January 10, 2019
Capital assets, typically those involved in process manufacturing plants, automated assembly lines, and in energy, utility & oil and gas facilities have long shelf lives, but business cycles that determine the cost to construct them and the return on that investment could wildly fluctuate. The return on capital assets is impacted by multiple factors—supply chain instability, new technologies, regulatory legislation and ever-changing consumer tastes. Katherine James, IFS Vice President of Sales, North America, discusses two strategic disciplines that can help—operational intelligence and enterprise asset management.
Any unexpected changes to supply and demand when managing equipment in asset-focused organizations has a ripple effect on ROI. Because capital assets have long lifecycles of 10, 20, maybe even 50 or more years, there can be a need for executives, corporate boards and financiers to liquidate the expense of these assets during fluctuating conditions. It is straightforward enough to profitably manage assets during periods of sustained economic growth or even a typical recession, but during a drastic shift in demand, significant portions of an asset portfolio may be idled. Regulatory alterations or changes in global trade patterns can render assumptions used to justify an asset in one region useless, while placing a premium on productive capacity in another. Mothballing or reactivation of equipment comes at a price, and the equipment is not worth much from a resale point of view on the open market.
Standard business intelligence (BI) tools allow executives to see what has just happened. But a new breed of reporting solution, operational intelligence (OI), is designed to bring quite literally ‘fighter jet’ tactics into the boardroom. OI was created to help pilots make quick changes in real time, moving through the stages of observation, orientation, decision and action (OODA) faster and smarter.
Step into the future
OI speeds up a company’s movement through the OODA loop. It is constructed around a business map—a clear visualization of how value flows through the organization. Metrics are aligned with the business map to better identify restrictions in the enterprise value stream. The software then runs analysis to provide a method to take immediate action directly in those operational systems.
For organizations considerably affected by outside factors such as commodity prices, OI can include external data on leading indicators, providing advance notice of potential business impacts before business signals would manifest themselves looking simply at internal metrics.
A global reach
As they move through that OODA loop, executives need to make decisions about their geographically dispersed, global portfolio. Here, Enterprise Asset Management (EAM) software must support them in this by allowing them to streamline refits, shutdowns, decommissioning or construction of new assets, ensuring that all health, safety, environmental and corporate social duties are adhered to.
Modern EAM contains templates used to manage similar assets or asset classes at multiple sites without creating each asset separately in the system. Entire classes of assets can be formed rapidly with standard maintenance, parts, tools and other data. Managers can alter these objects to accommodate individual site differences, including regulations in different countries. Organizations moving capacity from one location or division to another will reduce non-value-added work while increasing standardization and consistency.
A platform for e-commerce
Maintenance, substantive refits and overhauls have increasingly become the responsibility of contractors rather than maintenance department staff. The percentage of industrial organizations outsourcing maintenance increased sixfold between 1990 and 2000 alone. As volatility heightens, this collaborative approach to maintenance, and even operations contracting, will become more common because contractors can staff operations in a more flexible fashion than they could with direct employees.
Some of this contracted maintenance work may be performed by equipment vendors as part of a full lifecycle support contract. In others, equipment upkeep, facilities, and projects requiring specialized tools, materials testing and other maintenance work may be put out to bid, or handled under a contract framework agreement with maintenance or construction organizations.
To better manage the vast spectrum of maintenance organizations, executives of asset-intensive companies will need EAM software that automates the process of putting work out to bid, accepting bids and monitoring performance against the contract. EAM must also offer contractors web-based portals to report completion of tasks, submit invoices and act as a more integral part of the organization.
From upstairs to the factory floor
Unfortunately, the majority of EAM software was created more as an isolated computerized maintenance management system (CMMS)—a work management tool for maintenance technicians. A point-to-point integration with finance, inventory, risk management and quality functionality of enterprise resource planning (ERP) software may be possible. But as business conditions and the financial return on asset operations change, executives that depend on separate systems with a limited set of integrated fields will find it more challenging to make decisions based on real-time visibility of operational cost and asset readiness.
A case in point
Consider the decisions in this scenario that an executive team must face as new productive capacity comes online. A head pressure problem develops in a critical compressor unit. Maintenance finds it, but does not hold the required information to diagnose the issue because it is buried in a stack of CDs and binders left by the consulting engineers that designed the asset. Other data is contained in as-built documentation left by the contractors. Acquiring the information needed to operate the asset costs downtime, man hours and dollars the company can ill afford. Often, executives also find a new asset suffers from unexpected stoppages as a result of the same design flaw as the asset it replaced. Data contained in years of maintenance records would have revealed the design changes that were required, but the system engineers did not have the ability to review that data in a meaningful way. The result is a lost opportunity to increase productive capacity and reduce cost because of inefficient handling of asset data.
Asset management—a business enabler
To overcome this volatility, EAM needs to be the system of record—not a point solution that lives alongside the software used to run the business—and address the entire design-operate-maintain asset lifecycle. EAM software must be designed as a pure play application from the general ledger, all the way to the individual equipment object on a facility floor.
Changes to target geographies, the market and technology are making assets obsolete, which require new capital investments to be made at a more rapid pace. Asset-intensive businesses need the visibility and control to adapt to these changes. An organization which lacks the operational intelligence and streamlined asset lifecycle management tools will not be able to efficiently reconfigure assets. The result is delay in action and decision-making that ultimately will leave them vulnerable.
About the Author
As IFS Vice President of Sales, Katherine James is responsible for the organization’s strategy, development and execution within her territory. She is a transformational leader and senior sales executive with more than 20 years of experience in the enterprise software industry including more than 10 years with Infor Global Solutions. She has also held positions with Aptean and PROS Pricing. Contact: https://www.linkedin.com/in/katherine-james-4195203.