The next wave of ROI
Holly Corp. and others count on Web-native EAM for big returns
By Joy LePree, contributing editor -- Manufacturing Business Technology, 8/1/2002 6:00:00 AM
Thanks to the recent implementation of a Web-based enterprise asset management (EAM) solution, Dallas-based oil refiner Holly Corp. expects to see annual revenue increases of at least $1.2 million, as well as significant annual cost savings.
"The Web-based EAM system we've implemented should greatly enhance our current day-to-day operations in several areas," says Tommy Gureio, vice president of information technology at Holly Corp. "The most significant benefit will be an increase in revenue of about $1.2 to $2 million, which we expect to come from increased uptime and production from our refinery thanks to better management and more productive maintenance procedures."
Gureio maintains that additional return-on-investment (ROI) likely will be derived from maintenance cost savings. "It's likely we will see improvements due to the ability to better schedule and use our labor force, which will reduce overtime and the use of outside contractors," says Gureio. "We also may see a reduction in equipment costs, since we expect the Web-based EAM system to help us better manage our inventory and do a better job of analyzing how much time and money we are spending on certain pieces of equipment."
The system Holly deployed—7i from Datastream, Greenville, S.C.—is an example of the new generation of EAM systems that offer an Internet-based architecture. These systems promise lower cost of ownership than deploying equally large systems under a client/server architecture.
For capital-intensive industries, finding better, more efficient ways to conduct asset management can be strategic. As Gureio points out, "When you have 40,000 different pieces of equipment in a plant, your ability to manage them more effectively can have a pretty significant impact on your bottom line."
Since Holly only recently transitioned from several legacy systems to the new Web-native EAM system, actual ROI has yet to accrue. However, based on Holly's expectations, Gureio expects Datastream's 7i system will pay for itself in about 18 months.
Where the ROI is
Like traditional EAM solutions, the new Web-native systems provide ROI through improvements in three main areas: increased capacity and productivity, decreased maintenance costs, and reduced capital expenses.
"These are the three areas that become the litmus test for ROI," says Marty Osborn, vice president of product management for Datastream. "ROI isn't about adding more features and software, but it does come from using software and features to drive improvements in these three areas."
EAM systems increase capacity and productivity and reduce costs because they have the ability to help manufacturers improve the reliability of equipment, which reduces maintenance costs and heightens uptime. "If assets aren't performing and start failing, then manufacturers don't have the capacity they need to produce their product," says Osborn. "But EAM can help them schedule and improve their predictive maintenance program, which goes a long way when it comes to boosting capacity."
EAM systems also reduce expenses related to labor and inventory because the systems assist users with scheduling and prioritizing so the appropriate labor and inventory of parts are always on-hand for scheduled maintenance activities.
ROI also can be achieved through EAM-related reduced capital investments. "If you perform predictive maintenance sporadically, or not at all, your equipment will fail and you'll have to spend capital to get new equipment," explains Osborn. "But if you take advantage of the EAM solution's ability to organize maintenance activities, you will be able to better maintain equipment. Therefore you'll spend less on capital investments."
Bill Kelley, senior director of process and energy with Indus International, an Atlanta,-based EAM provider, explains that asset management solutions can be used as tools for work planning, which provides additional ROI. "The ability to plan is important because any sort of unscheduled maintenance and downtime related to assets can be very expensive if you include overtime, expediting of inventory and materials that you might not have on-hand, and the loss of time in a production line," he says. "When you incorporate an EAM solution, you're trying to take the average 20 or 30 percent planned maintenance and raise that to nearly 95 percent to 98 percent planned activities."
While these ROI-enhancing benefits can be achieved with traditional EAM solutions, as well as Web-based ones, industry experts believe that newer Web-based technologies will take ROI to a new level.
Efficient deployment
Web-based technologies can reduce the total cost of ownership due to cheaper installation and maintenance, and simpler integration.
"From a systems standpoint, they help reduce the total cost of ownership because Web-based systems remove the requirement of maintaining the application code on the desktop, which was needed with traditional client/ server architectures," notes Tom Singer, a principal with Tompkins Associates, a Raleigh, N.C.-based consulting firm. "The traditional method required a bit of IT administrative support, but Web-based technologies eliminate that need because you can simply access the maintenance application through a standard Internet browser. There's no need to install and update proprietary application software on every desktop."
Web technologies also reduce total cost of ownership because the standard Web services method of exchanging information between applications makes integration easier. "This makes integration more cost-effective between other applications within the enterprise, and among trading partners," says Singer.
Not only do best-of-breed vendors offer EAM, so do vendors of enterprise resources planning (ERP) systems that have been expanding their solutions offering under a larger suite approach to include EAM functionality. "One of the best ways manufacturers can reduce the total cost of ownership of a solution is by using a Web-based system," says Thor Coole, product delivery account manager with IFS, a Chicago-based collaborative enterprise suite vendor that offers EAM software. "To run the Web applications, all you need is a Web browser."
Greater consistency
Since Web-centric EAM solutions allow manufacturers to collapse their operation by focusing on one application and one implementation, manufacturers have the ability to better structure and manage their assets around that one application. This capability promises greater consistency, which can enhance ROI in ways that traditional solutions can't.
"Most large manufacturers probably have multiple EAM applications in use throughout their business, so if they want to rationalize basic work processes around assets, it becomes consuming because they must all be conformed to each other," explains Marc McCluskey, research director with AMR Research, a Boston-based analyst firm. "But when a Web-architected solution is used, the ability to deliver that to multiple facilities becomes easier and less cost-prohibitive to obtain."
Hart & Cooley, a Holland, Mich.-based manufacturer of heating and cooling products, recognizes the potential of Web-based EAM to bring benefits via standardized procedures. The company currently is using the MAXIMO EAM suite from Bedford, Mass.-based MRO Software, in client/server mode, but plans to upgrade to MAXIMO's Internet-based version this winter, according to Bill Broughton, technical service manager for Hart & Cooley.
According to Broughton, the upgrade will bring a more common approach to EAM across plants. "Once we are on the Internet version, it will eliminate individual plant management [of EAM procedures]," says Broughton. "This will be a big help when it comes to streamlining many of the plants and companies that we've acquired in the past year. I will be able to use Web pages to assist them in managing their plants the same way that the rest of Hart & Cooley does, and it won't put an IT overload on the other locations. In addition, the Internet version of MAXIMO will help us standardize with the other locations when it comes to equipment numbers and part numbers. This will be very helpful when it comes to managing the equipment in a similar manner."
Datastream's Osborn is another advocate for greater consistency through Web-based systems. "The big savings are tied to the ability of Web-based systems to share a common, enterprisewide database," he says. "We have a customer with eight plants that previously had eight different inventory part numbers for the same piece of equipment, eight different sets of preventive maintenance, and eight different sets of standard job tasks—basically all efforts were multiplied by a factor of eight. But by using a Web-based EAM solution with a common database shared throughout the enterprise, they now have one core team developing standard tools, routines, and key performance indicators. And by standardizing on inventory, they believe they can save about 30 percent of their inventory."
Inventory costs can be further decreased with a Web-based system running on a common database because a manufacturer's multiple sites can pool buying power to influence the cost of spare parts. For example, if there's a company with four facilities that all use the same type of duct tape, using a common database for inventory and purchasing will allow them to put one order together for 100 rolls a week instead of four smaller orders. Buying spare parts in greater numbers will greatly decrease the cost of inventory," says Coole.
Another benefit of Web-based EAM solutions is a more seamless tie and compatible architecture with e-procurement systems, says Kelley. "Web-based EAM solutions give manufacturers the ability to simultaneously plan and shop for a project, so once the project is approved they can quickly acquire materials," he says.
Web-based EAM promises a raft of benefits, but as Tompkins' Singer points out, "Whether it's a traditional or Web-based solution, EAM merely gives manufacturers the tools to enhance their ROI. But if the maintenance department does employ good practices, the EAM system should be capable of reducing equipment downtime and increasing reliability, which can boost uptime and manufacturing productivity."
| For more info: | ||
| Datastream: www.datastream.net | IFS: www.ifsworld.com | Indus International: www.indus.com |
| MRO Software: www.mro.com | ||
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