The True Value That Comes from Effective EAM
Working inside the system and effectively using the standard functionality you have already paid for, is a mantra that we at Reveal continue to propagate. The intent is to get the deserved Return On Investment (ROI) from the SAP ERP investment that you have already made. I am often asked what value we can expect from the effective use of Enterprise Asset Management (EAM) as part of the integrated suite of tools available to the business in your SAP ERP system.Firstly, the great strength of SAP is its integrated nature. Albeit that it has touchpoints with almost all other application modules in SAP, PM/EAM is most closely aligned with the following key modules.
- Production Planning
- Sales & Distribution
- Material Management
- Human Capital Management
The business driver behind the ‘WHY’ question for PM/EAM is that it helps the business better manage production, lower operational costs and avoid at best or reduce at worst unplanned downtime. By enabling scheduled inspections, efficient break/fix repairs processes and sound planning of preventative maintenance we can keep equipment in optimal condition, reduce interruptions and ensure the safety of all. These organizational imperatives drive successful business execution and have a positive impact on our ability to sustain production and even meet on-time delivery requirements. In environments such as oil, gas, and mining, the same dynamics apply. Safety issues on something like an oil platform or a mine shaft, have had an international focus in the past and are therefore very visible to the outside world.
The Standard Cost Justification for PM/EAM
If it is true, as some researchers say, that $1 million savings in maintenance costs contributes as much to profits as increasing sales by $3 million, then the argument for an effective PM/EAM solution is compelling. Especially when one considers that maintenance as a portion of product cost, can be as high as 38%. Cost containment savings in maintenance then become real contributors to the bottom line.The standard cost justification for PM/EAM that should be factored into decision-making processes include:
- Labor costs – USA PM productivity puts it in the range of 25% to 60%
- Materials costs – usually 20 to 30% higher than necessary
- Project outage and overhaul saving – time eliminated from projects, outage or refurbishing activity, converts into productive time. This means money …
- Equipment downtime costs – Major potential savings à target 20%
- Other costs impacted by maintenance – warranty costs, energy cost savings, quality cost savings, equipment effectiveness savings.
The business imperative, therefore, provides a strong case for effective use of your SAP PM/EAM functionality.
Methodology for SAP EAM/PM Data Analysis and Reporting
In the last article on Plant Maintenance-Work Management, my colleague discussed the key indicators for doing a health check on the effectivity of a work management process. The main objective was to get control of the work and not allow the work (Backlog) to control us, all of which align with the cost issues and value structure proposed above. Given consensus now on the value what is the process dynamic for getting from business objectives to accurate data analysis and reporting?
There are seven core focal points that build to an effective outcome:
- The Business Objectives
- The Business Strategies aligned with the objectives
- The Processes to deliver strategies and objectives
- The System components that will drive the data modeling for reporting
- The Data itself and the level of integrity
- Data Processing to deliver actionable information
- Reporting based on agreed metrics and operational reports
To read from the start of our series of articles on Plant Maintenance, start with our Work Management piece. As a part of our ongoing commitment to providing pertinent supply chain industry education, Reveal experts attend events and educate on a wide range of SAP-centric supply chain management topics to help you achieve immediate value with your existing SAP System.