Develop a system of systems
Understanding how assets work together to help manufacturers create more business value requires the performance of these assets to be analyzed. Analysis of performance is how business should be managed, giving managers a tremendous opportunity to move their manufacturing business forward. Plant Engineering spoke with Mary T. Bunzel, worldwide industry leader for the Maximo brand of asset management industry solutions at IBM for some perspective on how manufacturers can manage asset pool availability:
PE: We read and hear a lot about asset management, but I’m not sure there’s a good definition that everyone can start with. How do you define asset management in manufacturing?
Bunzel: The term "asset management" can be interpreted a number of ways, depending on who the audience is. For manufacturers, assets are resources that are deployed in pursuit of their ultimate mission: to produce exactly the right amount of goods, which can be consumed by the market, at the lowest possible cost. Good asset management practices therefore, deliver on this mission by ensuring the asset pool is fully available to deliver on capacity and quality commitments.
Prior to the latest economic downturn, freer flowing capital allowed manufacturers to hide inefficiencies in their practices. Backup equipment and extra inventory on hand were used to ensure against downtime. Changes in consumer buying behavior have meant that manufacturers have had to organize their businesses differently.
Reductions in production schedules and manpower have been necessary measures to preserve the enterprise but these changes put even more pressure on the asset pool to perform; e.g. when production is scheduled to run, asset performance is even more critical. No longer do we have the luxury to wait for assets to be available on the next shift; there is no next shift. If equipment is not performing, it means saleable goods are not going out the door, translating directly to missed market opportunity.
Asset management in manufacturing means managing your asset pool to be available when you need it and at the lowest possible cost.
PE: What are the advantages to asset management, both financial and operational?
Bunzel: Often, the agendas for financial accounting for assets are in conflict with the operational needs of an enterprise. I’ll offer several examples:
c The design for a piece of equipment might specify certain components, which as a collaborative system deliver the desired performance. The original design might call for advanced engineering support, installation and training. Once the package is agreed to by engineering, safety, production and others, it gets delivered to accounting/purchasing teams. These teams aren’t incented with operation efficiency. More often, they are measured by negotiated price reductions. Components of the package deemed less important by these teams might be negotiated out of the deal as vendors work to meet the demands of the finance group. Unfortunately, sometimes this means that critical components like extended warranty or training might be eliminated.
c Another example relates to on-hand inventory. In an effort to drive down inventory carried on hand, accounting might make decisions to eliminate parts that have not been used for a specified period of time. Without the views of how those parts contribute to operations, a key piece of information is not considered when decisions are made. Failure of a single critical part can bring down the entire production line. The total cost of a part is not necessarily reflected accurately by its book value. Instead, its contribution to the production systems is the better measure and is the one operations and maintenance would consider.
c In an attempt to solve part availability issues, finance might implement a purchase-card policy (P-card). These types of policies encourage spot purchases made for equipment repairs, policies that sidestep operational tracking of parts usage. Parts purchased under this program are tracked only as a line item on a charge card statement. They are never tied back to the original demand created by the equipment failure. True cost of repair for an asset is lost, valuable failure history is not captured and true usage levels for parts are disguised.
Financial systems should account for financial transactions involving assets, their depreciation and resource expenditures against assets. Maintenance, repair and operations systems should own sole responsibility for tracking the dynamic, operational details on assets and how they contribute to asset performance. In this way, enterprises have an opportunity to truly manage the resources to extract maximum efficiency.
PE: This is both a strategic effort and a technological effort. How should manufacturers balance the two?
Bunzel: Balancing strategic goals to take advantage of new technology in a fiscally responsible way has been a challenge for manufacturing enterprises since the invention of the wheel.
Organizations have long realized the value of using technology to control and monitor assets. Most often, due to the cost of implementing this technology, manufacturers selected where to apply the technology based on the criticality of a few critical assets. Original Equipment Manufacturers have been embedding sensors and onboard monitoring capabilities in response to growing complexity in the assets. Originally, this technology was levered to monitor production processes and quality. And for critical assets, it was quite common to use these same monitoring capabilities to monitor the health of these assets. Unfortunately, the cost associated with this strategy was so high that it was reserved for only the most critical points on the production line.
Now that almost all assets are instrumented and the language they use is standardized, the costs to interconnect them have come down as well. These factors combine to create opportunity. Business leaders are evaluating their business mix to take advantage of these new opportunities to enhance their relationships with customers – to the point where OEMs are launching whole new lines of business fueled by these technological advances.
For example, OEMs are taking advantage of the intellectual property generated during design, manufacturing and installation of an asset by combining legacy knowledge with field services. Unlimited amounts and combinations of onboard sensors are analyzed against as-designed performance standards. Often this analysis takes into account external environmental conditions as well so that they can assess the true nature of how the asset is performing in its current environment.
For customers who depend on these critical assets, the ability to know that an asset is having trouble, well in advance of a full failure, creates lead time for them to prepare a response. Again, if their mission is to deliver production capacity at the lowest cost possible, they must be able to control the repair cycle and its impact on production.
For service providers, these technology advances create new opportunities to differentiate themselves against their competitors and to create a closer relationship with their customers. On the operations side, it is even more critical for them to manage their cost structure. They make promises to deliver service – promises that carry penalties if they are not met. Creating lead time for them means they can strategize with their customers on the most cost effective and least disruptive path to repair.
Balancing means different things to manufacturers, OEMs and service providers, but in each case, the balance is now tipped in favor of levering technology to accomplish mission goals.
PE: Give me an example from your client experience about how this is working in practical terms on the plant floor.
Bunzel: This evolution touches both the shop floor and the top floor of manufacturing.
A leading cereal manufacturer has implemented a monitoring strategy for 10 of their large stainless-steel cookers. Production schedules are organized around capacity, length of run and planned maintenance schedules. Another feature now incorporated into the decision matrix is data analyzed from previous production runs.
Measurement points from multiple inputs are evaluated against known failure trends to predict wear patterns. They now have a more complete view of the amount of remaining life, meaning they are able to adjust maintenance to deliver just-in-time maintenance – not too soon and not too late – extracting the maximum value out of the investment they make in their maintenance strategy. This approach has led
to annual savings of more than $1 million for only these 10 cookers each year. Program expansions incorporate new groups of equipment as more and more are connected.
A leading aerospace and defense manufacturer monitors how its equipment is performing, monitoring equipment performance reported by multitudes of sensors on the aircraft during take off, mid flight and when landing. These readings are analyzed against design data and internal knowledge centers.
Teams working in collaboration have access to dashboards that are continually updated to reflect the current health of the asset. Because they are so in tune with the current status of the equipment, they now have a platform they can base their power-by-the-hour contracting strategy with customers: selling the "hot air blowing out the back of the engine" instead of a one-time asset transaction. Customers benefit because they pay for the service the asset delivers.
This strategy has enabled this company to quadruple its services business in only six years, growing to almost half of the companies overall revenue stream. Without instrumented, intelligent and interconnected assets, they would not be able to scale this offering to achieve these numbers.
Heavy equipment manufacturers are now throwing their hats into the arena of smart assets. Earth moving equipment are critical elements of a supply chain for customers in construction, mining, agriculture and many other types of businesses. The critical nature of these assets is even more enhanced when you consider the fact that these assets are expected to perform in the most remote, dirty and harsh conditions. They travel on narrow roads that are carved through or over mountains or they deliver seed, fertilizer and other applications based on precise analysis of soil conditions. Failure of a single asset under these circumstances can affect the entire process if a road is blocked or a combine fails in the field. Use of advanced sensing and analytics are used to create visibility to asset conditions. Guidance systems onboard the asset have been enhanced to include not only production plans and instructions but also dashboards that are continually updated with current asset conditions.
Those who are investing to implement the smart asset strategy are experiencing growth and performance among the highest in their peer category. Everyday we talk with new customers who want to learn more about how they can make their products smarter. We expect this trend to not only continue but to grow in momentum as more and more organizations find ways to expand their businesses.
PE: What’s the big message IBM will deliver on asset management at this year’s Pulse event in Las Vegas?
Bunzel: Assets don’t operate in isolation – they are "systems of systems." How they work together creates more business value. Analysis of asset performance touches both the top line and the bottom line of how enterprises are measured.
Analysis of performance is how business should be managed, looking to the past to anticipate the future. Analysis of performance gives managers the ability to look at the present and to move forward using data in almost a full-time way. It’s a tremendous opportunity because of the impact it can have.
The value is in the data and adapting to the data. Sense, analyze and respond are the basis for the IBM Smarter Planet message, and Smarter Planet is about solving problems. It’s real. It’s not some big vision from Silicon Valley. It’s real and it’s relevant.