Enterprise Asset Management

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Enterprise Asset Management

Maximizing Return on Assets and Emerging Trends

June 2008

~ Underwritten, in Part, by ~

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Executive Summary

Research Benchmark Aberdeen’s Research Benchmarks provide an in- depth and comprehensive look into process, procedure, methodologies, and

technologies with best practice identification and actionable recommendations

Aberdeen Group's latest research in Enterprise Asset Management (EAM) reveals that Best-in-Class companies are using asset management strategies to reduce operational cost, improve profitability and hence improve the competitive edge in the market place. In this research report, Aberdeen Group surveyed more than 160 manufacturing executives to understand the strategies and business capabilities adopted by manufacturers to maximize Return on Assets (RoA) and reduce risk from failure of critical assets. This research will also uncover emerging trends around energy management initiatives adopted by companies to reduce energy consumption costs.

Best-in-Class Performance

In the following analysis, Aberdeen uses three Key Performance Indicators (KPIs) to identify Best-in-Class performance. Across these metrics Best-in- Class manufacturers averaged:

• 93% Overall Equipment Effectiveness (OEE)

• 97% plant throughput

• 3% downtime

Competitive Maturity Assessment

“With the increase in costs and being in a highly leveraged industry, maximum uptime and utilization of assets is very critical for our organization.

Also, operating in an asset intensive environment, manual tasks are impossible to perform to achieve our goals. Hence, maintenance and monitoring of assets is very critical to our industry.”

~ Madhukar Rajagopal, CIO JSW Steel Ltd Aberdeen's survey analysis shows that the firms enjoying Best-in-Class

performance share several common characteristics:

• Best-in-Class manufacturers are 50% more likely to standardize asset maintenance and reliability processes across the enterprise

• Best-in-Class companies are three-times more likely to establish continuous improvement teams to focus on condition and Reliability Centered Maintenance (RCM)

• Best-in-Class companies are two-times more likely to utilize mobile devices integrated with the asset management solution

Required Actions

In addition to the specific recommendations in Chapter Three of this report, to achieve Best-in-Class performance, companies must:

• Improve visibility into production and asset performance across the enterprise through the use of asset analytics and dashboards

• Move from a break-fix maintenance approach to a more predictive approach by adopting advanced capabilities such as RCM

• Invest in an Enterprise Asset Management (EAM) solution and establish real time interoperability between EAM and Enterprise Resource Planning (ERP)

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Figures

Figure 1: Managing Risks and Maximizing Return on Assets...4

Figure 2: Top Strategic Actions ...7

Figure 3: Technology Enablers ...13

Figure 4: Empowering Employees with Mobile Solutions...14

Figure 5: Establishing Real-time Interoperability...15

Figure 6: Reducing Energy Consumption Costs ...16

Tables

Table 1: Top Performers Earn Best-in-Class Status...5

Table 2: The Best-in-Class PACE Framework ...6

Table 3: The Competitive Framework...10

Table 4: The PACE Framework Key ...20

Table 5: The Competitive Framework Key ...20

Table 6: The Relationship Between PACE and the Competitive Framework ...20

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Chapter One:

Benchmarking the Best-in-Class

Business Context

Fast Facts

Best-in-Class enterprises significantly out perform their competition in all three KPIs.

These manufacturers enjoy:

√ 93% Overall Equipment Effectiveness (OEE)

√ 97% plant throughput

√ 3% downtime The rising commodity and energy costs and the uncertain global economy

have all put more pressures on manufacturers than ever before to reduce operating costs on each and every aspect of manufacturing operations. For manufacturers, this requires plants and factories to be available and running at peak performance and producing high quality products at the right time.

To achieve these goals companies are developing multiple strategies for asset management at an enterprise level.

This Benchmark Report will uncover the pressures that are driving companies to focus on Enterprise Asset Management (EAM), the specific strategic actions companies are taking to address the pressures, and the business and technology enablers that are adopted by manufacturers to effectively manage manufacturing assets. The findings of this report will also uncover some of the emerging trends in the asset management field around the use of energy management initiatives to achieve the ultimate goal of cost reductions in manufacturing operations.

Dominant Market Pressures

Manufacturers across different industry verticals have invested heavily in assets. When it comes to asset intensive industries this investment can be a significant portion of the total capital invested in a manufacturing plant. The top pressure driving manufacturers to focus on asset management is to maximize return on the investments on these assets.

Figure 1: Managing Risks and Maximizing Return on Assets

7%

5%

18%

19%

61%

65%

0% 35% 70%

Maximize Return on Assets (RoA) The risks from failure of critical assets

Complexity in manufacturing assets Reduce energy consumption costs Compliance to regulatory requirements

(e.g. environmental, OSHA) Aging / Retiring workforce Corporate focus on green initiatives

% All Respondents

Source: Aberdeen Group, June 2008

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“We have been given the tone at the top: higher focus on asset management in order to improve reliability and performance, reduce out of service time. The main and principal decision so far was to create an Asset Management Group to drive this approach and concept.”

~ Gilles Bocabarteille, Vice President, Asset Management, Pride International, Inc.

The second most prevalent pressure in the industry around asset

management is to manage and mitigate risk due to failure of critical assets (61%). Aberdeen research in March 2008 regarding Risk Mitigation in Manufacturing Operations showed that risk due to asset failure is one of the top three risks that have the most impact on manufacturing operations. The science of risk has garnered much attention among manufacturers and is critical in terms of asset management. Managing risk is an approach of identifying the top risks to the operations, quantifying and prioritizing the identified risks, and establishing controls to mitigate these risks. From the asset management perspective, this approach helps manufacturers to be proactive in nature and move away from the traditional break-fix approach by gaining real-time visibility into equipment failures before they actually occur. The focus on transitioning from a reactive to predictive asset management approach will remain central throughout the rest of this analysis and continue to re-emerge in our key findings.

The Maturity Class Framework

Aberdeen uses three key performance criteria to distinguish the Best-in- Class from Industry Average and Laggard organizations. These are:

• Overall Equipment Effectiveness (OEE) measured as a percentage by multiplying availability times performance times quality

• Plant throughput measured as total actual output divided by total theoretical output

• Asset downtime measured as the amount of time the asset is offline against total asset availability

Respondents were divided among three categories based on their aggregate performances in these three metrics: the top 20% of performers (Best-in- Class), the middle 50% (Industry Average), and the bottom 30% of

performers (Laggards). Table 1 displays the aggregated performance of Best- in-Class, Industry Average, and Laggard organizations.

Table 1: Top Performers Earn Best-in-Class Status

Definition of Maturity Class Mean Class Performance Best-in-Class:

Top 20% of aggregate performance scorers

93% OEE

97% plant throughput

3% asset downtime Industry Average:

Middle 50% of aggregate performance scorers

86% OEE

13% downtime

67% OEE Laggard:

Bottom 30% of aggregate performance scorers

34% asset downtime

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The Best-in-Class PACE Model

Manufacturing companies faced with the pressure to maximize Return on Assets (RoA) are looking at multiple strategies to optimize asset utilization at the enterprise level. Table 2 summarizes some of the strategic actions, business process capabilities, and technology enablers Best-in-Class companies have implemented to address these market pressures.

Table 2: The Best-in-Class PACE Framework

Pressures Actions Capabilities Enablers

Maximize Return on Assets (RoA)

Optimize asset utilization

Improve visibility into production and asset performance across enterprise

Executive focus on establishing continuous improvement initiatives for asset management

Standardized processes for maintenance and reliability across the enterprise

Executive ownership and sponsorship for asset

management strategies across the enterprise

Asset management data is used to analyze, predict, plan, and schedule maintenance activities

Asset management system is integrated with predictive failure analysis data

Predictive maintenance

Reliability Centered Maintenance (RCM)

Asset performance dashboards

Manufacturing analytics

Condition based maintenance

Operator training

Mobile solutions

Risk management

Corrective and Preventive Actions (CAPA)

Best-in-Class Strategies

The top strategic action manufacturers are taking to address the market pressures shown in Figure 1 is to optimize asset utilization (Figure 2). This action is reported by more than two thirds of the total pool of survey respondents. Optimizing asset utilization is a process of balancing trade-offs between different areas of asset management such as asset scheduling, spare parts replenishment, asset downtime, and the maximizing metrics like Overall Equipment Effectiveness (OEE) and plant throughput. Often this improvement in operational performance can result in the ultimate cost reduction and improved profitability.

One of the steps necessary to optimize asset utilization is to move from a reactive to a proactive based asset management approach. This requires manufacturers to have real-time visibility into production and asset performance data. This visibility allows manufacturers to monitor asset condition in real time, deliver that data to decision makers as actionable intelligence and finally use the data to analyze, predict, plan, and schedule maintenance activities across different assets. This is the action being taken by 53% of the responding manufacturers.

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Figure 2: Top Strategic Actions

26%

32%

47%

63%

19%

38%

53%

69%

0% 40% 80%

Create real-time interoperability between asset management and existing technology investments

Executive focus on establishing Continuous Improvement initiatives for asset management

Improve visibility into production and asset performance across enterprise

Optimize asset utilization

BIC All Respondents

Manufacturers are also developing strategies for establishing continuous improvement initiatives and getting attention from the executive team to enable the success of such initiatives. These initiatives are focused on establishing cross functional teams to share and execute best practices for asset management across different departments. Companies are extending this collaborative approach by creating real-time interoperability between asset management solutions and the existing technology investments at the plant and enterprise level.

Manufacturers of all performance levels face the same market pressures and are responding with the same strategic actions. When compared, there is no significant difference between the market pressures faced by the Best-in- Class, Industry Average, or Laggard manufacturers. Similarly, there is no significant difference in the strategic actions these different categories of manufacturers are taking. However Best-in-Class manufacturers realize improved performance as compared to Industry Average and Laggard manufacturers (Figure 1). In the next chapter, Aberdeen will link specific business capabilities and technology enablers to Best-in-Class performance and identify how the aforementioned strategic actions can be assured success.

Aberdeen Insights — Challenges

Seventy-seven percent (77%) of survey respondents indicated that their focus on asset management has increased as compared to last year. Upon further analysis, Aberdeen found that this focus is even higher among Best-in-Class companies, with 84% of the Best-in-Class increasing their focus on asset management. While asset management is top of mind for plant management as well as corporate leadership, there are multiple challenges companies are facing to effectively execute the strategic actions discussed in this chapter.

continued

“Our plant is sitting on over

$600 million in fixed assets.

Asset management is vital for municipal infrastructure.”

~ Bradley Bellows City of Ottawa

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Aberdeen Insights — Challenges

The top two challenges are based on the cultural change required within the organization. Companies are primarily challenged due to the change in culture required to move from break-fix maintenance to proactive maintenance techniques (45%). The second most prevalent challenge among survey respondents was that asset management is still viewed as a necessary cost by senior management (35%) and hence it is difficult to get ownership from the executives. In addition to the cultural challenges, companies are overwhelmed with the data available on the plant floor and face challenges to manage the complex and disparate data sets to improve decision making (31%).

Chapter Two will look at the capabilities Best-in-Class are adopting to address these challenges.

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Chapter Two:

Benchmarking Requirements for Success

The success of asset management initiatives depends heavily on where in the maturity class framework an enterprise falls (Table 1). Maturity affects how an enterprise should leverage supporting technologies and other business capabilities, and in turn, goes a long way to translating the strategies presented in Chapter One to maximizing RoA.

Case Study - Skånemejerier

Skånemejerier is one of the largest dairy companies in the Scandinavian market, best known for its milk and dairy products. Skånemejerier has three production plants that process over 40,000 order lines daily for products ranging from milk and cheese to highly specialized health foods.

With such a variety of short shelf-life products, equipment failures, production stoppages, and recalls, could be extremely costly.

Skånemejerier wanted to improve the analyses of assembly line

breakdowns and allow production and maintenance personnel access to relevant data that would help them make better decisions to improve the overall quality of the plant. Skånemejerier had an outdated, in-house maintenance solution that was beginning to cause problems. The company was looking to computerize preventive maintenance routines, as well as improve the spare parts purchasing and handling process.

Skånemejerier decided to adopt an integrated EAM solution to address these issues.

The biggest overall benefit Skånemejerier has experienced, since implementing the EAM solution, is the drastic reduction in spare parts inventory. According to Jan Lindskog, CIO of Skånemejerier “We are able to reduce our spare parts stock level by 40% resulting in cost reduction from USD $2.29 million to USD $1.37 million.” Some other benefits that Skånemejerier realized after the implementation are as follows:

• Increased collaboration among plants as all three production plants can now see the amount and type of stock available in other locations

• Reduction in error and increased time savings as the new EAM solution is integrated with other financial, production, and purchasing solutions eliminating the need to manually input and transfer information such as financial data between the various systems

• Improved visibility into assets and the ability to analyze trends around equipment reliability

• Reduction in maintenance resource waste and increased control over maintenance related costs

Fast Facts

Best-in-Class manufacturers are more likely to adopt the following technology enablers:

√ Two-times as likely to adopt Reliability Centered

Maintenance (RCM)

√ 60% more likely to adopt alert and alarm management

√ 62% more likely to adopt asset analytics

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Competitive Assessment

Aberdeen analyzed the aggregated metrics of surveyed companies to determine whether their performance ranked as Best-in-Class, Industry Average, or Laggard.

In addition to having common performance levels, each class also shared characteristics in five key categories: (1) process (the standardization and management of processes across the enterprise); (2) organization (cross functional teams established to create corporate culture of reliability); (3) knowledge management (using data modeling capabilities to automate

workflows); (4) technology (the software and capabilities that are crucial for asset management); and (5) performance management (use of asset data to manage performance). These characteristics serve as guidelines for best practices, and correlate directly with Best-in-Class performance across the key metrics.

Table 3: The Competitive Framework

Definitions

√ EAM - Enterprise Asset Management

√ CMMS - Computerized Maintenance Management System

√ APM- Asset Performance Management

√ ERP- Enterprise Resource Planning

√ PFA- Plant Floor Automation

√ RCM- Reliability Centered Maintenance

Best-in-Class Average Laggards Standardized processes for maintenance and reliability across the enterprise

68% 51% 45%

Standardized measurement of Key Performance Indicators (KPI) across the enterprise

53% 40% 18%

Standardized processes for monitoring equipment condition across the enterprise

Process

44% 40% 15%

Executive ownership and sponsorship for asset management strategies across the enterprise

53% 52% 36%

Established continuous improvement teams focused on condition and reliability centered maintenance activities

53% 50% 16%

Established cross-functional team including maintenance, productions, and engineering to create a corporate culture for reliability

Organization

35% 23% 18%

Process modeling capabilities are used for automating workflows and interoperability between systems

Knowledge

33% 19% 13%

Percentage of manufacturers currently using technology:

Technology ^{61% PFA} 79% EAM / CMMS

37% APM

45% PFA

56 % EAM / CMMS

31% APM

23% PFA

48% EAM / CMMS

11% APM Asset management system is integrated with predictive failure analysis data

28%s 17% 6%

Lean principles used to manage maintenance operations Performance

37% 25% 12%

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Process

Best-in-Class manufacturers are differentiating themselves by standardizing processes across different aspects of asset management. First, these manufacturers are 50% more likely than Laggards to standardize asset maintenance and reliability processes across the enterprise. Best-in-Class manufacturers are also nearly three times as likely as Laggards to

standardize the measurement of Key Performance Indicators (KPIs) as well as standardize equipment monitoring condition across the enterprise.

All these are important processes for managing assets, and standardizing these processes will allow manufacturers to capture best practices and implement them across different plants to optimize asset utilization. This also allows senior executives to compare performance of different plants and to share knowledge and information from one plant to another.

Organization

Organizational capabilities are critical for addressing the cultural challenges discussed in Chapter One. Best-in-Class manufacturers are strategically organized to get buy-in from different stakeholders in the organization by raising awareness about the importance of asset management to the overall corporate growth plans. The Best-in-Class are establishing ownership and sponsorship from the executive level regarding their asset management strategies and programs. On a plant floor level, Best-in-Class manufacturers are establishing continuous improvement teams focused on advanced asset management capabilities such as condition and reliability centered

maintenance initiatives. This step directly helps companies to change the maintenance culture to being predictive and have teams in place to continually improve processes for reliability and condition based maintenance programs.

Finally, Best-in-Class manufacturers are taking a collaborative approach towards asset management by establishing cross-functional teams from production, maintenance, and engineering to create a corporate culture of reliability. This also helps organizations to bring perspectives from different functional departments to optimize production, inventory, and assets at an enterprise level. This may very well be one of the reasons why Best-in-Class manufacturers realize 16% higher Overall Equipment Effectives (OEE) as compared to Laggard manufacturers. As OEE is a metric that involves availability, quality and performance, it is absolutely necessary for all these departments to work collaboratively and establish strategies to realize higher operational performance.

Knowledge and Performance Management

Knowledge and performance management capabilities are both crucial for the overall asset management strategy of the organization. Best-in-Class manufacturers are not only automating workflows, but are using process modeling capabilities to effectively automate workflows and interoperate across different systems. This is an effective capability as it allows

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manufacturers to capture best practices from the experienced maintenance employees and incorporate those practices to model and manage

workflows. Adopting such capabilities also allows manufacturers to address the issue of an aging / retiring workforce by transferring knowledge from few experienced employees to the overall workforce. Best-in-Class are nearly three times as likely to use such advanced modeling capabilities to automate workflows as compared to Laggards.

“We are at the early stage and are transiting from a traditional engineering and technical group to asset management group.

Our expectation is to drive the cultural change with regards to the maintenance of our asset in order to better prevent, predict rather than react.”

~ Gilles Bocabarteille, Vice President, Asset Management, Pride International, Inc.

On the performance management side, Best-in-Class companies are integrating failure analysis data in their asset management system and are also three-times as likely as Laggards to use Lean maintenance concepts in their overall asset management strategy. As standalones, the necessity for these capabilities is not immediately apparent. However, in aggregate, there are important synergies that exist between the knowledge and performance management capabilities identified earlier. Process modeling capabilities very often help facilitate using Lean in maintenance operations. Subsequently, manufacturers are able to more precisely understand both processes and the performance of assets, ultimately allowing for optimized spare parts inventory levels and asset maintenance schedules.

Technology

Best-in-Class companies are automating the capabilities discussed earlier by adopting technology solutions. Best-in-Class companies are nearly three- times as likely as Laggards to use Plant Floor Automation (PFA) and Asset Performance Management (APM) solutions. These solutions play a critical part in automating data collection from the assets and using analytical capabilities to understand the true value of the data collected. Best-in-Class companies are 65% more likely than Laggards to invest in an Enterprise Asset Management (EAM) solution. Aberdeen Group findings indicate that the adoption level of EAM solutions have increased since last year for manufacturers across all the three categories of performance. This truly highlights the importance of looking at asset management at an enterprise level.

In addition to looking at the major technology solutions, Aberdeen Group analyzed the specific modules or technology enablers that differentiate Best- in-Class performance (Figure 4). Best-in-Class companies are adopting modules to automate three important aspects of asset management:

advanced maintenance capabilities, real-time visibility, and monitoring of assets and employee training.

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Figure 3: Technology Enablers

22%

35%

27%

21%

49%

44%

40%

41%

44%

67%

71%

0% 40% 80%

Reliability Centered Maintenance (RCM) Asset Dashboards

Asset Analytics Operator Training Preventive Maintenance Alerts and Alarm Management

Others Best-in-Class

“We use an enterprise asset management solution that tracks job ticket measures. We track and trend key

performances indicators and review them versus plan each month.”

~ Manager, IT Large Life Science Company

One of the top strategic action manufacturers are taking is to increase visibility into production and asset performance (Figure 2). While we observed insignificant differences in the strategic actions of the Best-in-Class compared to our general population, we do see differences in how they might be satisfying the need for visibility and other requirements. Best-in- Class companies are improving visibility by adopting asset analytics, dashboards, and alarm management modules to automate data collection, analyze and monitor asset data, and finally escalate adverse events to appropriate decision makers at the right time and in the right format to prevent equipment failure.

Best-in-Class manufacturers are also moving away from the break-fix maintenance to a predictive approach by adopting preventive maintenance as well as Reliability Centered Maintenance (RCM) capabilities. Preventive maintenance capabilities ensure that asset maintenance is performed at regular intervals to improve the life span for assets. RCM is an advanced maintenance capability that analyzes critical failure mode of assets to determine the optimum maintenance policy to reduce the severity of asset failure. Both these approaches are important to reduce the risk due to failure of critical assets.

Finally, Best-in-Class companies are addressing the aging / retiring workforce by adopting operator training modules. This ensures that the best practices already embedded in asset management systems are effectively transferred to new and inexperienced employees. This often further reduces down time and critical asset failures.

Use of Mobile Solutions in Asset Management

Another area that clearly differentiates Best-in-Class performance is the use of mobile solutions in the overall asset management strategy. Best-in-Class

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companies are 2.5-times as likely as other manufacturers to integrate mobile devices with the asset management solution allowing manufacturers the flexibility to operate remotely.

Figure 4: Empowering Employees with Mobile Solutions

26%

32%

37%

20%

19%

15%

0% 20% 40%

Mobile devices integrated with asset management systems

Mobile devices are used in maintenance rounds

Mobile devices used to initiate work order without going back to

workstations

Best-in-Class Others

Traditionally, maintenance employees collected asset and equipment

information on paper while on maintenance rounds for routine inspection of equipment. However, the Best-in-Class are eliminating this manual approach by equipping their employees with mobile devices to input equipment inspection data directly into mobile devices that are integrated with the asset management system. This eliminates the process of manual data entry into the computer resulting in reduction of data collection errors and time savings. Finally, the Best-in-Class are using mobile devices to initiate work orders without going to their workstations.

Real Time Interoperability

While Best-in-Class manufacturers are more likely to invest in asset

management technology, these manufacturers are also establishing real-time interoperability among existing technology investments. This capability is very much in line with the strategic actions of creating real-time

interoperability between technology solutions, discussed in Chapter One.

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Figure 5: Establishing Real-time Interoperability

100%

80%

100%

42% 47%

71%

33% 33%

56%

0%

40%

80%

APM and PFA (Plant floor automation)

APM and CMMS/EAM CMMS/EAM and ERP

BIC Industry Average Laggards

The primary role of technology is to facilitate information sharing across the enterprise so that employees have visibility into the manufacturing process.

One of the roadblocks to this facilitation is the fact that manufacturers have adopted technology applications that function independently in a siloed manner. Best-in-Class manufacturers are not only integrating their

technology solution at the plant level by integrating Plant Floor Automation (PFA) with APM solutions and APM with CMMS / EAM solutions, but these manufacturers are getting the true value of enterprise-wide adoption by integrating the EAM solution with ERP solutions.

This integration provides manufacturers with the ability to streamline

maintenance operations through better planning and scheduling of production and maintenance tasks. An integrated solution offers enterprise-wide visibility of the complete asset lifecycle, right from the design phase to the final disposition. This information becomes important in making decisions about future asset purchases. Finally, integration allows manufacturers to connect their maintenance applications with higher-level business systems more easily which in turn results in increasing responsiveness and an ability to make quick and intelligent asset management decisions.

Aberdeen Insights — Technology

While only 19% of survey respondents have selected reducing energy management cost as a pressure (Figure 1), Aberdeen found that Best-in- Class manufacturers are more likely to face this as a pressure as compared to other manufacturers. The Best-in-Class are developing strategies at a plant level and gaining support from the top executives to reduce energy consumption costs.

Best-in-Class manufacturers are integrating energy management

programs with the overall asset management strategy. Best-in-Class are three-times as likely as Laggards to establish executive level accountability to manage the success of green initiatives. The Best-in-Class are also three-times as likely to collect and monitor asset data at the equipment level and utilize that data to minimize energy consumption.

continued

“We use the asset management module from our ERP, tying financial, HR, and operations together. We take data

collected from the work orders in the system to determine where worker hours and maintenance costs are going and monitoring the work order backlog. The data is compiled into detailed monthly reports for the supervisors and high- level quarterly graphical reports for management. The data is monitored to ensure that we hit set targets.”

~ Bradley Bellows City of Ottawa

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Aberdeen Insights — Technology

As the energy cost is skyrocketing, the cost of operating manufacturing assets and equipments are likely to rise. Companies need to establish these energy management strategies and adopt analytics and dashboards to collect, monitor, and analyze energy usage data to minimize energy consumption.

Figure 6: Reducing Energy Consumption Costs

53%

37% 32% 37%

31%

23% 24% 29%

19%

12% 13% 12%

0%

30%

60%

Energy usage data is monitored and

collected at equipment level

Asset data utilized to minimize energy

consumption

Energy management integrated with the

overall asset management strategy

Executive level accountability to manage the success

of green initiatives BIC Industry Average Laggards

“JSW Group is associated with Al Gore's ‘The Climate Project.’ We have one of the greenest steel plants and many of our manufacturing processes are inherently green. In addition, from an IT

perspective, we are ensuring that all components, including the data center, are green.”

~ Madhukar Rajagopal, CIO JSW Steel Ltd

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Chapter Three:

Required Actions

Fast Facts

Best in Class manufacturers are:

√ Two-times more likely to standardize processes for measuring KPIs across the enterprise

√ Two-times more likely to use Lean principles to manage maintenance operations

√ 1.5-times more likely to integrate mobile deices with asset management systems

√ 30% more likely to utilize mobile device to initiate work order without going back to workstations Whether a company is trying to move its performance in EAM from Laggard

to Industry Average, or Industry Average to Best-in-Class, the following actions will help spur the necessary performance improvements:

Laggard Steps to Success

• Transition from a break-fix approach for asset management to a predictive approach by establishing continuous improvement teams with a focus on condition and reliability centered maintenance activities. Best-in-Class manufacturers are two-times more likely to establish such teams.

• Standardize processes for maintenance and reliability as well as monitoring equipment status across the enterprise. This will enable Laggards to capture best practices for asset management across different plants and scale it across the enterprise.

• Establish support from the executive management for asset management initiatives. Best-in-Class companies are nearly 50%

more likely to get executive sponsorships for asset management programs.

• Invest in analytics, dashboards, and alarm management tools to improve visibility into production and asset performance across the enterprise. The Best-in-Class are more likely than Laggards to adopt the aforementioned tools.

Industry Average Steps to Success

• Utilize data and process modeling capabilities to automate workflows and interoperate between technologies. The Best-in- Class are 75% more likely to invest in such capabilities than Industry Average manufacturers.

• Establish cross functional teams between production, maintenance, and engineering to foster collaboration among these departments and establish a corporate culture of reliability.

• Invest in EAM solutions and establish real-time interoperability between EAM and ERP solutions. The Best-in-Class are 40% more likely than Industry Average manufacturers to invest in EAM solutions and establish interoperability with ERP.

Best-in-Class Steps to Success

• Invest in advanced maintenance capabilities such as Reliability Centered Maintenance (RCM). Currently only 40% of Best-in-Class manufacturers have adopted RCM. This is an important capability

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for Best-in-Class manufacturers to retain their higher operational performance.

• Empower maintenance employees with mobile devices that are integrated with asset management solutions. Adoption of mobility solutions for asset management will reduce error because of manual data entry during routine operator rounds and will enable

employees to initiate work orders without going to their workstations.

• Establish strategies to reduce energy consumptions costs. This includes collecting and monitoring energy usage data at the equipment level and using that data to minimize energy consumption. Best-in-Class manufacturers should also include energy management initiatives with the overall asset management strategy.

Aberdeen Insights — Summary

Manufacturing companies are facing increasing pressure to maximize RoA and reduce risks due to failure of critical assets. To address these

pressures Best-in-Class manufacturers are taking a holistic approach by taking asset management to an enterprise level.

Best-in-Class manufacturers are adopting predictive maintenance capabilities, improving visibility into production and asset performance, establishing executive sponsorship as well as cross functional teams on the plant floor, investing in EAM solutions, and are closing the loop by establishing real-time interoperability with ERP systems.

All these steps are critical for Best-in-Class companies to realize 16%

higher Overall Equipment Effectiveness (OEE), 22% higher plant throughput, and 31% lower asset downtime as compared to Laggards.

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Appendix A:

Research Methodology

Study Focus

Responding manufacturing executives completed an online survey that included questions designed to determine the following:

√ The pressures driving their focus on enterprise asset management

√ The structure and effectiveness of existing technology implementations

√ Top technology enablers adopted to facilitate

enterprise asset management

√ The benefits, if any, that have been derived from

technology adoption and integration

The study is aimed to identify emerging best practices for enterprise asset management across the industry, and to provide a framework by which readers could assess their own capabilities

Between April and June 2008, Aberdeen examined the use, the experiences, and the intentions of more than 160 manufacturing executives across different industry verticals regarding their asset management capabilities.

Aberdeen supplemented this online survey effort with interviews with select survey respondents, gathering additional information on asset management strategies, experiences, and results.

Responding enterprises included the following:

• Job title / function: The research sample included respondents with the following job titles: CxO or President (9%); Vice-President (5%);

Director (9%); Manager (39%), Staff (16%), Consultant (16%), and other (5%).

• Industry: The research sample included respondents from

automotive (15%); chemicals (15%); oil and gas (14%); utilities (8%);

food and beverage (8%); industrial equipment manufacturing (8%) and energy (7%).

• Geography: The majority of respondents (56%) were from North America. Remaining respondents were from the Asia-Pacific region (14%), Europe (18%) and Middle East, Africa (10%).

• Company size: Forty-seven percent (47%) of respondents were from large enterprises (annual revenues above US $1 billion); 27% were from midsize enterprises (annual revenues between $50 million and

$1 billion); and 26% of respondents were from small businesses (annual revenues of $50 million or less).

• Headcount: Fifty-three percent (53%) of respondents were from large enterprises (headcount greater than 1,000 employees); 26%

were from midsize enterprises (headcount between 100 and 999 employees); and 31% of respondents were from small businesses (headcount between 1 and 99 employees).

Solution providers recognized as sponsors were solicited after the fact and had no substantive influence on the direction of this report. Their

sponsorship has made it possible for Aberdeen Group to make these findings available to readers at no charge.

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Table 4: The PACE Framework Key

Overview

Aberdeen applies a methodology to benchmark research that evaluates the business pressures, actions, capabilities, and enablers (PACE) that indicate corporate behavior in specific business processes. These terms are defined as follows:

Pressures — external forces that impact an organization’s market position, competitiveness, or business operations (e.g., economic, political and regulatory, technology, changing customer preferences, competitive) Actions — the strategic approaches that an organization takes in response to industry pressures (e.g., align the corporate business model to leverage industry opportunities, such as product / service strategy, target markets, financial strategy, go-to-market, and sales strategy)

Capabilities — the business process competencies required to execute corporate strategy (e.g., skilled people, brand, market positioning, viable products / services, ecosystem partners, financing)

Enablers — the key functionality of technology solutions required to support the organization’s enabling business practices (e.g., development platform, applications, network connectivity, user interface, training and support, partner interfaces, data cleansing, and management)

Table 5: The Competitive Framework Key

Overview The Aberdeen Competitive Framework defines enterprises as falling into one of the following three levels of practices and performance:

Best-in-Class (20%) — Practices that are the best currently being employed and are significantly superior to the Industry Average, and result in the top industry performance.

Industry Average (50%) — Practices that represent the average or norm, and result in average industry

performance.

Laggards (30%) — Practices that are significantly behind the average of the industry, and result in below average performance.

In the following categories:

Process — What is the scope of process standardization? What is the efficiency and effectiveness of this process?

Organization — How is your company currently organized to manage and optimize this particular process?

Knowledge — What visibility do you have into key data and intelligence required to manage this process?

Technology — What level of automation have you used to support this process? How is this automation integrated and aligned?

Performance — What do you measure? How frequently? What’s your actual performance?

Table 6: The Relationship Between PACE and the Competitive Framework PACE and the Competitive Framework – How They Interact

Aberdeen research indicates that companies that identify the most influential pressures and take the most transformational and effective actions are most likely to achieve superior performance. The level of competitive performance that a company achieves is strongly determined by the PACE choices that they make and how well they execute those decisions.

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Appendix B:

Related Aberdeen Research

Related Aberdeen research that forms a companion or reference to this report include:

• Risk Mitigation in Manufacturing Operations; March 2008

• Event Driven Manufacturing Intelligence: Creating Closed Loop Performance Management; May 2008

• Manufacturing Operations Management: The Next Generation of Manufacturing Systems; January 2008

• Ground Up Strategies for Asset Performance Management;

September 2007

• Manufacturing IQ: Taking Manufacturing Intelligence to the Enterprise; July 2007

• Benchmarking Enterprise Asset Management; June 2007

• Collaborative Asset Maintenance Strategies, December 2006

• Driving Enterprise Performance with Asset Information, July 2006

• The Asset Management Benchmark Report : Moving Toward Zero Downtime, April 2006

Information on these and any other Aberdeen publications can be found at www.Aberdeen.com.

Author: Matthew Littlefield, Research Analyst, Manufacturing, [email protected]

Mehul Shah, Research Analyst, Manufacturing, [email protected]

Since 1988, Aberdeen's research has been helping corporations worldwide become Best-in-Class. Having benchmarked the performance of more than 644,000 companies, Aberdeen is uniquely positioned to provide organizations with the facts that matter — the facts that enable companies to get ahead and drive results. That's why our research is relied on by more than 2.2 million readers in over 40 countries, 90% of the Fortune 1,000, and 93% of the Technology 500.

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