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How to Establish a Measurable ROI from Implementing IBM Maximo Asset Management
Mountain West Maximo User GroupMonday, August 3rd, 2015
Created by Leon ReedPrincipal Reliability ConsultantGenesisSolutions
POC: Bill ThompsonDirector, APO Marketing Communications
Systems& Technology
AssetReliability
Strategy& Process
22A Fully Integrated Global EAM Service Provider
Computerized Business Intelligence System for Profitable Asset Management• Payback Achieved from Utilizing Output Data Converted into Metrics for
Cost Analytics and Measuring Reliability Improvements
Objective
• Eliminate Waste
• Reduce Variation
• Reduce Costs
• Improve Safety and Environment
• Increase Profit Margins
• Remain Competitive
Measuring ROI from Implementing Maximo
Benefits of Implementing Maximo
Insanity: doing the same thing over and over again and expecting different results.
-Albert Einstein
33A Fully Integrated Global EAM Service Provider
Reliability Excellence • Achieved Through Proactive Asset Management
• Final Frontier for Improving Thinning Profit Margins in Mature Industries
• Maximo • Automates Asset Management
• Central Repository for Asset Management Data
• Business System for Managing Work, Inventories, and Maintenance Resources
• Intelligence gathering system for making vital and cost effective business decisions for your organizations
Measuring ROI from Implementing Maximo
Benefits of Implementing Maximo
44A Fully Integrated Global EAM Service Provider
Maximo Reliability Analytics• Scorecards
• Performance Charts
• Key Performance Indicators
• Failure Analysis
• Cost Analysis
Implementing a “Best in Class” CMMS/EAM System in an absolute necessity for an industry today to achieve World Class Reliability and Operational Excellence
Measuring ROI from Implementing Maximo
Maximo Output Data Converted into Metrics
55A Fully Integrated Global EAM Service Provider
Average Percentages of Improvements• Asset Management Cost Reduced by 12% to 18% Avg.
• According to US Department of Labor
• Above 30% in Extremely Reactive Industries
• Inventory Optimization Cost Reductions up to 20% Avg.
• Reduced Overtime Costs by 15% to 20% Avg.
• Production Throughput Increase of 10% – 18% Avg.
• Extended Life of Assets up to 22% Avg.
• Maintenance Labor Utilization Improvement – 57% Avg. with Planning and Scheduling
• Improved Reduction of Environmental and Safety Incidents with Lost Time Accidents by 20% Avg.
Sounds Fantastic. Will These Numbers Impress your Leadership into Committing to Maximo? Probably Not!
Measuring ROI from Implementing Maximo
Improvements Utilizing a CMMS
EXTENDED ASSET LIFE
REDUCED INVENTORY COSTS
LOWER OPERATING COSTS
REDUCED OVERTIME
INCREASED PRODUCTION
IMPROVED SAFETY/EN-VIRONMENTAL
IMPROVED LABOR UTI-LIZATION
66A Fully Integrated Global EAM Service Provider
• Beware of the simple percentages, average gains and ambiguous industry claims• Communicate in a language Leadership understands• Extrapolate definitive percentages specific to your reality into estimated or actual costs• Culminate in Annual ROI, Payback Period, Increase in Profit Margin
• Estimated ROI• Benefit and Project Costs estimation to Justify Funding and Implementing Maximo
• Actual ROI• Actual Benefit and Project Costs derived from Maximo and Business metrics after
implementation
Measuring ROI from Implementing Maximo
Improvements Utilizing a CMMS
77A Fully Integrated Global EAM Service Provider
Measuring ROI from Implementing Maximo• ROI results of total benefits received against total costs of implementing the project • Same standard formula used in any business case.
Cost Benefits (CB) – Project Costs (PC)
Measuring ROI from Implementing Maximo
Measuring ROI
Project Costs (PC)ROI% = X 100
• Once these costs and ROI are quantified, payback period and profit margin impact can be determined.
How do we determine Cost Benefits and Project Costs ?
ROI% = X 100 CB – PC PC
OR
88A Fully Integrated Global EAM Service Provider
Maximo Project Costs (PC)• Software, Hardware and associated Licenses
• Data Input and Configuration
• Initial Installation and Training
• IT, Engineering and Technician Support
Measuring ROI from Implementing Maximo
Measuring Project Costs (PC)
99A Fully Integrated Global EAM Service Provider
Maximo Cost Benefits (CB)• Increased Asset Life
• Increased Productivity
• Reduced Downtime
• Optimized Inventory Levels
• Reduced Overtime
• Increased Purchasing Efficiency
• Optimized Labor Utilization
• Costly Bad Actor Identification and Cost Mitigation
Measuring ROI from Implementing Maximo
Measuring Cost Benefits (CB)
1010
What is “Your” Estimated ROI?
Estimated ROI is from Estimated Benefit and Project Costs to Justify Funding and Implementing Maximo
• Develop solid business case cost estimation
• Obtain real “current state” cost numbers for your specific industry or facility
• Adjust implied estimated benefits and percentages to match the realities
• Once Quantified, Total Sum of Estimated Cost Benefits and Estimated Project Costs Plugged into ROI Formula
• Determine estimated ROI and estimated payback time
• Improvement Impact on the Bottom Line
• Estimated increase in Profit Margins
Measuring ROI from Implementing Maximo
Developing the Business Case
A Fully Integrated Global EAM Service Provider
1111A Fully Integrated Global EAM Service Provider
Maximo Cost Benefits (CB) for a Business Case
• Extended Asset Life• [Actual Asset Costs or Replacement Asset Value (RAV) /Expected Life (Years)] X [Est. % Extension/100] = Cost Savings/Yr.
• Reduced Downtime - Increased Productivity From Improved Equipment Availability• [Average Production Output /Yr.] X [Est. % Equipment Availability Increase/100] X [Profit/Unit] = Est. Profit Increase/Yr.
• Reduced Overtime• Annual Overtime Costs/Dept. X [Est % Reduction/100] = Annual Overtime Costs Savings/Dept.
• Increase Purchasing Efficiency• Automated Vendor Management, Automated Purchasing of PM Spare Parts and Inventory - 250.00 avg. cost per manual PO.
• Optimized Inventory Levels• Total Inventory Cost x [Est % Reduction/100] = Inventory cost savings
• Optimized Labor Utilization• Annual Maintenance Labor Cost X [Est. % Efficiency Reduction/100 = Annual Labor Cost Savings
Measuring ROI from Implementing Maximo
Estimating Cost Benefits (CB) for a Business Case
1212A Fully Integrated Global EAM Service Provider
What is “Your “ Actual ROI • Increased Asset Life
• Increased Productivity
• Reduced Downtime
• Optimized Inventory Levels
• Reduced Overtime
• Increased Purchasing Efficiency
• Optimized Labor Utilization
• Costly Bad Actor Identification and Cost Mitigation
Measuring ROI from Implementing Maximo
Measuring Cost Benefits (CB) for Actual ROI
MaximoSystem Install
1313A Fully Integrated Global EAM Service Provider
What is “Your “ Actual ROI • Achieved and Measured from Actual Maximo Project Implementation Costs and Cost
Benefits
• Utilizing Actual Maximo Output Data from Equipment Downtime, Labor Costs, Failure Data, Equipment Availability, etc.
• Measured from Actual Business Metrics Relative to the Maximo Implementation
• Converted into Metrics Measuring Reliability Improvements for Cost Analytics
• Total Summation of Actual Cost Benefits and Project Costs are Plugged into ROI Formula
• Determine Actual ROI and Actual Payback Period
• Improvement of Actual Impact to the Bottom Line and an increase in Profit Margins
“True Payback in Proactive Asset Management for a CMMS/EAM system is made when Reliability Excellence is achieved from converting the output data into metrics for executing Performance Analytics, Cost Analysis and Statistical Reliability Analysis for increasing profit margins and reducing safety incidents”.
Measuring ROI from Implementing Maximo
Measuring Actual Payback and ROI
1414A Fully Integrated Global EAM Service Provider
Begin with the End in Mind• Stephen Covey’s 2nd Law• Seasoned Reliability Engineers are needed for CMMS Implementations• Manage system integration to foundational key elements for proactive asset management • Ensures definitive configurations for correct output data
• Accurate metric conversions to perform analytics
Desired Maximo Report Function Improvements• Improved Number Crunching using custom defined historical data criteria• Fed into a independent configurable Maximo Metrics
Module • Conversion outputs to KPI’s, Scorecards and Dashboards
• Selection of user defined graphical displays• Custom legends, backgrounds and colors
• Saved to a report query with custom print functions
Measuring ROI from Implementing Maximo
Summary
1515A Fully Integrated Global EAM Service Provider
Measuring ROI from Implementing Maximo• Same standard formula used in any business case. • Not Complicated
Cost Benefits (CB) – Project Costs (PC)
Measuring ROI from Implementing Maximo
Conclusion
Project Costs (PC)ROI% = X 100
Determining accurate Estimated and Actual Cost Benefits (CB) will be paramount for achieving success in establishing a Measurable ROI from Implementing Maximo
Bill Thompson – [email protected](203) 431-0281 – [email protected]
www.GenesisSolutions.com
ROI% = X 100 CB – PC PC
OR