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© 2001 Net Results Inc. Return on Investment Measuring the MAXIMO ® ROI.

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Presentation on theme: "© 2001 Net Results Inc. Return on Investment Measuring the MAXIMO ® ROI."— Presentation transcript:

1 © 2001 Net Results Inc. Return on Investment Measuring the MAXIMO ® ROI

2 © 2001 Net Results Inc. Net Results: Doing Business In Africa Europe Middle East North America South America United Kingdom Africa Europe Middle East North America South America United Kingdom

3 © 2001 Net Results Inc. Net Results: Doing Business With Aerospace Automotive Consumer Products Electric, Water and Gas Utilities Facilities Management Food & Beverage Government & Military Industrial Distribution Oil and Gas Production and Refining Specialty Chemical Telecommunications Aerospace Automotive Consumer Products Electric, Water and Gas Utilities Facilities Management Food & Beverage Government & Military Industrial Distribution Oil and Gas Production and Refining Specialty Chemical Telecommunications

4 © 2001 Net Results Inc. Why Invest in Information Technology Better InformationBetter Information …improved decision making Improved ServiceImproved Service …process information faster - 24x7 Increased ProductivityIncreased Productivity …do more in less time Competitive AdvantageCompetitive Advantage …our customers prefer us!

5 © 2001 Net Results Inc. Why MAXIMO ® ? Why did you or would you buy MAXIMO ® ?Why did you or would you buy MAXIMO ® ? Here is what we hear?Here is what we hear? –We need a system –Needed to issue and track work orders –We dont know what we are spending and where we are spending it –Wanted to replace our old system –Cant get any support from IT on our legacy system –What do you mean… Why MAXIMO ® ?

6 © 2001 Net Results Inc. Ultimately what are we trying to do? RevenueRevenue CostsCosts RiskRisk

7 © 2001 Net Results Inc. MAXIMO ® Impact Areas Salable Capacity RevenueSalable Capacity Revenue Labor CostsLabor Costs Materials CostsMaterials Costs Asset Life CostsAsset Life Costs Risk Revenue & CostsRisk Revenue & Costs Opportunity Costs Revenue & CostsOpportunity Costs Revenue & Costs

8 © 2001 Net Results Inc. MAXIMO Impact on Operating Statements Operating Statements Strategic MRO Big Six Income Statement Balance Sheet Cash Flow Statement 1.Asset Life ± Operating Expense 0 Property, Plant, and Equipment 0 Accumulated Depreciation 0 Depreciation ­ CAPEX 2.Saleable Capacity + Incremental EBIT + Accounts Receivable + Accounts Payable + Inventory + Accounts Receivable + Accounts Payable 3.Labor ­ Operating Expense + Incremental EBIT + CASH + Net Income 4.Materials ­ Operating Expense + Incremental EBIT + CASH ­ Inventory + Net Income ­ Inventory 5.Risk ­ Operating Expense + Incremental EBIT + CASH ­ Net Income 6.Opportunity Costs + Other Income + CASH ­ Accounts Payable ­ Short Term Debt ­ Long Term Borrowing + Cash Dividends (+) Increase, (–) Decrease, ( ±) Depends, (0) No Definable Effect

9 © 2001 Net Results Inc. Wisdom Knowledge of your current practices is GOOD.Knowledge of your current practices is GOOD. Knowledge of What you should or could be doing is GREAT.Knowledge of What you should or could be doing is GREAT. Knowledge of How to do What you need to do is VALUABLE.Knowledge of How to do What you need to do is VALUABLE. Doing it is PRICELESS!Doing it is PRICELESS!

10 © 2001 Net Results Inc. More Wisdom Knowing how much you spent last year is GOOD.Knowing how much you spent last year is GOOD. Knowing what you are going to spend next year is GREAT.Knowing what you are going to spend next year is GREAT. Knowing the cost drivers is VALUABLE.Knowing the cost drivers is VALUABLE. Positively impacting the cost drivers is PRICELESS!Positively impacting the cost drivers is PRICELESS!

11 © 2001 Net Results Inc. Next Year… I will need _____ electricians._____ electricians. to conduct _____ amount of planned maintenance activitiesto conduct _____ amount of planned maintenance activities _____ money for MRO materials._____ money for MRO materials. _____ money for maintenance services._____ money for maintenance services. to replace _____ assets because of their projected cost of operations.to replace _____ assets because of their projected cost of operations.

12 © 2001 Net Results Inc. Asset Management I will need 8 electricians because of expected asset demands I will conduct 7,500 planned maintenance tasks based on inspection results and analysis. I will spend $1.8 million based on MRO material consumption pattern, and inventory objectives. I will spend $500,000 based on smart planning and contractor management strategies I will spend 8% of my book asset value based or $1.6 million based on improved asset management Activity Management I will need 10 electricians because I have 10 on staff.I will need 10 electricians because I have 10 on staff. I will conduct 10,000 planned maintenance tasks according to my schedule.I will conduct 10,000 planned maintenance tasks according to my schedule. I will spend $2.5 million on MRO supplies based on last years buying practices and results.I will spend $2.5 million on MRO supplies based on last years buying practices and results. I will spend $750,000 in outside maintenance services per a general service agreement.I will spend $750,000 in outside maintenance services per a general service agreement. I will spend 10% of my book asset value or $2 Million in capital improvements.I will spend 10% of my book asset value or $2 Million in capital improvements. The Strategic MRO Imperative Activity v. Asset Management $1,600,000 $250,000 $150,000 $700,000 $250,000

13 © 2001 Net Results Inc. MRO Softwares Value Impact Assessment The VIA uses a systematic approach to extracting the value proposition of MAXIMO ® and Associated Technology.The VIA uses a systematic approach to extracting the value proposition of MAXIMO ® and Associated Technology. –Discovery Meeting –Pre-Assessment Activities –On-site Assessment –Report Generation and Presentation

14 © 2001 Net Results Inc. Demand Supply Compression (DSC) Goal To achieve the absolute economic advantage in the marketplace. $0 Total Cost of Operations time The DSC Goal is achieved by an intense focus on making an intense focus on making progress towards the progress towards the Future Perfect Objectives Future Perfect Objectives Only Produce Exactly What is Consumed in the Market Only Invest in Assets Necessary to Produce Exactly What is Consumed in the Market Only Invest in Assets that Never Fail over their Useful Life Achieve the Lowest Total Cost of Ownership (TCO) for all Assets Only invest in resources that enable the first four future perfect objectives Current State Better Practice Best Practice $$$ $$ $ Future Perfect Continuous Improvement Technology Interventions

15 © 2001 Net Results Inc. Value Impact Assessment The VIA follows the Strategic MRO, powered by DSC Guiding Principles.The VIA follows the Strategic MRO, powered by DSC Guiding Principles. –Define the Value Stream –Connect the Asset to the Value Stream –Connect Demand to the Asset –Connect Supply to Demand –Compress Demand Supply Connections

16 © 2001 Net Results Inc. Define the Value Stream UNIT Of VALUE Your company creates value. For example:Your company creates value. For example: –Water Company –Automotive Manufacturer –Mobile Telecommunications –Military Base Operations –Truck Load Freight Company –Chemical Company Your MAXIMO ® and Associated Technology Investments must advance the value creation of your organization. Period!Your MAXIMO ® and Associated Technology Investments must advance the value creation of your organization. Period!

17 © 2001 Net Results Inc. Plan Design Build Acquire Install Use Maintain & Repair Overhaul Dispose Connect the Asset to the Value Stream UNIT Of VALUE Plan Design Build Acquire Install Use Maintain & Repair Overhaul Dispose Asset Criticality Classes Asset Profiles Asset Portfolio Management Tracking Indirect Costs per Asset Labor Material Special Equipment Integrated to Accounting systems enables full financial planning Asset LifecycleTypes of AssetsMAXIMO ® Value

18 © 2001 Net Results Inc. Connect the Asset to the Value Stream UNIT Of VALUE Plan Design Build Acquire Install Use Maintain & Repair Overhaul Dispose Asset Lifecycle Asset Performance Forecasting and Tracking Availability Analysis Drives Supply Response Overall Equipment Effectiveness Supports TPM, RCM, ZBM initiatives Early Equipment Management Types of AssetsMAXIMO ® Value

19 © 2001 Net Results Inc. MAXIMO ROI In Connecting the Asset to the Value Stream we start by estimating the Total Cost of Ownership for an Asset. Knowledge of TCO and Availability Requirements is used to support target costing programs. The goal is to drive down possession costs. 10% TCO reduction for the asset in question. Lots of Assets to go!Lots of Assets to go! Ac Pu Po Di Ac Pu Po Di Purchase Price Acquisition Possession Disposal TCO $ A to VSVS

20 © 2001 Net Results Inc. Connect Demand to the Asset UNIT Of VALUE Plan Design Build Acquire Install Use Maintain & Repair Overhaul Dispose Asset Lifecycle Failure Modes: Safety/Env. Availability Quality Performance Cost MTTR Expectations v. Actual Reliability Analysis Real Time FMEA Asset DemandsMAXIMO ® Value All Failures Not Equal Asset Availability Requirements Frequency of Demand Sporadic vs. Chronic

21 © 2001 Net Results Inc. Connect Demand to the Asset UNIT Of VALUE Plan Design Build Acquire Install Use Maintain & Repair Overhaul Dispose Asset Lifecycle Demand Criticality Classification (ranking System) Real Time Performance Tracking CBM SCADA, DCS OEE Asset DemandsMAXIMO ® Value Proactive Demand vs. Reactive Demand Goal is to Extend Demand Lead Time for PM and CM

22 © 2001 Net Results Inc. MAXIMO ROI In connecting demand to the asset we attempt to increase Reliability to increase Availability (capacity), resulting in increased Earnings Potential Increased Reliability reduces cost of maintenance labor and MRO supplies. Ac Pu Po Di Ac Pu Po Di Purchase Price Acquisition Possession Disposal TCO $ A to VSVS Ac Po Di D to A Ea Earnings Pu

23 © 2001 Net Results Inc. Connect Supply to Demand - Labor UNIT Of VALUE Plan Design Build Acquire Install Use Maintain & Repair Overhaul Dispose Asset Lifecycle Matching Labor with Demand Location Hierarchies Crew Locations Repair Shops Matching Labor with Demand Job Plans Craft Designations Supply - LaborMAXIMO ® Value Labor Positioning To Asset To Labor Labor Skills Multi-skilling Autonomous Maintenance

24 © 2001 Net Results Inc. Connect Supply to Demand - Labor UNIT Of VALUE Plan Design Build Acquire Install Use Maintain & Repair Overhaul Dispose Asset Lifecycle Mobile Communications Smart Planning Asset Criticality Demand Criticality Geographic Density Skill Density Opportunity Maintenance Contractor Management Supply - LaborMAXIMO ® Value Labor Communications Real time Prioritization of Work Contractor Services

25 © 2001 Net Results Inc. Connect Supply to Demand - Materials UNIT Of VALUE Plan Design Build Acquire Install Use Maintain & Repair Overhaul Dispose Asset Lifecycle Warranty, Repair and rotating equipment tracking Inventory Availability Analysis Consumption Based ROP, ROQ Supply - MaterialsMAXIMO ® Value Consumables, Spares, and Repairs Strategy Stock v. Non-Stock Inventory Optimization

26 © 2001 Net Results Inc. Connect Supply to Demand - Materials UNIT Of VALUE Plan Design Build Acquire Install Use Maintain & Repair Overhaul Dispose Asset Lifecycle Stocking Locations and Materials tied to Asset and availability requirements IT Asset Management Three way match initiates AP transaction Supply - MaterialsMAXIMO Value Smart Storeroom IT Assets Smart Payment

27 © 2001 Net Results Inc. Connect Supply to Demand - Materials UNIT Of VALUE Plan Design Build Acquire Install Use Maintain & Repair Overhaul Dispose Asset Lifecycle Spend Analysis data through Asset Catalog Online Commerce Services Catalog Management Workflow Supply - MaterialsMAXIMO ® Value Strategic Sourcing Supply Transparency Order Fulfillment Decentralized Sourcing

28 © 2001 Net Results Inc. Connect Supply to Demand UNIT Of VALUE Plan Design Build Acquire Install Use Maintain & Repair Overhaul Dispose Asset Lifecycle Asset Portfolio data Replacement value Indirect Costs Safety/ Environmental findings OEE Tracking Connect to asset register in accounting system Asset ValueMAXIMO ® Value Condition Assessment Asset Disposal

29 © 2001 Net Results Inc. MAXIMO ROI In connecting supply to demand we attempt to reduce the TCO components associated with Labor and Materials Increased Earnings through improved availability Reduced labor through improved scheduling Material costs reduction through standardization, price reductions, reduction in consumption, reduction in minimum stock levels Ac Pu Po Di Ac Pu Po Di TCO $ A to VSVS Ac Pu Po Di D to A Ea Ac Pu Po Di S to D Ea Earnings Disposal Possession Purchase Price Acquisition

30 © 2001 Net Results Inc. Compress Demand Supply Connections UNIT Of VALUE Plan Design Build Acquire Install Use Maintain & Repair Overhaul Dispose Asset Lifecycle Asset Lifecycle Management Work Management MRO Supply Chain Management Better Information Improved Service Increased Productivity Competitive Advantage DSC Guiding PrinciplesMAXIMO Value Define the Value Stream Connect Assets to the Value Stream Connect Demand to the Asset Connect Supply to Demand – Labor & Materials Compress Demand Supply Connections

31 © 2001 Net Results Inc. MaterialsLabor Salable Capacity CAPEX Opportunity Costs Opportunity Costs Opportunity Costs 1235 RISK Opportunity Costs 4 High Level Practical Paths Forward

32 © 2001 Net Results Inc. Materials Asset Reliability 1 Demand Response 2 Reliability Centered Maintenance Total Productive Maintenance Design for Serviceability Zero Breakdown Maintenance Strategic Sourcing Line of Sight Procurement E-procurement E-catalogs Compression StrategiesValue DriverValue Impact Procurement Practices 4 Demand Driven Maintenance Asset Criticality Classifications Demand Criticality Classifications Demand Response Strategies Smart Planning and Scheduling Storeroom & Inventory Management 3 Smart Storeroom Consumption Driven Inventory Management Consumable, Spare, and Repair Designations Asset Based Inventory Purging Develop Detailed PPF - Materials

33 © 2001 Net Results Inc. Common Findings Salable Capacity / Mission CapacitySalable Capacity / Mission Capacity –1% - 5% increase in Salable Capacity if preventable downtime would have occurred. LaborLabor –10-20% reduction in maintenance labor straight time and overtime through improved scheduling techniques, failure reduction, integration with materials planning, and a formal contractor management process. –5%-50% reduction in production labor overtime due to improved maintenance practices. MaterialsMaterials –25% to 75% reduction in inventory investment through improved stocking and replenishment practices. –5% to 50% reduction in production related scrap and rework due to improved maintenance practices.

34 © 2001 Net Results Inc. Reasons Not to Trust ROI Results Based on Industry Benchmarks versus true understanding of existing processes.Based on Industry Benchmarks versus true understanding of existing processes. Assessor not grounded in realityAssessor not grounded in reality – engineering practices – maintenance practices – purchasing practices – distribution practices Lack of understanding of better and best practices and their applicability to your operations.Lack of understanding of better and best practices and their applicability to your operations. Unclear Adoption Strategy and RatesUnclear Adoption Strategy and Rates Slicing and dicing People without understanding true nature of their effortsSlicing and dicing People without understanding true nature of their efforts Unable to distinguish role of technology from process changes or leadership decisions.Unable to distinguish role of technology from process changes or leadership decisions.

35 © 2001 Net Results Inc. KitBa CAB Inc.

36 © 2001 Net Results Inc. KitBa CABs Value Stream The KitBa CAB plant is a stock production operation with 2001 sales estimated at $60 million.The KitBa CAB plant is a stock production operation with 2001 sales estimated at $60 million. The current product lifecycle is estimated at 10 years, before a significant model change is experienced.The current product lifecycle is estimated at 10 years, before a significant model change is experienced. All product sales are through distributors, thus KitBa CAB manufactures and ships to distributor stock.All product sales are through distributors, thus KitBa CAB manufactures and ships to distributor stock. The current distribution channel structure does not require the KitBa CAB operations to produce and deliver stock cabinets to specific consumer orders.The current distribution channel structure does not require the KitBa CAB operations to produce and deliver stock cabinets to specific consumer orders.

37 © 2001 Net Results Inc. KitBa CABs Stated Objectives Want to standardize asset management strategies and practicesWant to standardize asset management strategies and practices Want to develop a KitBa CAB Asset Management System that is deployable and certifiableWant to develop a KitBa CAB Asset Management System that is deployable and certifiable Want to standardize on supporting technology, i.e., CMMS – EAM?Want to standardize on supporting technology, i.e., CMMS – EAM? Implement Autonomous Maintenance where it makes senseImplement Autonomous Maintenance where it makes sense Integrate Asset Management Strategy with Lean/6 Sigma effortsIntegrate Asset Management Strategy with Lean/6 Sigma efforts Share maintenance best practicesShare maintenance best practices Lower cost of operations in response to market price pressuresLower cost of operations in response to market price pressures Improve manufacturing performanceImprove manufacturing performance Have spent considerable money on new assets want to do a better job at maintaining them.Have spent considerable money on new assets want to do a better job at maintaining them. Want to leverage MRO spendWant to leverage MRO spend Want to eventually connect to supply chain using e-commerce technologyWant to eventually connect to supply chain using e-commerce technology

38 © 2001 Net Results Inc. What to Do? Practical Path Forward MAXIMO ® technology uniquely aligns with Lean Enterprise and Six Sigma Initiatives.MAXIMO ® technology uniquely aligns with Lean Enterprise and Six Sigma Initiatives. –Guiding Principles –Future Perfect Objectives Lead Time ReductionLead Time Reduction Elimination of Waste and Non-Value Adding activitiesElimination of Waste and Non-Value Adding activities Cost ReductionCost Reduction Quality ImprovementQuality Improvement Variation Reduction – Asset PerformanceVariation Reduction – Asset Performance

39 © 2001 Net Results Inc. KitBa CAB Plant, Property, & Equipment AssetCost Accumulated Depreciation Book Value Property $352,096$106,628$245,468 Plant $3,990,072$922,708$3,067,364 Equipment $13,226,221$6,876,089$6,350,132 Computers, etc. $935,045$403,314$531,731 Total $18,503,434$8,308,739$10,194,695 The fixed asset turnover ratio, based on an estimated $60 million in sales, is $60,000,000/$10,194,694 = The industry ratio for NAICS code 337 Furniture & Related Product Mfg is This would suggest that KitBa CAB is producing value using less invested cost in its assets, and/or that its assets are older than the average of the industry.

40 © 2001 Net Results Inc. KitBa CAB Asset Cost Tracking

41 © 2001 Net Results Inc. KitBa CAB - Practical Path Forward Defining Critical AssetsDefining Critical Assets Managing Asset Profiles and PortfoliosManaging Asset Profiles and Portfolios Applying Asset StandardsApplying Asset Standards Doing it right the first time, every time!Doing it right the first time, every time!

42 © 2001 Net Results Inc. KitBa CABs Equipment Downtime & WO Statistics Plant 4 - Component Plant Equip. # Equipment Name Downtime Hrs Moldow dust collector Conv. finish line - general Conv. finish line oven Conv. finish line conveyor Dodds mortiser " Timesaver - door line E'static finish line - general Progressive tenoner # Torit dust collector # Northwood router New stickline Bacci mortiser # Costa panel sander Delle Vedove # #2 Torwegge Double End Tenoner Work Order Type Amount EMER Count 17 MISC Count 2 PM Count 19 PROJECT Count 6 REPAIR Count 30 SCHEDULED Count 4 Total78 #2 Torwegge Double End Tenoner Work Order Priority Amount Priority 1 63 Priority 2 7 Priority 3 8 Total78 Priority Total All 123 EMER Count MISC Count 2200 PM Count PROJECT Count 6501 REPAIR Count SCHEDULED Count 4310 Total Percentage of Total 80.8%9.0%10.3%

43 © 2001 Net Results Inc. KitBa CABs Practical Path Forward Demand Criticality ClassificationDemand Criticality Classification Failure Codes and Diagnostic InformationFailure Codes and Diagnostic Information Location and Asset-based Failure AnalysisLocation and Asset-based Failure Analysis TPM, ZBM, RCMTPM, ZBM, RCM Formal Asset Condition Assessment ProcessFormal Asset Condition Assessment Process Early Equipment ManagementEarly Equipment Management

44 © 2001 Net Results Inc. KitBa Cab Work Order Process & Results In FY02, KitBa CAB conducted 2,911 scheduled work orders, of which 1,737 were completed on time; for a performance level of 59.7%.

45 © 2001 Net Results Inc. KitBa CABs Practical Path Forward Proactive v. Reactive Strategy ManagementProactive v. Reactive Strategy Management Smart Planning and SchedulingSmart Planning and Scheduling Work Order AnalysisWork Order Analysis Mobile TechnologyMobile Technology Maintenance Practice ComplianceMaintenance Practice Compliance Technician Skill DevelopmentTechnician Skill Development

46 © 2001 Net Results Inc. KitBa CAB: Materials

47 © 2001 Net Results Inc. KitBa Cabs Practical Path Forward Strategic SourcingStrategic Sourcing Smart Storeroom ManagementSmart Storeroom Management Smart Inventory ManagementSmart Inventory Management Requisition & Purchase Order ProcessRequisition & Purchase Order Process Warranty TrackingWarranty Tracking Payment ProcessPayment Process

48 © 2001 Net Results Inc. Practical Paths Forward – KitBa CAB

49 © 2001 Net Results Inc. PPF Phases for KitBa CAB

50 © 2001 Net Results Inc. And the results are! Sec.Description Savings Estimates Total Year 1Year 2Year Smart Planning and Scheduling$0$200,565$601,695$802, MRO Supply Chain Management$115,965$413,295 $942, Smart Inventory Management$162,350$626,675$907,505$1,695,530 Total $278,315$1,240,535$1,922,495$3,441,345 Five Plant MAXIMO ® Proposal

51 © 2001 Net Results Inc. SAMM Strategic Asset Management Methodologies Services MRO Software

52 © 2001 Net Results Inc. Strategic MRO, powered by DSC Contact your MRO Software Service Provider or Contact us at – Phone:


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