how to establish a measurable roi from implementing ibm maximo asset management mountain west maximo...

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


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


Benefits of Implementing Maximo


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


Maximo Output Data Converted into Metrics


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!


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


• 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


Improvements Utilizing a CMMS


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

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


Maximo Project Costs (PC)• Software, Hardware and associated Licenses

• Data Input and Configuration

• Initial Installation and Training

• IT, Engineering and Technician Support


Measuring Project Costs (PC)


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 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


Developing the Business Case

A 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


Estimating Cost Benefits (CB) for a Business Case


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 Cost Benefits (CB) for Actual ROI

MaximoSystem Install


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 Actual Payback and ROI


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


Summary


Measuring ROI from Implementing Maximo• Same standard formula used in any business case. • Not Complicated

Cost Benefits (CB) – Project Costs (PC)


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

mailto:[email protected]

mailto:[email protected]

http://www.genesissolutions.com/

how to establish a measurable roi from implementing ibm maximo asset management mountain west maximo...

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