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Capturing Real and Lasting Benefits from your Enterprise AssetManagement System

Robert Morgan

AdviCoach of Tennessee

Introduction

The goal of any Enterprise Asset Management project is to eliminate asset downtime which drives upcosts due to productivity loss. While software helps to achieve this by providing the capability to improvemaintenance schedules, increase uptime and enhance reliability and risk management policies, lack ofaccurate and timely data in your system results in most organizations unable to truly take advantage ofthe system. Providing master, referential and transactional data requires precise planning and execution.

Fully deploying an Asset Management System can lead to improvements in production, reduced costs,and greater profitability. Leveraging an eAM system requires a collaborative environment betweeninternal organizations and their suppliers. Any industry that relies upon capital equipment for productionmust focus on uptime/availability of that equipment to meet production schedules. Any unplanneddowntime disrupts schedules, costs money and delays on-time deliveries. An eAM system can becomethe cornerstone of the foundation for obtaining reliability of capital equipment and ultimately help thebusiness produce greater profits.

Completing a successful ERP project requires many activities to come together at just the right time. Oneaspect of the project that can become very problematic for process industries is the capture and loadingof data. This subject will be explored by reviewing the best practices performed by an aluminum industrygiant that enabled project management controls and data management controls to successfully completea large scale implementation on time.

Background of Alcoa, Inc.’s Primary Metals ERP Project

In 2001 Alcoa, Inc. embarked on an enterprise wide project to deploy the Oracle E-Business Suite (EBS)across all operating units in all regions of the globe where Alcoa had manufacturing operations. Alcoahad completed several acquisitions of other vertically integrated aluminum companies and needed to beable to align all operating units for better, faster reporting and decision making processes.

The Primary Metals business unit represented the core process of smelting operations that producedaluminum metal in various shapes and sizes in both pure and alloyed blends. Aluminum was consumedby downstream units of Alcoa that produced thousands of products serving many business sectorsincluding transportation, food and beverage packages, building materials, powders, electricalcomponents, etc.

The Primary Metals unit was partnered with mining and refining operations for extracting aluminum orefrom the earth’s surface and refining the ore into an alumina powder which becomes the principal rawmaterial for the aluminum smelting operations. This unit and the Primary Metals unit were joined toproduce a Global Primary Products business.

The smelting operation is a continuous activity of introducing alumina into “pots” where anelectrochemical process separates the aluminum particles forming molten aluminum. At set frequencies,the molten aluminum is tapped from the smelting pots and delivered to a casting operation to be weighed,graded, blended with other molten aluminum, alloyed and then cast into various shapes and sizes. Thenature of the manufacturing operations in the casting operation was a clear candidate for the OracleProcess Manufacturing module.

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The entire ERP project for Alcoa’s Primary Metals unit included 14 smelting sites in the US and Canadaand a single sales office and headquarters in Tennessee. An additional 10 smelters and 8 refineries arelocated around the world. Due to the aforementioned acquisitions, there were no standard businessprocesses for measuring equipment uptime, failures, planned vs. unplanned maintenance activities, etc.Processes from purchasing, plant maintenance, maintenance parts and materials, inventorymanagement, finished goods inventory control, shipping, invoicing, etc. were all performed with varioussystems and with various levels of controls.

The Oracle EBS was selected for Alcoa, Inc. and included nearly the full suite of enterprise applications:Financial, Order Management, Procurement, Inventory, Enterprise Maintenance, Planning, ProductionScheduling, Advanced Supply Chain Planning, plus other related solutions. Alcoa partnered with Oracleto define, build and test the first release of the eAM system.

Alcoa is considered a heavy industry with approximately 50% of the $39B assets (2010 annual report) inplant and equipment. Achieving a high level of equipment reliability and availability is a critical keyperformance measure. Alcoa depends upon an aggressive management process for maintaining plantand equipment and the eAM system is the foundation for achieving this goal. Operational readiness is acritical factor as is ensuring all planned and predicative maintenance is completed on schedule.Eliminating failures and reducing unplanned outages are the goals when optimizing productionoperations.

In addition, Alcoa carries over $1.5B in inventoried parts and supplies to keep these assets operating andbuys substantially more for maintenance activities. Linking eAM to the supply chain for optimalprice/performance and best practice processes is essential to managing at the lowest possible cost.

Why Deploy an eAM System with Integrated Supply Chain

Implementing a powerful maintenance system is the foundation for any business reaching for operationalexcellence and reliability. An asset maintenance system must be capable of defining equipment at thelowest level of maintainable components and parts. Identifying crucial parts on all equipment enablesaccurate bills of materials needed for any repair or replacement activity. It’s also important to be able toclassify the critical equipment in the operation to ensure spares or replacement parts are available ondemand.

Extending the life of capital assets is healthy for a profitable business as is ensuring the useful life meetsor exceeds the expected life of the assets. Poorly maintained assets will have a reduced life and/orexpensive repairs for avoidable breakdowns.

By planning and executing preventative maintenance activities, optimal asset life can be achieved andsustained. Simply replacing lubricants at the correct frequency can add years to the life of motors, shafts,engines, etc. and eliminate more costly replacements of expensive components.

Production output can be optimized, plant schedules can be met and customer deliveries can hit targetdates when production equipment runs when expected. Avoiding unplanned downtimes can eliminatescheduling failures.

There are many hidden costs associated with unplanned failures. Unplanned outages generally alwaysrequire unexpected maintenance activities. These activities can be overtime labor, expediting delivery ofparts that are not kept in inventory at escalated delivery fees, and pulling away from plannedmaintenance on other work to address unplanned activities. These costs can be 2-3x the cost of what therepair work could have been if it were done within planned maintenance work.

Reliability of operating equipment has become a critical metric for optimized plant operations. Byanalyzing well organized data from equipment maintenance histories, studying failed parts, measuringsuch items as MTBF “mean time between failures”, a skilled reliability engineer can predict part or

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component failures. In addition, by analyzing for the weakest point in a piece of hardware, the engineercan seek improved engineered solutions to eliminate the weak point. These efforts will always aim forreducing failures and increasing reliability.

Predictive maintenance and conditioned based monitoring will drive the scheduling of equipmentmonitoring activities such as vibration analysis and oil analysis and will result in timely adjustments oralignments to keep equipment operating within the desired operating parameters as defined by themanufacturer. Scheduling these “routes” will require equipment, trained personnel and appropriaterecording devices to capture readings for analysis.

Achieving the Goals of Equipment Optimization

An Enterprise Asset Management system that brings together the disciplines of maintenance, supplychain, finance and production is the only way to connect these components into real time data collection,analysis and decision making. The Oracle eAM of the e-business suite when deployed with procurement,inventory management, finance and a manufacturing system can effectively provide the right parts of theorganization together for achieving optimized equipment utilization.

A desired goal for support of the planned maintenance activities is to have the right part in the rightquantity available at the right time at the lowest possible price. The e-business suite can enable anorganization to achieve this goal.

The eAM system must be fully configured and enabled to serve to link the other business activities.Equipment BOM’s must be defined to the lowest possible level, each part must be defined in theinventory system – even if there are no on-hand quantities planned. Asset hierarchies, work conditioncodes, routes, etc. must all be planned and built for each level of maintenance, inspection, overhaul, etc.

Finally defining the appropriate Key Performance Indicators for maintenance activities will focus theactivities on work that drives the right behaviors. Maintenance managers will be focusing their time ondriving compliance on the right activities to obtain optimized equipment and reliability of the assets of thecompany.

Ready the People Systems

Implementing enterprise systems is as much about connecting people to process as it is aboutimplementing computer systems. In fact, installing systems is by far the easier task.

Maintenance personnel roles are growing and maturing to include learning to use analytical tools,measurement devices, re-engineering of critical equipment and monitoring for compliance. Planning andscheduling predictive and preventative maintenance to monitor equipment health are becoming thenormal activities. Less time should be spent on emergency breakdowns and unplanned outages asequipment reliability grows and planned maintenance activities are completed on schedule.

Reliability engineers are teaming with maintenance personnel to focus on eliminating weak links found oncritical production equipment.

Enable the Supply Chain Leverage

Supply Chain personnel can be the lifeblood of the maintenance team by implementing best practicesand finding reliable suppliers to hold required levels of needed parts and supplies. The Oracle e-businesssuite provides the ideal leverage to implement best business practices for supply chain execution.

The powerful features of the Oracle modules can create automated Supply Chain replenishment signalsdirectly from planned work orders to the supplier without the need for personnel in either inventorymanagement or purchasing to touch the signal!

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By putting control into blanket orders with annual contracts with suppliers, parts and price can be agreedupon annually. Each blanket order release can be sent to the supplier for fulfillment without pricenegotiations. Further, by enabling the auto-requisitioning of parts from work orders, a manual partsrequisition is automated. The auto-requested part is aligned with the blanket PO that has auto POenabled creating a direct order to the supplier. Therefore, a supplier PO is auto generated from plannedand released work orders. Signaling and review of auto generated transactions are available formanagement review as appropriate.

These are best business practices that can be implemented under well defined orders with key suppliers.All transactions are available for management review. The advantages are significant as time to writerequisitions is eliminated and the time to write individual PO’s for routine parts is also eliminated. Also,with supplier delivery performance metrics being measured and managed, holding parts in inventory canbe reduced and possibly eliminated releasing capital to the business.

Build Equipment Reliability Into Asset Management

Building reliability into operating equipment requires engineering skills, analyzing data collected fromfailures and designing components to obtain longer life.

Reliability engineers will generally study the failures of critical components of equipment by methodicallyseeking to discover the root cause of the failure. By carefully analyzing the root cause, the engineer candetermine if improper maintenance was a cause or if incidents contributed to failures, or if the equipmentdesign was a contributing factor. The root cause can then be studied for appropriate remedies and orredesign of component parts can eliminate the failures.

Another useful tool that reliability engineers may deploy is the study of failure frequencies, mean timebetween failures (MTBF) and probabilities of failures. Maintainability of critical components is anotherarea of interest to the engineer and may provide re-engineering alternatives to ensure propermaintenance can be written, executed and result in extending the useful life of the part.

Asset intensive companies that rely on critical equipment being available as expected must engage thestudies and findings of reliability engineers. A fully deployed eAM and well defined maintenancepractices will collect the necessary information for reliability engineers to perform a thorough analysis andmake appropriate recommendations.

Develop and Manage Key Performance Indicators

Defining, measuring, and communicating Key Performance Indicators (KPI’s) is a performancemanagement practice used to drive compliance with defined business requirements.

KPI’s can bring every stakeholder to the same assessment of measuring the effectiveness ofmaintenance practices. By selecting a few Key Performance Indicators, the entire team can rally arounddriving behaviors toward achieving the desired outcomes.

A few KPI’s implemented into the Alcoa maintenance area include:

1) Work Order cost vs estimates

2) Asset Down Time (Hours)

3) Planned vs Unplanned work (unplanned should be minimal)

4) PM’s completed on time (percentage)

5) Scheduled vs unscheduled work

6) Work completed on-time (percentage)

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Sharing Best Practices

Alcoa business units, though disparate, were provided opportunities to collaborate regarding bestmaintenance practices. By sharing like KPI’s, units were able to find leaders, learn from their lessons andadopt best practices across all the units. Recognition for outstanding achievements provided appropriateincentives. The results were to enable a global giant to move rapidly toward maintenance excellence.

Summary

Asset management requires a disciplined deployment and use of an asset maintenance system. Datamust be collected, stored and made available for analysis by maintenance supervisors and highly skilledengineers. By executing a well designed system of preventative maintenance, measuring key operatingcharacteristics, analyzing for shifts and taking appropriate actions, unplanned downtimes can beprevented. Equipment reliability can improve, equipment operations can be optimized, costs can becontrolled and profitability can be improved.

About the Author

Robert Morgan retired from Alcoa after 30 years predominately working in an IT management role.Robert led a successful deployment of the Oracle E-Business Suite for Alcoa’s Primary Metals businessunit. This project spanned 8 years, started as a North America initiative that later expanded to overseethe deployment of the same solution to Primary Metals units around the globe. Robert holds a BS degreein Business Management from Indiana University of Pennsylvania.

Upon retirement, Robert opened an AdviCoach business coaching franchise in Tennessee where headvises and coaches the owners of privately held, family owned businesses. It is through this venturethat Robert began coaching the owners of Chain-Sys, an Oracle Platinum Partner, that builds and sellslicensed software tools for the EBS market and provides implementation services to Oracle E-Businesscustomers to assist in the deployment of enterprise wide system solutions. Chain-Sys has developed andis marketing the AppLoad suite of tools that enables data loading to be streamlined and simplified.