How to Establish a
Measurable ROI from
Implementing
IBM Maximo Asset
Management
Mountain West Maximo User Group
Monday, August 3rd, 2015
Created by Leon Reed
Principal Reliability Consultant
GenesisSolutions
Asset
Reliability
Systems
& Technology
Strategy
& Process
POC: Bill Thompson
Director, APO Marketing Communications
Measuring ROI from Implementing Maximo
Benefits of Implementing Maximo
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
Insanity: doing the same thing over and
over again and expecting different results.
-Albert Einstein
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Measuring ROI from Implementing Maximo
Benefits of Implementing Maximo
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
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Measuring ROI from Implementing Maximo
Maximo Output Data Converted into Metrics
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
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Measuring ROI from Implementing Maximo
Improvements Utilizing a CMMS
Average Percentages of Improvements
•
Asset Management Cost Reduced by 12% to 18% Avg.
•
According to US Department of Labor
EXTENDED ASSET LIFE
REDUCED INVENTORY
COSTS
LOWER OPERATING COSTS
•
Above 30% in Extremely Reactive Industries
REDUCED OVERTIME
•
Inventory Optimization Cost Reductions up to 20% Avg.
•
Reduced Overtime Costs by 15% to 20% Avg.
INCREASED PRODUCTION
•
Production Throughput Increase of 10% – 18% Avg.
IMPROVED
SAFETY/ENVIRONMENTAL
•
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.
IMPROVED LABOR
UTILIZATION
Sounds Fantastic. Will These Numbers Impress your Leadership into
Committing to Maximo? Probably Not!
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Measuring ROI from Implementing Maximo
Improvements Utilizing a CMMS
•
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
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Measuring ROI from Implementing Maximo
Measuring ROI
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.
ROI% =
Cost Benefits (CB) – Project Costs (PC) X 100
Project Costs (PC)
OR
ROI% = CB – PC X 100
PC
• 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 ?
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Measuring ROI from Implementing Maximo
Measuring Project Costs (PC)
Maximo Project Costs (PC)
• Software, Hardware and associated Licenses
• Data Input and Configuration
• Initial Installation and Training
• IT, Engineering and Technician Support
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Measuring ROI from Implementing Maximo
Measuring Cost Benefits (CB)
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
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Measuring ROI from Implementing Maximo
Developing the Business Case
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
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Measuring ROI from Implementing Maximo
Estimating Cost Benefits (CB) for a Business Case
Maximo Cost Benefits (CB) for a Business Case
•
Extended Asset Life
•
•
Reduced Downtime - Increased Productivity From Improved Equipment Availability
•
•
Automated Vendor Management, Automated Purchasing of PM Spare Parts and Inventory - 250.00 avg. cost per manual PO.
Optimized Inventory Levels
•
•
Annual Overtime Costs/Dept. X [Est % Reduction/100] = Annual Overtime Costs Savings/Dept.
Increase Purchasing Efficiency
•
•
[Average Production Output /Yr.] X [Est. % Equipment Availability Increase/100] X [Profit/Unit] = Est. Profit Increase/Yr.
Reduced Overtime
•
•
[Actual Asset Costs or Replacement Asset Value (RAV) /Expected Life (Years)] X [Est. % Extension/100] = Cost Savings/Yr.
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
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Measuring ROI from Implementing Maximo
Measuring Cost Benefits (CB) for Actual ROI
What is “Your “ Actual ROI
• Increased Asset Life
• Increased Productivity
Maximo
System
Install
• Reduced Downtime
• Optimized Inventory Levels
• Reduced Overtime
• Increased Purchasing Efficiency
• Optimized Labor Utilization
• Costly Bad Actor Identification and Cost Mitigation
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Measuring ROI from Implementing Maximo
Measuring Actual Payback and ROI
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”.
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Measuring ROI from Implementing Maximo
Summary
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
•
•
Selection of user defined graphical displays
•
•
Conversion outputs to KPI’s, Scorecards and Dashboards
Custom legends, backgrounds and colors
Saved to a report query with custom print functions
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Measuring ROI from Implementing Maximo
Conclusion
Measuring ROI from Implementing Maximo
•
Same standard formula used in any business case.
•
Not Complicated
ROI% =
Cost Benefits (CB) – Project Costs (PC) X 100
Project Costs (PC)
OR
ROI% = CB – PC X 100
PC
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
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