Asset analysis: The forgotten ROI from your CMMS
It’s one thing to use CMMS to manage everyday work orders and preventive maintenance schedules of assets/equipment.
It’s one thing to use CMMS to manage everyday work orders and preventive maintenance schedules of assets/equipment. CMMS can also help better plan for capital expenditures as upcoming budget cycles approach.
That’s where asset life cycle analysis (ALCA) comes into play. ACLA is a macro approach to examining critical data for all assets to help grade each asset and make informed “replace vs. repair” decisions. An “A” is the top grade and an “F” is failing, just like in school.
By capturing day-to-day operation information for predictive maintenance, work orders, and other sources, and crunching the data using ALCA, CMMS users are also better equipped to differentiate good vendors from bad and evaluate PM effectiveness, which contributes to a better ROI.
Consider the following example:
The general manager of a recycling plant asks her directors to submit capital budgets by month end closing. The director of operations starts filling a spreadsheet with equipment he projects will need to be replaced primarily due to the age of each asset. He enters air conditioning unit two because it’s the oldest AC in the building. But identifying equipment that may be taking up more repair time is harder to track and requires more research.
Under the same scenario, the director of operations uses ALCA to grade equipment in question. A boiler unit that has been in use for only 5 years regularly fails because of short-term overheating. However, the antique AC unit on the roof has had only routine maintenance repairs despite its age, and can go another year without replacement.
Using ACLA, key performance indicators derived from PM and WO processing, labor, outsourcing repairs, and other data can help shift capital spending from replacing older assets to replacing frequently malfunctioning assets that incur heavy repair costs. And the director submits a budget that saves significantly on capital expenditures.
ACLA typically “grades” maintained equipment on three critical factors: age, frequency of failure, and rising/falling costs factors. The AC, although 8 years past its expected life, shows a steady or even decreasing frequency of failure, with a steady or decreasing maintenance cost. The boiler unit, although newer, shows more frequent failures and high maintenance costs.
Asset evaluation (including possible replacement) based on age alone is not a fair assessment. By taking into account frequency of failure as well as associated maintenance costs, selecting the most critical assets to replace or repair is much more reliable. With people and dollar resources so precious in today’s world, ALCA can make for a quick ROI in an area often overlooked when implementing a CMMS solution.