Christopher J. Campbell, Robert Kaehler, and Anne Greco  |  08/01/2008

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Value-Based Equipment Management

From purchasing to maintenance, proper planning makes equipment management easier.

 

Manufacturing organizations that depend upon high levels of sophisticated equipment can benefit dramatically from a fully integrated value-based equipment management system. By understanding and capitalizing on several significant trends in equipment management, organizations can reduce overhead costs, reduce maintenance costs, and optimize equipment use.

Recent trends in equipment management include:

Broadening of business processes and related software tools to encompass the entire equipment life cycle

Enterprisewide deployment of integrated application solutions, as opposed to the “stovepipe” departmental systems typical of the past

A dramatic shift towards commercial off-the-shelf products vs. in-house custom software

 

Many leading organizations are aggressively addressing these three trends and implementing what is becoming known as a value-based equipment management system because the bottom-line financial benefits are sizable, return on investment is rapid, and numerous “soft” benefits also result.

When properly implemented, a value-based equipment management system and fully integrated business processes provide all levels of your organization, including engineering, metrology, production, and executive management, with crucial decision-making information. With modern businesses so heavily reliant on high-technology facilities and tools to be competitive, an organization that does not properly leverage modern equipment management principles will struggle to meet today’s business challenges, including:

Effective business support. Having the right equipment in the right place at the right time helps support lean manufacturing initiatives.

Regulatory compliance. Regulations and standards from bodies such as ISO/IEC, ANSI, SEC, DOD, DOE, NASA, OSHA, FDA, and FAA continue to grow more complex and stringent.

Dynamic business environment . Projects, equipment, and people are continuously evolving in response to market demands and management priorities.

 

Information integration

The key to successful value-based equipment management is an integrated system of capturing information. There are several dimensions of integration, each of which must be addressed in a comprehensive value-based equipment management system:

Vertical integration between active life-cycle functions, such as financial recordkeeping, physical tracking, and calibration management

Horizontal integration over the “time” axis as the equipment’s lifetime progresses from the planning and acquisition phase, to active use by the first owner, through various movement and service events, and eventually to redeployment or disposal

Organizational integration as many individuals, departments, and facilities across the enterprise are able to leverage the unified equipment-data repository and standardize equipment management business processes; this also implies that the common information system should be robust enough to handle all of the categories of assets, not necessarily calibrated gauges or instruments, but also general plant equipment, manufacturing tooling and fixtures, or computing (IT) equipment

 

The modern concept of the equipment management life cycle can be described as a continuous process and dynamic flow of information, as in the three dimensions of integration just described. In contrast to prior models, including two-dimensional “timelines” or static backroom record- keeping, the new equipment life-cycle continuum comprises all phases of the entire life cycle for all equipment, and does so in parallel with the strategic goals of the organization.

A value-based equipment management solution not only completely addresses each phase of the equipment life cycle, but also eliminates wasteful and error-prone duplication of data at the various stations in the life of each equipment item. Further, the ideal equipment management solution will play an active role in reducing expenses through screening of unnecessary equipment acquisitions and streamlining of equipment management business processes.

Planning and budgeting

Over time, as information is captured and reviewed, and the prior year’s budgets provide a baseline of information, the planning and budgeting phase becomes an integral tool in ensuring that equipment expenditures align with larger business priorities.

Value-based equipment management principles dictate that before new equipment is acquired, underutilized or available equipment must be identified and possibly transferred to where it’s needed, thus avoiding unnecessary capital expenditures.

In addition, forward visibility over equipment requirements affords better analysis of rent/lease vs. purchase decision factors. Without an integrated planning database, it’s too easy to make the mistake of renting a test instrument with the intent of returning it after a few days or weeks, but keeping it so long that it’s “paid for” many times over.

Procurement

When a new piece of equipment is procured, have the value-based equipment management system set to capture information directly through the purchase order, minimizing the time it takes to install new equipment into the system.

To ensure that the data maintain their accuracy over time, equipment organizations need to implement a structured equipment-cataloguing system. The equipment database, if properly managed, can be a tremendously valuable aspect of an organization. The key is the data itself, which must be normalized and maintained rigorously. By taking free-form asset descriptions and translating them into standardized manufacturer, model, number, and description formats, organizations will eliminate errors, inconsistencies, and confusion, ensuring that the right equipment is located each time a search is conducted.

Equipment tracking

Once the equipment arrives on site, the equipment-tracking solution will note the consumer information regarding the equipment as specified in the planning and procurement processes, and identify and begin tracking the equipment. Some organizations have stringent tracking process requirements for certain equipment (such as government, controlled, or customer property) that must be supported by electronic or hard-copy documentation of compliance with unique requirements.

At a minimum, an enterprise equipment-tracking system must provide basic fields and capabilities such as:

Nomenclature (i.e., manufacturer, model, and description)

Current physical location

Permanent assigned or pool location, if different from current

Current accountable custodian person and department

Complete set of view and search functions as well as data administration transactions, all running under user role and security control

The more robust information systems extend the basic capabilities in numerous other directions, for instance:

Ability to handle government/customer contract property and its unique data fields, procedures, and reporting requirements (as in Federal Acquisition Regulations Part 45)

Fixed-asset interface to carry depreciation, book value, etc. for company capital

Integral movement and shipping module to track multiple-item transportation activities with option to generate electronic or hard-copy traveler documents

Online life-cycle history to provide a perpetual “diary” showing all significant occurrences to each equipment item

Fields and screens to accommodate special requirements for tracking of manufacturing tooling, jigs, and fixtures.

 

Service management

Typically, at an enterprisewide level, only a fraction of the equipment tracked in an equipment management system requires calibration. This is one of the fundamental differentiators between value-based equipment management trends and conventional “stovepipe” models wherein stand-alone software packages track each category of equipment, often unique to a particular site or department in an organization. A value-based equipment management solution will account for this factor by applying a layering technique in which management or the financial department can perform basic asset accounting and tracking functions for a given equipment item, whether calibrated or not. At the same time, the metrology division can have exclusive control over calibration-related attributes and functions for the equipment for which it is responsible.

Essential service management capabilities include:

Seamless interface with tracking module

Ability to handle any type of work, not just calibration, but also repair, proof load, etc.

Flexible schedule engine that supports multiple recall schedules and service procedures per equipment item

Support for in-house as well as vendor-performed services

Real-time status tracking and externally defined (tabled) workflow logic for total visibility over jobs, equipment, technicians, and vendors

Table-driven validation of all crucial attributes, such as technician IDs, condition or result codes, accounting charge numbers, etc.

Unlimited, structured, comprehensive database (as opposed to free-form text notes), to capture labor, environmental test conditions, parts/materials used, standards traceability, readings data, etc.

 

More elaborate solutions incorporate features such as:

Integral service request and work backlog management tools, enabling self-service requests and status checks by equipment owners and end-users via the intranet

A procedures database where work instructions, time estimates, and various other details can be stored in a shared library for reference by various departments

Automatic generation of e-mail messages concerning recalls, delinquency, or out-of-tolerance notices

Interactive capture of detailed readings data, and automatic flagging and reporting of out-of-tolerance conditions

Interface to tool-crib or equipment-pool functions to support shelf-life dating

Hooks to support barcode scanners (e.g., receiving counter) or label printers

 

Maintenance

Performing preventive (vs. reactive) maintenance has been shown to reduce maintenance costs up to 50 percent, primarily because it is planned and executed in a structured manner. As a result of better maintenance, the equipment life cycle is extended, avoiding the cost of purchasing new equipment. By closely tracking maintenance and monitoring equipment, resources are not spent keeping up nonessential equipment. Of course, for mission-critical equipment that is within the measurement chain, periodic calibration or maintenance is absolutely crucial. A best-of-breed service- management package will enable tracking of various types of work, across multiple shops or labs, with a tremendous degree of flexibility.

Redeployment

One of the areas where manufacturers have seen the most astounding cost reductions is through intelligent redeployment of equipment. Organizations can review existing equipment before allocating funds for new equipment, or further optimize equipment use by incorporating an equipment pool generating reservations for when equipment is available for redeployment. Reservations can be categorized by user, department, project, or date span, to improve productivity and user satisfaction. Consolidating this planned-use matrix in an open community system enables better management visibility over production or engineering schedules vs. periodic calibration or planned maintenance recall requirements; in other words, equipment service or other business support activities can be rearranged to avoid disruption of crucial line-of-business work.

Implementing an equipment-pool rental model provides a cost-allocation mechanism to encourage continuous redeployment of general-purpose equipment. Categories or items of equipment are assigned a daily rental rate and then are checked out/in by users as needed. Because equipment-related costs are brought to the forefront of visibility by departmental management, instead of being buried in lump-sum “overhead” accounts, equipment users are encouraged to turn in unneeded equipment promptly so that it may be redeployed. Underutilized equipment is readily identifiable and items showing little or no usage or check-out activity during a specified time period may automatically be targeted for redeployment, trade-in, or resale on the open market.

Obviously, reallocating physical assets from one facility to another has a significant effect on capital expenditures. Another benefit that results is that the efficient redeployment of equipment from one location to another will make that resource available to the requesting location sooner than a new purchase.

Benefits

A comprehensive equipment management solution enables an organization to effectively manage and track physical assets and components, which will have a significant effect on operating expenses in addition to process improvement benefits such as:

Optimizing equipment utilization will reduce capital expenditures up to 20 percent annually.

Having the right equipment in the right place at the right time enables the organization to support lean manufacturing and minimize downtime.

Standardization of the equipment life-cycle management processes and equipment data attributes across multiple facilities will facilitate the sharing of calibration procedures or entire templates.

A comprehensive equipment management system will help ensure government/regulatory/corporate compliance.

Replacement of fragmented “stovepipe” applications for each equipment management life-cycle phase eliminates the duplication of data and wasted IT and administrative resources.

A more cohesive capital appropriation planning, budgeting, and approval process gives management advanced notice.

Normalization and integration of data reduces data entry, greatly improves integrity and accuracy, and enables easier comparisons of like equipment.

 

Conclusion

By applying equipment management methodology and process across all phases of the equipment life cycle--including the planning and budgeting, procurement, tracking, service management, and redeployment phases--organizations have the tools and business processes to provide everyone from the production foreman to the CEO with crucial decision-making information. This value-based equipment management strategy enables an organization to better track and manage physical assets and components, significantly affect operating expenses, and realize many intangible benefits, including the ability to respond quickly and intelligently to daily challenges in today’s dynamic, competitive business environment.

 

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About The Author

Christopher J. Campbell, Robert Kaehler, and Anne Greco’s default image

Christopher J. Campbell, Robert Kaehler, and Anne Greco

Christopher J. Campbell is the president and CEO of AssetSmart and has more than 15 years of direct experience building and implementing equipment management systems.

Robert Kaehler is the senior vice president of sales and marketing of AssetSmart and is a recognized futurist in asset and equipment management.

Anne Greco is the marketing manager of AssetSmart and has written and published articles in numerous fields of study.