Asset Management means different things across the enterprise. When it comes to plants, asset management means getting a higher return on investment for any plant-based assets. On the surface, asset management on the plant level does not seem to be a big deal. The authors present a very simple formula for calculating the return on plant assets: take the money spent maintaining the assets, subtract it from the money earned using the assets, and divide it by the money spent to buy the assets, and you have your "return on assets." But here's where it gets stickier: most plants have between 5,000 and 10,000 assets! The traditional approach of letting humans monitor the condition of assets fails when you have so many plant assets to monitor.

In the book, "Joan Bonhoffer," one of Mulcahy's "MBA Protégés," elaborates on the problem. "Some (assets) are in the critical path, like the equipment on the line or cooling pumps. Others, like a light bulb or the air conditioner in the break room, are not as critical. Just being aware of all this is the first challenge. Then you need to understand how to take care of it all and make sure that your plan allows you to produce what you need. It makes no sense to have beautifully maintained equipment if you aren't making money."

When I read this chapter, I looked at the return on asset equation and thought to myself, "That's easy - just decrease your maintenance costs and your return on assets goes up!" Of course, in practice, it's much more complicated. The "Asset Management" chapter outlines the different maintenance strategies companies can take. One useful way of looking at maintenance is to place all companies on a continuum of their plant maintenance sophistication, from the lowest level (totally reactive maintenance with no systems), to the higher levels (reliability-centered maintenance and financially optimized maintenance).

So what do the higher levels of maintenance look like? According to Joan Bonhoffer, "In theory, it's possible to develop a model that predicts when your light bulbs will fail. In practice, however, we simply maintain an enormous stock of light bulbs. This reduces the impact of failure and widens the window for maintenance. The downside is how it increases inventory cost." Bonhoffer goes on to acknowledge that light bulbs are not the main concern: the key is to identify the areas where failure is most costly.

The fictionalized executives in this chapter go on to discuss a salient point: can software help us to address these predictive asset management needs? As it turns out, there are more options for asset management software than ever before. Best of breed systems have become very sophisticated. In addition, ERP vendors now have their own asset management systems, often billed as EAM, or "Enterprise Asset Management." Not surprisingly, there is heated debate in the vendor community about whether the best of breed approach or the "extended ERP approach" is better. But for companies that are heavily invested in SAP, the appeal of integrating plant asset data with ERP reporting systems has to be high. In this case, you don't need a different identity to sign on to the asset management system; you can see all the costs tracked into the overall financial reporting, and the integrated workflow processes are all there for the ERP user.

Of course, integrated asset management systems from ERP vendors like SAP do have some downsides to ponder. Standardizing on one asset management system could pose problems for plants that have specific asset considerations that require a best-of-breed system. But the point is that the software has arrived where such decisions are possible.

No matter which asset management systems are chosen, the main message is that the software has reached the point where it can legitimately be called "advanced condition assessment systems," and as such, this software represents a major decision-making advance over "plain tribal knowledge," which is that walking around know-how that leaves the plant after the shift each day.

4. Energy Management in the Perfect Plant

Plant energy management has a "ripped from the headlines" sizzle. The results of good energy management can't be questioned either. At Sapphire 2008, Bernard Morneau of OSIsoft, a colleague of author J. Patrick Kennedy, presented the case of Kodak, which reported a plant energy savings of $21 million during the first 18 months of their new plant energy initiative.

So what are the keys to achieving this kind of success? Common sense dictates that energy management means the practice of conserving resources in order to reduce costs to the lowest level possible. The key to reducing energy costs is visibility, and the key to visibility is getting the right information at the right time to make more informed energy decisions.

So how do we get there? The technology is there, but simply ordering up the technology from the board room is not going to get it done. Energy management requires buy-in at every level of the company. Our fictional friend Joan Bonhoffer put it this way: "People must be able to correctly visualize how their actions correspond to the energy resources they consume, on a minute-by-minute basis. To do this, two things must happen: first, you have to give your people the means to affect their working lives. Second, you have to teach them to respect those means."

Bonhoffer cited the real life example of Kodak, and their successful attempt to link the desire to reduce waste at the plant level with the collective desire to reduce the "carbon footprint" of human society. "Kodak drove their effort to change the culture by taking every opportunity to remind their people how important the matter is to the plant's future, to the company's future, and to the earth's future as well," says Bonhoffer in the book. Kodak did this through a vast "winning and inclusive culture" initiative which included a range of communications channels, including posters, meetings, and the company intranet. Kodak really did succeed in their attempt to make each employee feel like their input on energy management made a difference.

But culture change is only one part of the puzzle. You also need a methodology for targeting and reducing energy costs. This starts by creating a "Energy Bill of Materials." This bill is a detailed list that tracks the exact amounts and types of energy used to create products in a specific time and place. You need to see that data in order to make informed decisions, and that means tracking energy at an increasing level of detail, and then sharing that information back with your (hopefully motivated) employees.

The book outlines four stages in energy management that companies can aspire to. At the move evolved (stage four) level, companies are getting feedback on production processes not just internally but from outside the enterprise, from customers and suppliers. They are now managing their networked operations using a "virtually integrated customer and vendor supply chain, with automated systems and the works."

Of course, getting to stage four takes time. The book describes some of Kodak's initial energy assessments, visiting facilities with state of the art control systems that no one knew how to operate. Some plants had failed instrumentation sensors, and the overlap between the heating and cooling necessary for the plants was often greater than needed. This resulted in plants pumping energy to heat rooms, then using high energy output to cool the room back down. Better information and visibility into those situations was the solution.

As you achieve greater visibility and control, new areas for energy innovation come into play. In the book, Bonhoffer cites the example of exhaust systems. "Can you drop to slower speeds during off hours, or even shut down? Many areas that were once 24/7 operations are working in two shifts, or perhaps only one, and yet the systems still run all the time. Talk about wasted buckets of energy. Entire vats of energy are being squandered."

You can't make changes to energy consumption if you can't measure it. Kodak's solution involves a real-time energy information system that is capable of disseminating the information it compiles. An energy control system is also recommended, one that can make smaller changes automatically so that the people involved in can focus on mission-critical situations.

In Kodak's case, they provide information access to everyone, from senior management on down, so they can view daily fluctuations in energy consumption. Kodak uses a SAP Enterprise Portal to make this "actionable information" visible on user desktops. The approach is based on the energy management philosophy of "use only what you need, when you need it." Since we're talking about complex manufacturing processes, this means tightly focusing on each link in that "value chain" and optimizing the energy usage for that particular part of the chain. In the process, your chances of engaging the interest of the workers involved with that part of the production cycle improve greatly.

Since drawing employees into the effort is such a crucial part of energy reduction, let's look at a couple of examples. In Kodak's case, they attached metrics software to particular machines. This allowed them to figure out how many energy resources are used at different times of day.

As Joan Bonhoffer explained, "With the results visible at an energy usage console, suddenly (everyone at Kodak) could see everything. Not only could they determine average energy usage for the last 30, 60, or 90 days, but they could also see it on a daily basis... Within minutes of going into conservation mode, for instance, the operators could see that they had lowered their consumption by 20%. Before, all they had was large-scale statistics on a spreadsheet. Suddenly, the value of the small, incremental steps that might otherwise be neglected was right before their eyes." During his Sapphire 2008 presentation, Bernard Morneau mentioned that Kodak's individual plants have also engaged in friendly competition on energy savings as a way of further galvanizing the corporate culture into a shared commitment towards energy conservation.

Another example of employee buy-in cited in the book involved a paper mill that was struggling to get workers to understand how their daily operations impacted energy spending and consumption. They started by implementing a primitive color-coded flag system that allowed them to control the speed of the machines. As Bonhoffer explains, "First, they reduced the speed of the least profitable machine, so that everybody could understand the principle... When the first machine had processed a number of rolls, the flagman raised his yellow flag to announce it, so that everyone else could adjust the pace. Green flags signaled everyone to speed up, and red ones told them to stop. Essentially, the system allowed people to see which machine was slowed back and how much, and when the process was able to resume as usual." This flag system engaged the workers in an unprecedented way, and eventually this success led this paper mill to install an automated system of controls.

Conclusion - SAP Customers are Moving Ahead

In the beginning of this article, we talked about how the technology has caught up with the pressing need for plant innovation. For each SAP customer, the exact technology used does vary. The good news is that SAP users are finding ways to tie SAP into the other systems needed to better manage plant operations. Because "In Pursuit of the Perfect Plant" is meant for a broader audience, it does not go into detail about the SAP-specific technology used in its examples.

But for those SAPtips readers who are curious, in closing, we can cite a couple of examples of the systems SAP users are applying to these problems. For Amgen, this meant creating a plant data warehouse architecture using SAP's MII (Manufacturing Integration and Intelligence) system to form a direct connection between shop floor systems and the SAP core. This resulted in a data-validated repository, based on a "single version of the truth," that allowed for adhoc user queries on relevant information. Amgen brought several systems into the plant data warehouse mix, including MES (Manufacturing Executing System) and LIMS (Laboratory Information Management System) systems.

For Kodak, they used the aforementioned SAP Enterprise Portal to display relevant energy consumption information in a visually appealing manner to their users. To provide this information via the Portal, Kodak, integrated their core SAP system with best of breed energy management software, including plant floor information systems from OSIsoft.

Clearly there is a lot of ground to cover in "pursuit" of a perfect plant. Even in the book itself, you could take individual chapters like "asset management" or "quality management" and expand them into separate books. Therefore, the pursuit of the perfect plant will always be a fruitful journey, rather than a destination. We can rest assured that the imperfect world outside of the plant, as well as a rapidly changing competitive landscape, will ensure that there is no end in sight when companies look for ways to optimize their plant activities.

That said, I hope I hope I've given a better sense of what the "Perfect Plant" book has to offer and the challenges that plant operators now face. In the wake of unprecedented problems with energy consumption, there is also an opportunity for SAP customers to address this on the plant level. When it comes to plant operations, case studies show that bottom line improvements can happen, but only when technology, strategy, and the employees that execute that strategy are all aligned.

Site Editor's Note: This article was originally published in a modified version in the October/November 2008 edition of SAPtips. SAPtips is a subscription-based publication, but you can obtain a free sample issue from the SAPtips web site, as well as information on all previously published articles.    

SAPtips Bio: Jon Reed, JonERP.com. Jon Reed is an independent SAP analyst who writes on SAP consulting trends. He is the President of JonERP.com, an interactive Web site which features Jon's SAP Career Blog and his podcasts for SAP professionals. Jon has been publishing SAP career and market analysis for more than a decade, and he serves as the career expert for SearchSAP.com's "Ask the Expert" panel. From 2003 to 2006, Jon was the Managing Editor of SAPtips.

Jon Reed was recently named an SAP Mentor. The SAP Mentor Initiative is a highly selective program which recognizes those individuals who are making an outstanding contribution to the SAP community. Jon is one of 70 mentors who are playing an active role in SAP's online ecosystem, which includes the combined 1.3 million members of the SDN and BPX web sites.