ARC Advisory Group

Translating the Benefits of IIoT to Executive Interests

Blog Post created by ARC Advisory Group on Nov 28, 2016

Operations Need Good Asset Management with IIoT

Operations groups obviously depend on good asset management and maintenance to achieve production objectives for on-time delivery with in-spec quality at minimum cost. To meet these goals, production needs the equipment to be available (uptime) and performing as required (capable).  High uptime with low unplanned downtime becomes the key metric for maintenance.  Uptime has been shown to be the top metric in multiple ARC surveys among maintenance and operations personnel over the past decade. Fundamentally, higher uptime enables production operations to perform optimally.  The leading application of Industrial IoT (IIoT) is predictive maintenance to identify issues before they cascade into a failure with unplanned downtime or other forms of process degradation.

 

IIoT Supports C-suite Metrics

IIoT for Key Maintenance and Executive KPIsPer ARC’s surveys, the asset management KPIs focus on uptime, asset longevity, cost control, safety, and quality. They directly affect C-suite metrics of revenue, cash conservation, profitability, and risk management.  These C-suite’s metrics involve the P&L statement and balance sheet that are scrutinized by financial analysts and potential investors.

 

Uptime:  Unscheduled downtime causes losses in direct labor and, often, work-in-process (WIP) materials.  These losses have a direct negative impact on profitability.  With just-in-time (JIT) scheduling and minimal inventory, the production interruptions also cause missed shipment dates, customer satisfaction issues, and reduced revenue.  The resulting lower revenue negatively impacts P&L.

 

Uptime also affects inventory and the balance sheet. Manufacturers typically have a queue of materials between operations to buffer interruptions, particularly equipment failures.  Higher equipment uptime reduces uncertainty and allows for lower inventory.  This conserves cash and improves the balance sheet.

 

Asset longevity: Good asset management extends the useful life of assets, delaying the need for costly capital projects to replace or refurbish those assets.  Avoiding capital expenditures conserves cash.  With more cash, financial metrics improve, along with stock prices.

 

Cost control for maintenance:  The demise of a relatively expensive component often cascades onto other system components (just as the loss of $20 of engine oil can cause your car’s engine to seize, leading to a $5,000+ repair).  Without appropriate maintenance, repair costs can escalate dramatically.

 

Safety and risk management:  Catastrophic equipment failure can put nearby people in danger.  Also, failure of a major system can cascade into other systems, representing a significant business risk.  Governance, including Sarbanes-Oxley compliance, necessitates good asset management.

 

“Reprinted with permission, original blog was posted here”. You may also visit here for more such insights on the digital transformation of industry.

 

About ARC Advisory Group (www.arcweb.com): Founded in 1986, ARC Advisory Group is a Boston based leading technology research and advisory firm for industry and infrastructure.

For further information or to provide feedback on this article, please contact sgandhi@arcweb.com

 

About the Author:

Ralph Rio

Vice President, Enterprise Software, ARC Advisory Group, Boston

Ralph's focus areas include Enterprise Asset Management (EAM), Field Service Management (FSM), Global Service Providers (GSP), and 3D Scanning systems & software.

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