Asset Management System / Asset Monitoring / CMMS

How to better manage performance with your CMMS

David Berger says aim to connect your operational plan directly with high-level business strategy.

By David Berger

Try to envision what it would be like to provide a single version of the truth to all of your stakeholders. Sophisticated performance management is a major benefit to be derived from some of the more advanced CMMS packages available today. The three key components of a system effective in performance management are (1) planning, (2) enabling transaction processing systems to facilitate performance management, and (3) analysis and feedback loops.

Planning


Performance management starts with setting goals and objectives at the highest level of the enterprise. At the highest level, the chairman may set return-on-asset, return-on-equity, net-income, market-share, revenue-growth and similar goals. The drivers at this level are improved financial performance, better risk management, greater operational efficiency, and increased market share and customer loyalty through an improved value-for-money proposition.

As the company develops its overall strategy to support its high-level goals, it is vitally important to connect the business strategy with plant operations. Too often, the strategic plan is pushed down to the business units and functional areas such as marketing, information technology, and human resources, yet the more-complex plant operation is left somewhat out of the loop. For plant operations to become an effective part of the business strategy, the plant must build an operational plan that directly connects to the high-level business strategy. Perhaps the best way to do this is by creating a set of performance targets that can be directly tied to one or more of the high-level goals. Ideally, the performance targets should be quantitatively measurable and linked to the compensation plan for plant executives.

Some companies use tools such as Balanced Scorecard or Growth Management Scorecard to provide the strategic measurement framework at all levels in the enterprise. The scorecard approach starts with the overall strategy and vision for the enterprise, and then breaks it down for each strategic business unit.

Some companies have an internal process view, learning and growth view, or other areas instead of or in addition to the areas above. Each level in the enterprise is responsible for developing performance measures and setting targets for each of the views. An enterprise performance management system should enable constant monitoring of the indicators that will affect attainment of the performance targets. The enterprise performance management system should provide management with the insight to predict the likely outcome of business activities in a timeframe that enables corrective action if the outcome is off-target. Regardless of what model is employed, each business unit must commit to qualitative goals and objectives as well as quantitative measures and targets for each corporate-wide driver.

Development of action plans is much easier and will garner more support if there is direct relevance to the overall business goals of the company. A related benefit is the increase in employee morale that comes from having daily operation directly tied to the business goals of the company. To meet the targets set at all levels, action items must be identified. For example, if for the next 12 months the spare-parts inventory level is to be reduced by 20% and the frequency of stockouts decreased by 10% on critical spare parts, then there needs to be a clearly defined plan as to how that will happen. Action items might include identifying and eliminating obsolete inventory items, classifying the inventory using the ABC and XYZ inventory classification model, and tracking service levels by inventory class and adjusting inventory levels accordingly.

Enabling transaction processing systems to facilitate performance management


The real competitive advantage of a CMMS that has more-sophisticated performance management capability lies in the manner in which routine activities are transacted through the system. Your CMMS should be able to embed business rules and policies in the system in a fashion that ensures you collect the data necessary to feed your performance analysis engine.

The benefit of such a system is the way it enables capture of costing and reliability data at the time of routine transaction processing, without placing an additional burden on the individuals performing the transactions.

It is exceptionally important that all transactions impacting the performance of the plant be captured and fed to the performance management analysis engine. This often requires taking information from production systems, HR systems, and other specialty modules or separate applications. For a CMMS to move to being a sophisticated performance management system, the solution must provide the means to consolidate the information from any other applications into the performance management analysis engine.

Analysis and feedback loops


The modern CMMS has effective analysis tools available to help monitor progress in meeting performance targets and assisting management in identifying further improvement opportunities. These include reliability-centered maintenance, knowledge-based diagnostics, economic order quantity modeling, service-level simulation for spare-parts inventory, supplier history analysis, workflow analysis, and activity-based management, among other tools.

A modern CMMS can also deliver information on variances to budget in a variety of ways, such as by work order, piece of equipment, location, shift, and tradespeople. Significant variances must be explained so that corrective action can be taken, and/or performance targets and budgets can be modified. By exploiting the power of the CMMS, management can focus the energy of individuals and departments on meeting performance targets and ultimately the goals and objectives of the overall enterprise.

Surprisingly, studies have shown that only about 30% of the functionality of a CMMS system is used. In part, this is because many companies are still transaction-focused. This is good news for those companies that do use the sophisticated analytical features of a CMMS in support of a performance management program, for surely they will achieve competitive advantage.