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Can you please explain the difference between CMMS and EAM software packages?
Computerized maintenance management software (CMMS) is a mature class of software that has been in productive use on PCs since the mid 1980s. Other common names include work order management systems (WOMS) and work management systems (WMS). This class of software places heavy emphasis on the work order process from issuance to closure. Most software provides for an inventory of assets against which work orders are issued. Depending upon the CMMS product, different levels of sophistication are available to store inventory and expense information related to executing the work.
Enterprise asset management (EAM) software is a newer class that is designed to integrate with an organization's financial, customer information, billing, and human resource management software systems. The term "enterprise" means that the software is part of the core business software upon which the organization bases financial and management decisions. Many CMMS vendors are enhancing and maturing their products to be EAM. And many enterprise resource planning (ERP) vendors that have typically focused on human resource and financial realms are incorporating CMMS-like functions to meet the growing demand for EAM software.
I have been trying to understand what makes "asset management" any different from run-of-the-mill rehabilitation planning. I still don't get it.
Sound and cost-effective rehabilitation planning is one of the desired outcomes of an asset management program. I assume what is meant by "run-of-the-mill" is the maintenance, repair, and replacement decision-making we engineers and maintenance professionals have done for hundreds of years. There is really nothing different about that part of the process; it still comes down to good engineering decision-making. The difference is that an asset management program helps ensure that adequate funds are available to preserve assets. This helps focus the decision-making efforts on adopting the preservation options that have the least long-term cost implications for those assets that are most important to maintaining a desired level of customer service.
Should renewal and replacement (R&R) projects be capitalized?
The easy answer is yes. Any activity or project that extends the useful life of a fixed asset or improves the service capability of the fixed asset should be capitalized. However, most municipal utilities have difficulty in properly capitalizing their R&R projects. There are three main reasons for this difficulty:
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The business motivations for municipal utilities are different than for private industry. Private industry is motivated to show the best earnings to investors, which results in the practice of capitalizing legitimate R&R expenditures. Though this takes effort from a management and accounting perspective, the payoffs in stating the improved earnings for investors is worth it. Municipal utilities do not have the same profit motive, so they typically resort to a more relaxed method of accounting for R&R expenditures.
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Distinguishing between a true R&R project and a normal maintenance project can be difficult. So many utility managers consider R&R projects to be system maintenance, and have developed the practice of budgeting and paying for their R&R needs through operating budgets. Of course, since they are using the operating budget, the expenditures are expensed rather than capitalized.
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The record of fixed assets has not been maintained at the appropriate level of detail to allow the municipal clerk to remove the asset from the record and replace it with the new or rehabilitated asset. The clerk then forces the expenditure to be expensed. Since most water and wastewater utilities went through major expansions and upgrades in the late 1970s and early 1980s due to the Clean Water Act, the need to deal with R&R expenditures was not foremost on managers' minds. Now, many utilities around the country are beginning to grapple with these issues. Municipal utilities should realize that, though not motivated by profit, bond investors do care about healthy earnings which, again, support the practice of capitalizing R&R projects. An appropriate set of policies, procedures, and information technology that take into account the utility's size and resources can be designed to help resolve the second and third issues mentioned above.
Why do we need asset management if the finance department is already depreciating our assets?
Although depreciation attempts to demonstrate financially the decreasing value of your capital assets, it does not really help you identify what assets need renewal and replacement, how much, and when. For example, an asset might need replacement before or after the useful life indicated by the depreciation schedules. Pipelines often last years longer than the depreciation schedules might indicate and that life might be extended by rehabilitation work. The depreciation of a major asset, like a water treatment plant, is often based as one item depreciated over 30 years. Actually, that asset is made up of numerous sub-assets which may have very different useful lives. The asset management system furnishes managers with much more detailed and useful information in terms of planning when renewal and replacement dollars will be needed.
What is the best way to fully utilize my department's maintenance management system to apply asset management techniques other than just assigning and tracking work orders?
If you have already established a computerized maintenance management system (CMMS) that has your full asset inventory, you are well on your way. Try stepping back a bit and define what you need from the system other than just work management. Deciding on the scope of an asset management program can be difficult and requires an understanding of existing systems and business processes you are currently using, and level of effort needed to modify use of the CMMS. To fully realize the potential of the CMMS to improve maintenance capabilities, assess the current O&M situation, enlist organizational leaders and/or asset management advocates, and develop an asset management strategy and subsequent implementation plan.
Doing the first cycle of condition assessments is an overwhelming time requirement for my staff. How can this be done more efficiently during the implementation of an asset management program?
Develop a strategy that uses multiple avenues to obtain condition assessments. Some of these avenues are in-house staff as part of periodic maintenance, contract maintenance resources who provide periodic maintenance to specific systems (eg. HVAC, vehicle fleet), and consultants who perform facility planning services. The key requirement is a consistent condition assessment format and definitions for condition of the various types of equipment/facilities that are to be assessed. Complete outsourcing of condition assessments is another alternative, but it is beneficial for the client to perform at least a portion of the assessments in-house.
How can multiple departments serving different functions be involved in the same asset management program?
Not only can they be, but they really should be. Asset management must be embraced at the executive level of an organization and implemented throughout. To achieve success, it is suggested that a management committee be formed to establish guiding principles for implementing asset management using a common approach. Department managers should be involved on the committee where different issues can be discussed and decisions acted upon. In many cases, one department may act as a leader for the organization, helping to forge the way for others to adapt and modify to meet requirements. The key is to ensure that everyone is aligned to the guiding principles of the program and is using enterprise-class software and knowledge-management systems.
I understand why maintenance supervisors need asset management, but can you explain why managers and executives need it?
Managers need information to justify expenditures on maintenance that most boards and councils consider a lower priority than labor and new capital requirements. As such, when the need for dollars gets tight decisions are made to defer critical maintenance. This may be due to the perception that facilities are over built and over designed and "it can wait untill next year." Asset management can provide a philosophy that the organization can adopt, from labor up through management and the ruling body, and encourages an adoption of policy, funding, and performance objectives that provide an on-going assessment of the condition and operating performance of utility assets.
Policy decisions involve determining a level of operation that the ruling body and management support, deciding on an annual condition assessment standard for determining priority and criticality, and status of each asset category and process element. The information maintained over a period of time will lower the risk assessment by financial institutions evaluating a utility for new bonding requirements because the information, methods and procedures, board policy, and funding commitments demonstrate that the investment will be maintained over the life of each asset.