Using Effective EAM to Improve Asset Utilization & Reduce Costs
James Mourafetis and Uday Kamat
By focusing on people and operational improvement, an EAM (Enterprise Asset Management) program can significantly improve asset utilization rates while reducing long-term capital costs. That attention to people and operations is an essential element of EAM success, however, strategies centered alone on capital investments in facilities and fleet logistics typically fall short of the significant benefits an effective EAM effort can produce.
EAM encompasses the whole life, optimal management of the physical assets of an organization to maximize value. It applies to the design, construction, commissioning, operations, maintenance, and the decommissioning and replacement of equipment and facilities.
Capital-intensive businesses in industries, such as rail, mass transit, utilities, oil and gas, mining, petrochemicals and airlines, are among those that stand to benefit from a thorough EAM approach. The railroad industry offers numerous examples of the potential value EAM can deliver.
Class I railroads, for example, typically see locomotive utilization rates in the 25 to 35 percent range. Like their counterparts in other heavy asset reliant industries, when railroad assets like locomotives are off-line, they aren’t generating revenue. Meanwhile, that locomotive off-line time forces railroads to maintain larger fleets, increasing their capital costs.
EAM’s Potential Benefits
EAM can benefit railroads’ performance in three areas:
- Productivity-The typical railroad faces a 65 to 70 percent operating ratio, which means the cost to operate is 65 to 70 percent of revenue. So, railroads that optimize workforce efficiency can handle five to 10 percent year-on-year growth while bending the cost curve.
- Reliability-Fleet maintenance improvements can boost asset utilization rates and extend the life of rolling stock, allowing railroads to reduce the size and frequency of investments in their fleets.
- Safety-Improved fleet maintenance can lower accident rates and increase public safety.
An effective EAM initiative must combine a top-down approach, defining the initiative’s strategies and goals with a bottom-up aspect focused on gaining workforce input and buy-in that can ease implementation of the strategy.
The Steps to EAM Success
For railroads, the key to EAM success is a simultaneous focus on both strategy and implementation as executives follow a four-step process. Those four steps include:
1. Identify assets and measures.
Executives must first answer three essential questions about the asset:
- Utilization-How often is the asset in use?
- Reliability-How well does the asset work?
- Unit cost-How much does it cost to use the asset?
It’s also necessary to determine an asset performance index (API); for example, the percentage of time a locomotive is actually pulling railcars. Examining the locomotive’s API against the various factors contributing to time not spent pulling railcars provides a detailed picture of the asset’s current utilization and potential areas for improvement.
2. Create an asset vision for the future.
The railroad can use benchmarks from other heavy asset industries to set realistic targets, allowing for differences in systems and approaches between industries. Meanwhile, executives should assemble cross-functional teams to redesign workflows and achieve the desired improvements. Such collaboration will ensure buy-in from shop floor personnel who will be directly affected by process changes and maximize the chances for the EAM initiative’s success.
3. Develop work streams to align and prioritize actions.
To maximize asset utilization, it’s necessary to identify factors contributing to time loss buckets and target improvements to reduce losses. A top-level work plan should be established for each work stream that clearly defines its current and future state and measures the unit cost impact of planned improvements. Along the way, value is created by linking project deliverables to API improvements. The chain of command should look something like this:
- Champions assigned for each work stream lead reviews with project teams and periodically present project performance to an asset management team.
- The asset management team reports to an asset committee charged with devising strategies to remove work stream roadblocks.
- A senior management steering committee oversees governance over the initiative and reports progress quarterly to the chief operating officer.
4. Deliver productivity results through EAM integration and value analysis/value engineering.
The first task in this stage is identifying what matters through on-site analysis. The next is developing capable processes by organizing repair and testing processes in a systematic manner. Site improvement councils should be created to develop and install the success factors critical to driving continuous improvement, while a quality council should be formed to eliminate defects. Detailed road maps and timelines aligned with specific targets will help achieve the desired short-term results of improved workforce efficiency and asset utilization, along with the long-term goals of reducing capital investments. Finally, integrating EAM to achieve sustainability and employing value engineering over the longterm can lock in the improvements.
EAM Benefits Delivered
The benefits Class I railroads can realize by employing a successful EAM initiative can be significant. One railroad, for example, set a long-term goal of improving its asset performance by 25 percent over a 15-year timeline, with every one percent improvement in the railroad’s API equivalent to a one percent improvement in asset uptime. After engaging in the sort of EAM process described in the previous steps, the railroad is on course to reduce locomotive mechanical operating costs through a fleet reduction of 25 percent. Shop-level performance improvements produced by the EAM effort include a 30 percent reduction in incidents related to poor quality after shop release, a 20 percent improvement in on-time release from the shop and a 15 percent improvement in craft wrench time.
Another EAM success story saw a railroad looking to reduce the time needed to repair and/or replace wheels on its car fleet. It realized a 46 percent improvement in wheel repair time, a 45 percent improvement in documentation work and a 46 percent improvement in repair prep work. In another case, an operator looking to reduce yard dwell time saw EAM lead to a 19 percent improvement in service island dwell time and a 12.2 percent improvement in locomotive maintenance dwell. The EAM effort also increased visibility among previously siloed units. That increased visibility, combined with the collaboration among management and shop workers, has improved morale and enabled sustained efficiency improvements.
A Coordinated EAM Approach Delivers the Greatest Benefit
The greatest improvements in asset utilization result from changes at the shop level and the involvement of employees working there. Workflow process changes determined exclusively at an organization’s highest level and handed down to the shop floor inevitably produce unsatisfactory results. Instead, the best EAM outcomes result from involving both craftspeople in the shop and their local management, as well as upper management. Such coordinated efforts not only maximize the chances of achieving desired short-term results, but also provide for the sort of longterm, high-level support that will help ensure the improvements‘ sustainability.
For any heavy asset business that traditionally takes a long-term view of its capital assets, an effective EAM initiative can produce clear and valuable benefits. These immediate gains in productivity and asset utilization can lead to longterm savings in operating costs and capital expenditures.