The integration of enterprise asset management and the supply chain

Abstract

This study was born out of the author's hands-on experience of pioneering the integration of Enterprise Asset Management (EAM) and the Supply Chain (SC). This first happened during a project undertaken as Project Manager during 1999- 2000 in which there came an understanding of the relationship between the two disciplines, which now forms the basis of this thesis. A supply chain is the movement of materials in response to the demand for a product. The traditional supply chain consists of five functions namely Buy, Move, Store, Make, and Sell. This is a perfect fit for a production environment. With supply chains has come the need to manage and optimise them. This discipline is called Supply Chain Management (SCM) and is about ensuring supply meets demand. Supply chain management has become a vital aspect for companies striving to improve their competitive edge and profitability and the number one strategic priority for manufacturing executives. Enterprise asset management is the discipline of improving the Return On Investment (ROI) and Return On Assets (ROA) of capital-intensive assets through their effective and efficient management. Companies seldom have the opportunity to apply asset management in the planning, acquisition, installation, and disposal phases of an asset's life cycle. Due to this EAM has become associated with the maintenance life cycle of assets only. To achieve more profitable supply chain operations, companies are moving towards integrated supply and demand planning. In a process-manufacturing environment it is not simply a case of setting up a production schedule in response to an accurate end-user "demand signal" but includes the demand set by . plant assets for Maintenance, Repair and Operating (MRO) materials. There is a definite interdependency between EAM and SCM. To integrate the two is not only desirable, but also essential. The market has stopped thinking of the supply chain as a simplified series of events. It's a highly complex network of related supply chains required to manufacture a finished product. DNA Enterprise Asset Management (DNA EAM), a company that is part of DNA Supply Chain Investments Limited (DNA SC), came to realise this in its drive to optimise assets. It investigated the MRO supply chain and found the traditional supply chain to be unsuitable for MRO materials. DNA EAM found a second supply chain within the "Make" function of the traditional (production) supply chain. It is a supply chain that is initiated when a plant is in operation and is in the service and support of assets. The integrated Enterprise Asset Management Supply Chain (EAM SC) model consists of an Operate, Buy, Move, Store and Maintain function. DNA EAM calls the integrated asset management supply chain the Indirect supply chain and the production supply chain the Direct supply chain. The Maintenance and Repair (M&R) demand signal is the integrator between asset management and the supply chain. There are several ways that the demand signal can be enhanced. Most noticeably it is enhanced by changing from corrective to preventive maintenance, using scientific optimisation techniques such as Reliability Centred Maintenance (RCM), and the correct selection and implementation of EAM software. DNA EAM has commercialised the indirect supply chain. The value proposition is based on greater profitability due to increased production revenue and savings on operational expenses, and reduced life cycle costs of assets through decreased M&R inventories and asset support costs. The power of the indirect supply chain lies not with the value proposition or commercialisation of it, but the understanding, clarity, and unification of the two disciplines.