Maintaining spreadsheets and process manuals no longer cuts it for Capital Asset Planning. Capital asset planning is time consuming, has complex authorization procedures, and questionable statistics, leading many in management to question its true value. Since no comprehensive system exists to support the budgeting, planning, and forecasting processes, it’s no surprise that capital asset planning has not been a priority. Instead the capital asset planning process relies on a maze of disconnected spreadsheets and manual processes.
New software solutions are emerging that build on cloud-based budgeting and forecasting applications. The solutions combine specialized functionality with guided workflows and process support to transform capital asset planning into an accurate and reliable process.
Challenges of Planning for Capital Assets
Budgeting and planning for capital assets is challenging and involves making predictions that carry a high degree of risk, impact financial commitments, and require rigorous record keeping and reporting. Many factors come into play including the:
- Effect of manual processes and spreadsheets
- Lack of developed processes and audit trails
- Impact of maintenance activities on production
- Impact of machine failures on uptime
- Need to maximize asset availability to meet production targets
Capital Planning in Maximo
As the market for budgeting and planning software matures, specialized solutions for capital asset planning are evolving. Maximo’s Budget Monitoring module creates budgets for maintenance activities for a fiscal period. ValuD has developed a solution accelerator to enhance Maximo that monitors budgets, estimates, as well as asset replacements, so that all costs are visible. This helps customers plan for future capital costs for asset replacement and repairs more efficiently. Building on a solid planning process, IBM Maximo seamlessly integrates detailed financial and operational capital asset planning information for a holistic approach to capital budgeting, approvals and expenses.
Process: The capital planning process of the ValuD solution accelerator:
- Includes the purchase cost of the new asset including depreciation
- Compares the operating and maintenance cost of the existing asset to the new asset for each year
- Calculates the Net Present Value (NPV), Internal Rate of Return (IRR) and year-on-year cash flow analysis
- Presents repair or replace the existing asset data
Cost Analysis: Maximo can be easily configured to capture maintenance forecasted cost of an asset over a period of time. This provides the total cost (capital + operating) of an existing asset. The Maximo PM forecasting module is leveraged to identify the projected PM cost. Using failure code analysis, measurement readings, and MTBF & MTTR analysis, the solution accelerator predicts the number of times the asset is prone to failure or breakdown. This data is used to calculate the corrective maintenance cost based on a proprietary algorithm.
Total cost of an alternative asset completes the analysis. Maximo can be easily integrated with [email protected] [email protected] is a cloud-based software-as-a-service that provides intelligent and intuitive analytics that enable clients to optimize the performance of their motor-driven systems. This is done by providing timely technical and financial analytics on the equipment’s energy and reliability operating performance. [email protected] has a repository of about 47000 motors available in the market that provide the replacement cost as well as running cost (energy expenses). The solution provides recommendations based on real data.
Decision Making: Based on the analysis described above, the Plant Manager can create a capital planning request in Maximo for review. If this request is approved, Maximo will create a work order to procure the asset. The existing asset will be decommissioned and will be replaced with a new asset, which can be linked to the original asset for historical purposes.
Capital asset planning is a complex process that includes significant cash outflow and substantial risk. Given the error prone spreadsheet-based processes, large-scale projects historically tend to go off the rails. Building on successful cloud-based implementations of more-straightforward accounting and forecasting applications, Maximo combines specialized functionality required for capital asset planning. Linking financial and technical plans, Maximo allows organizations to plan for all phases of an asset’s useful life—from planning and construction to maintenance and decommissioning. Operational processes are streamlined and decisions improved providing management with tools to assess impact on cash flows and revenue and a more predictable balance sheet.
To learn more about IBM Maximo enhancements, contact us at [email protected]
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