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Asset-intensive organizations that rely on the continued performance of their physical assets, such as big manufacturers, multisite organizations and large utilities, need to make sure their enterprise asset management, or EAM, systems work well with their ERP systems.
Indeed, ERP and EAM systems have to act as partners rather than competitors to help organizations accomplish their objectives, said Tracy Smith, president of SwainSmith, a consulting firm based in Franklin, Tenn.
Both ERP and EAM software serve distinct, specific purposes that add value to an organization. Each system complements the other by doing what it does best in its respective field, Smith added. ERP systems are better at managing financial assets while EAM systems do a better job of managing physical assets. Bringing EAM software and ERP software together with an effective integration strategy enables them to do what they do best.
"Although there are modules in an ERP system that you could use to manage your physical assets, the functionality just isn't there. The focus of the software company is not around assets, it's around financials," Smith said. "What we say is that you can have the best of both worlds."
A company can have an ERP system to manage its finances; issue checks, roll costs up to the general ledger and manage cash, receivables and payables, but it should have a separate system that is entirely dedicated to its physical assets, which means EAM software, according to Smith.
Challenges to EAM and ERP integration
Smith said he tells his clients they need both an EAM system and an ERP system, and they need to talk to each other.
"But that's where it gets a little sticky -- making sure that they're communicating with each other in the correct manner is critical," he said.
Tracy Smithpresident, SwainSmith
Historically, integrating EAM and ERP systems has been complex and expensive. Different types of databases, table structures, upgrade issues and system constraints have added costs and complexity to getting EAM software and ERP systems in sync and communicating, Smith said.
This is the main reason that some organizations have chosen ERP over EAM when it comes to asset management.
ERP systems normally manage the organization's financials. When using EAM software, a portion of those financials related to asset management activities, e.g., maintenance, repair and operations, materials management, and purchasing, are initiated and tracked in the EAM system. To ensure that costs are correctly allocated so vendors are paid and cost information is passed to the ERP system, the two systems must be integrated, Smith said.
Integrating EAM in the ERP suite is the best way forward
"For example, we'll integrate Maximo, IBM's EAM system to SAP's ERP system," he said. "And we'll integrate Infor's EAM system to Oracle's ERP system."
However, Steve Cox, group vice president of Oracle ERP and Enterprise Performance Management product marketing at Oracle, based in Redwood Shores, Calif., said EAM should be part of an ERP system.
"The market is coming around to our way of thinking that the best way of deploying innovative new technologies is as part of a suite," he said. "There are still people out there with EAM software from independent vendors but more and more people are talking to us about enterprise asset management as part of an ERP offering."
The way an organization implements EAM depends on the size of the company, the politics in the company, that is the corporate structure and who's responsible for what, and the budget, said Ray Rebello, director of product marketing at Acumatica Inc., a provider of cloud-based ERP software based in Bellevue, Wash.
"If you're a large enterprise and you have multiple global locations, but you're standardized on a large ERP system, you're not going to take that out and put in an [ERP] system that has enterprise asset management," he said.
What that large enterprise will do is work with its stakeholders and get a best-of-breed EAM system and integrate that with its ERP -- either an EAM system that the company's ERP vendor sells or an EAM system from another vendor.
"When you go to the midmarket, where we specialize, that's where people don't want to have best-of-breed systems," Rebello said. "They may have them because they have had them for decades but they really don't want to have them. They want to be able to put information in one, and then be able to do all sorts of things in that system."
Rebello said that midsize companies want streamlined business processes, visibility into their information across all departments and fewer costs, including IT costs.
"And when you have integrations, you have IT costs," he said. "But if you have one ERP system, like Acumatica, which includes asset management, it's all working together."
Companies that are doing EAM systems correctly also need to look at other strategies, such as the internet of things (IoT), Cox said.
IoT augments EAM and ERP capabilities
"You need to look at how you're going to manage the data, then you're going to need to manage ... all of the data that you're producing internally, both from your IoT sensors and the existing maintenance data," he said. "But if you then start to complement that with big data, my own view is that EAM software, as a stand-alone concept, is not right for most businesses. The best solution is always going to be EAM as part of an ERP solution."
For companies that change their business models and offer their products on a subscription model, maintenance moves from being an overhead to a critical part of the business.
"As a CFO, I want to know everything there is going on about maintenance, and I want to be able to make really simple projections [based on, in part, the data from the IoT sensors] of how my maintenance costs are going, where the fail points are, what's not working, how planned maintenance compares to unplanned maintenance -- that becomes part of my financial results," Cox said. "So as the as-a-service model becomes more important, your maintenance becomes equally important because it's so closely related to that kind of business."
Seth Lippincott, a senior analyst at Boston-based Nucleus Research, agreed that EAM systems employ IoT pretty extensively.
"Instrumentation has been around for a long time -- collecting data in terms of, is your machine running, how well is it running? And then the IoT piece comes in with being able to capture and analyze that data coming through so that you can set a better optimal run rate for the lifecycle management of the asset [rather than just an approximation]," he said.
A company can use the data it's capturing from the sensors on the machines to figure out which parts are failing, at what times and in what parts of the process, so it can optimize how it manages the assets.
"In terms of instrumentation and the collection of IoT data and analyzing that kind of data, that's where IoT can be really of value," Lippincott said. "Because [a company] can say, 'Well, we've been doing scheduled maintenance every 7,000 cycles but we can double that and we'll still be in the range of delivering the service and the quality of the components that we're making."'
The company, therefore, is able to be more efficient, have less unscheduled downtime and less lost productivity, Lippincott said.
"From an enterprise asset management [standpoint] is where we see customers ... get value from IoT in a traditional manufacturing shop floor type situation," he said.