Your company has heavily invested in its assets and your goal is to see these assets work effectively by generating revenue and cycling money back into the business. Calculating the return on assets can help you to benchmark your company’s profitability. This ratio of net income to the cost of assets is a measure of how efficiently your company is managing its assets to generate revenue. It can also be used for specific pieces of equipment to track the life cycle cost over time. This data is useful for decision making processes and can be provided to investors and joint venture partners who will undoubtedly ask for it.
Unfortunately, asset intensive companies tend to have a low return on assets. The cost of the equipment is high, the maintenance requirements are intensive, and downtime is almost inevitable. Taking full advantage of your CMMS and EAM systems so that you can successfully manage inventory and maintenance processes will help you to increase this profitability ratio. Furthermore, if inaccuracies in your data management systems are faulting your processes and operations then it could be a factor in low return on assets. The goal is to reduce asset costs and expenses while increasing revenue, and there are several ways to accomplish this by leveraging your CMMS and EAM systems.
Reducing Asset Costs
In industry, there are many ways to reduce asset costs without affecting quality or safety. NRX typically advises companies to lean out their spare parts inventory as well as improve manufacturing efficiency. Managing your spare parts inventory should be an automated process. Your CMMS system should have automated procurement of parts when they reach a minimum. This will help to decrease unplanned downtime and keep your inventory at an acceptable level. Additionally, your current data in the CMMS should accurately reflect what is in your physical inventory. Nothing is worse than ordering spare parts when you had them all along, or when you need the part but it is not there and not updated in the system.
Secondly, improving your manufacturing efficiency will also help to reduce asset costs. This will result in increased wrench time so that maintenance professionals are making the most of their precious time. The CMMS system you have should allow these employees to accurately and quickly populate data. They need quick access to the documents required for their job, and communication between planning and maintenance should be simple and up to date. When your CMMS system allows you to seamlessly plan and schedule maintenance, the productivity of your company will increase.
Increasing Net Income
The other step to increase return on assets requires you to focus on net income improvements by increasing revenue and decreasing expenses. Reducing downtime is a key part of this process and will have a positive impact on revenue. It also decreases expenses as shown by an Elsevier study on Reducing the Cost of Preventive Maintenance (PM) Through Adopting a Proactive Reliability-Focused Culture. This study explains that preventative maintenance is much cheaper than reactive maintenance. You should be using your CMMS and EAM systems to automate notifications for regular repair and maintenance procedures.
You should also be working towards using your CMMS system to automate planning processes. Assets should be labeled by their criticality, and critical assets should always have spare parts available. Maintenance prioritization can be automated by criticality and scheduled using notifications. When the maintenance is completed this should be logged so that it isn’t accidentally completed twice and so that relevant information from the procedure can be accessed in the future.
Often asset intensive company’s express frustrations when they don’t see the expected return on investment from their CMMS or EAM systems. Our customers take advantage of NRX AssetHub to help them reach the full potential of their existing systems. This software has been proven to increase return on assets through the many improved processes mentioned above. Contact us today to find out how you can leverage your CMMS system to make your assets work for you.
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