Conceptual Enterprise Asset Management For Plant Construction Process

Conceptual Enterprise Asset Management for Plant Construction Process
Applies to:
Document is applicable to all SAP R/3 and ERP6.0 versions.
Summary
This document provides an introductory and conceptual overview of Enterprise Asset Management. It is illustrated using a case study, under the context of production plant construction.
Author(s): Benedict Yong Teng Xiang Company: LANXESS Chemicals Created on: 31 December 2012
Author Bio
Benedict Yong is a Certified SAP BI Consultant, and practitioner of Enterprise Asset Management (EAM) and Business Intelligence (BI).
He holds a Bachelor of Management (Australia) and a Diploma in Business InfoTech (Singapore). He is familiar with the Consulting and Support environments, with his various Project Lead & Consultant roles during his stay in Accenture and IBM.
He is situated in Singapore and is bilingual in English and Mandarin, conversational German. He can be contacted at benytx@gmail.com.
Note: credits given on the last page.
SAP COMMUNITY NETWORK 2010 SAP AG
Table of Contents
Introduction ......................................................................................................................................................... 3 Definitions ........................................................................................................................................................... 4 What is Enterprise Asset Management (EAM)? ............................................................................................. 4 What are the benefits of EAM? ....................................................................................................................... 5 What are SAP Offerings to EAM? ................................................................................................................... 6 What does SAP EAM comprise of? ................................................................................................................ 6 What is PM and what is its function? .............................................................................................................. 7 What is PS and what is its function? ............................................................................................................... 7 What are the basic EAM terms? ..................................................................................................................... 7 What are the latest developments in SAP EAM till date? ............................................................................... 7 Our Case Study: How do we do it? .................................................................................................................... 8 Business Requirements .................................................................................................................................. 8 System Setup Strategy ................................................................................................................................... 9 MasterData Setup ......................................................................................................................................... 11 Process View ................................................................................................................................................ 15 Costflow View ................................................................................................................................................ 16 Our Case Study: How do we use it? ................................................................................................................. 17 Screen Sequences ........................................................................................................................................ 17 Budgeting Screen.......................................................................................................................................... 18 Tracking Screen ............................................................................................................................................ 19 Settlement Screen......................................................................................................................................... 21 Reporting Screen .......................................................................................................................................... 22 Conclusion ........................................................................................................................................................ 23 Appendix ........................................................................................................................................................... 24 Detailed EAM Cycle with Transaction code listings ...................................................................................... 24 Integration between Asset Management (Logistics) and Asset Accounting (Finance) ................................ 24 Credits and Content Sources............................................................................................................................ 25
Introduction
In todays business environment, the bottom-line for high system availability, costs reduction, and maximize return on assets are becoming more obvious. Hence, an innovative need for an integrated approach to Enterprise Asset Management (EAM) is needed to yield significant savings, improve the operational performance and proper cost controlling. The approach should spans all phases of an asset lifecycle, which includes cost planning and budgeting, asset-in-construction and capitalization to final asset, specification and design, operations and maintenance, decommissioning and disposal, and, finally reporting and analytics. In SAP words: EAM helps companies manage physical assets production plants, capital equipment, vehicle fleets, and facilities complexes over the complete asset life cycle. In conjunction with powerful reporting and analysis, the SAP solutions EAM capabilities enable you to reduce operating costs, better manage capital expenditure, and improve asset utilization."
Definitions
What is Enterprise Asset Management (EAM)? We shall adopt a neutral definition from WIKI, 2012: Enterprise asset management (EAM) means the whole life optimal management of the physical assets of an organization to maximize value. It covers such things as the design, construction, commissioning, operations, maintenance and decommissioning/replacement of plant, equipment and facilities. "Enterprise" refers to the management of the assets across departments, locations, facilities and, in some cases, business units. By managing assets across the facility, organizations can improve utilization and performance, reduce capital costs, reduce asset-related operating costs, extend asset life and subsequently improve ROA (return on assets).
The definition of EAM is constantly evolving depending on vendor offerings, industrial needs, etcs. For the purpose of this discussion paper, we will focus on applying EAM on plant construction and asset maintenance, referencing to the SAP flow diagram prior 2012.
What are the benefits of EAM? This question is perhaps better address by: Asset Visibility: Seeing the Opportunity in Asset Management EAM can be traced back to the Return on assets (ROA) of an organization. ROA is an effective measure of the impact of corporate strategy. However, an organization has to link its corporate goals to it operational activity. To understand the ROA metric, we have to decompose it to its component parts:
Each of the three essential elements can be improved with better asset management: Assets. If a company is using information to optimize utilization, new asset investment can be avoided or underperforming assets can be decommissioned. Visibility into work in process, quality yields, emissions, production rates, and so forth also contributes to making good utilization choices. Revenue. Information regarding operating performance improves productivity and utilization. It can also be critical for making informed decisions about costs, lead times, and customer service. Profit. Higher productivity generally means lower costs through more efficient resource consumption (people, materials, energy). And a number of shadow costs, compliance and maintenance, can also be significantly improved with better visibility.
What are SAP Offerings to EAM? The SAP solution for enterprise asset management allows you to manage key asset management activities, including: Investment planning and asset specification and design Gain control over business planning and simulation, investment management, collaborative specification and design, and collaborative project management. Procurement and asset construction, installation, and implementation Optimise supplier qualification and candidate selection, bidding and contract management, collaborative project management, collaborative change management, information handover for commissioning and startup, and project and investment controlling. Maintenance and operations management Handle technical asset management, maintenance planning and execution, preventive and predictive maintenance, reliability-centred maintenance, mobile asset management, MRO parts and services procurement, MRO inventory management, employee and contractor management, asset accounting and maintenance budgeting, and asset performance analysis. Decommissioning and disposal Perform asset transfer and disposal, collaborative engineering and project management, waste management, regulatory compliance management, and asset remarketing.
What does SAP EAM comprise of? It fundamentally includes Project Systems (PS) and Plant Maintenance (PM) with integration with Purchase Orders from Material Management (MM-PO), Assets from Finance (FI-AA), and Cost Centers from Controlling (CO-CCA). In advanced cases, Investment Management (IM) and Industry Solution Real-estate (IS-RE) are activated. EAM can be further divided into the upstream logistics aspect - Asset Management (AM) and the downstream finance aspect - Asset Accounting (AA). An asset from the point of view of AM can be an equipment.
What is PM and what is its function? Plant Maintenance (PM) is in-charge of maintenance of plant-related items (ie. repair, overhaul, inspection) but can be customized to go beyond that. A production plant is an asset; PM is used to maintain assets. PM by itself is an area of corporate function. It is typically can be coupled with CS if there is a revenue component. Although maintenance sounds dull, but to Aircraft/Vessels company it is not a laughing matter. You need to have maintenance planning. For instance, for every 25000 miles travelled basic inspection is required and every 3-monthly painting. If PM is not tracked well, disruptions and catastrophes happen.
What is PS and what is its function? Project Systems (PS) provides broader functionality in support of project management requirements beyond cost management. Given the tighter integration with operational aspects of project management (e.g. procurement, detailed cost planning, project scheduling, etc.) that PS provides, it enables more timely and efficient cost capture.
What are the basic EAM terms? Functional Location (FL) - an organizational unit within Logistics, that structures the maintenance objects of a company. A functional location represents the place at which a maintenance task is to be performed Corrective Maintenance (CM) performing maintenance when a breakdown happens Preventive Maintenance (PM) scheduling maintenance before breakdown happens Asset under Construction (AuC) asset with undefined value. For example, building a production plant, the total cost is not known until its completion Final Asset (FXA) asset with defined value and should have depreciations Operating Expenditure (OPEX) cost to be expensed out Capital Expenditure (CAPEX) cost to be capitalized into an asset eventually
What are the latest developments in SAP EAM till date?
Our Case Study: How do we do it?
Business Requirements In our case study, the core requirement can be simplified into: (1) Budget Control (2) Order Execution (3) Asset Settlement
System Setup Strategy There are many options to setup an EAM system: (a) Purchase Order with Internal Order (b) Purchase Order with WBS element (c) PM Order with Internal Order (d) PM Order with WBS element The simplest way for budget controlling is using Purchase Order with account assignment to either a WBS element or Internal order. However, in the context of EAM, PM Order will be more apt to be the central transactional object, due to the greater maintenance flexibility it offers. Internal Orders is a more direct way to manage cost. But it does not provide hierarchical cost structure for analysis. PS hierarchical cost listing has synergistic advantage when applied to PM functional location. We will walkthrough scenario (d) the most complete design!
PM Order with WBS element Option PM Order will be the primary transaction in any EAM systems, coupled with the budgeting functionality of PS Project. A PM Order (PMWO) should only be raised with a WBS element assigned to it this will ensure the budget mechanism to be applied more consistently. When a PMWO is released, a PR will be generated (by customization). The components required by PMWO will be translated into the PR lines automatically. At the same time, a PR commitment will be created against the WBS element budget check. When the PR is approved, a PO can be created. When a PO is created, the PR commitment is closed, but a PO commitment is raised against the budget. When the PO is fully delivered and/or invoiced, the PO commitment materialized into actual cost. With actual cost on PMWO, cost settlement can start.
In our case study, our EAM process is breakdown into 5 steps (see Process View section for detailed flow). The process can also be viewed in 4 Object levels: Project (PS), Asset (AA), Order (PM), and Material (MM).
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MasterData Setup
Functional Location is primary master data to the Plant Maintenance module. It is basically an object that SAP uses to structure areas for plant maintenance. Together with equipments, they are termed as technical objects. Technical objects, in the context of PM, are items that can be subjected to maintenance (i.e. an equipment can breakdown, so can a room in a plant). A functional location is not a storage location as in SAP MM there is no linkage at all, it is just a different context! It is very crucial to define functional location in the PM function. This even more critical when we are using PM in the context of EAM. When we use PM for EAM, we define the whole plant (from the engineering conceptual draft) as a functional location. We will want the correct cost for each production plant section match the correct functional location. We will want the correct equipments to be installed to the correct functional location. We will want to know the exact location of all assets and all the cost associated to the locations and the assets. The SAP dictionary definition of a functional location is an organizational unit within Logistics that structures the maintenance objects of a company according to functional, process-related or spatial criteria. A functional location represents the place at which a maintenance task is to be performed.
Information flow deriving functional location data from actual engineering diagram Production Process Structure Engineering Plant conceptual Draft System Representation of Production Plant
Process Area 1: Raw Material Process Area 2: Halogenation Process Area 3: Polymerization Process Area 4: Packaging P&ID (Piping & Instrumentation)
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WBS Project is primary master data to the Project System module, and the second most important master data for EAM. It is basically an object that SAP uses to manage and structure cost for projects. Based on experience, it is important to structure a Project into at least 3 sections based on capitalization types: 1) Tangible Capitalization 2) Intangible Capitalization 3) Expense (no capitalization)
One of the core purpose of using EAM is ensuring proper capitalization of cost into the proper assets. In the realms of finance, assets are broadly characterized either as tangible or intangible. As the project object holds the budget, it has to create a section for expense apart from having tangible and intangible class. SAP allow early classification of WBS element under different asset class. As the project object is also used for operational purposes, the tangible section can be further detailed allows building of more budget control options.
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Our case study is designed in such a way that the WBS Project and the Functional Location are mirrored. One WBS element in principle corresponds to one functional location. Equipments in the functional locations consumes budget from account-assigned WBS element.
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When creating a PM Order, the included functional location and wbs element information should tally PM Order with proper functional location (e.g. SINALL1-T801)
PM Order with proper WBS element (e.g. C30-O0101D2015-T801)
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Process View
Step 1: Project Start Project Controller create project structure and allocate budget.
Step 2: Order Create Requester raises the PM Order with the appropriate WBS elements
Step 3: Order Release & Technical Complete PM Order is released, the procurement cycle starts Order raiser TECO the PM Order when goods are recevied and time is confirmed
Step 4: Order Close Finance perform monthly cost settlement Finance CLSD the PM Order
Step 5: Project Technical Complete and Close Status Released = start reservation / requisition TECO = work done (no further commitment can be added) CLSD = fully invoiced Project Controller TECO the Project when all logistics aspect should be completed Project Controller CLSD the Project when all finance aspect should be completed
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Costflow View In our case study, each account-assigned WBS element will auto-generate an AuC upon release. AuC will be a placeholder for all cost as per WBS element. When the AuC has come to a completion, we can settle it to one-or-multiple FXA. In the assignment rule screen, we can allocate the cost as per PM Order to FXA.
The flow for cost starts at PM Order. When the PM Order incurs actual cost, and settlement run is done; cost is moved from the PM Order to its assigned WBS element. And the auto-assigned rule in the WBS element moves the cost to its AuC. During the second settlement run, cost is finally moved from AuC to FXA provided allocation rule is made. PMWO -> (1) WBS Element -> (2) AuC -> (3) FXA
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Our Case Study: How do we use it?
Screen Sequences Based on our system design and requirement areas (Budget Control, Order Execution, Asset Settlement), we will display the SAP screens in the following sequences: 1. Budgeting Screen 2. Tracking Screen 3. Settlement Screen 4. Reporting Screen
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Budgeting Screen The first step to EAM is budget management. The function is accessed via transaction CJ30 CJ30. The setup will trigger the budget availability check in the PM Order. In the additional data tab of PM Order maintenance, we can activate mandatory WBS element. We have the options to allocate budget at the top most WBS element or at a lower level. For the former allocation, budget can be freely used by all nodes but there could be a case of overusing budget among the nodes.
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Tracking Screen The list of PMWO that are linked to WBS elements can be accessed via transaction IW38. The listing allows IW38 filtering (apart from WBS elements/project) by status, dates, author, plant, functional location, equipment, etcs.
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The list of PMWO generated that is linked to WBS elements can be accessed via transaction CJI3. CJI3
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Settlement Screen Before we can settle the cost from the AuC to FXA, we have to maintain the allocation rule for settlement via transaction CJIC CJIC. CJIC allows us to allocate cost base on PM Order level.
However, we may choose to break the figure down either by percentage or dollar value. AuC can be allocated to one or many FXA.
The transaction CJ88 (or CJ8G is the actual execution transaction for cost settlement. CJ8G)
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Reporting Screen The report S_ALR_87013558 enables us to have a close loop analysis, as the transaction flow from budget cost to actual cost, and from hierarchical Project level to transactional PM Order level. Of course there are plenty of other reports that the SAP PS Information System can offers. If not, we can still using screen painter / writer.
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Conclusion
The case for better asset management should flow from the corporate level to the ground. Safer, more productive assets at an operational level are essential to optimized revenue, profit, and capital use across the network of assets, which, in turn, translates to better ROA performance enterprise wide.
Enterprise Asset Management Strategy cannot be created without the combined efforts of both the operational and controlling teams. Because it encompasses crucial decisions that impact PM Orders, Purchase Orders, Final Assets and AuC, and Costs and Budgets.
SAP Plant Maintenance is not just a system for maintenance of production plant; it can be scaled up to be a complete a system to collect, analyze and allocate cost for plant construction; and eventually an enormous system to manage the complete lifecycle of asset systems.
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Appendix
Detailed EAM Cycle with Transaction code listings
Integration between Asset Management (Logistics) and Asset Accounting (Finance)
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Credits and Content Sources

1. SDN EAM Brief Brochure http://www.sap.com/cis/industries/millproducts/metallurgy/brochures/Solution_Brief_EAM.pdf 2. SDN Overview of EAM features and functionalities http://www.sap.com/australia/solutions/sam/featuresfunctions/assetmanagement.epx 3. SAP Roadmap for EAM '11 http://www.ps-consulting.de/pdf/vortrag/infotag-2011/EnterpriseAssetManagement-SAP-Roadmap-NewSolution-Features.pdfS 4. SAP EAM Updates on Offerings from SAP '12 http://www.sap.com/campaigns/2012_02_miningmetals/assets/SAP_MiningMetals_Forum_2012_A5_SAP_Enterprise_Asset_Management.pdf 5. Asset Visibility: Seeing the Opportunity in Asset Management http://www.sdn.sap.com/irj/scn/go/portal/prtroot/docs/library/uuid/a038ee55-c513-2d10-33a285570032d43a Integrating SAP BPC into SAP Business Intelligence, technically http://scn.sap.com/docs/DOC-4252 (my other paper in 2010) someday EAM will find its way to Business Intelligence, vice versa
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Conceptual Enterprise Asset Management For Plant Construction Process

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Note: credits given on the last page.

SAP COMMUNITY NETWORK 2010 SAP AG