A Data-Driven Solution

AssetLens is a data-driven and operationalization-ready asset investment planning (AIP) platform built and deployed by 1898 & Co., part of Burns & McDonnell. AssetLens was created for manufacturing leaders to modernize and improve how infrastructure and capital asset expenditures are developed and assessed.

Within AssetLens, operational and financial information, which can often be sequestered or subjectively interpreted, is standardized, centralized and combined with the experience of 1898 & Co. consultants. One source of the truth is obtained for:

• Asset health, criticality, remaining life and risk.
• Book value and replacement cost.
• Initiative considerations (safety, environmental and automation potential).
• Capital expenditure request, evaluation and approval workflows.
• Project forecasting and budget outlay.

Manufacturers using AssetLens consistently report a strong return on their investment (ROI) through enhanced investment prioritization methods, reduction in excess and overlooked costs, and streamlined processes.

Foundation: Quantifiable Benefits and Return on Investment

In the food and consumer products manufacturing industry, the percentage of sustaining capital expenditures set aside for base business can range from 25% to 70%. Much of this percentage goes toward ongoing asset replacement or refurbishment projects balanced with regulatory, safety and quality improvement needs. Companies with a higher number of assets, older infrastructure, shorter on staff or have an aggressive acquisition strategy may find it necessary to allocate at the higher end of the percentage range to keep operations stable.

1898 & Co. has found that at least 5%-15% of base business spending is either overspent (inflated budget), underspent (significant backlog) or incorrectly allocated (project A instead of project B). Reprioritizing these dollars to higher-value investments supported by data can yield a number of benefits, while the planning process itself can be 30%+ more efficient.

Reprioritized, more accurate investments may lead to:

• Reserved funds for cost savings and growth instead of simply staying in business.
• Transparency to cut or defer spending when needed.
• Accelerated investments in innovation and sustainability.
• Mitigated profitability loss from operational instability.
• Boosted shareholder return.

Forecasting Accuracy

Many organizations struggle sifting through fragmented information and subjective project justifications, complicated further by large spreadsheets to manage. There is often a consensus toward room for improvement trying to extend forecasts beyond one to two years. Manufacturers also tend to play it safe and keep certain category spending constant from year to year, with a use-it-or-lose-it mentality.

Benefits of improved accuracy are highlighted by Verdantix’s Global Corporate Survey showing the importance of a single source of truth (91% of respondents). A 2016 report highlights that forecasts within 5% of actual results grew shareholder value more than 30% faster across a three-year period. Accurate forecasting is a business imperative and it boosts investor confidence.

Asset-specific templates are used in AssetLens to create a single standardized source of health and risk insights while also allowing the user to evaluate remaining life, book value and initiative impacts. No longer is “old/need to replace” a valid and acceptable project justification if it’s presented without data.

Project request and planning functions within AssetLens tie investment decisions back to data, giving the user a way to evaluate cost and benefits. Capital forecasting is often extended beyond five years in this environment and analysis across operating sites is standard and agile.

Excess and Overlooked Costs

Two sources of inflated and overlooked costs are downtime and maintenance spending. Manufacturing downtime averages $36,000/hour for fast-moving consumer goods and can reach $150,000 for small and mid-size companies. Delayed investments are often the culprit for higher maintenance costs, with 62% of companies reporting above-inflation increases, as well as safety risks and reduced efficiency.

Organizations that are ineffective in managing asset life cycles and health of infrastructure tend to spend more on spare parts, maintenance activities and outsourcing contractor help. Profitability quickly erodes during emergency/unexpected capital events and when production lines are not operational.

AssetLens is used by organizations to manage operations within a tolerable level of risk, proactively identifying intervention needs when data deems necessary; this could be allocating to asset replacements or a need for ongoing maintenance. The goal is minimizing downtime and avoiding unnecessary spending, which can equate to several percentage points in excess cost avoidance.

Time Spent on Capital Planning

Annual planning and master planning is time-consuming, often delaying project execution and costing manufacturers commercial opportunities. It is common to hear that 1%-5% of projects planned and allocated are not delivered in the same year due to inefficiencies and shifting priorities. Agility can be a challenge if insights aren’t available to identify when dollars can and should be shifted from one spend category to another.

Centralizing assessment and planning processes in AssetLens creates enterprise transparency, reduces manual effort and equips leadership to distinguish needs vs. wants more efficiently. Planning often happens faster in AssetLens vs. traditional planning methods. When planning happens faster, teams have more time to focus on detailed engineering or commercial negotiation, such as volume purchasing from OEMs on future projects to advantage pricing 10%-20%.

Summary and Case Example of ROI

AssetLens helps manufacturers unlock cost savings, optimize budgets, keep teams focused on execution and align investments with business strategy. When building an ROI case for an asset investment planning solution like AssetLens, the following gains (or cost avoidance areas) are evaluated:

• Asset replacement reallocation (5-15 percentage points).
  • Example: the decision to replace the boiler instead of a palletizer.
• Shareholder return (10 percentage points).
  • Example: setting annual expenditure plans and upholding accuracy within 5%.
• Maintenance savings (2.5 percentage points).
  • Example: reducing inventory of expensive spare parts and lowering frequency of third-party contractors performing work on aged and unsupported equipment.
• Project pricing (10-20 percentage points).
  • Example: bundling several automation systems to be modernized in a single project.
• Project delivery rate (5 percentage points).
  • Example: Executing two to three more projects and gaining their return sooner.

See a hypothetical case example for a midsized fictional company, Goshawk Manufacturing Co., to illustrate how gains affected their business.