Assets are only assets when they are making you money. If they don’t make money for you, then they are just costs to your business. Every production environment is filled with equipment that’s purpose is to make your company money – they are all intended to be “Assets”. Yet, not all production environments are managed as if the equipment in them are actually assets as discussed in, “Every Environment is Someone’s Production Environment.”
Producing A Return on Assets (ROA)
If we agree that the equipment in your production environments is, in fact, assets, then ensuring that those assets are always available to produce revenue for your company must be the focus of your organization. Further, since revenue is only a part of the equation, ensuring that those assets are available and managed at the lowest possible cost will produce the most income for your company. That means, that more income will remain in your company accounts and the real return on your assets will increase – because your costs are down and your revenue is up.
The key to producing this return is managing your assets in a way that recovering and preventing downtime is everyone’s first priority.
ROA = Net Income/ Average Total Assets
The return on assets (ROA) shows the percentage of how profitable a company’s assets are in generating revenue. (source: Wikipedia). The ROA calculation is very straightforward: divide net income by total asset value. That means, to maximize your ROA, you have to increase your net income, decrease your total assets, or both. Our recommendation to our customers is to do both.
Doing both always seems like the logical choice – but it isn’t as easy as it seems – unless you can measure both of those activities and drive action to optimize each part of the equation.
Let’s look at each separately.
Driving Net Income really means the following: You must make equipment available to produce revenue AND you must keep the cost of that availability as low as possible. That means, you need: highly available assets (i.e.: low downtime, fast response time, rapid return to service), a focus on preventing downtime in the future, a way to keep your support costs low and, of course, a way to measure and track those metrics. If you can’t track your progress towards your goals, you won’t be successful driving down costs and increasing income.
Average Total Assets:
Another key to success is to know the health and utilization of the assets in your production environments. If you have unproductive assets that are not producing sufficient return, you need to know this and take action. Your EAM solution must be able to drive utilization, identify assets that are obsoleted and need to be replaced/retired, and provide insights into assets that are consistently causing downtime and driving support costs up.
Now imagine an integrated solution that enables real-time access to the data required to drive return on assets. Our solution, Scireo, uses real-time management consoles to track the cost and performance of both equipment and staff members, customizable notifications, and escalations that make sure the right people know when they need to take action and seamless integration that drops the costs associated with coordinating actions across departments.
Couple all of this with The Sente Group’s ability to rapidly customize our aEAM solution with almost any environment and you have a winning solution that will accelerate your ability to produce a return on your assets.
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See how Scireo aEAM Software drops asset and support costs by 50% while accelerating time-to-market 2X.
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