Asset management is increasingly recognised as a technology-empowered methodology which can boost an organisation’s productivity, reduce costs, cut energy wastage and encourage the adoption of best business practices. Typically there are two primary routes to approaching physical asset management: using ERP software or specialised EAM software.
ERP systems offer a large scale consolidated approach to tracking an organisation’s asset-related processes, while EAM systems provide in-depth, best of breed functionality to monitor, react and predict the precise performance of assets over their lifetime.
Defining ERP & EAM Systems
ERP (Enterprise Resource Planning) is business management software that allows an organisation to use a system of integrated applications or modules to manage its activities. ERP is designed to combine all of a company’s activities into a single database, eliminating incompatible and duplicate technologies.
EAM (Enterprise Asset Management) also known as computerised maintenance management systems (CMMS) is a term used to describe software specifically designed to improve asset performance, increase service life and cut costs across an organisation’s physical assets, primarily buildings and equipment.
Let The Debate Commence: ERP vs EAM
At first glance, choosing an ERP system to manage physical assets looks pretty enticing. There is only one software system to support which is attractive from a CIO’s perspective, and financials are all in one place.
But while ERP is a great fit for financials, manufacturing, supply chain and CRM to name but a few, extending these capabilities to areas such as asset management can result in disappointment. In many cases an ERP System offers less functionality and is harder to use for asset management.
EAM on the other hand is designed specifically to support assets and offers more depth and insight from which to improve operational performance. But historically, the cost and complexity of integrating EAM with ERP has proved prohibitive.
However organisations are now beginning to realise that the ERP one-stop shop approach might be short-sighted, and that that it is impossible for one software system to optimally serve the needs of the entire organisation. It is fundamental that critical functions like Asset Management get the tools they require while Finance and IT get the consolidation and system simplicity they need.
Integrating ERP & EAM Systems
First and foremost – it is complicated. ERP systems normally manage the organisation’s financials. By using an EAM system, a portion of those financials—those related to asset management activities (e.g., MRO purchasing)—are initiated and tracked in the EAM System. To ensure costs are correctly allocated across the chart of accounts and vendors are paid, cost information must be passed to the ERP system. The two systems must be integrated.
This is where it gets sticky. EAM and ERP system integrations have been historically complex and expensive. Different types of databases, table structures, upgrade issues and system constraints have added costs and headaches to getting EAM and ERP systems in synch and communicating. The difficulty associated with system integration is the primary reason why some organisations have chosen ERP over EAM when it comes to asset management.
Additionally, many of the past complexities of system integration were not only due to the technologies employed, but also where certain business processes reside. Defining where business process will be executed (i.e., EAM vs. ERP) is a key factor of integration success. If overlooked, it could result in a long, expensive and painful integration experience.
Ultimately organisations need costs to be at the asset level. Knowing what the organisation spends to operate and maintain assets supports informed and educated business decisions. With that said, the most efficient and effective means of capturing asset lifecycle costs is to perform Work Management (i.e., Maintenance and Engineering), MRO Materials Management and Purchasing all in one system. These are integrated functions and ideally should have one system home for their activities, preferably the EAM System.
The Sum Of The Whole Is Greater Than Its Parts
Organisations need EAM and ERP systems to work together to fully deliver their strategic plan. Both ERP and EAM systems serve distinct, specific and value-added purposes. EAM systems do a better job of managing physical assets. ERP Systems are better at managing financial assets. Bring both systems together with an effective integration strategy underpinned by software, and they can focus on what they do best. EAM and ERP systems are partners, not competitors, in the ongoing effort to help organisations reduce costs, meet regulatory demands, and boost performance.