Top Strategies for Asset Performance Management (APM) Mehul Shah, Research Analyst Aberdeen Group February 24th, 2010

Agenda Introduction Polling Questions Define Asset Performance Management Challenges Aberdeen Research Frameworks APM Research Results Recommendation for Action

Polling Question # 1 What are your CFO’s TOP THREE (3) OBJECTIVES for the next 12 months? Revenue growth Reduce operating expense Improve profitability Customer satisfaction Risk Management Maintain or improve product and service margins Sustainability / Corporate Responsibility

Polling Question # 2 What are the TOP TWO PRESSURE driving you to focus on asset management? (Select two) Maximize Return on Assets (RoA) Reduced operational and maintenance budgets Aging assets Need to comply with safety and regulatory requirements Increasing demand variability

Polling Question # 3 What are the TOP TWO STRATEGIES that your company is establishing to address the pressures? Implement advanced asset performance management and analytical capability Establish a risk based strategy Create / improve real time visibility into asset performance Improve collaboration across maintenance, production and financial groups

What is Asset Performance Management? Approach that synchronizes operations, maintenance, and engineering goals Balancing asset availability and asset utilization Risk Management – Maintenance based on criticality of asset Visibility into complete lifecycle of asset – Understanding the Economic Value Add Aligning asset performance to corporate performance

6 Major Roadblocks to Asset Management Change in culture required to move from break fix to proactive maintenance Asset management is still viewed as a cost center by senior management Lack of communication among production, maintenance, engineering and IT departments Complex and disparate data sets present a significant road block to decision making Lack of awareness of how asset management can reduce environmental impact Transfer of knowledge from a few experienced employees to others

Our Research Methodology 5,000+ Executives surveyed 10,000 + data points collected per study 12 Benchmark Reports planned for 2010 Library of 15,000 benchmark survey responses and 200,000 data points

Aberdeen Maturity Class Framework Best-in-Class - Top 20% Selected Performance Criteria (KPI) Industry Average Total Respondents: Unscheduled Asset Downtime OEE - Middle 50% Return on Asset Goals Laggard - Bottom 30% Respondents are scored individually across KPI

Aberdeen’s Methodology End-User Investigation: PACE Framework Pressures: External and internal forces that impact an organization’s market position, competitiveness, or business operations. P A Actions: The strategic approaches that an organization takes in response to industry pressures. Capabilities: The business competencies (organization, process, etc…) required to execute corporate strategy. C Enablers: The key technology solutions required to support the organization’s business practices. E

Aberdeen Maturity Class Framework Asset Downtime OEE Return on Assets What are Best-in-Class companies doing differently? What pitfalls are they avoiding? Why are they achieving greater success? What technologies and services are enabling them to succeed?

Study Demographics Current Survey Respondents: 139 Job Title: 26% Upper Management (CEO, COO, CFO, CTO, President, VP, Partner/Principle) 22% Director 23% Manager 10% Staff Revenue Size 30% Small (under $50 Million) 38% Medium ($50 Million - $1 Billion) 33% Large (Over $1 Billion) Geographies: 55% North American 17% Asia Pacific 17% Europe 9% Middle East, Africa Industry 21% Oil/Gas 11% Consumer Packaged Goods 8% Utilities 5% Chemicals 4% Metal and Metal Products 4% High Technology Manufacturing 2% Automotive

Top Objectives of CFO’s Source: Aberdeen Group, October 2009

Source: Aberdeen Group, October 2009 Budget Changes 38% 47% 36% 35% 31% 32% 27% 22% 28% 0% 10% 20% 30% 40% 50% Capital Expenditure Operational Expenditure Maintenance Budget Decreased Increased Remained Same Percentage of Respondents, n=139 This is of no surprise to us that Majority of CFO selected reducing operating expense as the top goal for the next 12 months. Further analysis showed that more than 60% of the total survey population have seen decrease in caps, operational and maintenance budget or have remained the same. Forward thinking CFO are also thinking of how to improve corporate revenue and profitability metrics in the wake of reduced budgets. When we looked to see if there is something BIC CFO’s are doing different, we found that they are more likely to take a risk management strategy as compared to other. This trend is further exemplified in the Aberdeen report, where we surveyed more than 4000 companies, and the CFO were found to be more likely to establish a goal of managing risks across the enterprise. Source: Aberdeen Group, October 2009

Top Pressures Driving Improvement in Asset Performance Management Source: Aberdeen Group, October 2009

Defining the Best-in-Class: Industry Average Performance Criteria Used to Identify Best-in-Class Laggard Operational Equipment Effectiveness (OEE) 88% 81% 75% Unscheduled Downtime 2% 11% 18%

Results Achieved by Best-in-Class: Estimated performance against corporate plan.. 30% Over achieved by 25% 25% 20% 15% 10% Over achieved by 7% Percentage of Respondents, n=139 5% 0% -5% -10% Missed by -10% -15% Return on Assets (RoA) Best-in-Class Industry Average Laggard

Source: Aberdeen Group, October 2009 Actions – The “A” of PACE Initiatives the Best-in-Class Leverage to Outperform Peers 32% 23% 41% 40% 26% 39% 57% 0% 10% 20% 30% 50% 60% Synchronize asset performance with corporate performance objectives Create / improve real time visibility into asset performance Establish continuous improvement programs Establish a risk based strategy Implement advanced asset performance management and analytical capability Percentage of Respondents, n=139 All Others Best-in-Class Source: Aberdeen Group, October 2009

Source: Aberdeen Group, October 2009 Process Capabilities Source: Aberdeen Group, October 2009

Organization Capabilities Source: Aberdeen Group, October 2009

Knowledge Management Capabilities Visibility Source: Aberdeen Group, October 2009

Performance Management Capabilities Source: Aberdeen Group, October 2009

Source: Aberdeen Group, October 2009 Sustainability Source: Aberdeen Group, October 2009

Enterprise Wide Technology 80% 73% 71% 65% 70% 62% 63% 60% 48% 50% 50% 43% 42% 40% 31% 32% 30% Percentage of Respondents, n=139 22% 20% 10% 0% EAM - Enterprise EHS - Environment BI - Business Energy Management Asset Management Health and Safety Intelligence Best-in-Class Industry Average Laggard Source: Aberdeen Group, October 2009

Real Time Interoperability 4% 7% 17% 14% 28% 33% 18% 16% 23% 42% 31% 25% 35% 38% 50% 55% 0% 10% 20% 30% 40% 60% Wireless Sensors and CMMS/EAM Energy Management and CMMS/EAM CMMS/EAM and BI CMMS/EAM and Mobile devices Control System and CMMS/EAM CMMS/EAM and ERP Percentage of Respondents, n=139 Laggard Industry Average Best-in-Class Source: Aberdeen Group, October 2009

Source: Aberdeen Group, October 2009 Enablers 12% 22% 19% 32% 46% 17% 31% 41% 42% 44% 33% 38% 43% 81% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Mobile Solutions Master Data Management Asset Dashboard Asset Analytics Spare Parts Optimization Alerts and Alarm Management Percentage of Respondents, n=139 Laggard Industry Average Best-in-Class Source: Aberdeen Group, October 2009

Laggard Step to Success Establish executive ownership and sponsorship for asset performance and energy management strategies across the enterprise Align goals and metrics across maintenance and production teams Invest in analytics to provide predictive insights based on the captured asset data Include energy data (consumption, costs etc) as part of the optimization process to schedule maintenance and production activities

Industry Average Steps to Success Provide on-demand asset lifecycle information to maintenance and production employees Invest in centralized knowledge warehouse to store asset performance, energy and operations data Include energy management in corporate wide sustainability initiative Invest in automation with specific focus on alarm management, dashboards, analytics, and mobile solution

Best-in-Class Steps to Success Align operational performance with corporate performance to understand the impact of asset strategies on organizations financial goals Manage energy consumption by developing initiatives integrated with the overall asset management strategy Establish a risk based approach to ensure predictive asset management Establish real-time interoperability between asset management and business systems

Thank You Research Contact: Mehul Shah Research Analyst mehul.shah@aberdeen.com 617-854-5212