Better ROI on Reusable Assets through Time KPI Tracking:

The Importance of Asset Management Software

What would a note on your annual Balance Sheet mean to you if it explained that your company had to
write down large costs due to unforeseen reusable asset losses caused by inadequate management?


Just How Effective Are We?

One of the underlying concepts behind masLogic is that you cant manage what you cant see.
By providing visibility into the reusable assets lifecycle, masLogic lets you understand where your
assets physically are, using Google Maps system in the Dashboard, and their status. Data is
documented into reports or dashboard charts that help you pinpoint problems and remove
bottlenecks. Furthermore, those numbers allow you to measure and benchmark the
management of those assets with abilities to perform annual comparisons. By focusing on
specific metrics, you can build a picture of your asset utilization; this will help an organization
with forecasting and budgeting.
Key metrics can also help you determine how well your investments in opportunities are
performing. Comparing costs from before and after implementation of these enhancements will
highlight the impact of your expenditures your return on investment. Logistics costs represent
an average of 8% (Flores, et al., 2012) to as much as 15% (RedPrarie, 2002) of sales, thus
maximizing return on investment is crucial. This is true for any organization of any size.


Metrics and Key Performance Indicators

What Are KPIs?
Any measurable aspect of managing your assets can be a metric, but not all are indicative of how
well the processes are working. Each organization will have a small number of important metrics
that are key to understanding their overall level of performance. Such crucial metrics are called
key performance indicators (KPIs), and are often used to benchmark the success or failure of
asset management over time. For most organizations, three to five metrics are a manageable
number of KPIs to track (Taras & Taras, 2014), but the exact nature of relevant statistics will differ
from organization to organization. The metrics you choose to implement need to answer the
questions that senior management and finance professionals require for balancing the cost and
resources. Systems like masLogic are often required to provide insight into the unknown factors
that generate progress; these tools provide that knowledge in way that management can
streamline processes and enforce the best practises.


masLogic 2.3 The Importance of Asset Management Software 1



Logistics KPIs
Generally, there are four broad categories of metrics in which you should be measuring
performance: cost, productivity, quality and time (Kumar S, 2013). By ensuring that you
understand your organizations performance in these areas, you gain insights in the
completeness of the picture. How effective is your asset management. Many of the KPIs are
aspects of a business that an organization will want to monitor, benchmark and reassess through
the implementation process, while others will be measurements of industry as well as cross
departmental factors. The latter type of KPI is especially important to document and review
because they are often the drivers of change with which you need to be able to cope.
Listed below are several typical metrics, categorized into four areas described above:

Asset Lifecycle (Cost)
One aspect of owning and/or using reusable assets that is frequently overlooked is having a good
picture of the assets lifecycle. Understanding how long you can expect assets to last within your
environment, or depreciation cost, can help you forecast replacement costs and help avoid
having insufficient inventory levels. This is particularly important when replenishment of assets
takes a significant amount of time. By creating this metric, you are able to track many factors
including damage rates, repairs, treatment options (e.g., ISPM-15), and safety requirements.

Average Inventory Levels (Productivity)
If you need assets (e.g., containers) for shipping orders, availability on hand is obviously a crucial
factor to the success of your organization. Conversely, if you receive shipments in containers that
need be returned, the number that accumulates affects the magnitude of your current liability
and the space required to store them. In either case, tracking the number and location of assets
under your management over time is important information to understand and provides insights
into your overall equipment utilization. By comparing these levels against sales or shipment
volumes, you can see how your organizations asset inventory is affected by your throughput.
Minimum and maximum thresholds can be derived from these metrics, to be incorporated into
your processes, to improve your organizations responsiveness to evolving situations and to avoid
bottlenecks or congestion.
Units per Transaction (Productivity)
Most companies experience considerable variation in the number of assets used for each
shipment as they go to different customers and locations, or arrive from different suppliers.
Understanding how those shipments vary will help incorporate forecast information into
planning your logistics. For example, if you know how many assets youll need for a particular
product, youll be able to accurately take into account projected changes to sales. Examples of


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related measures in this category include: average number of turns per containers, number of
containers per transaction and cost per container trip.
Inventory Accuracy (Quality)
All logistics systems are limited by the quality of data that is available to them. Well-designed
systems acknowledge the possibility of poor quality information thus develop revision
capabilities or update mechanisms. The frequency and magnitude of corrections are inventory
accuracy metrics. If you need to make frequent and significant changes to the inventory counts
that you record, it will be very difficult for you to properly plan and manage your assets.
Sometimes, reporting for this metric is segmented by asset type for two reasons:
1. Differences in how some assets are tracked can have an impact on the accuracy of the
information collected, and
2. The ability to define and address opportunities for higher priority asset types first is
desired.
This is particularly important where data collection occurs in complex variations, requiring robust
solutions for improving quality.
Even though this metric is traditionally rarely tracked, it is one of the most important KPIs for an
organization to integrate. Experienced masLogic users are often amazed by the improvement of
asset management simply through refining the accuracy of inventory information.
Container Quality (Quality)
The monitoring and enforcement of quality standards is often one of the most critical and
challenging success factors in managing a container pool. This policy offers objective and timely
metrics. The percentage of assets which adhere to the established criteria is an important
indicator of the physical health of the asset pool. The quality standard is often established in
order to satisfy the logistics, traceability and safety requirements.

Turnaround Time (Time)
Whether you are shipping or receiving reusable assets, tracking their turnaround time is
important. Factors such as transport down time, handling, warehouse racking, store display, and
customs & inspections all impact how long an asset needs to be in use before it is available to be
returned. It is important to have visibility in the timeliness of the information available to you; if
data is not real-time after the physical transaction, your model needs to be flexible. By
understanding the rate at which assets are returned, you can plan for inventory levels and
requirements with confidence. Tracking this metric will help you understand how masLogic
improves the availability of your assets and reduces your overall inventory needs.


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Replenishment (Time)
Regardless of how efficiently you are in managing your assets, you will periodically have to
replace them because of wear & tear or losses, as well as increases in your inventory because of
new resources. Understanding the lead times and delivery periods for asset replenishment may
be crucial to maintaining required inventory levels and delivering on service levels. As you adopt
KPIs, your understanding of your asset management will become more sophisticated, and
replenishment will need to be addressed in conjunction with those other processes. The
application of replenishment time metrics to establishing ordering thresholds can streamline
your fulfilment processes.
Balancing and Reporting

As alluded to above, the collection of data and creation of KPI figures is a balance between
usefulness and cost to generate. It is important that you choose the most relevant KPI metrics
that you can track with the tools available to you because accuracy and auditability are vital
characteristics to maintain if you want them to be effective and compelling. Too much effort or
guesswork involved in creating your KPIs will undermine the confidence that others have in their
value. Similarly, the relevance and applicability of the KPI needs to be obvious to the audience
they are intended for. Often, this will require you to integrate data from other sources such as
expenditures or sales results. Well-designed systems like masLogic will let you export source data
into analytical formats (such as Microsoft Excel) so that you can properly calculate and report
on your chosen KPIs.

The Role of masLogic

Using masLogic will streamline the
creation of most of the data required
for your metrics. In some cases,
masLogic or a dedicated substitute
will be the only method of acquiring
the data you need. As the most
effective tool for improving the
management of your reusable assets,
masLogic will have the most
significant impact on the metrics that
you implement. Data presented in
masLogics real-time dashboard is
chosen to provide insight into crucial
Figure 1: using masLogic to calculate ROI
$0
$5,000
$10,000
$15,000
New Asset Cost ROI With masLogic
AR cost ON cost ST cost
Projected Actual Savings


masLogic 2.3 The Importance of Asset Management Software 4


metrics and can help you track the variables that have the biggest impact on your asset
management.
An important step in implementing masLogic for your organization is creating reports that will
help support your chosen KPIs. By incorporating a review of the kind of information masLogic can
provide, you can institute a process of feedback-driven continual improvements, an industry best
practice (Martichenko, 2010). As you monitor the chosen KPIs, refine, upgrade the dynamics, let
the processes evolve and the tool alongside. Tools like masLogic must be complex yet flexible
enough to incorporate into policies that are robust such as asset management.
Using masLogic to calculate ROI can be illustrated with the example in Figure 1. This report gives
the costs over time for replacing three types of reusable assets (coded AR, ON and ST). Beginning
in June 2013 when masLogic was implemented, it includes the projected costs that would have
been incurred had masLogic not been in use and the calculated savings based on those
projections. Here, after the ramp-up period of four months, masLogic incurs savings of about
$9200 per month. By comparing the investment made to adopt masLogic (e.g., fees, staff, process
overhead, etc.) with these savings, you can easily calculate your ROI.
Results

Calculating return on investment properly involves reporting your KPIs as soon as they are
feasible, even before improvements are implemented and processes can be adapted.
Understanding what your actual ROI is depends on knowing what your starting point is, which is
directly related to how soon you begin to accumulate your data. Historical data has value but
often lacks sufficient details to directly compare with contemporary information. For instance,
crucial information like elapsed times, data entry dates, and conflict resolution details are often
unavailable.

A good ROI depends upon the implementation of changes and improvements to processes as
they evolve. Adopting masLogic is a good first step, but you need to pay attention to what your
KPIs are telling you and to follow-up on problem areas. From inception through implementation,
senior management must support, if you want the roll-out to be successful.







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References

Flores, H., Mason, N., Xue, L., Ibanez, A., Meneses, C., Eory, K., & Varela, A. (2012, April 10).
Development of Logistics Efficiency Monitoring. Retrieved from Arizona State University:
http://ilpil.asu.edu/wordpress/wp-content/uploads/Final-Final-Report-Metrics-Project.pdf
Kumar S, S. (2013). Are you measuring the right metrics to optimize logistics processes? Retrieved from
Genpact: http://www.genpact.com/docs/resource-/are-you-measuring-the-right-metrics-to-
optimize-logistic-processes
Martichenko, R. (2010, May). What's the Problem with Continuous Improvement? Retrieved from
Logistics Quarterly: http://logisticsquarterly.com/issues/10-5/article1.html
RedPrarie. (2002). Achieving Measurable Results in Logistics. Retrieved from IDII Supply Chain Software
Research & Consulting: http://www.idii.com/wp/rpAchievingMeasurableResults.pdf
Secretariat of the International Plant Protection Convention. (2009). ISPM 15 - Regulation of Wood
Packaging Material in International Trade. Retrieved from IPPC:
https://www.ippc.int/sites/default/files/documents/20131115/ispm_15_2009_en_2013-11-
15_2013111509%3A00--504.61%20KB.pdf
Taras, M., & Taras, J. (2014, February). Supply Chain Metric. Retrieved from Supply Chain Metric:
http://www.supplychainmetric.com/






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