Asset-intensive organizations that rely on the continued performance of their physical assets, such as big manufacturers, multisite organizations and large utilities, need to make sure their enterprise asset management, or EAM, systems work well with their ERP systems.
Both ERP and EAM software serve distinct, specific purposes that add value to an organization. Each system complements the other by doing what it does best in its respective field, Smith added. ERP systems are better at managing financial assets while EAM systems do a better job of managing physical assets. Bringing EAM software and ERP software together with an effective integration strategy enables them to do what they do best.
"Although there are modules in an ERP system that you could use to manage your physical assets, the functionality just isn't there. The focus of the software company is not around assets, it's around financials," Smith said. "What we say is that you can have the best of both worlds."
A company can have an ERP system to manage its finances; issue checks, roll costs up to the general ledger and manage cash, receivables and payables, but it should have a separate system that is entirely dedicated to its physical assets, which means EAM software, according to Smith.
Challenges to EAM and ERP integration
Smith said he tells his clients they need both an EAM system and an ERP system, and they need to talk to each other.
"But that's where it gets a little sticky -- making sure that they're communicating with each other in the correct manner is critical," he said.
Historically, integrating EAM and ERP systems has been complex and expensive. Different types of databases, table structures, upgrade issues and system constraints have added costs and complexity to getting EAM software and ERP systems in sync and communicating, Smith said.
This is the main reason that some organizations have chosen ERPover EAM when it comes to asset management.
ERP systems normally manage the organization's financials. When using EAM software, a portion of those financials related to asset management activities, e.g., maintenance, repair and operations, materials management, and purchasing, are initiated and tracked in the EAM system. To ensure that costs are correctly allocated so vendors are paid and cost information is passed to the ERP system, the two systems must be integrated, Smith said.