Are your systems and processes configured to provide you with the information you need to manage your assets?
Or are they viewed as a burden with little value?
There are many processes and tools to support the management of the information on assets and the maintenance of the assets. Depending upon the size and requirements of the organization, tools from manual paper based systems, to spreadsheets, to dedicated CMMS (computerized maintenance management systems), EAMS (enterprise asset management systems), and ERP (enterprise resource planning) systems have been effectively used.
The critical issues are to select the processes and tools most appropriate for your organization, and to use them effectively. There are many situations where the appropriate tools were not effectively used due to ineffective processes, ineffective training, or poor implementation and configuration. The selection of inappropriate tools may cause even more issues. These situations can cause poor quality or inaccurate data, as users see no value to the systems, inefficient processes with considerable manual intervention where the processes are not optimized for the system used, and duplicate data entry or use of manual entry when the systems could better manage the data. The final result is often a considerable investment in systems with little of the promised benefit achieved.
Is reducing operating and maintenance cost the only way to improve profitability?
What is the impact to reducing asset management budgets?
Increased profitability can be achieved through reducing the per-unit costs of the output. This can indeed be achieved through reducing operating costs, including asset management and maintenance budgets. The difficulty is that typically the impact is negative to the individuals who need to make the changes. Increased profitability can usually be more easily be accomplished by increasing output within the existing infrastructure, if all the output can be sold. To help drive this behaviour, one common performance measure used for production is OEE (Overall Equipment Effectiveness). OEE is the product of Availability, Production Rate, and Quality Rate; or simply: how long you can run it, how fast you can run it, and how much of the output is good.
If focusing only on costs and not results, it is possible to reduce the asset management budget to the point where the physical assets are not able to perform at the desired level, resulting in loss revenue and reduced profitability. Taken to the extreme, is the situation where the organization is not replenishing or refurbishing the infrastructure, but instead is “consuming the assets” required to produce the product or deliver the service. This may be required in a crisis situation, where the long-term is sacrificed as the future beyond the short-term remains in question. If the situation of consuming the assets is left to continue, the expectation is the organization is not looking to remain a “going concern” in that business.
Are you focusing on the right financial drivers?
Do you fully understand the implication of the financial decisions made?
What risks are the most critical to you?
Do you look at production risks?
What about health and safety, and environmental risks?
There are many risks related to asset management facing organizations today, with different probabilities and severity of outcomes. Often the implications of the risks are not fully understood.
If you are not able to operate your physical assets when needed, is it just lost revenue for the duration of the downtime? Or additional costs due to expedited deliveries? Or is the matter more severe, resulting in a permanently lost customer because of missed deliveries in a JIT (Just In Time) manufacturing environment? Customer issues related to quality or customer service can have similar outcomes.
The negative outcomes related to health and safety, and environmental violations have gotten much more severe. As well as the amount of the fines increasing for violations, more jurisdictions are imposing jail sentences for the violations.
What is the risk impact to your organization?
What is the risk impact to you, given the responsibility of your position?
What is your business strategy?
Is it consistent across the organization?
Is it appropriate for your business and current economic environment?
Organizational strategy and objectives need to be well defined and communicated throughout the organization. In defining strategy and objectives, they need to address customer needs and acknowledge the constraints that the organization operates within.
Effective communication of the business strategy and objectives is a minimum requirement to ensuring consistency in understanding across the organization. The business strategy should be cascaded down though the organization, to have the strategy at the lower levels support the overall organizational strategy. Even with the common understanding of the organizational objectives, “operational silos” may still exist, as the different parts of the organization optimize the performance of their individual groups, resulting in sub-optimal performance of the overall organization.
Output for capital-intensive business can be internally constrained, or externally constrained. Some businesses can change between internally and externally constrained depending upon the industry response to economic situations. Strategy needs to address the issues imposed by the constraint. A business where the output is internally constrained can sell all the output that can be produced, but is limited in the amount it can produce. Typical businesses are commodities that sell at a market-set price. Externally constrained output is imposed by factors not controlled by the organization, such as market demand for the output, derived demand (demand driven by other product, e.g. electrical transmission, pipelines, transport), scarce inputs, or logistics required by a complex process (e.g. JIT used in automotive assembly). The strategy in the internally constrained situation is to focus effort on asset management to increase output, thereby increasing revenue. In the externally constrained situation, the focus on asset management is upon producing to the level of the constraint in the most economical manner. For an organization that changes between internally and externally constrained, it must understand its response to the economic environment, and adjust its strategy to match the current situation.
Do you understand your own business output constraints?
Do you manage the business strategy to match your constraints?
What measures do you use to monitor your asset management performance?
What behaviours are they intended to drive?
With properly defined business and asset management strategy and objectives, the organization then needs to drive the behaviours to support the strategy and objectives. Communication of the strategy and objectives is critical to drive behaviours. Using appropriate performance measures will help to clearly communicate the strategy and objectives, and show the organization’s progress toward supporting them. Like strategy, performance measures needed to be cascaded down through the organization to drive behaviours at the lower levels that support the overall objectives. The work by Robert S. Kaplan and David P. Norton on “Balanced Scorecard” has developed a system intended to drive a broader perspective of measures through the inclusion of non-financial measures that drive improvements in areas that will have a critical influence on the performance of the organization.
Performance measures can also support continuous improvement initiatives. If a broad set of raw data can be gathered (e.g. DCS or SCADA systems, production systems, EAMS/CMMS), trended and analysed, the co-relation between variables can be better understood, and the “ripple effect” of changes to the variables can be predicted to some degree. With this understanding, the organization can then focus on the critical performance drivers.
Performance measures can be used to manage obligations between groups through service level agreements (SLA). The SLA could be internal within an organization to ensure the services provided are suitable to the end-user of the service, or they could be contractual between two separate organizations (e.g. outsourced maintenance services). Again, it is critical to ensure that the measures developed drive the desired behaviour.
Are your measures appropriate to your strategy and objectives?
Do they support the desired behaviours?
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