Optimise asset management as a business imperative

The most effective way to reduce costs in the long-term is to optimise physical asset productivity, says John Mitchell*, a machinery monitoring and analysis expert who spoke at Pragma`s 2005 Asset Management Thought Leadership Conference.

Gaining the highest possible lifetime value from your physical assets requires careful consideration of the various lifecycle stages of the asset, and a skilfully crafted approach to maintenance that seeks the optimum balance between over- and under-maintenance.

Such an approach requires a mental shift from perceiving asset management as an administrative and maintenance task to positioning it as a strategic activity that is results-driven.

Asset management is about more than simply ensuring all equipment is accounted for and in working order. Rather, it is about deploying and institutionalising a strategic, fully integrated array of comprehensive improvements to technologies and practices related to various business functions including management, engineering, operations and maintenance. It is about maximising the performance of your assets and effectively channelling the value and contribution of each asset back into the business.

However, there are far too many organisations that focus their attention primarily on improving the efficiency of maintenance management and logistics processes instead of increasing production effectiveness; assuring capacity to meet delivery obligations; and improving reliability so that the need for maintenance work is eliminated.

The primary characteristic of physical asset management should be an orientation to business values and profit opportunities, building from existing strengths. Potentially reducing maintenance costs by as much as 40%, and increasing uptime by 20%, requires the organisation to have a detailed knowledge of its business and an overall business-driven strategy. It must move from a cost centre culture to a profit centre one and there must be equal partnership between management, engineering, operations and maintenance.

The organisation must also make use of the appropriate technologies; implement the necessary practices; instil the proper culture; introduce hierarchical, linked measures of performance; identify strengths, targets and barriers to success; and create a transition plan if it wants to optimise its asset management.

Key steps in the process of optimising asset management include:

* Identifying improvement opportunities with the highest business value
* Benchmarking to accurately assess position
* Prioritising and planning improvements based on business value and risk or reward in an accurate financial model
* Investing and implementing to maximise value and return
* Measuring results; and
* Continuously adjusting and improving to maximise value further.

Organisations need to know and understand the economics of their business, from market constraints to opportunities for profit and financial drivers. Opportunities for improvement must constantly be identified, comparing where you are currently to where you must be, and what the business value contribution is from reliability improvements at organisational, process and equipment levels.

This knowledge is vital to business generally. It is also what gives optimising asset management a chance at success, so benefiting the business to the extent that it can. This success can be increased if key practices and applications are implemented, such as planning and scheduling, materials maintenance, repair and overhaul, spares management, and condition-based, reliability-centred maintenance.

The business-driven, overall objective should be to manage capacity assurance rather than maintenance. In other words, emphasise the need for reliability improvement and so eliminate the need for maintenance.

Increased awareness of the economic advantages that are achievable if defects are eliminated and effectiveness improved rather than constantly repairing and restoring is another key to success. Equate to every-day understanding what the impact of waste and lost production is on results and sustainable costs, and the value of saving costs rather than increasing production; then communicate this clearly to all in the organisation.

The journey to excellence begins by laying the groundwork today. Benchmark, sell new ideas, keep the "big picture" in mind and remember that it is the entire operation that must be optimised. Go for rapid improvement and the quick win; implement technologies based on effectiveness; use all available resources; establish accountability; measure results; demonstrate improvement quickly or change; add best-practice process; remove non-performers; and pay attention to detail.

If you do these, you will successfully optimise your asset management and discover improvements in business results thanks to increased uptime, greater production and manufacturing assets usefulness, reduced operation and maintenance costs, and increased capital effectiveness.

Consider this: lesser performers focus primarily on reducing cost, numbers and hourly rates. Best performers direct attention to proficiency, effectiveness and adding business value.

* John Mitchell is considered among the world`s leading experts in the field of machinery monitoring and analysis. He was founder and president of Palomar Technology International and a manager of the Bruel Kjaer Condition Monitoring Systems Division in Denmark.