a result of a handful of events, 2003 has been a benchmark year in the discipline
of asset management, the implications of which are reverberating around the
world. All of these events were, in some manner, due to a failure of physical
The Colombia Space Shuttle disaster
- The New York
blackout, the London blackout, and the blackout in Italy
- Six people,
responsible for the management and maintenance of the rail lines, were charged
with manslaughter regarding the Hatfield train disaster in the United Kingdom
The global reaction to these events has been the culmination of a continuous
series of changes in this area since the early 1970s. These changes have encompassed
attitudes within society, heightened levels of understanding as well as the
competitive market forces acting on the function of physical asset management.
This is Part One of three-part note.
discusses the implications for asset management.
presents a new framework for asset management.
has become increasingly intolerant of industrial incidents, particularly in
the areas of safety and environmental integrity. It is no longer considered
acceptable to cause harm to either the environment or to people and the communities
that they live in.
the past ten years this has been reflected in various changes in legislation
and regulation in countries around the world. Some of the recent developments
in these areas include:
Changes to the regulations governing electricity providers in the United Kingdom—now
providing a high degree of focus on risk management and mitigation.
Wide ranging fraud legislation by the federal government of Canada in response
to the Westray disaster
Legislation in response to the Longford disaster in Australia
is becoming obvious that in the future those responsible for the management
of physical assets will be more likely to be called to account when there is
a failure, and as can be seen by recent history, it is likely that it will not
be companies but individuals.
extreme cases incidents can also mean irreversible damage to a company's public
image. Think of such disasters as the Exxon-Valdez environmental incident, the
Union Carbide disaster in Bhopal in India or more recently the linking of Powergen
to the New York blackout. All of these incidents have remained chained to these
companies in the public mind.
Level of Understanding
publication of the report Reliability-centred Maintenance, prepared by Stan
Nowlan and Howard Heap, has enabled a quantum leap in the way in which we understand
how maintenance should be managed.
of the findings of this report fly in the face of long-held, "common-sense"
type beliefs and have exposed the true complex nature of asset management. They
also force companies to look at their physical asset base in an entirely different
manner. At a high level these can be summarized in the following points:
Changes to our understanding of how maintenance contributes to a company's
Changes to the way in which we understand equipment failures
The maintenance department alone is not capable of developing a sustainable
and adequate maintenance strategy regime
Maintenance is not about preventing failures, it is about preventing the consequences
An understanding of the ability of operational maintenance to drive capital
More protection is not necessarily better
An understanding of new ways of maintaining items, particularly those that
don't fail according to long-held views
Extensive data is not required to take decisions on maintenance policies
Many of these new ways of thinking have challenged long held industry views.
So much so that they are often difficult for industry professionals to easily
assimilate. They are even less likely to be understood by those outside of the
field of asset management.
As we move into the 21st century many are beginning to look towards asset management
as a source of strategic advantages. To achieve this the organization will need
to have a deep understanding of these issues, and others like them, integrated
into their thinking and corporate cultures.
Competitive Market Forces
of the key elements of the increasingly open global competitive environment
is pressure on costs. There are pressures to increase profit margins, or in
worst case scenarios retain profit margins under lowering retail prices.
one of the largest elements of both operational and capital spending, asset
management is often an obvious target for reductions in this area.
costs are high, in some cases artificially high. Not only are they high but
there is increasing pressure on maintenance costs to rise. Areas such as increased
regulation, complex and automated machinery, as well as the rising costs of
physical assets themselves are pushing maintenance operators to the wire. Pressures
to do more are increasing while the pressure to spend less is greater than it
has ever been.
of the major factors behind this trend is that we are more dependent on machinery
than at any time in the past. Where previously we would use people to do work,
today we use machinery.
conflicting situation of pressures to increase the work done combined with pressures
to reduce the costs of doing that work, has been one of the principal drivers
behind many of the vast range of product and service "solutions" that have appeared
over the past three decades. These have generally been focused on appealing
to this management concern over rising direct costs.
situation has unfortunately led to more poor decisions and misunderstandings
in asset management than any other influencing factor. The results of decisions
based on these concerns alone, while often bringing some short-term gains, are
rarely sustainable and can even be dangerous in the medium to long term.
or isolated cost cutting often leads to the eradication of skills or activities
that assist in achieving production goals. In worst case scenarios they impinge
on the safe operating environments of assets.
does not mean that direct cost reductions are not achievable in asset management.
of the maintenance that we do today either achieves very little, or is actively
counter productive. As such there is always scope for reducing areas of redundancy.
Added to that are other areas of inefficiency such as planning and scheduling,
stores management, and other key areas.
The concept of direct cost reduction needs to be replaced with the focus on
reducing maintenance unit costs. This requires a redirection of costs from the
present activities towards activities that we truly must do to achieve adequate
performance levels. Any increase in attention, no matter where it comes from,
is of course welcome. However it needs to be reinforced with knowledge of the
true nature of asset management, as well as the strategic importance to many
facets of corporate activity.
This may include regulatory and legislative compliance, safety and environmental
integrity as well as the standard economic requirements of quality, production
This concludes Part One of three-part note.
Part Two discusses the implications for asset management.
Part Three presents a new framework for asset management.
About the Author
Mather is an author, speaker, and management consultant from Australia
currently living and working in the United Kingdom. He specializes in assisting
companies to achieve strategic advantages within the areas of physical asset
management. After beginning in Australia he has enjoyed a career in over fifteen
countries around the world. He can be reached at firstname.lastname@example.org
or go to www.strategic-advantages.com