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The Strategic Importance of Asset Management Part Three: A New Framework

Written By: Daryl Mather
Published On: December 20 2003

A New Framework for Asset Management

As the level of understanding of these areas begins to rise, so too do the expectations that managers and companies will be able to meet modern requirements.

In the past, maintenance strategy has frequently been treated in a highly reactive manner. Maintenance regimes are often created in response to machine breakdowns or incidents. Often, in the aftermath of disasters, there are public statements made demanding, or promising, "more intensive maintenance."

While the intention is laudable, the result of such reactive actions is often either non-effective or counter productive. Either way it is too late to stop the original incident from having occurred.

Managing assets needs to be done in a truly proactive approach, one that ties the management of physical assets to the corporate objectives.

A modern approach to asset management can be visualized as a series of dominoes. Each domino needs the momentum from the previous area, and then proceeds to pass this momentum to the next domino in the line. Starting at any point other than the beginning will leave some dominoes standing.

Modern asset management can be seen in the same way. Each of the dominoes represents one of the decision-making areas that are required to adequately manage assets.

The initial momentum to begin the sequence comes from the vision of a future state. This needs to clearly represent the corporate objectives and goals, and expressing how asset management can play a part in achieving these goals.

This energy is then carried forward to impact on the remaining areas of decision-making. As with the dominoes, a decision to begin in the middle of this chain reaction will omit areas important to the end result.


This is Part Three of a three-part note.

Part One discussed changing attitudes.

Part Two covered the implications for asset management.

The Corporate Viewpoint

Perhaps more than any other management initiative, asset management is heavily driven by the corporate requirements and objectives. Yet it is often overlooked or summed up in global statements regarding "improved efficiency" or "improved quality."

One of the more recent tools in a manager's arsenal is the balanced scorecard. This proven tool has been used successfully throughout the world as a means of communicating corporate strategy, and converting strategy into results. However specific asset management goals and causality links are rarely included in corporate scorecards. Including asset management at this level of corporate objective setting, sets two powerful dynamics in motion. Firstly, it raises the level of understanding, throughout the company, of this area and its importance. Secondly, it provides guidelines for future decisions that will need to be taken regarding the following steps in the chain reaction.

Developing Maintenance Strategy

The corporate objectives, once clearly defined and linked to asset management, act as "requirements" in the creation of the strategy regimes.

An example of this can be found in the linking of corporate objectives regarding quality to asset performance. Determining exactly what the future acceptable level of poor quality will be immediately provides a guide for the performance standards required of the assets in the production lines.

These then need to be considered along with all other requirements that the company may have of its assets. There are a large number of areas that contribute to the company's requirements of its assets, and all of these need to be considered in the resulting analysis.

When there is a clear definition of what it is that companies need from their asset base it will allow them to

a)
understand if their assets are able to achieve these objectives in the first place, and
b)
determine the maintenance strategies required to ensure that they do, or
c)
determine what enhancement actions are required to meet corporate requirements Working through these two steps not only forces a radical change in the manner in which companies view their assets, it also leads to a radical change in the way that the assets are managed and that decisions are taken in this area.

Applying Maintenance Strategy

As work on maintenance strategy gets underway, work can begin on the steps relating to the application of maintenance strategy. This means taking the strategies and determining what are the supporting business needs and processes that will be required to execute them.

As the strategies are developed, information regarding the clear requirements of the materials and human resources functions will begin to emerge.

This gives a company the ability to totally plan and control the maintenance efforts and spending, from the strategies through to the materials and human resources dimensions, all aligned with the true asset requirements.

Similarly, as these fundamental issues are addressed, there begins to be an understanding of what the business processes need to be. Quite often this can mean a radical change to existing processes.

These can range from processes governing acquisition, installation and enhancements, through to the operational processes. In some cases it may require different maintenance scheduling frequencies, in others it may require whole new skill bases to be developed or it may lead to changes in the ways that we plan, perform, and record work that are done.

In stark contrast to conventional thinking in field of asset management systems, it becomes clear that business processes do not drive "requirements". In fact business processes, and the systems that are used to manage them, are driven by asset requirements.

This is one of the key misconceptions to have emerged regarding enterprise asset management in recent years.

Administering Maintenance Strategy

With the asset requirements, supporting business needs, and work processes defined, attention can now turn to the use of an existing or future computerized maintenance management system(1).

It sometimes becomes clear that the systems in place are either inadequate for managing the asset portfolio or that they are being used in a manner that does not align with the newly defined business processes.

This is often a startling revelation to companies expecting to be able to merely "roll out the maintenance modules" of their existing ERP that was bought for financial or other business reasons.

This can often be a rude awakening when the amounts of money that are sometimes involved are taken into account.

Conclusions

There can be no doubt that the perceived importance of physical asset management has risen substantially during 2003. There can also be no doubt that this trend will continue into the future as it has done over the past three decades.

It is beginning to become more widely understood that asset management is a complex and specialized area. One which can be a source of strategic advantages, but also one in which the implications of misjudgement can be extremely serious. Not only from a financial perspective but also in many areas of corporate activity. In order to exploit the advantages available in asset management, and ensure their responsible stewardship, management will need to be based around three basic tenets:

  1. Using the correct people;

  2. With the correct knowledge;

  3. To make decisions in the correct way.


Bibliography
Maintenance—A New Paradigm, John Moubray, available from www.aladon.com

(1)Often referred to as a computerized maintenance management system (CMMS), or enterprise resource planning (ERP) system, or enterprise asset management (EAM) system.

The case Against Streamlined RCM, John Moubray, available from www.aladon.com
Reliability-centred Maintenance report Dolby Access Press


About the Author

Daryl 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 darylm@klaron.net or go to www.strategic-advantages.com

 
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