The Strategic Importance of Asset Management Part Two: Implications

  • Written By: Daryl Mather
  • Published On: December 19 2003



Implications for Asset Management

The changing attitudes, understandings of physical assets, and market conditions bring a broad array of implications for those responsible for asset management. The majority of these can be explained as "new accountabilities." Many of these are accountabilities leveled at, or within, corporations themselves. However many will also be directed at the individuals taking or overseeing these decisions, often with daunting consequences for failure.

New Levels of Accountability

As previously highlighted, asset managers are beginning to find themselves increasingly called to account for the decisions that have been taken.

Decisions will increasingly be judged against:

  • Higher standards for legislative and regulatory compliance

  • Increased understanding of the role of assets in areas of productivity, cost, and quality

  • Risk of damage to the corporate image of the company

  • Failures to adequately understand production needs

  • Failure to accurately determine capital planning requirements, based on current physical assets and future requirements

This leads to two conclusions. Firstly those responsible for taking decisions regarding physical assets need to have a deep understanding of all of the issues and implications of those decisions, as well as the necessary authority to act on them.

Secondly it will require the ability to adequately defend decisions taken. Not only in terms of considerations internal to the company, but also in terms of defence in the case of potential legal actions. It is this second conclusion that has the most impact for maintenance managers of the future.

The ability to state that asset management decisions are defendable is paramount. This means that they have been taken by qualified and experienced people; in a manner that is in line with internationally accepted standards on the issue; and in a manner that provably complies with the first two premises. That is to say, a manner that is totally auditable.

Although these may stretch into many areas of corporate management, there are three "in vogue" elements of today's market that are particularly of concern.

They are:

  • ERP/EAM decision making and management

  • Outsourcing of asset management functions

  • The use of call centers as viable asset management tools


This is Part Two of a three-part note.

Part One discussed changing attitudes.

Part Three will present a new framework for asset management.

The EAM/ERP Market

Asset management, or enterprise asset management as it is often referred to within this industry, is one of the areas where there has been a definite decay in the decision-making process.

Although this area is by far the most expensive of the current range of solutions in asset management, it is easily the most misunderstood and counter-productive in many cases.

Prior to 2003 many maintenance systems were implemented as a result of an ERP implementation. A logical follow on to what has been considered the "main game" (often financial, supply chain, or information technology related). Decisions within this area have frequently been taken, or managed, by people with little or no true depth of knowledge in the asset management arena.

Even in organizations where the importance of asset management is understood those with a background in IT or finance, or other unrelated disciplines, are often responsible for these types of projects. As well as the decisions involved in executing the projects.

As has been explained earlier, the area of maintenance management is an area that is complex and not guided by recognized "common-sense" judgements. It is not an area that is easily nor rapidly understood by those outside of the discipline. While the use of quasi-experts may be sufficient in other areas of corporate activity, in asset management the stakes are simply too high.

Even in the most cavalier of boardrooms the corporate risk associated with this dangerous practice is becoming recognized. In the years that follow 2003, as accountability continues to be a marked factor of asset management, previous decisions will increasingly need to be revisited by those with the knowledge and depth of experience to do so.

This marks a dramatic change in the structure of this market sector. Decisions regarding selection, implementation, and post-implementation management must become more focused on the true areas of asset management.

Previously "requirements" were attached to processes currently in place, or more often a proposed future state of processes. As we move forward, this will become driven more by the requirements that companies have of their physical asset base, in order to achieve strategic advantages within their markets.

Outsourcing in Asset Management

Outsourcing has become one of the catch-cries of those offering solutions and regimes aimed at lowering direct costs. In some areas this may be relevant. Within the area of physical assets there are some major considerations that first need to be taken into account.

Regardless of who has been delegated the responsibility for maintaining the asset base, there is still only one asset owner. That is the corporation that operates and owns the assets. So while it remains possible to delegate responsibility, it is still not possible to delegate the legal ramifications of these responsibilities. This has been shown dramatically in the recent events, previously mentioned, in the United Kingdom.

This indicates that there are at least two areas of asset management that need to be retained under the strict control of the asset owners.

Firstly, is the judgement as to what should be done. The determination of exactly what maintenance regimes should be applied in order to comply with the corporate requirements of the physical assets. The asset owners are the only ones that can do this successfully as they are the only ones with full knowledge of the corporate objectives in this area.

Secondly, there is a need to retain control, in some form or other, over how things should be done. This can better be explained as the standards to which a task must be completed, as well as the dates within which a task must be completed.

Contracts for outsourced maintenance cannot be managed on the basis of merely handing over assets or a series of tasks to be managed. The execution of many tasks, derived in response to the asset requirements, have small tolerances for execution They are driven by the way in which a piece of equipment fails as well as the consequences of that failure.

A failure to carry out these tasks within the timeframes that are required is a failure of the asset management function.

This carefully balanced combination of doing the right job and doing the job right is the essence of responsible asset stewardship and will be the basis on which asset managers, will be judged in the future, regardless of who they have delegated responsibility to for executing this plan.

The Use of Call Centers

The use of call centers for asset management is an extremely disturbing development and one that is increasing in popularity.

People with some form of engineering background often staff these initially, but more often than not they become operated by data management and clerical types of employees.

If these are used only as a means of data capture then the situation is manageable. Yet in more extreme cases there have been efforts to almost fully automate the scheduling decision making process, using centers such as these as points where work can be prioritized and dispatched for execution.

Again the situation develops whereby people with little or no depth of understanding of the area of asset management are making decisions that could have potentially disastrous consequences. This is often on the recommendations of other people with dubious levels of understanding of the ramifications and importance of asset management.

All engineering judgement needs to take as its base current operating conditions. These can often be intangible and changeable. This only increases the level of corporate exposure to risk. This situation is neither defendable nor is it logical.

These are merely a few of the areas that are affected by the changes in perceptions regarding maintenance. There are, of course, many others throughout the entire range of activities and decisions that are taken on the subject.

This concludes Part Two of a three-part note.

Part One discussed changing attitudes.

Part Three will present a new framework for asset management.


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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