Asset Management? Or, Maintenance Management, Re-branded?

By Ron Moore, The Ron Moore Group
As appeared in IMPACT

The development of PAS55, a British Standard for supporting Asset Management, and its influence on various maintenance organizations, has been a very positive development. It’s a good document, one which has been slowly evolving into ISO 55000, scheduled for issue in November 2013. According to Terry O’Hanlon, CEO of the Reliability Web, and member of the ISO standards committee for Asset Management, ISO 55000 is a Management Systems Standard for Asset Management. The point he makes is subtle, but critical. It is not an Asset Management Standard. It provides nothing on “how-to-do” asset management, rather it simply provides the “what-to-do” elements for a management system, i.e., it represents a business management system that happens to relate to managing assets, with an emphasis on managing value creation and risk. Clearly, it’s a business imperative for companies to manage their assets effectively, including intellectual property, human, and physical assets. However, most seem to be focusing their interpretation of PAS55 and ISO 55000 on managing physical assets, and on maintenance in particular. While maintenance is an essential element in asset management, it is not sufficient, and likely is not what is intended by PAS55 and ISO 55000. Indeed, Terry states strongly that “Asset management is not about managing assets. It is about delivering value to an organization through the utilization of its assets.”

With that nuanced introduction in mind, it’s been my experience that most all of the asset management strategy documents give far too much attention to physical asset management, and maintenance in particular, and not nearly enough attention to other issues that are even more critical to effective asset management. Indeed, all but one of the strategy documents I’ve read appear to be maintenance management strategies that have been “re-branded” as asset management strategies in an apparent attempt to make them more relevant to corporate executives. Asset management just sounds better at the executive level than maintenance management. This is particularly true for manufacturing plants and industrial operations. While maintenance is an essential element in asset management, it is simply not sufficient. The key questions which should be asked are: “Do these asset management strategy documents substantially advance the performance of our assets, in terms of the value we create, i.e., quality production output? At the lowest sustainable cost? With excellent environmental performance? And the lowest risk of injury? And minimize risks related to these and perhaps other issues?”

With this in mind, I would like to offer my suggestions or guidance regarding the issues that should be addressed in developing an asset management strategy, particularly related to physical asset management. These suggestions generally focus on large manufacturing and industrial operations, e.g., refineries, chemical plants, primary metal plants, paper mills, power stations, automotive plants, mining operations, etc., and while they may apply, are not necessarily intended for institutional facilities, e.g., airports, hospitals, schools, etc. While ISO 55000 describes many phases in developing an asset management strategy, i.e., Need, Plan, Design, Create, Operate/Maintain, Renew/Dispose, I’d like to give particular attention to the phases related to Need, Design, Operate, and Maintain.

Business Requirements for the Assets

An asset management strategy begins with the organization’s strategy and plan for achieving its goals, and then supports delivery of the value associated with the organization’s plan. For any asset management strategy to be effective, it must first clearly define the business requirements for the assets in the coming years, that is, in one, five, and ten years, and even longer depending on the business situation. This will necessarily require input from senior executives of the organization, from marketing and sales, and perhaps others. This should be the very first issue that is addressed in any asset management strategy. How can we develop a strategy if we don’t first understand the business requirements for the assets? For example, if I plan to shut down an operation in the next two years, it will have a very different asset management strategy than if I plan to run the operation for the next 10 years, and double the business volume every five years. All but one of the strategy documents I’ve read omitted this essential requirement. The latest draft of ISO 55000, indicates that the asset management strategy is an input to the organization’s strategy and business plan, and then later in the section on planning properly states that the organization’s asset management objectives should be derived from its strategic plan and should translate the organizational objectives into specific asset management objectives. Certainly, it’s an input, but I strongly believe that the organization’s strategy and business plans should drive the asset management strategy – that’s where the asset management strategy begins.

Current Asset Performance vs. Business Requirements. Most all the asset management strategies I’ve read do not include a requirement to measure and/or analyze current performance against the assets’ requirements. This analysis should include a gap analysis and appropriate plans for improving current performance. For example, if overall equipment effectiveness or OEE is lacking, it should be improved before any additional capital expenditures are authorized for increasing capacity. The question is “Are we effectively using the assets we have?”, and before we authorize additional capital, we must assure good performance in existing assets. Manufacturing companies often authorize additional capital for increasing capacity, when existing assets, if operated well, would provide for additional capacity requirements.

Capital Projects Role in Asset Management

Moreover, the typical asset management strategy does not include the role of the design and capital projects function in the management of the assets, particularly those that are planned. It will be very difficult to effectively manage new assets if they are poorly designed for the intended service and business needs, and fail to consider life cycle cost and performance implications. And, as noted above, the business should not be spending money on new assets until the existing assets are performing at a high level.

Operations Role in Asset Management

The typical asset management strategies mention operations’ role only in passing, if at all. If you don’t have strong leadership from operations in managing assets, you will not have good asset management or performance, irrespective of how well maintenance is done. In about 90% of the industrial operations I’ve seen, some two-thirds of production losses have nothing to do with equipment. These losses relate to issues such as product or raw material changeovers, poor production planning, rate and quality losses, short stops, inadequate raw material quantity and quality, and market demand. Of the one-third that is related to equipment failures, some two-thirds of that is caused of poor operating practices. For example, these are typically poor startup and shutdown practices, failure to operate the equipment per the standards required, running the equipment beyond its inherent capability, inconsistencies in operation across the shifts, and generally a lack of basic care and a sense of ownership. Figure 1, below illustrates this.

 
Figure 1: Causes of Production Losses

 

Reinforcing this view is the following data:

1. The Japanese Institute of Plant Mgmt (JIPM) reported that 70% of equipment failures are preventable by operators.
2. A Fortune 500 manufacturer did 23 RCM analyses, identifying 1,864 tasks to minimize equipment failures – 1,260 tasks, or 68% were done by operators; and 237 redesigns of process and/or equipment were required.
3. A large chemical company did several FMEA analyses at one of their plants, identifying 475 tasks to minimize equipment failures. 315 tasks, or 66% were done by operators.

Given this data is even close, how can you have effective an asset management strategy without operations leadership and operational excellence, particularly when maintenance only controls 33% of equipment failures, and only 10% of the asset’s total production losses?

Tools for Improving Asset Management

The typical asset management strategy makes little or no mention of the various tools that might be used for improving asset management and performance, e.g., RCM, RCA, TPM, etc. While condition monitoring is at times identified as an element in managing physical assets, it is not given sufficient prominence. Some 80-90% of assets have a random failure pattern associated with them, or constant conditional probability of failure. The best way to manage random failures is to understand the consequence of failure, and then to develop a comprehensive condition monitoring or inspection strategy to detect those pending failures early enough to manage their consequence; or to improve the design for longer life, or to design in redundancy so that if the failure occurs, you still have functionality; or to accept run-to-failure as a valid approach, because the consequence of failure is minimal. Of course, once a defect is detected, an excellent work management program, including excellent maintenance planning and scheduling, is needed to manage the consequence of the defect. This last issue is typically well covered by the asset management strategy of a given organization, but it’s not nearly sufficient. Typically, more guidance is needed in the strategy document relative to the tools that will be used to assure effective asset management.

Executive Support

Last, but by no means least, once executives approve the asset management plan, they have an obligation to support it. That is, they must provide adequate resources in the form of money, people, and training/skill development to assure the asset management plan can effectively deliver the results and attendant value for the organization. These resource requirements should be clearly defined in the asset management strategy.

Summary

Most asset management strategies make a good start at creating an effective strategy, but are insufficient to assure excellence in asset management in a manufacturing plant, even if followed in a very disciplined and rigorous manner. Most asset management strategies are missing, or only cover superficially: 1) the requirements of the assets by the business in the coming years; 2) the current performance or state of the assets; 3) the supporting role of design and capital projects; 4) most importantly, the leadership role of operations and the criticality of excellence in operating practices; 5) the tools for supporting effective asset management, and finally, 6) the resources required for implementing the strategy. How can you effectively manage your assets when these issues are not fully addressed?  You’re strongly encouraged to address these issues in your asset management strategy.


Ron Moore is the Managing Partner of The RM Group, Inc. in Knoxville, TN. He is the author of Making Common Sense Common Practice: Models for Manufacturing Excellence (now in its 4th edition); and of What Tool? When? A Management Guide for Selecting the Right Improvement Tools (now in its 2nd edition), both from MRO-Zone.com; as well as Business Fables and Foibles and Our Transplant Journey: A Caregiver’s Story; and over 50 journal articles. He can be reached at 865-675-7647, or by email at RonsRMGp@aol.com.

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