Systematizing Your Asset Management Operation
Tracy Smith, Principal of SwainSmith Inc.
When it comes to your asset management operation, most companies focus on maintenance, repair and operations (MRO). In theory, this makes sense. You would think that focusing on MRO would be the most effective way to improve equipment performance and reduce downtime. But in fact, it can compromise the effort. Too much focus on MRO prevents people from taking a step back and seeing the big picture.
If a company wants to see consistent, measurable improvement in asset performance, costs and risks, it must stop viewing its business functions – MRO, storeroom, procurement and the rest – as isolated units and start treating its asset management operation as a unified system that relies on the cooperation of all elements for success. This is the basic premise of asset management systems.
The Asset Management Challenge
Conventional MRO solutions treat individual components of an operation as separate entities. If a company wants to improve asset performance, it focuses on a single aspect of it operation. The company may implement a reliability centered maintenance (RCM) program, purchase a software system, or seek out supply chain solutions. The trouble is, it does this without a sense of the larger perspective, or how the separate pieces of its operation should fit together.
As a result, many organizations suffer from a haphazard, stop-and-go, whack-a-mole approach to asset management. They make improvements piecemeal without considering the larger context. For example, they implement maintenance planning and scheduling without considering MRO supply chain performance, or install information systems without establishing consistent and insightful software content. They focus too much on maintenance operations or software applications and ignore other elements that drive success.
Yes, maintenance and software are critical to the success of an asset management operation, but they can’t do it alone. They are key players, it’s true, but they are still only two players on a much larger team, a team that includes storeroom operations, procurement, operations, project management, accounts payable and many others. Neglecting the other players on the team is a fatal mistake because maintenance and software depend on key support functions, like storeroom and procurement, for their success.
The results of this mistake are all too familiar. Parts aren’t available when needed, maintenance job plans aren’t detailed enough, materials catalogs don’t match actual inventories, procurement costs are too high, equipment is down too often, and so on. Despite a company’s best attempts, it ends up with inefficient operations and frustrated management. Often, companies blame the software or the culture that implemented it rather than addressing the root of the problem.
The Big Picture
What is missing is a consolidated effort, a comprehensive strategy that addresses all the variables in the asset management equation. The truth is, asset performance is determined by many factors interacting across multiple internal business functions. Operations must coordinate with maintenance to keep equipment in good condition; maintenance depends on the storeroom for parts and materials; the storeroom relies on procurement to obtain supplies; and procurement is at the mercy of project management and accounting when it comes to authorizing purchases and paying vendors. Understanding and leveraging these interdepartmental dependencies is the key to getting the most out of a company’s physical assets. For an asset management operation to be successful, all the associated business functions must be integrated like puzzle pieces to create a single, seamless operation.
Asset management functional matrix
Asset management is a team effort. This is where asset management systems shine. They provide the strategy and structure necessary for coordinating large-scale MRO operations.
Asset Management Systems
An asset management system is a holistic program for directing and controlling all aspects of equipment and infrastructure management, from planning and investing to operations, maintenance and disposal. An asset management system is not a software system. Rather, it is a set of policies, strategies, practices and processes that govern all activities affecting a company’s physical assets. Software is a powerful asset management tool, but it does not replace a comprehensive asset management system.
An asset management system establishes clear, documented processes for every activity that affects an asset’s lifecycle, from purchasing a piece of equipment to creating a work order to contracting a vendor. It dictates procedures to ensure that all asset lifecycle events, including maintenance work orders and supply chain transactions, are captured and tracked within the software system to ensure accurate data and reporting. It lays out clear guidelines for dividing responsibilities and coordinating activities between departments. In short, it provides a complete program for managing physical assets across the entire organization and throughout the full asset lifecycle.
An asset management system unites organizational vision and structure with practices, content, information systems and assessment tools to create efficient and effective operations. These components represent all the different factors that must be directed and coordinated to create a successful asset management operation. They encompass the organization’s overall objectives, asset management strategy, team roles and responsibilities, operational activities, technology requirements, master data libraries, coding structures and performance measurement tools.
Figure 2 represents a sample asset management system. Specific components and their contents will differ from one organization to another, but the basic structure is the same for any operation.
Sample of an asset management system
- Organization & Management is the first component of a successful system. It includes the asset management policy, objectives and strategy determined by upper management, as well as role descriptions and responsibilities that help define organizational structure.
- Practices are the second component of an asset management system. They include processes and procedures for all maintenance, storeroom and procurement activities, plus business rules and guidelines for coordinating with project management, accounting and other functions. Practices are the heart of an asset management system; they keep things running. The other parts of the system cannot function effectively without solid, consistent, clearly defined practices.
- Content is the third component of a system. It comprises master data, such as asset registries, equipment hierarchies, materials catalogs, vendor catalogs, as well as coding structures, naming conventions, classification systems and other tools for grouping and filtering data. Good content is the foundation of good data management.
- Information Systems constitute the fourth component of an asset management system. This component specifies the requirements for all technology associated with asset management, including enterprise asset management (EAM), enterprise resource planning (ERP), computerized maintenance management system (CMMS), supervisory control and data acquisition (SCADA), data historian system, distributed control system (DCS), predictive maintenance (PdM) technologies, and production control and monitoring systems.
- Performance Improvement is the fifth and final component of a system. It contains assessment tools, such as key performance indicators (KPIs), performance targets and audit scoresheets, to measure the system’s effectiveness and find new ways to improve.
Together, these five components provide the tools needed to effectively manage an organization’s physical assets, starting at the top with large-scale policy and objectives and working down to detailed guidelines for specific roles, practices and technologies.
An asset management system provides the big picture for maintenance operations. Once in place, it serves as a framework for implementing smaller programs, such as reliability initiatives, supply chain solutions and software systems. An asset management system ensures that programs like these are integrated seamlessly within the rest of an operation to ensure maximum performance and return on investment (ROI).
Why Use Systems?
Asset management is about making sure a company’s physical assets are helping it accomplish its business objectives. The only way to ensure this is to maintain a clear line of sight between upper management and the folks in the trenches, aligning the organization from execs to techs. An asset management system does this by providing a clear directive from upper management regarding the company’s asset management policy and defining management-approved practices and procedures to govern day-to-day activities.
This top-down approach also allows a company to define the interrelationships between its various business functions from the very beginning, delineating specific roles and responsibilities at the outset to avoid problems later on. Moving across a broad front like this helps ensure success because it takes all variables into account, avoiding surprises that pop up halfway through an implementation. This might happen, for instance, if an organization tries to implement maintenance plans and schedules without an effective storeroom operation.
By defining how different business functions will interact and providing a unified set of guidelines for the organization as a whole, an asset management system helps to unite an organization around a common cause. This produces synergy, a whole that is greater than the sum of its parts. Creating synergy is at the heart of what an asset management system does.
The Benefits of Systematizing
Systematizing an asset management operation improves more than just equipment reliability. The rewards stretch across the entire organization, from operational productivity to bottom-line profit to stakeholder relationships. Done right, an asset management system:
- improves asset performance and reliability;
- increases ROI on equipment and software purchases;
- facilitates better record keeping and reporting;
- standardizes practices and procedures;
- improves coordination between business functions;
- increases operational efficiency and productivity;
- minimizes costs and improves the bottom line;
- facilitates the realization of business objectives;
- minimizes health, safety and environmental risks;
- demonstrates compliance with legal, statutory and industry standards;
- signals to regulators and stakeholders that assets are in good hands;
- facilitates better performance measurement and analysis;
- formalizes commitment to continued improvement and provides a clearly defined path forward.
Soft Dollar Programs, Hard Dollar Savings
Numerous organizations have seen firsthand what systematizing can do for an operation. One organization, for example, has been implementing an asset management system over the last 18 months and is already seeing significant, measurable improvements in performance, reliability and bottom-line costs.
A representative from the organization’s upper management reports that the company has realized a significant ROI on the system in less than two years. “We are increasingly becoming a more reliable organization and minimizing costs in the process,” the representative says. Unplanned maintenance is down, productivity is up, emergency maintenance has been cut in half and callout work has been significantly reduced.
The system also has generated downstream benefits for the organization in the form of reduced insurance premiums, netting it significant hard dollar savings. The organization’s contact explains:
“Insurance regulators like management systems, especially ones that focus on improving safety, reducing environmental impact and minimizing risk. Large manufacturing companies like ours pay a lot of money for insurance. By demonstrating good stewardship, our asset management system has actually reduced our insurance premiums, providing us with significant hard savings that directly impact our bottom line.”
This organization chose to take a comprehensive approach to managing its assets because it wanted to create value in the long term. The company’s representative put it best:
“We are an asset-intensive organization. Our physical assets are critical to helping us accomplish our business objectives. We felt the implementation of an asset management system provided a top-down, comprehensive approach to improving performance that addressed all variables and could create value across a broad organizational front on a long-term, sustainable basis.”
A Standard for Excellence
Companies aren’t the only ones talking about the benefits of systems. International experts increasingly agree that asset-intensive organizations need process-centric systems to manage their operations. In 2004, the British Standards Institution published PAS55, the world’s first international asset management standard. It states that an organization shall “establish, document, implement, maintain and continually improve an asset management system.”
ISO55000, the internationally recognized asset management suite of standards published in 2014 by the International Organization for Standardization (ISO), agrees. According to Section 4.4 of ISO55001, an organization shall “establish, implement, maintain and continually improve an asset management system, including the processes needed and their interactions.” Together, ISO55000, 55001 and 55002 provide complete guidelines for creating and implementing an asset management system.
Why are asset management systems so important? The answer is simple: asset management systems represent a comprehensive approach to asset management. Asset management systems provide the holistic perspective and large-scale strategy necessary for managing large maintenance operations. They lower costs, improve asset performance and reduce risk.
The systems themselves may be as complex as the operations they manage, but the results are simple. Asset management systems make asset-intensive organizations run better.
Tracy Smith is the Principal of SwainSmith Inc., a consulting, education, and systems advisory firm that specializes in Business Process Management. He is a veteran asset management developer, strategist, and consultant with 24 years of experience building and improving asset management systems for some of the world’s largest manufacturing organizations.