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AssetManagementconceptsandpractices JWoodhouse2003
AssetManagementconceptsandpractices JWoodhouse2003
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Equipment maintainers & software vendors have used the term to gain
greater credibility and corporate ‘voice’ for their activities or products. As
maintenance has for so long been treated as a ‘necessary evil’ and low on the
budgeting priority list, perhaps calling it Asset Management sounds more
positive? But this often results in Asset Management being seen as just
another label for a technical discipline – looking after the hardware.
The financial sector, meanwhile, has long used the phrase to describe the
management of stocks and investment portfolios – trying to find the best mix
of capital security/growth and interest rates/yield. In this case, the focus is on
value and risks, with buying and selling being the Asset Management
activities.
Asset creation/acquisition
Asset exploitation (i.e. use of the asset to meet some corporate objective)
Asset care (i.e. maintenance, risk management and sustainability)
Asset renewal/disposal (including residual liabilities)
The ‘best mix’ is whatever yields the highest total value (as defined by the degree of
satisfying the organisation’s various competing objectives). This is significantly more
comprehensive than the popular “Balanced Scorecard” view of corporate
performance, which is promoted to consider both short term results and longer term
sustainability (but has no ‘balancing’ mechanism even for this)! And, in fact,
‘balance’ is not what we are looking for anyway: balance involves equality of impact
“Optimisation” is the correct word for defining this best-value mix. Unfortunately,
however, the word has become grossly overused and misused by salesmen, and now
few people really understand what it means in practice. It is not, for example, the
point where risks start to exceed costs, or where a portfolio of investment projects is
‘rationalised’ for resource constraints. To demonstrate that we are delivering optimal
value over the asset life cycle, we need to understand what ‘value’ means, to whom,
and then be able to quantify it in consistent terms (usually financial, and we must not
forget or underestimate the ‘intangibles’ of reputation, morale and customer
satisfaction!). The multiple competing goals of any organisation need to be converted
into ‘scales of significance’ – this provides a coherent basis for defining criticality,
priorities and decision-making (including trade-offs and ‘optimisation).
This is illustrated best by the ‘Shamrock’ diagram1 (Figure 1) in which the inner ring
of five core dimensions reflects the methods available to quantify economic
significance for any combination of the outer subjects. The three dimensions most
difficult to quantify (and therefore the most important to do so for greater alignment
on priorities and decision-making) are risk, sustainability and the ‘shine’ factors (the
intangibles such as reputation, morale and customer satisfaction).
11
The Shamrock diagram was developed by the international MACRO project (EU1488), researching
best practices in asset management decision-making.
Figure 2. Searching for the right goal: optimum = best value = ‘minimum total cost/risk/impact’
Similar discoveries and conclusions also emerged in the public sector in Australia
during the 1990’s, and in some early guidance for transport infrastructure in the USA.
The person who is expected to deliver results therefore needs to be given appropriate
freedom to determine what must be done to achieve them - rather than the common
situation of inputs determined in one department (such as projects, engineering or
maintenance) and outputs made the responsibility of another (operations/production).
This places the value-for-money decision-making much closer to the assets, where the
knowledge of characteristics, risks and opportunities lies. Any shared services or
obligations that apply to all assets or all activities (e.g. policies, risk appetites, data
and KPI structures) were treated and evaluated as enablers or consistency/governance
aids. And the central ‘overhead’ departments that provide such shared elements,
such as HR, IT and Finance, had to compete with the open market for their value-
adding contributions and funding justification.
reported that it is their fastest ever selling ‘standard’, overtaking even the well-known
ISO 9000 quality management requirements. To this day, and despite the subsequent
publication of the more generic ISO 55000 series, organisations are finding that the
PAS 55:2008 documents are extremely useful sources of pragmatic guidance about
what represents good asset management practice (and then using the corresponding
ISO Standard for their validation/certification). PAS 55 provided a structured set of
requirements to cover both the ‘horizontal’ integration of life cycle stages, and the
‘vertical’ integration of corporate purposes with asset management and individual
asset intervention activities (Figure 4).
The ISO 55000 family, published in February 2014, comprises three documents,
covering concepts and terminology, the requirements for a management system, and
guidance for the application of such a management system. This ‘system for asset
management’ provides the joined-up governance, value focus and alignments
necessary to ensure that organisational objectives are converted into appropriate asset
management strategies, plans and delivery, with continual improvement processes and
enablers (such as resources, competencies, information etc). Figure 5 shows the main
elements of an asset management system.
With the existence of ‘standards’ for asset management, it is tempting to think that
better asset management is just the implementation of a joined-up management
system. However, while this will indeed stimulate better practices and deliver
significant performance improvement, the management system is just part of a more
fundamental transformation – in culture, behaviour and thinking. This wider
‘discipline’ of asset management is described in the GFMAM Asset Management
‘Landscape’2 and IAM ‘Anatomy’ of Asset Management3. In this article, I only
summarise (below) some of the learning points for successful and sustained corporate
transformations in this area.
2
www.GFMAM.org
3
www.theIAM.org
workforce! We hear that “people are our greatest asset”, but often see evidence of the
opposite. The disillusionment and scepticism resulting from temporary initiatives and
oscillating management fashions mean that there is much credibility to be rebuilt.
Just another re-badging exercise is not going to be enough. An effective asset-
managing organisation listens to the those in the best place to contribute knowledge
and make decisions – and this is often involves ‘inverting the pyramid’ (Figure 6).
The technologies, methodologies and ‘tools’ can also be very confusing. The toolkit
is fast growing and continually evolving, wrapped in jargon and acronyms such as
LCC, RCM, TPM, RBI, RCA, CBM, ERM, ERP, CMMS/EAM, GIS, CRM and
many more. And, while many of these will have a part to play, the real challenge lies
in understanding which bits of which to use, in what circumstances, and to what level
of detail/granularity.
A preliminary AM checklist
Getting the whole jigsaw puzzle sorted out is a major challenge, therefore. We
certainly cannot solve all the problems simultaneously. However there are some
valuable pointers to the establishment of the right environment, and foundation stones
that help to build a robust total structure. The following is a set of observations
gained over the last 20 years of working with successful Asset Managers and seeing
what seems to be the minimum underlying set of enablers:
> A clear choice of ‘granularity’ for defining an asset (not the whole company
and not the individual equipment components): a level of composite system
whose measurable performance boundary is clear, big enough to justify a life
cycle management plan and demonstrate value-for-money. The most obvious
use of asset = equipment unit is where most people start, but the entity that
best fits for value optimisation is the system unit, such as production line,
network route or other combination of elements that clearly and directly
contributes to the organisation’s service.
> Life Cycle Activities (design, purchase/construct, operate, maintain, renew,
decommission – the things we do to assets) may be how different task types
4
See www.SALVOproject.org
and resources are organised within delivery departments, but it is the cross-
functional collaboration mechanisms, decision-making processes and
performance criteria that make the value difference; and these need to be
based on total life cycle cost, performance and risk.
> All secondary business functions (i.e. support activities such as HR, IT,
Finance etc) and shared or occasional specialist resource requirements are
organised as internal service providers, with dual roles of ‘enabler’ and
‘policeman’. Scopes and funding of these shared, secondary resources need
to be aggressively challenged for their value added (compared to outsourcing)
and/or compliance and consistency motivations (in line with non-negotiable
policies and standards).
> The ‘umbrella’ image and language (e.g. ‘Asset Management’ or ‘Operational
Excellence’ - it does not matter as long as it is clearly defined and explained)
has to be prominent and consistent in Company, Departmental & Personal
objectives, house literature, training plans, stakeholder relationships etc. This
requires evident top management sponsorship, and multi-year sustained
reinforcement.
> ‘Missed opportunities’ and asset downtime events are monitored and costed –
this is where most of the big improvements will come from (rather than just
cost cutting). Unless a price is put on asset non-performance, it is almost
impossible to justify or optimise what is worth spending to improve it.
> Problem/opportunity identification, investigation, business case (decision-
making) & change implementation processes are all linked together and part
of normal, daily life – including closing the loop and realising the benefits!
> Don’t create an ‘Asset Management Department’ – it provides an excuse for
the rest of the organisation to say it is not their responsibility! Asset
management is the sum of what everybody is doing, together. It may need
some dedicated resources as ‘lubricators’, but these are facilitators or
policemen to promote good practice, break down barriers and ensure
alignment.
> Education: organisations need urgently to identify and address the big gaps
and backlog at a) senior management, b) technical/professional and c)
workforce levels. ‘Sheep-dip’ consistency of basic concepts training, and good
induction processes for new staff are needed to maintain the message.
> Twin track corporate planning: “quick wins” (benefits within 12 months)
deliverable are visibly used to ‘pay for’ sustained commitment to the larger
goal, typically 3-5 years away (the timescales of ambition needed to achieve
core behavioural/process changes). This is a self-adaptive, cumulative
improvement path, and contrasts greatly with strategies based on typical
benchmarking, audits and ‘blue skies visioneering’ (which tend to generate an
intimidating wish-lists and, at best, temporary enthusiasms).
And, if we get this right, the prizes are enormous. The growing pool of reported
results and case studies shows just how big an impact is possible:
These are just a small sample of the emerging evidence. And to find out more about
the subject, how to get started, maturity assessment and roadmapping, education and
professional development, there is a growing range of available resources, courses
and help available.
John Woodhouse
Managing Director, TWPL
Chair of Panel of Experts, IAM
john.woodhouse@twpl.com