Post By :- admin Date:- July 4, 2017
WHAT IS ASSET PERFORMANCE MANAGEMENT?
Every top performer optimize their assets. It’s true in any field—sports, the arts, and business.
Yet in business,optimizing performance of capital assets often plays distant runner-up to the more glamorous pursuit of top line growth. That’s not surprising, given the importance of increasingsales revenue and growing a customerbase. But it can be costly. Under-performing capital assets leave tremendous profit potential on the table—potential estimated to be as much as 10 percent improvement to the bottom line annually, with up to 30percent reductions in operating costs.Insufficient attention to optimizing assets can also lead to operating surprises that are even more punishing.Consider the prominent pharmaceutical firm that, due to production processes deemed unsafe by the Foodand Drug Administration (FDA) and its UK counterpart the Medicines and Healthcare products RegulatoryAgency (MHRA), was barred from providing more than 45 million doses of flu vaccine to the United States.It lost more than $100 million in revenue, took a charge of 36 cents per share, and saw its stock priceplummet more than 30 percent2—all because critical capital assets and processes in its manufacturingoperations were managed inappropriately.Or consider the public water utility whose quality-control problems in 1993 with storm run-off systems andpurification processes led to almost $200 million in medical and facilities expenses, and more tragically, tomore than 100 deaths.3 The disaster could have been avoided if the utility had the ability to more effectivelymodel and predict asset performance for circumstances like those that lead to this disaster.The solution to achieving hidden profit potential and avoiding costly operating surprises is AssetPerformance Management. Asset Performance Management combines best-of-breed enterprise asset management (EAM) software with the power of cross-functional data analysis and advanced analytics.This enables organizations to make decisions that optimize not just their assets, but their operational and financial results.
WHY IS ASSET PERFORMANCE OPPORTUNITY A SECRET?
ARC Advisory Group may have said it best. “Investments in capital assets are staggering…billions of dollarsinvested in hundreds of plants worldwide. While the nature of the assets may differ…acquiring, maintaining,and disposing of these assets is a very serious business. A one percent improvement in performance can beworth millions annually.”
How this magnitude of profit potential could remain a secret remains a mystery, particularly in today’s tough,cost-constrained operating environment. But it has a lot to do with the realities of organizational culture andthe traditional role of asset management. Asset solutions have long had a visibility problem. They havetraditionally been marketed to and run by an organization’s maintenance personnel. Unfairly, maintenancecarries a stigma, even though it is critical—accounting for as much as 50% of some organizations’operational expenses. But it is also unglamorous and has resulted in asset solutions being hidden from executive level attention. The benefits of asset solutions are no secret to maintenance managers worldwide,but those benefits have yet to percolate to the top of the executive suite.
THE EVOLUTION OF ASSET PERFORMANCE MANAGEMENT
Asset Performance Management has the power to overcome the maintenance stigma because it has thepower to change operational performance. It completes the evolution from maintaining assets to optimizingassets for higher profits and better overall performance on the bottom line.
Understanding how and why this is true requires just a brief description of how Asset PerformanceManagement has progressed from earlier asset solutions. First-generation solutions, known as ComputerizedMaintenance Management Systems (CMMS), are essentially a way to automate a maintenance to-do list—when to turn the wrench on a certain piece of equipment, when to order replacement parts, and so on.
Thenext generation, Enterprise Asset Management (EAM), focused on how to track and manage an asset’sperformance—how to extend the asset’s life and reduce its downtime. For example, if an organization has200 forklifts across 10 sites, and 150 are productive and 50 are not, the company can analyze maintenancetransactions associated with the better-performing lifts—which manufacturer made them, when and howoften they are maintained, what comprises preventive maintenance, and so on—and then use those findingsto improve performance.
Asset Performance Management builds upon and extends EAM by combining asset management,maintenance and tracking with the ability to use this data to improve operational decision-making.EAM answers the question, “How do we get the most out of an asset?” Asset Performance Managementanswers the question, “How does the asset affect operational performance?” APM supplements enterprisewidemaintenance transaction data with data from other silos in the organization—such as finance, humanresources, inventory, and production—and provides the advanced analytics necessary to identify correlationsand trends, thereby improving operational decisions and results.Consider a chief operations officer with the goal of increasing production output enterprise-wide by 10%through a more efficient production process. Using Asset Performance Management, the COO might lookacross the organization and notice that where production lags, a high number of reactive work orders arebeing issued, and that where this is true, there is also a spike in the use of contracted labor. This leads tothe conclusion that increased use of contract labor directly decreases both equipment (asset) efficiencyand production output. Information drawn from HR, production and maintenance data enables the COOto isolate a problem, predict the impact, and decide what steps to take for improvement.
HOW ASSET PERFORMANCE INFLUENCES ENTERPRISE PROFITS
The relationship between assets and bottom-line profits typically receives scant attention from uppermanagement. This is another reason why the profit potential of Asset Performance Management remainssomething of a secret from the broader organization. The good news is that because this potential isoverlooked, executives and organizations seeking top performance have new profit opportunities. Considerjust a few ways that Asset Performance Management positively impacts the bottom line.
Reduced Production Costs and Increased Capacity
Asset downtime disrupts production and drives up both process and per unit operating costs. Executivesoften lose sight of this because they focus on output, not on the assets used to create it. As one CFO put it,“Companies care about how many cans they make, not the can machine.” The irony is that companies canuse Asset Performance Management not only to make more cans, but to make each can more profitably.
This is because Asset Performance Management can:
- Increase the availability of assets through reduced downtime and improvement in Overall
Equipment Efficiency (OEE)
- Reduce capital investment in assets by 15% or more through improved preventive andpredictive maintenance and more efficient labor deployment.
A specific example comes from a food manufacturer that recently deployed Asset Performance Managementwith the goal of using longer manufacturing runs and improved uptime to increase manufacturing efficiencyfrom 87% to 92% and create $7M more in sales, with no additional manufacturing costs.
Reduced Revenue and Operating Losses from Asset Failure
As discussed earlier, little matches the punishment inflicted on an organization when critical assets fail.Whether it is a faulty sewer line or a poorly calibrated vaccine machine or a broken oil rig, asset failurecan create significant revenue and operating losses. The stakes grow even higher in regulated industries—such as pharmaceuticals, healthcare, food & beverage, and biotechnology—as well as in the highlyregulated public sector. Consequences of noncompliance can include not just lost revenue, but fines,plant or location closings, litigation, damage to reputation, and a loss of investor confidence that canpummel a company’s stock price. In the public sector, a loss of taxpayer confidence can reverberatethrough all levels of government.