Understanding the Business Benefits of an Asset Management Program
Have you tried to upgrade / replace a piece of equipment due to the high cost of maintenance? What about having the process stopped by procurement because they are not aligned with the high upfront cost?
While there is a generally a common goal of ensuring the long-term success of an organization, the approach is not always cohesive. An asset management program is there to ensure an integrated and cohesive approach is in place. This cohesive approach ensures the organization is working towards a common goal.
A few of the areas that asset management will impact are;
It is common in many organizations to have multiple risk analysis tools and profiles. What maintenance uses for their asset criticality may be completely different than that of operations or finance. In addition, if one function updates their risk analysis, the next group does not see those changes.
In an Asset Management program, all risks are analyzed and kept on a single risk register. This ensures the criteria used is consistent, and everyone has the latest information.
Having this information allows the organization to develop models that reflect the current risk profile, and how it will change over time. This is one of the first steps to developing a long-term plan to ensuring the requirements of the stakeholders are met.
The business plan should be influenced by all functions in the organization, as all are working towards a common goal. When the functions are integrated, using a common set of tools, an organization can generally plan and forecast;
- The impact on organization in 1, 3, 5 and 10 years, by changing the level of CAPEX this year by +5%, +10% or -5%, 10%
- Which assets need to be overhauled or replaced in the next 1, 3, 5 and 10 years
- A zero-based budget, ensuring all expenditures are justified to external stakeholders
The level of control and predictability of the assets and organization increases greatly with an asset management program.
Life Cycle Costing
As demonstrated in the example above, most functions are not integrated resulting in CAPEX not being spent in the best way. When functions are integrated, CAPEX expenditures becomes easier, and the whole picture is taken into account;
- The total cost of ownership is taking into account, not just the upfront price. As previously discussed, designing reliability, maintainability into equipment does cost extra up front, but results in a lower total cost.
- A cohesive approach is used to design the equipment, which may reduce the number of operators and maintainers.
- An understanding of which activities, can and will need to be outsourced, along with the potential costs. By considering this during the design phase, the life cycle of costs can be influenced.
Asset Data & Information
In many organizations, there are many different depositories of data. The maintenance system, engineering system, the financial system, the warehouse system and the sales systems. Trying to tie the data together from the various systems is often difficult at best.
When an integrated approach is taken, all the systems are generally linked to ensure the data becomes information. Once an organization has information, the information can be used to drive the business planning and operational phases.
Lastly, the regulatory requirements around asset management are becoming more prevalent. For example, municipalities are being asked to supply an Asset Management Plan, for a specific asset type, before receiving Federal funding.
By requiring the Asset Management Plan, the Federal government is ensuring that the municipality will be spending the funding in a way that maximizes the value of the asset class.
There are also examples, in which the insurance companies are looking at Asset Management Plans. Having an Asset Management Plan demonstrates the awareness of risks and the implementation of a control and monitoring solution. This enables insurance companies to either reduce rates or cover organizations that they may not normally cover.
Asset Management is Required
These are just a few of the reasons that asset management is required in your organization. As you can see, the entire organization benefits. All functions are better supported and integrated, resulting in improved predictability and control of the business.
Do you have an Asset Management program? What is stopping you from starting down the journey of asset management? Please leave your comments below.
Remember, to find success, you must first solve the problem, then achieve the implementation of the solution, and finally sustain winning results.
I’m James Kovacevic
Where Education Meets Application
Need help understanding how Asset Management can help your organization? What to benchmark your Asset Management system? Eruditio, LLC has Certified Asset Management Assessors on staff to support your journey into asset management. Click here to book a free 1-hour consultation to see how we can help you achieve your goals.