Asset Management - Plant Maintenance Resource Center

Asset Management – a source of additional profitability
Businesses in the manufacturing, process or infrastructure industries have a large capital
investment in the physical assets used in their operation.
Maintenance is a significant part of direct operating cost for these businesses. With profit
margins being increasingly squeezed, maintenance is one of the few areas where a business
can improve profitability. Maintenance has traditionally been managed as a cost to be
minimised rather than a strategic process that assures the profitability of the business.
The first step to realising the full payback potential of a maintenance management program and
it’s associated cost, is to understand that:
• Optimising the life cycle of an asset depends on effective maintenance.
• Maintenance management is a process.
Programmed maintenance management increases the efficiency and life span of equipment,
therefore increasing profitability. These ideas form part of the concept of “Asset Life Cycle
Management”. To fully understand the benefits of addressing asset management issues, it is
useful to define a model of “Asset Life Cycle Management” as a business management system.
Asset Life Cycle Management
There are essentially three stages in the life cycle of an asset:
1. Acquisition,
2. Operation and Maintenance, and
3. Disposal.
Figure 1, below, is one model of an asset life cycle management system. The Maintenance
Engineering Society of Australia (MESA is at www.mesa.org.au) uses a similar model to define
criteria used for awarding the annual Maintenance Excellence Awards.
BUSINESS
PLAN
ACQUISITION
OPERATING
ACTIVITIES
Asset
Life Cycle
Strategy
Development
and Review
Maintenance
Management
System
Asset
Disposal
Maintenance
Management
Improvement
Maintenance
Management
Planing
Maintenance
Management
Budget
Maintenance
Management
Evaluation
Maintenance
Management
Execution
Figure 1 Asset Life Cycle Management Model
Acquisition Phase: At the beginning of the asset life cycle, business goals provide the inputs
used during the design, procurement, installation and commissioning of the plant or equipment

[assets]. The specifications developed during this stage relate to the physical characteristics
and capabilities of the required assets.
Operation and Maintenance Phase: Business goals also define the requirements of how the
assets will be operated. A known range of raw material will be processed into products and
offered into the market place. Thus the business goals define the operating environment for the
assets and the performance goals needed. The ability to deliver products to an eager market at
lowest possible unit cost of production is the ultimate goal. Operational performance is defined
as a combination of production rate, quality and yield targets. Asset dependability is defined in
terms of reliability and availability targets.
Disposal Phase: The end of the asset life cycle is reached when the asset is no longer capable
of delivering the required operational performance, or cannot be cost effectively maintained to
achieve the required levels of dependability. The options are either modification or disposal and
replacement of the asset.
Optimising the Operation and Maintenance Phase
Optimal performance during this phase of the asset life cycle is only achieved by organisations
that embrace a holistic approach. This encourages a close working link between the production
and maintenance areas. They are jointly responsible for achieving business plan requirements.
There are many definitions of maintenance, however it must be defined and managed as a
“process”, in order to achieve optimum pay back from expenditure. Hence the need to identify a
maintenance management system as an integral part of the asset life cycle management model
shown in Figure 1.
During the operation and maintenance phases of the asset life cycle there are three critical
factors needed to realise optimal performance.
1. Plant [assets] must be managed to achieve the required dependability goals in the most
cost effective way. To do this, a strategy is developed for maintaining assets with a focus
on the asset’s function. The asset function defines what is needed to achieve operating
performance targets. Thus, effective maintenance is about preservation of asset function
to deliver the required operating performance, rather than just preservation of the asset
itself. The development of a strategy in this way provides the method for defining and
managing an accurate and realistic maintenance budget. This is basically a technical
matter that has been done effectively by application of processes such as PM
Optimisation (Visit www.pmoptimisation.com.au for additional information.)
2. Processes need to be established in order to efficiently manage maintenance activity,
evaluate performance against targets, and initiate any required improvement actions.
The processes should reflect the “plan, do, check and act” cycle of continuous
improvement. The improvement actions that will be taken are determined by the
prevailing business needs at that stage of the asset’s life. This is also a technical matter
but is not usually addressed within an organisation unless an asset life cycle
management model similar to that depicted in Figure 1 is adopted. Without such a
model, it is difficult to gain acceptance and management commitment to the concept of
maintenance as a process that plays an important role in achieving business profitability.
My experience shows that this is most easily done if the business employs a systems
approach to organising itself, and quality management principals have been deployed
within the organisation.
3. People need to be effectively engaged to realise the potential of the plant by using
established management processes. People need to understand their role, responsibility
and goals in terms of the maintenance management processes. This helps people
understand how to achieve their performance goals and will ultimately lead to the
achievement of business goals. People are the means of achieving performance and
dependability targets that assure the achievement of business goals. This is not a
technical matter, and so, is often not perceived as an integral part of asset and
maintenance management. Maintenance management personnel are usually managed
according to a prescribed HR doctrine within the organisation. It would be far more

effective if HR policies for these people were tailored to suit the “Plant , Process and
People” approach to maintenance management.
Twenty years of experience working in manufacturing and process industry has shown me that
these factors are usually dealt with in isolation. There are many organisations that have spent
millions of dollars on maintenance software, reliability analysis programs and forming self
managed work teams, but still have not achieved the required business results. The poor results
are caused by a failure to successfully link all three of these critical factors to address asset life
cycle management. Failures of this kind, only reinforces the workforce perception that they are
experiencing another one of those “flavour of the month” management fads.
Addressing all three factors, delivers synergetic asset management to your business. When this
happens:
• Business goals drive decisions for the use and care of assets.
• Production and maintenance work together as manufacturing teams to develop
mutual targets.
• Performance and dependability targets become drivers for business profitability.
• All resources are optimised, not just maintenance resources.
Results achieved by an organisation that has been successful in integrating these factors as
part of their asset management system include:
• Profit increases of 25-60%
• Productivity increases of 20-50%
• Machine downtime reduced by up to 98%
• Maintenance cost reductions up to 30%
Asset management needs to be considered as a holistic management system. This will ensure
that good decisions for the use and care of equipment are consistently made and implemented
– decisions, which constitute the best business value. The purpose of such a management
system is to ensure assets remain capable of delivering the performance required by the
business, over the asset life cycle.
There is huge untapped potential for Australian industry to improve performance and
profitability. Effectively deploying asset and maintenance management practices will guarantee
that your business goals are realised. Every business needs to manage assets for their entire
life cycle. Angelo Agresti is principal of Asset Capability Management.