Don’t Freeze Your Assets – Asset Management Part One

Posted by Laurence Cramp on November 24, 2015

Asset Iceberg - Second Image

Asset management needs a disciplined approach to maximise value and minimise liabilities across a portfolio of assets. A fit-for-purpose asset management strategy should link into an organisation’s strategic objectives. This will include creation or acquisition of appropriate assets in the first place, how best to utilise and support them and the adoption of optimal renewal or disposal actions, along with the ongoing management of any residual liability.

To do asset management effectively, organisations need to combine a holistic view of assets, their condition and lifecycle, with a detailed understanding of each asset, its performance, failure rates, maintenance schedules and demand requirements.

We work with a range of complex asset owners and operators, often with significant variance in the quality, condition and age of assets across a portfolio. Without the right systems, strategies and approaches to manage and control these assets organisations are in danger of ‘freezing’ the true value of their assets rather than enabling value and optimising cost.

Understanding the asset iceberg

The Institute of Asset Management defines Asset Management as “the systematic and co-ordinated activities and practices through which an organisation optimally and sustainably manages its assets and asset systems, their associated performance, risks and expenditures over their life cycles for the purposes of achieving its organisational strategic plan.”

That’s quite a mouthful. I prefer the simpler explanation from ISO 55000:2014 (becoming a common standard on asset management) which states “the coordinated activity of an organisation to realise value from assets.” Clearly the shape and size of your asset ‘iceberg’ depends on the complexity, scale and geographical reach of your business and customers.

It may apply to tangible assets such as buildings and equipment or to intangible assets such as human capital, intellectual property and financial assets. Regardless, we find that more and more people are understanding that Asset Management is not so much about ‘doing things to assets’ but about delivering value to customers through the effective use of assets.

Sizing the iceberg

All organisations will have assets and asset systems of different complexity and criticality that may in turn shape the Asset Management practices to be applied. Within an asset portfolio, best practice typically focuses on the ‘core systems’, normally assets that sit at the highest end of the criticality scale within an asset portfolio.

Diverse, geographically distributed, networked and diverse types of assets can generate their own information management and people management challenges. They may require a different resource profile to inspect, maintain and quality assure.

The broader business environment can also shape an effective asset strategy and determine the management lifecycle of assets. For example regulated utilities infrastructure, installed and maintained over a longer lifecycle will require a different application of best practice to short cycle high turnover assets.

Asset management should be seen as ‘the whole is greater than the sum of the parts’…the overall picture needs to be one of holistic insight, process integration, cultural engagement and optimisation of all aspects of asset management.

The Institute of Asset Management

Adopting best practice

Adopting a best practice asset management approach can enable significant benefits. From our experience and that of organisations such as the Institute of Asset Management, these can include:

  • Prolonging asset life through efficient and focused operations and maintenance
  • Improving customer satisfaction levels resulting from increased availability and uptime and better control of service delivery
  • Better health, safety and environmental performance and adherence with regulatory and security requirements
  • Clearer provision and demonstration of value for money
  • Improved risk management and governance
  • Improving responses to emergencies and faults
  • Reduction in unnecessary maintenance and truck rolls
  • Greater ability to plan for the long term, leading to better sustainability, financial management and performance optimisation

Reaching the heights

Assets are things that have actual or potential value and Asset Management is about realising that value. Value will mean different things to different stakeholders and will always involve some sort of trade-off between different priorities. These can relate to cost, risk, capital investment cycles, maintenance versus utilisation, long and short term priorities.

As a result there is no magic bullet to optimising an asset portfolio and enabling a better asset management strategy. Optimisation is often a delicate combination of the right information, skills, risk management approach and ability to measure performance and resulting benefits. Good asset management needs to be integrated and needs to work as a whole. Consideration of risks and liabilities across a sustainable asset lifecycle will be inherent in decision making.Asset Improvement CurveFor the complex asset-rich businesses we work with, reaching the heights of good practice asset management is about having the right plans in place, supported by the data, systems, skills and governance that will enable good decision making. It’s about getting up the curve to ensure the right asset maintenance is performed in the right way to the right assets – enabling a shift from reactive maintenance to condition-based maintenance.

Leadent’s Asset Management Maturity model helps organisations understand their current asset management performance, evidence areas of improvement and put in place resulting plans and actions.

Maturity Levels for Asset Management

In the second part of this blog we will talk about the four levels within our maturity model and how organisations can apply best practice within an integrated asset management system.

We’ve helped a wide range of organisations to better understand their assets, develop appropriate demand-led maintenance schedules, reduce waste, make appropriate asset decisions and realise significant value from transforming asset management systems and processes.

We can help you too – just get in touch to discuss further.