defining asset management

Defining Asset Management

S. Bradley Peterson, USAStrategic Asset Management Inc.

Asset management is a term that has been getting a lotof press recently. The term implies many things tomany people, and there is no industry standard forapplication. Implied in the term, however, are somebasic concepts:

• Business goals drive decisions regarding the use andcare of equipment assets

• Asset strategy is determined by operational consid-erations

• Maintenance and reliability are means to a definedgoal, not an end in themselves

• The intent is to optimize the application of allresources, not just maintenance

We have seen attempts to define asset management aslife-cycle cost management; it has been used in thephrase “asset management reliability”, which seems tobe redundant or confusing; we have seen the termsubstituted for maintenance or reliability practices. Wedefine asset management as a global managementprocess through which we consistently make andexecute the highest value decisions about the use andcare of our assets.

Strategic Asset Management Inc.25 New Britain AvenueUnionville, CT 06085

(800) [email protected]

SAMI

Strategic Asset Management Inc.

2

Our approach is based on the Operational ReliabilityMaturity Continuum. This empirical model describesfive stages of mastery that create a foundation ofimproved performance with growth potential continuingover a strategic horizon. This model was described insome detail in the September 1997 issue of Mainte-nance Technology magazine entitled Developing anAsset Management Strategy.

BACKGROUND

Mobil has identified reliability as a primary competitiveopportunity. Prior to working with SAMI, they haddeveloped the concept of “Business-Driven Reliability”,or employing reliability improvement where businessvalue is created. The opportunity lay in developing anoverall business process where the business plan wouldbe achieved by statistically assuring the underlyingreliability of people, processes and equipment necessaryto achieve the goals. And this would be assured at thelowest cost. While the goals may seem no different thanother plants, the difference comes in the process,specifications and decisions necessary for implementa-tion, and ultimately the new behaviors exhibited by theworkforce.

THE ASSET MANAGEMENT MODEL

In addition to the asset management concepts identifiedin the first paragraph, we identify several more:

• TEAMTM must completely align the businessplan with plant realities, identifying specificequipment condition and performance gaps toovercome to achieve the plan

• All of the work starts with an asset performancespecification, based on supporting the businessplan; we perform the necessary work to sustainthe performance specification, neither more norless

• All measures, from a corporate ROIC (ReturnOn Invested Capital), to plant contribution, tounit production rates, to specific equipmenthealth requirements, to the supporting mainte-nance strategy, all cascade in alignment

• The central focus of TEAMTM is the operator.He/she understands the manufacturing processand goals, understands and manages equipmenthealth to meet requirements, and gathers theresources necessary to achieve production goals

Implementing asset management is a process. Itcontains in it the following elements, and the decisionmodels to determine when to use them:

• Empowered Workforce• Reliability Centered Maintenance• Work Management Processes• Predictive and Preventive Maintenance• Self-managed Work Teams

PeopleReliability

ProcessReliability

EquipmentReliability

ProductionReliability

LeadershipTraining & DevelopmentCommunicationPerformance Management

Business ProcessesWork Management ProcessesProduction Processes

Tools(RCM, PdM, PM, Statistical Analysis)AssessmentReliability Teams

Process Control


Copyright 2002 by Strategic Asset Management Inc. 3

• Measures of Leading and Lagging KPI’s• Reliability Leadership and Planning• Safety, Health and Environment• Continuous Improvement• Reliability Modeling and Equipment Risk

Assessment• Cost of Unreliability Tracking• Root Cause Failure Analysis• Capacity/Business Objectives Modeling• Lifecycle Costing/Engineering• Activity-based Management

THE TEAMTM PROCESS MODEL

The TEAMTM process model is illustrated here. Theflow is generally as follows, and explained in greaterdetail below:

1. We identify equipment criticality, condition,FMEA’s, maintenance requirements

2. This information is taken into the annualplanning process. Plant-wide goals are set and

passed to the production units for validation3. The production units prepare their production

and expense plans, identifying what resourcesare required to meet the plant goals. They alsoidentify improvement opportunities and re-sources. This information is passed back to theplant-level plan for review and consolidation

4. When budgets (activity-based now, not histori-cal) are set, the units create an annual plan forall work in the unit (not just maintenance, butoperations and engineering)

5. The work is done to the schedule6. Results are measured7. Corrective actions are identified and prioritized

with the currently identified work8. Any changes to the plant are modeled for

impact on reliability, and new configurationsare incorporated into Plant Capability

PLANT CAPABILITY

In the Plant Capability segment we do “front-endRCM” on a processing unit. That is, we identify systemand component hierarchy, we classify process andcomponent criticality, we identify system failure modesand effects analysis, determine critical equipmentcondition, and assign a maintenance strategy for eachsystem or component based on criticality and value.This positions us to prepare activity-based maintenance

MEASUREMENT&

FEEDBACK

ModifyProductionCapability

ANNUALUNIT/DEPARTMENT

BUSINESS PLANDEVELOPMENT

PERIODIC PLANTPLAN UPDATE PERIODIC UNIT

PLAN UPDATE

PERFORMTHE WORK

3

12

4

5

67

8

9

3

11

TEAM Flow Model

BUSINESSSTRATEGY

CONTINUOUSIMPROVEMENT

ANNUAL PLANTBUSINESS PLANDEVELOPMENT

PLANTCAPABILITY

TM


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budgets, begins to identify equipment condition gaps,and provides the basic data to prepare a reliabilitymodel for the unit.

The operators and their supervision do all this work,after significant training. Initial training includesparticipating in The Manufacturing Game, which servesas a highly leveraged orientation and change manage-ment tool. It also initiates Action Teams, which modelthe type of team behaviors that will be necessary tooperate the units in the future.

We have simplified the equipment condition assessmentby equipment class type to be in a yes/no questionchecklist format that provides the basis for operatordaily care practices. The maintenance strategy isassigned via a simple matrix based on component valueand criticality.

Plant Capability, as shown by the diagram, is doneinitially and provides input to the annual businessplanning cycle.ANNUAL PLANT BUSINESS PLAN DEVELOPMENT

Typical annual plans begin with Corporate setting afinancial target for the plant, followed by efforts of theplant to justify a lower target, or deciding how to livewith the goal. Most often this follows the “I wish”principle of goal-setting: in spite of not having madeplan last year, we look for an increase of, for instance,8% production this year, while decreasing the operatingbudget by 5%. Since the plant leadership team are

“tough guys”, they are left to figure out what to dodifferently. In most plants, decreasing budgets leads toless equipment attention, decreased equipment health,and declining production.

The process for capital investment is often even lessstructured; plant management finds out the capital planis due in corporate by Friday, and meets all day Thurs-day to determine which projects will be proposed, basedsignificantly on emotional commitment to specificprojects. This lack of structure is not seen as important,however, since this only allocates a “bucket of money”,and projects will be decided in earnest during the courseof the year.

Unit goals are often specified by numbers for whichthere is little accountability during the year. Rather, welook for record shift goals, or running wide open, notknowing the consequences on equipment, safety or cost.

Under TEAMTM this process changes dramatically. Thefirst step is to determine the effects of increased demandon the units for throughput. What is the probability ofachieving the increased throughput goal? The chartbelow gives a viewpoint for production probability:

Depending on the unit’s production volume requirement,we can select the appropriate maintenance strategy withto meet the probability of production required. If the

Maintenance Is Assigned According To This MatrixCriticality Proactive Maintenance ActivitiesHigh-1High-2Medium-1

Medium-2Low-1Low-2

High-3Medium-3Low-3

0 - $5,000

Time Based Useful Life,Schedule & Replacebefore Failure

Time Based Useful Life,Inspect, PM & ConditionMonitoring

RCM, ContinuousMonitoring, PredictiveMaintenance, PM &Root Cause Analysis

Predictive MaintenanceRoot Cause Analysis

Inspect, PreventiveMaintenance

Inspect, Run to Failure

Run to Failure Operational Maintenance Preventive Maintenance

$5,000 - $50,000 Greater than $50,000

(1) (3)

(4) (5) (6)

(7) (8) (9)

(2)

High Criticality- A process in which a service interruption would result in a CoUR event.Medium Criticality- A process in which loss of service for less than 8 hours and would

not cause a CoUR event.Low Criticality- A process, which operates intermittently and service interruptions, will

not result in a CoUR violation

ComponentValue



unit at its healthiest equipment condition is unable toproduce at that required rate, we design the capitalproject, along with the cost/benefit calculation. This isfed back into the planning process, to determine whetherthe cost of maintenance or capital project is justified tomeet the rate requirement.

Thus we are able to iterate the goal setting process,based on facts and probabilities of achieving the goals.For instance, an 80% likelihood of achieving productiontargets would probably not be considered adequateassurance, and engineering steps would be taken inincrease the probability to acceptable limits.

We will have a list of capital projects, each having aspecific return on investment, from which the manage-ment team will choose. The guessing game is elimi-nated; it is actually likely that more capital will beapproved since the justifications are so clear, and theplant debottlenecking efforts will be based on maximumutilization of existing assets, rather than substituting acapital project for good asset health practices.For each capital project we will review RAM, MORand MOC (reliability, availability, maintainability,management of reliability, and management of change).The Management of Reliability will assure that theprobability of performing at specified productionvolumes for the unit is not negatively affected by theproject work.

ANNUAL UNIT/DEPARTMENT BUSINESS

PLAN DEVELOPMENT

The unit will set objectives based on the overall plantobjectives, coming out of the initial pass of Prepare/Update Annual Business Objectives.

At this point the unit will determine the likelihood andbarriers to achieving the production goal, as well as themaintenance budget. They will model in detail theunit’s capabilities, creating performance specificationfor each system and subsystem, all the way to identify-ing the required MTBF for components. Where thereexists a gap, we identify equipment upgrades, capitalprojects, and any changes in the maintenance programnecessary to meet the goal. We will create an activity-based maintenance and operating budget, since weknow the specific maintenance and operating strategiesfor each system and component in the unit.

The unit then signals the plant leadership what the costsand barriers may be to achieve the goals, and decisionsare made regarding the variations. The importantaspect here is the precision with which decisions aremade. We know our capacity and probability ofoperation; we have a rationale strategy and associatedcost with every maintenance activity, and will report onthose activities and specific variances.

Given this level of specificity by the units, a planner will

Maintenance and Capital Spending are Matched to Meet theProduction Volume Requirement

Probability

%

P r o d u c t I o n V o l u m e

100%

UnitProduction

Targets

1 23

Low Cost Maintenance Approach for 1

Higher Cost Maintenance for 2

Capacity Increase/DebottleneckingRequired


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have most of the information necessary to begin hiswork, and can prepare most work packages ahead oftime.

CONTINUOUSLY MANAGE WORK

In the Continuously Manage Work segment, we intro-duce some new concepts. First of all the Work Manage-ment System, in addition to holding the maintenancework and resources, plans and schedules operations andengineering work and resources. For instance, if anRCM study is planned for a piece of equipment for thisyear, resources will be loaded against that as a task.The operators’ daily rounds are identified as routinetasks, and reported as they are completed. Engineers inmost plants are critical path resources, yet we don’tschedule their time; in the TEAMTM process their tasksand priorities would be managed like the work of thecraftsmen.

Another opportunity we grasp is scheduling all thework; this includes routine maintenance, responsivemaintenance; operator performed maintenance; majormaintenance, outages and shutdowns; engineering work.Fundamentally we need to plan everyone’s work, and bydoing so, we are making judgements about the priorityand value of each task, start and stop times/dates, andperformance expectations, measures and reviews.

At this time the reader may ask, “Isn’t this terriblystructured and data driven?” “Where is there room forspontaneity and interest?” Our primary intent inmanufacturing is to set a standard that meets customers’needs, and to manage work and product to minimizevariation. That can only be done with data and plan-ning. The fun comes in through the feeling of controland contribution by the hourly workforce, but beingable to complete a planned task before starting severalmore, and by being consistently successful. Morepeople than have participated in the past require creativ-ity and better decision-making. Reducing variation inthe manufacturing process is everyone’s job, not just themanagers and superintendents.

Because there are clear specifications for equipmenthealth and work management, measurement becomesmuch easier. It is performed by the hourly staff, whoare motivated to improve, as performance is directlyrelated to rewards and recognition. We will need tomake meeting performance targets pay well for the

hourly ranks, just as management is measured andrewarded.

MEASUREMENT AND FEEDBACK

Review of results is an ongoing task. Variances aretreated as opportunities to understand more about theequipment and the process. Because we have a directknowledge of cause and effort in our equipment, we willidentify necessary changes in our equipment, ourknowledge, and our processes. Most failures will beseen as caused by the management system, rather theindividuals who willfully fail to perform.

CONTINUOUS IMPROVEMENT

Based on the analysis of the variance, we may find thatour maintenance routines are under- or over-maintainingequipment, that we are not eliminating systemic failuremodes and effects, that engineering projects are more orless robust that anticipated. Any changes we make needto be reflected back in the Plant Capability database.We may also make changes that affect our AnnualProfit Plan, which will be updated.

We also recognize that many failures are effects oflacking of understanding of equipment function, so wetake action to reduce our staff’s actions as a source ofvariation.

PLAN UPDATES

Control may be seen as desirable, but impossible, in ourever-changing world. Even a Stage 5 company hasunplanned downtime. Customers’ needs change.External forces buffet the plant, especially reactiveresponses to events. The question is not whether wewill respond to change, but how to do so most produc-tively.Our approach suggests that keeping to a monthly plan ishighly desirable. We can say in tune with the entireplant, and make changes in a planned fashion. One ofthe greatest causes of variation in production andequipment come when changes are made with littlecommunication, with little planning, and little consider-ation for other effects. For instance, we often hear thatdriving a process beyond prior limits without safeguardscaused an equipment outage. Or that one part of the



plant made a change without informing the rest of theplant, and led to unexpected results.

The TEAMTM model calls for changes to be reflected inboth the annual plan and the unit production plan. If wehave a product that is currently selling at a high margin,and we want to adjust production levels, great! But let’smake the change in a planned fashion. We revamp ourannual plan to reflect volume changes; the units have achance to respond to the efforts of the change, and toprepare for them. If we have been through this particu-lar change before, we can safely make the productionadjustments based on prior history. If our equipmentconfiguration has changed, or our workforce has turnedover, proceeding deliberately will maximize the likeli-hood of achieving the desired goals, and minimizingunintended consequences.

Specifically, in addition to changing our annual plan andthe unit plan, we will work to understand the systemstresses that will result from the change. We will runthe appropriate models of RAM, MOR and MOC, aswell as our unit reliability models to try to foresee andaccommodate effects of the change.

RESULTS EXPECTATIONS

Mobil has made some very good gains, even though weare very early in the implementation process. From afinancial perspective, teams have identified more than$1 million is benefits, and the Cost of UnReliability hasa reduction trend in 1999 to yield $8-10 million. Astelling, though, is the enthusiasm and dedication of thehourly workforce. Their leadership recognize thebenefits of greater contribution, control and satisfactionthat comes to the workforce with this process.

The unit teams receive more training than ever before,and they are applying the training immediately. Becausethis process leads to fundamental changes in managingactivities, there are changes in virtually every job andcore process in the plant. It is not a path for the timidor those unwilling to change. Some of the results of theprocess include:

• Corporate is using this project as part of themodel for all manufacturing facilities

• The Operations manager has said, “This is thebest return on any money I could have spent!”

• Union Official: “We want our employees toshare in the profits, because they will be takingmuch more responsibility”

• Operator: “For the first time I feel like I am notasked to check my brain at the door.”

SUMMARY

Aligning plant resources to continuously maximizevalue and minimize variation has been an industrygoal for decades. Technology and human factorshave finally provided the tools necessary to close inon this achievement.

Advanced and sophisticated plants, able to success-fully change and which have excellent leadership,are candidates for the process we call asset man-agement, or TEAMTM. We suggest that companiescomplete a minimum of Stage 3 performancebefore they embark on this program.

Recognizing that the concepts of asset manage-ment will grow and mature over time, we offerTEAMTM as a stake in the ground that provides abasis for discussion. We welcome reader’s input tocontinue to better define this process.

defining asset management

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