Competing With Aging Assets

Western industry is aging. In our new book “Value Driven Maintenance & Asset Management (VDMXL)” we describe a step-by-step approach on how a Maintenance & Asset Management organization can maximize the economic added value of an existing plant, fleet or infrastructure.

Mainnovation_fig-2(E)

Figure 2: VDMXL Competence Model

Because of the economic crisis many companies lack the financial resources to replace aging assets. Plant closure is a serious threat. Lifetime extension and modernization of our assets is the only way to survive in a global marketplace with modern plants in emerging countries like China, India and Brazil.

This is the new challenge that today’s maintenance managers are facing. We need to improve the economic added value of our aging assets and carrying out the best maintenance just is not good enough.

The technical department has to transform into a professional Maintenance and Asset Management organization that combines reliability improvement with lifetime extension and technical modernization. But how does such an organization work, and more importantly, how does it work in a sustainable way?

Value of Maintenance and Asset Management

In our new book we describe how a Maintenance & Asset Management organization can maximize the economic added value of an existing plant, fleet or infrastructure. The first step in this approach is to determine the dominant value driver of the asset.

According to VDMXL there are four drivers along which the organization can create added value with an existing asset (see Figure 1): a value driver that maximizes income through a higher uptime (Asset Utilization), a value driver that reduces the maintenance costs (Cost Control), a value driver that lowers the annual capital investments (Capital Allocation), and a value driver that minimizes risks in the area of Safety, Health, Environment & Quality (SHEQ Control).

Mainnovation_fig-1(E)

Figure 1: Value Drivers in Maintenance & Asset Management

Hundreds of improvements projects in the Maintenance & Asset Management domain have taught us that it is not feasible to improve on more than one value driver at the same time. An organization will be confused if the strategic focus is not clear.

That is why VDMXL tells you to aim your strategy at the dominant value driver: the driver that contains the highest economic value potential. The value potential on each driver can be easily calculated using the Discounted Cash Flow (DCF) methodology, a financial methodology that is well known in boardrooms of corporate and governmental organizations.

Competence Model Is the Basement

To utilize the calculated value potential, one needs to improve the performance of the Maintenance & Asset Management organization. For this purpose, we introduce the VDMXL Competence Model (see Figure 2). This model is a more detailed representation of the Value Driver Model shown in Figure 1 and describes the working of a Maintenance & Asset Management organization.

The model is built around two control loops: a control loop around Asset Utilization and one around Cost Control. Both control loops are interconnected through four central competences:

• Asset Portfolio Management: this strategic competence ensures that the assets continue to meet the requirements specified by the company and its environment in terms of functionality, availability, reliability, finances, safety, health and the environment over the longer term (1-10 years). Modification, replacement and lifetime extension projects are initiated here if it turns out that the assets no longer meet or are no longer expected to meet these requirements;

• Reliability Engineering: this tactical competence monitors the performance of existing assets to ensure that they meet the specified requirements by optimizing the preventative maintenance plan over the medium term (1-2 years);

• Planning & Scheduling: this tactical/operational competence plans and schedules technical jobs (0-1 year);

• Job Execution: this operational competence executes and monitors technical activities over the short term (0-1 month).

The four central competences are supported by four so-called resource competences: competences that focus on managing the resources required by a Maintenance & Asset Management organization:

• Technicians and tools (Skill & Tool Control);

• Spare parts (Spare Parts Control);

• Contractors (Outsourcing Control);

• Knowledge and information (Asset Data Control).

The two remaining competences for SHEQ Control and Capital Projects complete the overall working of the Maintenance & Asset Management organization.

KPI Measurement and Benchmarking

The VDMXL Competence Model provides a suitable framework for measuring the current performance of the Maintenance & Asset Management organization. We know from experience that it is impossible to find one universal indicator for measuring overall performance. For this reason VDMXL measures 12 Key Performance Indicators (KPIs) – one KPI for each competence (see Figure 3).

After measuring the KPIs, the next step is to assess the measured values. Is 80 percent technical availability a good score for an industrial enterprise? Is a 4 percent maintenance costs/asset replacement value expensive or cheap for a Maintenance & Asset Management organization? If we are too expensive, what is an acceptable level and what buttons must we press to get to that level?

VDMXL gives us a helping hand by comparing the measured KPIs with the performance levels of peer organizations (see Figure 3). This is also referred to as ‘benchmarking’. Benchmarking provides a transparent picture of which competences can be improved, to what extent and in what way. VDMXL contains a benchmark database with about 1.000 companies from different industries and different countries.

Mainnovation_fig-3(E)

Figure 3: KPI measurement and benchmarking

The benchmarking exercise shows which competences are already at the desired performance level and which competences need to be improved to increase the economic added value of the asset. Within VDMXL these last competences are called core competences.

The Winning Strategy

VDMXL puts forward various best practices for setting up the core competences. Best practices are proven working methods adopted by leading Maintenance & Asset Management organizations operating in various industries.

VDMXL uses well-known best practices like RCM, TPM and RBI, but also less well-known ones like Gatekeeper and Asset Based Costing. The strength of VDMXL is that it relates these best practices to a competence.

RCM is generally seen as the best practice in Reliability Engineering, for example, while TPM is used as best practice for Asset Utilization. These best practices have not been adopted by VDMXL on a one-for-one basis, but a translation was first made into thinking in terms of value and, furthermore, the best practices were made industry-independent as much as possible.

The advantage of using best practices is that it speeds up the strategy formulation process enormously. Instead of reinventing the wheel, we can start off with a working method of another leading organization. This not only saves time, it also removes a certain element of uncertainty. The provided method has already proven itself in practice.

This can be validated by reference visits. Eliminating uncertainty is an important success factor in the process of change that accompanies the introduction of the Winning Maintenance & Asset Management Strategy.

The adoption of best practices does require some caution, however. We have to make sure that the step to the best practice is not too great. This could lead to acceptance problems and discouragement within the organization. In that case it will be important to define a growth path across which the competence will develop gradually, in controllable steps, towards the best practice.

The Implementation Process

Now that the Winning Maintenance & Asset Management Strategy has been designed and approved, it can be implemented. The implementation starts off by setting up a KPI measurement system. This system is required to monitor, on a monthly or weekly basis, whether the designed strategy has the right impact.

Next, the selected strategy is translated into new work processes, organization structures, IT systems and business content. These four components must be introduced as an integral unit. After all, it is not possible to introduce new methods of working without considering the organization, arranging for the right IT system and ensuring that everyone has the required data and documents.

VDMXL has various tools to accelerate the design and implementation of the Winning Maintenance & Asset Management Strategy. The most familiar tools are the VDMXL Process Map and the VDMXL Control Panel.

The VDMXL Process Map is a detailed description of about 60 best practice Maintenance & Asset Management processes. The processes contain process flows, activity descriptions, standard roles and responsibility matrices.

The VDMXL Control Panel is a fully automated KPI Dashboard. This dashboard is inbuilt in modern Business Intelligence software and is integrated into the company’s EAM system. This means the twelve VDMXL KPIs are calculated in real time using data contained in the EAM system.

The VDMXL Control Panel contains a separate dashboard for each KPI that contains five subordinate PIs. Every PI or KPI can be further analysed using flexible drill-down analyses and lists with transactional data from the EAM system.

People often ask us the question: is VDMXL really adding value or is it just a theoretic model? We prefer not to answer that question personally. We rather refer to the hundreds of companies who have applied this methodology, often with impressive results.

Significant increases in uptime and safety improvements have convinced management boards that investing in maintenance & asset management can be very profitable economically. And when cutbacks were inevitable, VDMXL was able to demonstrate how to reduce the maintenance costs and to extend the asset lifetime in responsible ways. For these companies, maintenance & asset management no longer is a necessary evil, but an economic factor of significance.

Source: Haarman & Delahay, “VDMXL, Value Driven Maintenance & Asset Management” Mainnovation 2015

Mark Haarman & Guy Delahay

Managing Partners, Mainnovation (Netherlands)

www.mainnovation.com

Asset Management | 19.5.2016

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