Maintenance and Asset Management Two Sides of the Same Coin?
This article discusses the concept of Asset Management of physical assets. The most current definitions are presented, giving relevance to the work done by the IAM in the United Kingdom. The existing specifications BS PAS 55:2008, the ongoing work in international organizations (EFNMS and ESReDA) and the standardization work in progress (CEN and ISO) are discussed. Finally, it is highlighted that it is maintenance that is essential for the correct application of the concepts of Asset Management.
In an economic situation that is more and more complex, with an uncertainty in the evolution of financial markets, organizations have an absolute need to improve their performance by increasing their ratios of ROI (Return on Investments). This is only possible by improving its index of ROA (Return on Assets), since their physical assets represent the most important component of investment, and usually are not easily tradable.
In this context, organizations of all types and sizes, but particularly the capital intensive ones, have to cope with external and internal factors that increase the degree of uncertainty of whether or not they are able to achieve the economic and financial objectives. The effect of uncertainty on objectives of the organizations represents their “risk”. To ensure that this risk is controlled and that the ROI and ROA ratios are provided in a sustainable manner, it becomes necessary to manage the equipment by taking into account the entire life cycle.
Effective management of the equipment, especially in capital intensive organizations, implies not only a vision that encompasses aspects of economic and financial nature, but involves in a definitive way the technical management of the operations of physical assets, since they represent the most important share of the investments. Though varying from sector to sector, the investments will be made for twenty to thirty years in heavy industries such as chemical, pulp and paper or steel industries. It is therefore necessary to integrate the management of operations in the overall management of the companies; this is made possible by integrating relevant information related to all aspects of its performance through information technology, and development of techniques for collecting and processing information obtained from the production equipment.
The ability to optimize the management of physical assets, which we here designate as Asset Management, means that investors and consumers can have greater confidence in the services provided by organizations, thus enabling their economic and social sustainability (Ferreira 2009).
Definitions and Objectives of Maintenance and Asset Management
The development of new technological and business contexts has led to the natural evolution of the basic concepts of a production system. The concept of LCC – Life Cycle Cost of production equipment has led to a reflection on the importance of the nature and purpose of the investments to be made.
Figure 1. Contribution of the performance of maintenance organizations (Saltzer, 2006).
The definition of LCC imposes an overview of the management of physical assets from its initial phase of the project through to its decommissioning. The emergence of concepts of overall life of the equipment such as RAMS, as described in the standard EN 50126:2000, undertake to establish clear objectives for each stage of the life of equipment. Also, in the design phase, the methodology for operation and maintenance for the entire expected life cycle should be established, as well as what resources need to be allocated and what objectives need to be achieved. These objectives can be revised throughout the life cycle, always taking into consideration the risks involved for decisions taken.
All this new conceptualization of the life of equipment forced the evolution of the maintenance concept which is now defined as (EN 13306:2007): a combination of all the technical, administrative and managerial activities during the life cycle of an item intended to retain it in, or restore it to, a state in which it can perform the required function.
As one can see, this definition is very broad because it does not limit the intervention of maintenance to its technical concept, but extends it to other areas, such as acts of administration, and especially management. So there is a need to establish a maintenance strategy that is consistent with the business objectives. This then is part of the company’s global strategy, in order to guarantee the company’s production capacity throughout the life cycle of the equipment, as well as the margins of capital gains generated, which means keeping the company competitive. The maintenance strategy should be dynamic, according to the real needs of companies at any given time, to allow continuous improvement, and to generate greater added value with its action. The maintenance manager assumes a decisive role here, since he or she will know how to interpret the maintenance strategy within the company’s overall strategy, identify gaps in performance and develop improvement plans. The maintenance manager should be able to apply the technologies and resources necessary to maintain the equipment, depending on its criticality to the business of the company, ensuring operational safety and environmental safety. The impact of maintenance is increasingly important and one can try to summarize it, as it can be seen in Figure 1.
The contributions of maintenance to the success of organizations have been increasingly recognized. The role of maintenance managers has been naturally extended, implying its involvement in strategic planning issues, such as production capacity and renewal of equipment planning. This includes the selection of technological solutions and the LCC analysis, which contributes to the study of the consequences for the investments to be made. The expectations of company management will tend to increase, and maintenance personnel will not only require the essential technical skills for their work, but will also be expected to possess other management skills.
In this context, it appears the concept of (Physical) Asset Management. It is a concept that has been developed for more than twenty years now, but does not yet have a definite definition. The use of the concept depends on who is using it:
- For the financial sector Asset Management means the management of portfolios of financial assets such as shares or investment in public debt, etc.
- For the directors, especially in the area of economic and financial companies sectors, the term is used in global financial terms like selling or buying financial or physical assets that allow maximizing the value of companies.
- For managers of maintenance, especially in the U.S., the term has been used to gain greater credibility for activities they develop.
As maintenance was treated as a “necessary evil”, the term “Asset Management” appears as being more attractive and more professional, despite maintenance being only one component (fundamental) of a policy of a company’s physical asset management activities. The last use of the term gives a good idea about the evolution of the global concept of maintenance inside the management of physical assets, and is what really matters with regards to the purpose of this paper. Among the various existing definitions, who departed from this use of the term “Asset Management”, we find the following definitions referred by Mitchell (2007):
- Plant Asset Management: Integration and analysis of data obtained in line and in real-time by condition monitoring systems in combination with a predictive maintenance strategy as the RCM.
- Provide the level of service defined for the most efficient cost for current and future customers.
- Systematic and coordinated activities and procedures through which an organization optimizes the management of physical assets and its risks associated with their performance.
- The number of disciplines, methods, procedures and tools used to optimize the impact of costs, performance and exposure to risk in the business life cycle of equipment (associated with their availability, efficiency, quality, longevity and compliance with legal/regulations/safety/ environmental requirements) of the companies physical assets.
The last definition was presented by the IAM – Institute of Asset Management and supported the Public Available Specification BSI – British Standards Institution PAS 55:2008.
The Interest in the Standard PAS 55 and its Developments in Europe
Given the interest shown by British industry and based on the experience developed in Australia and New Zealand, in 2004 a cooperative effort was conducted between the British government and the main industrial confederations, especially with those of capital-intensive industrial companies. This was to create a set of specifications allowing to develop and better-define the context of Asset Management, to develop guidelines for the application of the concept and to allow to understand, using a self-assessment methodology, the degree of maturity of companies in the implementation of Asset Management. This work resulted in the following PAS (Public Available Specification):
- PAS 55-1:2008 Asset Management – Part 1 – Specification for the optimized management of physical assets
- PAS 55-2:2008 Asset Management – Part 2 – Guidelines for the application of PAS 55-1. In addition to these texts, it was also developed a questionnaire for self-assessment, which is available at the site http:// www.theiam.org to members of the Institute of Asset Management.
The definition of Asset Management stated in these PAS is:
Systematic and coordinated activities and practices through which an organization optimally and sustainably manages its assets and asset systems, their associated performance, risks and expenditures over their life cycles for the purpose of achieving its organizational strategic plan. It is an integrated approach, which aims to include a holistic, systematic, systemic, risk-based and optimized analysis of the physical assets.
Figure 2. Levels of assets and their management, according to PAS 55:2008.
Figure 3. Cycle PDCA applied to Asset Management, according to PAS 55:2008.
These PAS are mainly focused on management of physical assets. The other types of assets are considered only insofar as they can affect the optimal management of physical assets, although it is considered that the interdependence between the various types of assets and physical assets is very important. Other assets to be considered include human resources, financial assets, information systems and intangible assets, such as the company’s reputation.
The physical assets are usually placed in four classes:
- Industry (oil, gas, electronics...)
- Infrastructure (railways, roads, telecommunications, water treatment...)
- Mobile assets (military, aircraft, railway rolling stock, ships...)
- Buildings and public facilities (offices, schools, hospitals...)
The levels of analysis in this type of integrated approach can be seen in Figure 2.
The methodology of implementation of PAS 55 is based on the Deming’s methodology PDCA (Plan, Do, Check, Act), applied in this context of analysis, which is shown in Figure 3.
Actions Developed by International Organizations on the Asset Management Concept
Given the continued interest on the Asset Management concept that has stimulated its application, several actions have been developed by several international organizations in order to improve the concepts established to date and to help enterprises implement this concept in their structures.
This interest also stems from the fact that this management methodology of physical assets fits well within a lean management perspective, as it has the ultimate goal of optimizing the physical resources existing inside organizations.
Actions in development within international organizations (EFNMS and ESReDA)
The EFNMS – European Federation of National Maintenance Societies, of which APMI is currently an active member, has a Work Group (The European Asset Management Committee – EAMC) dedicated to the study and application of the concept of Asset Management, to better understand the consequences of its application for the activity of maintenance and to understand the context of its development within companies.
As part of its activity it is presently carrying out a business survey on the interest companies have in implementing the concept and, at the same time, to make a simple analysis of the implementation status of concept in these companies. This survey could be answered at: http://www.efnms.org. The purpose of this working group is to create “The Asset Management System by the EFNMS”. Also ESReDA – European Society for Reliability and Data Analysis (http://www. esreda.org) has a working group dedicated to developing the concept of Asset Management, aiming to better understand the difficulties of applying the concept in businesses and to study the interdependencies between the various assets in organizations, with the development and application of concepts of data analysis.
The international standardization organizations
The CEN (Comité Européen de Normalisation) in the Technical Committee 319 which is dedicated to developing standards for maintenance is developing at Group Working 10 a set of normative documents, whose working base documents have been developed by IAM in the United Kingdom and by the EAMC (EFNMS). For 2013/4 it expects to publish the first normative texts regarding the terminology and the scope of Asset Management.
The ISO (International Standards Organization) in TC 251 is also developing the first standard with a provisional title ISO 55000 “Asset management – Overview, Principles and Terminology”, which should be ready in the next two years.
Maintenance as a Key Component of the Asset Management
Quite often it is questioned whether the concept of Asset Management will replace the concept of maintenance in companies. As presented in the previous paragraphs, this concept aims to optimize the management physical assets throughout their lifecycle. It is easy to verify, particularly in capital intensive organizations in which the equipment has relatively long life cycles, that the optimization of its management is only possible with an organizational model that can ensure the necessary equipment availability for an optimized production. In this model, effective and efficient maintenance is essential, as it is essential that any maintenance organization is able to know how to acquire and handle the information flows that it is responsible for.
This has obvious implications on the ability of planning production, on the quality of products and services produced and on the optimization of corporate resources, whether they be human or material resources.
On the other hand, the optimal management of physical assets implies a greater compliance with existing legislation concerning the safety of people and goods, as for the environment sustainability. It is thus a paradigm shift of perspective on maintenance activities, in which to apply the concepts of Asset Management to companies, as have so far been developed, maintenance, which must be performed with optimized technical and human resources, is an indispensable component.
Given the development of the economic global and local contexts, as well as the development of new technologies, particularly in the area information technology, it is now possible to speak of an integrated management of physical assets, with regards to their optimization throughout its life cycle. This will have a very positive impact on the sustainability and on the competitiveness of businesses, particularly (but not exclusively) in capital-intensive companies where equipment have medium or long life cycles.
The BS PAS 55:2008 Specification, sponsored by IAM in the UK, allowed having a benchmark from which it is possible to understand the level of integration of the management of physical assets of the company and / or to help these companies to apply the general concepts underlying the concept of Asset Management.
There has been important work within international organizations (EFNMS, ESRe- DA) for the development of the concepts of Asset Management, as well as to better define the state of maturation of the companies in its application and the needs they have for making optimum use of the physical resources they have. The publication of international standards for 2013/4 (CEN, ISO) is also expected with the aim to better define the concepts of Asset Management internationally.
Are Maintenance and Asset Management two sides of the same coin? The answer is that maintenance is an essential and extremely important part of the same coin, which is the sustainable and integrated management of physical assets of businesses over their entire life cycle.
»»Who is Luis Andrade Ferreira? Luis is PhD in Mechanical Engineering from IN SA de Lyon, France, 1985. He is the Vice- Dean, Faculty of Engineering in the University of Porto, Portugal and the Vice-President of APMI, Portuguese Association for Industrial Maintenance. He is also the President of FIM, Maintenance Ibero-american Federation.
»»References ››Boston Consulting Group (1999), Asset Productivity, Perspectives n. 377, BSG, Boston ›› L.A. Ferreira (2009), Dependability and maintenance: its interrelation and importance on the sustainability of industrial operations, Proceed. of the X. Portuguese National Congress on Maintenance, Figueira da Foz, 14 p. (in Portuguese) ››Mitchell, J.S. (2007), Physical Asset Management Handbook, 4th ed., Clarion Technical Publishers, Houston ››NP EN 13306:2007, Maintenance Terminology, IPQ, Caparica ››NP EN 50126:2000, Railways applications – Demonstration of Reliability, Availability, Maintainability and Safety, IPQ, Caparica ›› Institute of Public Works Australia, International Infrastructure Management Manual, 2006 Edition, Sidney ››Saltzer, M. (2006), Achieving World Class Asset Management Performance, Maintenance & Asset Management, vol. 21, n. 4, pp. 5–13.
Digital technology revolutionizes maintenance strategies across industries by providing several automation tools and simplifying workflow management. Production assets are getting more interconnected as modern maintenance technologies find their way into the plant floor, facilities, and mobile equipment. Companies are leveraging digital technologies to combat predominant maintenance challenges, control maintenance costs, and enhance the quality of maintenance work.
Warehouse inventory operations drive the success and health of any business that sells or utilizes goods. Without the warehouse team, everything falls apart, leaving you with no way to generate reliable revenue. The turmoil of the past few years has caused many companies to focus on products and inventory themselves while letting some management and warehouse functionality slip. Now, ahead of peak season, is the perfect time for companies to refocus, prioritize the people running their warehouses, and reinstate practices designed to grease the wheels and ensure long-term success.