Key issues in (Physical) Asset Management

Managing physical assets is about dealing with risks over the lifecycle of assets. However Asset Management is often misunderstood: not realizing that it is also a way of thinking that involves the organization and business as a whole.

During my more than 25 years’ maintenance experience, I have observed how Maintenance Management transcends into Asset Management without any effective adjustment to the structure, strategy or mindset of an organization.

I observed, more than once, cases where production managers (typically appointed as Asset Manager) did not discuss subjects such as risk-based strategies and business requirements with their maintenance counterpart and technical specialists. I have even witnessed organizations where it seemed that they had opposite concerns and where they were fighting each other about details.

Another custom regularly seen is that fully outsourced maintenance contracts are based on cost (pursuing a reduction of Operational and Capital Expenditure) rather than the continuity of the Asset function (pursuing business continuity by an increased risk predictability and shared responsibility of risk mitigation).

These are just two of many examples. But they are typical for organizations who are unable to embrace Asset Management in its full extent to benefit from its potential:  Gaining competitive advantage.

To be more specific what issues and misconceptions we are facing regarding this subject, there are two underlying key issues:

1. Asset management is not a lifted maintenance approach 2.0

Asset management is a lifecycle approach, beginning at conceptual design, through to usage, decommissioning and disposal. Maintenance is a part which is embedded in asset management, but asset management is not a fancy relabelling exercise to sell old wine in new bottles.

I am curious how some companies, whose only business proposition is to provide maintenance as a service, can explain why they are legitimate to claim that they practice asset management without any deeper understanding of Asset behaviour (degradation and failure mechanisms). On the other hand, it is also not common practice during the design and construction stage of projects to take subjects like total cost of ownership, maintainability or human reliability into consideration.

A typical case of a failing asset management strategy, which I observed, was a plant where it was almost impossible to depressurize the plant. The root cause of this problem originated during contract negotiations without the application of the typical integrated life-cycle approach of asset management. In this case, the narrow view of the isolated project organization was not aware that you should also consider maintenance and reliability issues of the future plant. In addition to the limited view of this team, executive management agreed to consign financial incentives if the main contractor completed the project below budget. In other words: the urge for low first costs destroys the necessity to create lifecycle asset value. 

2. Data, experience and common sense are a holy trinity

Instead of maintenance, often considered as a business expense, the goal of asset management is to increase the asset value to leverage competitive advantage. The potential to increase this asset value is attained by forcing the right action founded on an appropriate decision-making process by the right people at the right time.

Without quality information, people can neither understand nor adequately make the proper decisions to improve the value in the lifecycle of an asset. An even worse situation emerges when deceptive information is available and trusted, but not recognized and challenged by common sense. Referring to asset integrity, if data is not accurate, they are useless for analytic and prognostic modelling. Making the wrong decision based on bad information is not the case when experts can recognize the flaws. However, if common sense and experience does not protect us from making flawed decisions in critical situations, the other option is managing data that provide relevant and accurate information. Besides using the common sense and experience of experts, effectively managing data quality is the second-best option to reduce acting on misleading information through utilization of bad data.

3. The role of information systems?

Whereas information systems have the potential to provide a solution, asset management improvement will not necessarily emerge as a result of investment in an asset management information systems. These investments are more likely to be more effective when information- and asset management strategies are integrated, implemented and aligned with the organizational goals. In a broader perspective, this approach has the potential to yield even long-term structural profitability, since many of these asset management improvements are expected to lead to a competitive advantage.

The key to effective asset Management is not a simple recipe. Companies that offer simple and general solutions usually do not understand the complexity of the interaction between the elements within the scope of asset management. Effective asset management starts with a plan based on the answers to the question “Why do we do it?”. Understanding the business and organizational context, competent and motivated staff (internal and external), detailed understanding of the underlying failure processes affected by human and asset behaviour along with other interfering factors are key to asset management. Information systems, standards and best practices are secondary elements that can help if their purpose is understood and expertly implemented.