PROPERTY & ASSETS
Introduction to physical asset management
In the first of a two-part series, Dr Michael Provost (pictured), Director of Michael Provost Consulting Ltd, discusses the long-term importance of looking after physical assets - extracted from his new book, Servitization and Physical Asset Management.
WHAT ARE ASSETS? Assets, in their broadest sense, are items used by businesses to create value and generate profits and must be available at the right time and place and must function and operate correctly. They must function and operate
on demand, since lack of functional delivery at the right time and place could have costly repercussions. The time, effort and material resources needed to keep them functioning and operating correctly must be minimised. They are also items of value on
the balance sheet(s) of one or more businesses, since their owners might not be their operators.
WHY WORRY ABOUT ASSET MANAGEMENT? Assets need to be looked after. They cost time and effort to create and consume materials during manufacture. They may have to last a long time, since replacement may be technically and/or financially difficult. Making rational business decisions based on information about the assets used by a business can yield significant financial benefits - increased revenues, reduced costs, increased shareholder value from more efficient and longer-lived assets etc. Proper asset management can mean the difference between business success and failure.
WHAT DO WE NEED TO KNOW ABOUT OUR ASSETS? Understanding what has happened, is happening and may be about to happen to assets is crucial. Questions include: • Are they working as required? • How are they being treated? • What are the identities of their component parts and how are they behaving?
• What has gone wrong and when do the faults need to be fixed?
• What is about to go wrong and can/should faults be fixed before failure?
• Where are the assets? • When and where do they need to be available for operation or maintenance?
• Are substitutes needed because of functional or operational failures?
• Do the assets need maintaining or replacing?
HOW DO WE FIND OUT WHAT IS HAPPENING? Accurate information enables better planning and results in fewer surprises. Current technologies allow data to be gathered to understand many of the above issues. Sensors that measure a variety of parameters are cheap, accurate and reliable, because they are usually fitted as part of control systems. Processing large quantities of raw data to produce information is becoming easier and cheaper.
WHAT IS THE BUSINESS BENEFIT? Since most businesses want the functionality an asset provides, rather than the asset itself, asset management represents a significant business opportunity. The guarantee of functionality is usually worth as much as or more than the asset itself. Those with the knowledge to manage assets effectively gain considerable competitive advantage. Asset management removes significant business risks, such as cost and balance sheet value risks, as well as regulatory, competition, revenue and customer satisfaction risks.
78 business network May 2019
WHO IS IN THE BEST POSITION TO CARRY OUT ASSET MANAGEMENT? • Customers and end users have a deep but narrow knowledge of a particular operation, but lack knowledge about performance of similar assets used by others
• Asset owners have an interest in maintaining ‘cradle to grave’ asset performance to retain and maximise asset value. However, the necessary engineering and operational skills are not usually part of their core businesses
• Suppliers have a deep knowledge of asset sub-system capabilities and performance, but lack the necessary knowledge of asset operational contexts
• IT/communications vendors have a deep knowledge of software and communication technology capabilities, but lack core asset engineering and operational expertise
• Manufacturers and system integrators have relationships with key stakeholders, giving a good overview of ‘cradle to grave’ asset performance and operation. However, they lack detailed knowledge of some of the drivers of asset performance and operation
Everyone has a role to play. However, manufacturers and system integrators, working with other stakeholders, are ideally placed to coordinate asset management because of the engineering knowledge they have of the assets they created and the broad overview they may have of the operation of these assets. Asset management offers an
excellent opportunity, particularly equipment manufacturers and system integrators, to leverage their knowledge of the assets to generate maximum business benefit. It is a mistake for any one stakeholder to ‘shut out’ the others; this can hamper information flow and diminishes value created from asset management.
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