Asset Management, in essence, is the answer to the very straightforward question:
What do you do when an important piece of equipment breaks down?
It’s a simple question but answering it does require some thought. Because whether it’s a complex machine with many moving parts or a lightbulb: you’ll want a strategy for repairing or replacing something when it breaks. If your equipment suffers downtime and prevents you from working, that’s lost opportunities and revenue. This is where asset management comes in.
According to the official ISO 55000 standard for asset management, it is defined as “the coordinated activity of an organisation to realise value from items, things or entities that have potential or actual value to an organisation.” Simply put: it’s making strategic use of the things that make you money! Whether that’s IT equipment, vehicles, heavy industrial machinery or buildings does not matter. Because the principles of Asset Management can be applied to any industry and company size.
The main idea is that it allows you insight into your assets’ full lifecycles. Setting up a system for Asset Management will result in more streamlined maintenance processes, lower costs and less downtime. In this article, we’ll take you through the basics, so you’ll be ready to climb to the top of the game!
You may have already heard of the term CMMS (Computerized Mainenance Management System). These are software packages that are designed to optimise maintenance processes. In other words: they help you plan for your asset health. So what exactly is the difference between asset management and maintenance management?
Put simply: you can view maintenance management as just one part of asset management. Maintenance management is mainly concerned with maintenance scheduling, labor planning and parts inventory. Instead, asset management focuses on the full asset lifecycle. The full lifecycle includes purchasing, leasing/maintenance contracts, Health-Safety-Environmental (HSE) regulations and eventual disposal/recycling of the asset.
Companies that will benefit most from a strong asset management strategy are companies that own a lot of expensive property (machines, vehicles, buildings etc.). Transportation, energy and manufacturing/production are some examples of industries that will gain the most from a good asset strategy.
That said, any company can apply the principles of asset management to optimise asset lifecycles. Think about the equipment you use on a daily basis and consider the cost implications if it breaks down or needs maintenance. How long should an asset last? How much would its downtime affect your core business? These questions will inform what level of asset management is appropriate for your business.
To determine how you’re doing in terms of asset management, there’s a model outlining the different stages within a business: The Asset Management Maturity Model (AMMM). There are several variations of this model that use slightly differing terminology. However, the important part is that it gives you a point of reference. The most widespread model identifies five different stages: Chaotic, Initial, Developing, Managed and Optimised. We’ll go through these phases below.
If your answer to the question at the start of this article was “I don’t know”, you’re very likely in the Chaotic phase of the AMMM. You own some important assets that you need for your primary business process. You mostly hope they won’t run into trouble, as they’re expensive and/or time-consuming to repair or replace. But you haven’t really though about how to account for that in terms of time and resources in the case it does happen. Furthermore, you’re not consciously aware of the concept of asset management and are not tracking asset health or performing scheduled inspections: any repairs are performed reactive and ad-hoc. You keep no records, history or register of your assets.
You have a clear idea about what asset management is and how it could benefit your organisation. You’re devising a strategy to keep track of your assets and their condition. You’ll be thinking ahead and making sure you have the necessary expertise on hand or at least on speed-dial. You also keep a stock of spare parts. All to keep your assets out of order as short a time as possible. You also may or may not have a periodical inspection plan for your critical assets. The common theme for those in the Initial phase of Asset Management, is that you’re starting to keep track of asset information in a consistent way.
You have a system for keeping consistent records on inspections and statistics concerning asset health. You’re also taking it a step further and use financial information about your asset costs. Furthermore, you have a very clear idea of your asset lifecycles. You combine all this information to actively inform your best Return on Investment of your assets: where and when to perform maintenance, repairs and replacements. Since you have a lot of data available, you’re confident in your decision-making. Ultimately, you’re moving from an ad-hoc, reactionary approach to preventive maintenance to further minimize your asset downtime and increasing productivity.
You’re keeping awesome track of your asset information and have further improved your approach to asset maintenance. You are aware of opportunities and risks concerning your assets. Using the information you have at your disposal, you’re moving on from planned maintenance. Where and when you perform maintenance, repairs and replacement is now informed by asset health monitoring, optimal efficiency and Return on Investment. Instead of a set schedule, planned maintenance has become predictive maintenance. You’re managing your asset health smartly and in a financially sound way.
You’ve perfected the predictive nature of your asset management strategy. You’re continuously managing asset health through automated sensors and procedures. Asset management is an integrated part of your day-to-day operations and informs where you spend your resources, maximising your Return on Investment. You’re working with clear, identified KPIs for you assets: production, run hours, costs etc. Barely any resources are wasted in maintaining, repairing and replacing your assets.
Before you dive into picking a strategy and complementary Asset Management software package, you’ll want to know what you’re currently working with. First, consider your business’ current structure, processes and KPIs. What equipment and machinery is absolutely essential for your core business and attaining your goals? Do you have warranty and/or maintenance contracts for these machines?
You’ll want to make in informed decision about where your initial focus will be when you start implementing asset management. Utlimately, you’ll want optimal return on investment, and in your primary business process, some procedures and equipment will be more important than others. Naturally, you’ll want to invest in these critical assets before anything else.
After you’ve taken stock of your most important procedures and assets and prioritised them, you’ll want to determine the amount of time and money you will initially invest in your strategy.
Depending on the complexity of your business process and assets, you can decide to set up basic maintenance scheduling for your most essential assets. Alternatively, you can take the time, effort and money to enter every contract and every nut and bolt. Or anything inbetween. You’ll know what works best for you!
You’ve made choices regarding your assets and your investment in asset management. Now you’ll want to choose a software package to complement your strategy. There’s a whole lot of software out there. Some packages focus on specific industries, while some have stronger maintenance or finance modules. Which one you choose is fully dependent on the previous steps and your business goals. Listing them all would be an impossible task, but know that there are many different options and there’s bound to be a system that works for you.
No matter the solution you choose, the next step is to take steps one and two from before and implement them in your chosen system. Identifying your critical assets and choosing the right software package is important for your strategy. However, training the people in your organisation that will work with the software should be top-of-the-list. After all, if they are going to be the ones working with the system, they should know how it works and how to properly work with it. Keep in mind that the success of the implementation of anything new is highly dependent on the adoption of the system by your key users (managers, team leads etc.).
Now that you’ve set everything up and have taken your first steps on the asset management-journey, your aim should be to continually improve and optimise your process. Luckily, most software packages offer reporting capabilities. This allows for monthly, weekly or even daily reports on a wide range of metrics. By running and analysing reports, you’ll be able to see what goes well and where there’s room for improvement in the your asset management strategy. Using reports well is crucial to climbing the AMMM-ladder!
If you’re interested in a deeper dive into the subject, look no further than the Institute for Asset Management’s ‘an Anatomy’.