Human nature hasn’t changed over the past 50 years, but it’s staggering how much technology has changed physical assets for every industry. Couple this with senior management’s insatiable thirst for lower costs and the rising concerns of regulatory bodies across all industries, and you get untenable pressure exerted on asset managers to do what is seemingly impossible. How can asset managers drive down costs while asset complexity, costs, and risk are dramatically on the rise?
This column provides a greater understanding of these looming issues and what is needed to resolve them – in other words, a formal case management solution fully integrated with your existing work management system. Key elements of a business case also are discussed.
Growing complexity of assets
With a developing interest in connecting physical assets to the Internet – building the so-called Internet of Things (IoT) – comes our greater dependency on those assets. This is regardless of asset class, whether we’re talking about plant equipment, facilities, fleet assets, infrastructure, or information technology. Although IoT brings incredible opportunity in terms of connectivity and integration, it also carries risks, such as an increased threat of security breaches and greater difficulty maintaining assets because of the complications presented by Internet access. This includes software and version compatibility, Internet availability and reliability, and network performance.
Furthermore, up-to-date versions of some physical assets have become far more expensive thanks to greater complexity and a shrinking useful life. The speed of technological improvements and competitive pressures contribute to this trend. So although the equipment is far more capable, it carries significantly greater risk if it fails, especially in light of our growing reliance on it.
Senior management’s drive to reduce costs
Each year, budgets are typically set for an expected increase in expenditures on repair and replacement of assets, spare parts, internal labor, contract work, tools, and so on. However, senior managers at most companies expect that costs will come down each year and that productivity and quality of work will improve. The most common outcome of these conflicting objectives is that senior management imposes a reduction on the budget submitted for approval to force asset managers to accomplish the same amount of work with less money.
Unfortunately, all too often, senior management’s obsession with cost reduction results in a growing backlog of corrective work that is pushed to future years, preventive maintenance work that is deferred or never done, and an increase in short-term repairs instead of asset replacement as the superior long-term solution. At least in part, this is exacerbated by the inability and/or fear of maintenance management to push back on senior management with solid data, ensuring that further cuts will be into bone as there is no more fat to trim.
After cycling through several years of work-order deferrals, using cheaper sources of less-skilled labor, buying inferior parts to save money, retaining assets beyond their useful life, and encouraging repairs on the cheap, many companies face the following potential consequences:
- An increase in the number and severity of health, safety, and environmental incidents and near-misses caused by use of inferior tools and safety equipment, reduced supervision, and poor workmanship.
- An increased probability and impact of asset failure with major financial consequences. This can be in the form of more costly repairs or unexpected asset replacement, increased scrap, prolonged equipment downtime that affects the ability to meet promised customer delivery dates, and increased capital tied up in work-in-process production inventory.
- An increased risk of catastrophic failures.
- A deteriorating track record and reputation with customers, suppliers, and the community at large.
- A significant decrease in staff morale and workmanship pride as a result of employees being forced to use inferior tools and parts to render temporary-bandage solutions for rapidly deteriorating assets.
These are critical elements of a business case for implementing a formal case management solution that provides an effective means of mitigating risks, investigating and analyzing potential improvements, and managing changes to the work program.
Increased regulatory pressures
Governments, insurance companies, regulatory bodies, and similar stakeholders from virtually every industry sector are understandably nervous about the risks discussed above. This has created mounting pressure on companies to better protect their employees, customers, and the public at large. In many cases, regulators are insisting on such measures as follows: