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:
- Implementing a framework for better managing your assets in line with best practices, such as compliance with ISO 55000 standards or specific regulatory guidelines (e.g., the handling and disposing of hazardous waste)
- Regular reporting on asset inventory and condition to ensure there are no signs of unexpected asset degradation (e.g., water/wastewater infrastructure)
- Proof of a comprehensive PM program, including identification of critical assets, critical parts, and critical PMs, as well as proof of satisfactory on-time completion of the work
- Comprehensive records kept of anomalous asset behavior, such as a downtime event in the nuclear industry
- Accurate recording of any incidents involving health, safety, and the environment, such as an oil pipeline leak, air quality issues in a given plant, or any lost time due to injury
- Tight controls in place for critical processes, such as electronic signatures required for changes to a chemical formulation or any maintenance work orders in a pharmaceutical manufacturer
- Proof of accurate and timely minutes kept for critical meetings (for example, safety meetings) as well as proof of executed action items
- Achieving satisfactory results of any formal and/or random inspections or audits by regulators or their agents, including addressing any deficiencies within a reasonable time frame, depending on severity.
There is no better business case than achieving compliance with a regulator. Many of the line items above can be converted into a business case justifying a case management system by adding relevant costs, opportunity costs, or benefits.
For example, the last bullet above is an ideal candidate for building a business case: A case management system can be used to record and carefully manage the process for addressing each audit deficiency. What activities are included in this? Initiating and assigning a case and launching an investigation are the first steps, of course, but the process also includes conducting root-cause analysis, assessing risks, determining costs and benefits of alternative solutions, running alternatives through a management-of-change process, and implementing approved changes. These are the formal steps within the case management flow as shown in Exhibit 1.
Integrated work and case management: A better solution
Asset managers today are faced with risk levels on the rise like never before because of increasing asset complexity and cost, senior management pressure to reduce costs, and regulatory compliance obligations. To help mitigate the risk and manage stakeholder expectations, a business case should be established to integrate work management and case management in terms of processes and a supporting CMMS. Benefits will flow from two major categories: productivity improvements and the opportunity cost associated with risk reduction. In addition, maintainers and others can initiate cases to investigate improvement ideas, such as changes to PM frequencies, job plan steps, safety procedures, parts and tools used, and operator/maintainer training.