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How do other industries manage assets?

Aug. 5, 2020
David Berger says world-class processes can be learned from couriers, big box retailers, health care, and the military.

If you were scouring the globe looking for world-class processes in asset management, which companies would you benchmark? Most companies would no doubt look to leading asset managers amongst their competitors usually within their marketplace. In my experience, the vast majority of organizations will not be thinking beyond this relatively narrow search.

About the Author: David Berger

Best practice processes can be found in any department of any company, anywhere in the world. Do not limit your search for excellence to strictly asset management functions because the entire industry is struggling with the same issues. Truly effective benchmarking comes from finding “best-in-class” companies, i.e., top performers for a given function such as planning and scheduling, supply chain management, or service management.

So instead of asking, “who are the best asset management shops out there,” ask “which companies manage their suppliers well,” or “which industry really understands the value of preventive maintenance,” and so on. Summarized below are four of the more common functions that are of interest to modern asset management operations, as well as possible target industries for benchmarking.

Service management

The maintenance department provides a service to the operations department. For the purposes of benchmarking, this is somewhat analogous to McDonald’s providing service to the general public. Asset managers could learn a great deal from the fast food industry with respect to attitude (smiles are free), manpower and capacity planning (demand is somewhat unpredictable), and order taking (fast food companies provide quick response time on “work orders”).

The courier industry is also a good target for benchmarking. The large courier companies have excellent dispatch and tracking systems for letters and parcels, which are analogous to the tracking of maintenance jobs via work orders or service orders. Furthermore, courier companies spend a great deal of time and effort in developing engineered work standards to improve the productivity and predictability of their processes. Some of the techniques used by the courier industry may be transferrable in developing standards for repetitive maintenance tasks.

Incentives are used very effectively by the courier companies to drive out higher levels of productivity. Service level agreements with customers are maintained at a very high level for response time and accuracy, in large part because incentives reward this behavior. Perhaps some form of incentives, not necessarily monetary, could be used in your maintenance department to improve performance.

Another industry that has an outstanding reputation for service excellence is the high-end computer hardware industry. Companies such as Xerox and IBM have built a reputation for delivering high-quality servicing of copiers and mainframe computers respectively. The excellent training program given to both the service personnel and their customers is one example of a best practice process worth investigating.

Supply chain management

There are many functions under the title of supply chain management – logistics, inventory control, supplier partnerships, and procurement are but a few. When it comes to tight control of inventory from one end of the supply chain to the other, pharmaceutical companies are clearly leaders. Drugs must be carefully tracked such that if a bad batch were detected in the field, the entire lot can be quickly recalled and the root cause of the problem found.

Although the inventory control requirements of most maintenance operations are less stringent, much can be learned from the pharmaceutical industry. This includes how to better manage suppliers, the value of lot control, and how to deal effectively with obsolescence.

Large retailers such as department stores (e.g., Wal-Mart), hardware stores (e.g., Home Depot), and grocery stores (e.g., Price Club), move a lot of material very efficiently. How to keep minimal stock in a world of uncertain demand is an art well worth learning from these expert companies. These companies have developed world-class techniques for managing their suppliers, keeping their inventory at an absolute minimum despite uncertain demand, expediting critical orders, ensuring constancy of supply, and using warehousing space efficiently.

Reliability management

What should you do with the endless stream of equipment history data that sits idly in some CMMS database and in the heads of senior asset management staff? What industries have found ways to mine that data to improve the reliability of their asset base?

The health care industry provides an excellent example of how focus on reliability management can pay big dividends. Health Maintenance Organizations (HMOs) have a mandate to maximize profit by maintaining the health of their clients. An HMO will bill its clients a premium. The premiums are then aggregated into the top line of a budget, and the HMO directs its energy into minimizing the sickness or “downtime” of its clients. This includes keeping its clientele away from the doctors and hospitals in order to decrease the cost of material, equipment, facilities, and labor (i.e., the number of doctors and support staff).

This is analogous to a production facility that has a capacity and budget to manufacture and sell product. Like the HMO, a plant strives to minimize “sickness” or downtime of its capital investment for maximum profit. This is accomplished by reduction of maintenance material or spare parts, maintenance equipment and facilities, and maintenance labor such as maintainers, stores personnel, and management.

Maintainers or technicians in a production environment are similar to the doctors working for an HMO in that in order to minimize costs, both must work efficiently and effectively to predict, prevent, and correct failures. Essentially, doctors manage the reliability of the human “machine,” whereas maintenance workers do the same with capital equipment. This is why HMOs are excellent benchmarking targets.

HMOs have expended much effort in understanding reliability management and are quite good at applying its principles throughout the life of its “assets” (i.e., clients). For example, doctors make use of encoded fields on “work orders” to track the problem as reported by a patient, the cause, and corrective action taken. The HMO then uses statistical analysis to drive out the preventive measures that reduce high cost failures, such as better training for doctors to prevent high failure rates in a given area of medicine.

As well, predictive models are built to understand who is at greatest risk, and how can a failure be avoided or at least the effects minimized. Knowledge-based diagnostic systems are used to assist the doctor in focusing on the root cause quickly and taking the least costly corrective action. For example, statistical analysis may show that unnecessary procedures have cost the organization dearly. The knowledge-based diagnostic system is based on rules that can provide better guidance to the doctor on when to use what procedure.

Preventive maintenance

Most maintenance operations have a reputation for being in continuous fire-fighting mode. There are companies out there, however, that have a superb reputation for emphasizing preventive maintenance.

For example, airlines, airport authorities, and utilities such as the nuclear power industry cannot afford to have a reactive-style maintenance operation. For the safety and convenience of the public, major emphasis is placed on preventive maintenance to avoid downtime. Although this may seem like an extremely costly approach for most maintenance shops, upon closer examination through benchmarking, it is surprising just how much is transferrable.

Similarly, the military has an outstanding preventive maintenance program for their equipment, as evidenced by the Gulf War. Much was learned by the U.S. military on the advantages of preventive maintenance over reactive maintenance and how to do it right.

The software industry also enjoys the benefits of solid preventive maintenance programs. Every software company’s worst nightmare is launching a new release to the general public and facing a massive clean-up of buggy software and a mired reputation. There are some lessons to be learned from this industry on the value of preventive maintenance.

How to narrow your scope

In summary, do not narrow your scope to benchmarking only other asset management functions in your industry. Instead, narrow your scope to those few processes that will yield the greatest improvement opportunity. Then, broaden the scope of your search for benchmarking targets to any company in the world that exhibits excellence for those processes, including but not limited to asset management.

Asset Manager

This article is part of our monthly Asset Manager column. Read more from David Berger.

About the Author

David Berger | P.Eng. (AB), MBA, president of The Lamus Group Inc.

David Berger, P.Eng. (AB), MBA, is president of The Lamus Group Inc., a consulting firm that provides advice and training to extract maximum performance, quality and value from your physical assets, processes, information systems and organizational design. Based in Toronto, Berger has held senior positions in industry, including for two large manufacturers, and senior roles in consulting. He has written more than 450 articles on a variety of topics such as asset management, operations management, information technology, e-commerce, organizational design, and strategy. Contact him at [email protected].

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