Invest in the people and the process
As the manufacturing process gets greater scrutiny in the search of enterprise cost savings, asset management is getting a great deal of attention – and not just from the corner office. The plant floor is engaged in both the search for the problems and solutions around asset management. Plant Engineering spoke with John Murphy, director of solution marketing in the EAM space for INFOR and...
As the manufacturing process gets greater scrutiny in the search of enterprise cost savings, asset management is getting a great deal of attention %%MDASSML%% and not just from the corner office. The plant floor is engaged in both the search for the problems and solutions around asset management. Plant Engineering spoke with John Murphy, director of solution marketing in the EAM space for INFOR and John Weber, president and founder of Software Toolbox, for some plant management insights on this critical issue:
PE: We read and hear a lot about asset management, but I’m not sure there’s a good definition that everyone can start with. How do you define asset management in manufacturing?
Murphy : This is a good question because it’s really evolved over the years %%MDASSML%% from a necessary evil in years past to a competitive advantage today, and a very viable path to sustained or improved business performance. At its core, asset management is a comprehensive practice designed to ensure a manufacturer’s property, plant and equipment are fully supporting its operational, financial and environmental objectives.
Some classic asset management practices include:
Asset registry and lifecycle costing
Asset tracking by location, by custodian
Management of work %%MDASSML%% both unscheduled and scheduled %%MDASSML%% as well as project-based (e.g. shutdown/turnaround)
Resource coordination, including people, tools, parts, etc, in support of maintenance activities
Preventive maintenance based on schedule, usage, condition
Predictive maintenance %%MDASSML%% real-time monitoring of equipment performance; detection and notification of potential problems
Capital project planning
Capital expenditure planning
Asset management is about to be transformed. In the wake of the summer of $150-plus per barrel of oil (which shuttered many factories), a green-driven supply chain and consumer movement, and the inevitable regulatory shifts highlighted most recently at Copenhagen, asset management finds itself on the tip of the sustainability arrow.
With so much energy consumed by commercial and industrial sectors, it’s no surprise that curbing a manufacturer’s appetite for energy leads directly to asset management. This is further transforming asset management from a tactical initiative to a strategic one. It’s also leading to the next generation of asset management %%MDASSML%% called asset sustainability %%MDASSML%% for both practices and technologies, which ingrains energy consumption, costs and emissions of assets into every aspect of asset management.
Manufacturers that transform their asset management strategy in this manner will undoubtedly hold a competitive advantage in performance and profitability over the laggards. Likewise, many asset management technology vendors will be challenged to make this transition.
Weber : The definition of asset management depends on your perspective. First of all, it’s the process a business uses to help ensure return on capital objectives of the business is met. Companies invest in physical assets but also personnel (human assets), and intellectual property assets. Regardless of the type of assets employed in a business, acquiring the assets uses financial capital and the investors in the firm expect a return on capital invested. So it is the process of ensuring that the assets of a company that are used in the fulfillment of the firm’s manufacturing business objectives are used, maintained, improved upon and disposed of at their end of life in ways that support maximizing return on capital.
Going deeper from there, you start to hear about techniques and tactics that are used in the process of asset management %%MDASSML%% whether that is OEE, maintenance management or any of the other tactics that fall into the acronym soup of the industry.
PE: What are the assets to asset management, both financial and operational?
Murphy : Asset management’s primary focus is on the capital infrastructure (production equipment, facilities, fleet, linear assets such as pipeline) a business uses to produce its revenue-generating products and services. Asset management also encompasses the resources (people, tools, parts, contractors, etc) that are required and consumed to ensure optimal performance of the capital.
PE: This is both a strategic effort and a technological effort. How should manufacturers balance the two?
Weber : The technology is a tool and a tactic that can be used to achieve the strategic results of the business. Asset management is not about the technology used to implement it %%MDASSML%% it’s about getting business results, period. All considerations of technology must be done in that light. The technology is there to help collect, manage, organize and present inputs in the form of data that support rapid, informed decisions regarding asset utilization, maintenance and even choices of acquisition or disposal of assets. The key is to remember it’s about business results. You can’t let it turn into a “technofest” where you end up with cool tools looking for a problem to solve or being used to try and solve a problem that isn’t even well defined or in a system that you don’t clearly understand the dynamics of.
Murphy : Strategy should absolutely lead the way, with a comprehensive assessment of performance and objectives, as well as an understanding of competitive, supplier and customer dynamics both now and in the future. With an asset management strategy in place, including a defined set of operational and maintenance processes to support the business strategy, manufacturers can then pursue enabling technology.
Of course it’s probable, say 100% likely, that change will take place across the board (technology and business), so it will be important to revisit and stay on top of both (at least annually if not quarterly). As well, it will be important to select a solution that is founded on architecture and technologies that enable you to keep pace with change cost-effectively and on your timeframe %%MDASSML%% not that of your solution vendor’s.
PE: If a plant manager wants to implement asset management, where does he start?
Murphy : When embarking on implementing asset management technology to support your strategy, you’ll want to take an incremental/phased approach. If possible, align phases with “low hanging fruit” (e.g. preventive maintenance) to achieve internal success, visibility and momentum, and with critical “pain points” in mind such as the unplanned downtime of a metal stamping unit on a 24/7 production line.
Also, if budgets are constrained (and where aren’t they?), a phased approach can self-fund future phases. Here, a great place to start is with energy reduction of assets, as studies indicate a 20% reduction in energy %%MDASSML%% a major operating expense %%MDASSML%% can be achieved through asset sustainability practices. That kind of impact on business performance and profitability will surely get executive attention and pave the way for broader asset management initiatives.
Weber : It may sound simplistic, but it starts first with knowing what one’s assets are. I’m not saying a detailed line item inventory, but rather knowing the types and mix of those types of assets used in the manufacturing process.
Once you know that, the mix of assets and each one’s ability to impact return on capital should drive where the business first invests its time. If you don’t know which assets affect the plant’s ability to generate a return on capital most, then you need to start with understanding your process. I know that may sound scary, but there is a tendency to rush out and get a lot of data, and then try to use it to make decisions, without understanding the dynamics of one’s manufacturing operation. Data is necessary %%MDASSML%% but not sufficient alone %%MDASSML%% for making good decisions once you do put in an asset management decision.
Only once you understand these two things, can you then begin to implement processes of asset management and technological systems to support the processes.
PE: What are the barriers to asset management within a manufacturing facility?
Murphy : Constrained budgets and a lack of executive attention. Also, be sure to align with corporate objectives. If customer satisfaction is top priority, focus on addressing issues such as quality or unscheduled downtime that will lead to better customer experience.
No one likes to change! The project champion needs to make an effort to ensure that the maintenance staff believes in the change, receives the support and encouragement needed to change and is not threatened by the change.
For example, EAM will help improve staff productivity and therefore allow maintenance organizations to get more from their existing staff. As a member of the maintenance team, does that mean jobs are going to be eliminated? That’s going to be the first concern. Emphasize the benefits of the system, both for the company and for staff members. In this example, asset management is not being implemented to replace staff. It’s being implemented so that the company can reduce OT hours (and costs), increase equipment reliability with the same staff, eliminate contractors or maybe even support a better work/life balance for employees. This needs to be explained and made clear to employees, and it needs to be delivered in a credible manner, by credible sources.
Weber : I tend to view barriers as things you can’t overcome, go around or adapt to. The things I’ll mention below start as obstacles. You can work through obstacles, find ways around them and make them even go away with time and dedication. If you ignore the obstacles, they can become barriers.
As I mentioned above, a big issue is understanding the systemic relationships between your assets and the output of the plant that affects return on capital. The other is not understanding that asset management is a process and something that has to be woven into your culture from the top down, in terms that enable people to see how their actions in their role on the team affects the company using its assets wisely.
Asset management can’t just be something that the manager says “go do.” They need to be willing to be invested in the process, both in their time and input, and with their budget, and realize that it’s something they will have to be invested in to some level for the long haul.
Asset management can’t be viewed as the “program of the quarter,” if you want to achieve strong results. In a large company, constantly shifting corporate focus or mandates of the quarter can become barriers because they hinder the plant manager’s ability to do things that require a long term outlook.
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Annual Salary Survey
In a year when manufacturing continued to lead the economic rebound, it makes sense that plant manager bonuses rebounded. Plant Engineering’s annual Salary Survey shows both wages and bonuses rose in 2012 after a retreat the year before.
Average salary across all job titles for plant floor management rose 3.5% to $95,446, and bonus compensation jumped to $15,162, a 4.2% increase from the 2010 level and double the 2011 total, which showed a sharp drop in bonus.