Recognize the true value of asset management

Traditionally, maintenance personnel focus on equipment uptime — or asset availability. Operations or manufacturing personnel focus on how much product these assets can produce — or asset utilization. Although forward-thinking plants are seeking ways to tear down the barriers and minimize the conflicts between maintenance and operations, they still tend to be opposing forces.

By Kevin F. Fitzgerald, P.E., Invensys Process Systems September 1, 2005

Traditionally, maintenance personnel focus on equipment uptime — or asset availability. Operations or manufacturing personnel focus on how much product these assets can produce — or asset utilization. Although forward-thinking plants are seeking ways to tear down the barriers and minimize the conflicts between maintenance and operations, they still tend to be opposing forces.

Process manufacturing operations are extremely complex systems. Recently the tendency has been to oversimplify critical functions within these systems to further one marketing position or another. Asset management is one example of this over simplification. To business managers responsible for process manufacturing operations, asset management implies the effective utilization of all assets within their operations to meet business objectives.

Most asset management software applications, though, are focused only on the maintenance and/or availability of plant equipment, particularly instrument assets. Although instrument maintenance is clearly a key element of a plant asset management strategy, maintenance improvements by themselves do not maximize the performance of the overall manufacturing asset base. Trying to optimize plant operations with this limited asset management focus can actually result in a degradation of performance. Optimizing plant assets to meet business objectives requires a holistic approach to asset management that goes well beyond the traditional focus of asset management software applications.

The measurement of overall asset value should be determined according to the plant’s business strategy. If a plant operates within a production-focused mode, the asset-value metric should represent a production focus. Conversely, if the plant strategy is cost-focused, the asset value should be cost-based.

Every process plant controls numerous assets. The overall asset value is a function of the value of each asset. This function is typically not simple and requires trade-offs across the different asset types and the plant strategy. However, plant-level strategic performance measures — or Dynamic Performance Measures, which are derived directly from the corporate manufacturing strategy — do reflect asset value effectively.

Asset availability vs. asset utilization

Strategies to optimize the value of asset management involve balancing asset availability and asset utilization — the two fundamental economic value components derived from the asset base in manufacturing operations.

Recently, considerable advancements have been made in the state-of-the-art of both asset availability and asset utilization. Both are becoming much more sophisticated. Utilization and availability however, are largely still viewed as independent, when in reality they are inter-dependent. Asset utilization and asset availability tend to strongly impact each other. In fact, the relationship between utilization and availability is multiplicative, meaning that the impact each has on the other is very significant to the overall performance of the plant’s operation.

Essentially, asset utilization and asset availability must be optimized in relation to each other to optimize the plant’s economic performance. For example, maximizing utilization of an equipment group could negatively impact the overall availability and hence, compromise the value derived from the equipment.

Conversely, maximizing asset availability can often be accomplished only at the expense of utilization. The ideal strategy balances utilization and availability to optimally meet plant business objectives. From this perspective it should be obvious why an asset management software application focused only on the maintenance and availability of assets could produce a much lower asset value than is possible through a balanced approach.

Performance-based asset management

The practical solution to optimizing the value delivered by an industrial plant asset base over any period of time is asset performance management. The key to solving any optimization problem is having the ability to systematically measure the variables associated with both the constraint and objective functions involved in the analysis. This can be accomplished effectively in an industrial plant only by extending the scope of the plant’s financial system to provide higher resolution or granularity of financial information.

To achieve this, the monthly data commonly provided by an ERP system must be made available according to the operational time constant — in other words — approaching real time. In addition, the financial data must be made available down to the level of the improvement initiative. In most plants, this would be the process unit level. Dynamic Performance Measures meet all these requirements. They provide real time, prioritized, financial and non-financial measures of the operation’s performance down to the process unit level or below.

Once the DPMs are installed and stored historically, these real-time financial measures are available via dashboards and/or scorecards, to determine if any initiative, or set of initiatives, is driving the prioritized value from the asset base in the right direction. The DPMs immediately calculate the economic value being produced by any part of the operation or for the operation as a whole. Any activity in the plant that drives value improvement or that destroys value can be immediately detected and recorded. With this information available, the relationship among resource productivity (economic value generated by an asset base), asset availability and asset utilization can be modeled over time.

Real-time dashboards and associated DPMs shift the focus of operations and maintenance personnel from utilization and availability respectively, to overall economic value. They tend to support each other, rather than contending because their metrics are not aligned. The manufacturing strategy’s economic performance becomes the principal driving force, rather than misleading individual factors of component asset availability or utilization.

Performance-based asset management still involves the effective management of asset availability and asset utilization. But by measuring the impact on the total asset productivity as measured by the DPMs, manufacturers can balance and optimize across availability and utilization. The DPM approach essentially allows a multiple-variable optimization view with an assigned priority based on the manufacturing strategy.

From an organizational perspective, the DPM approach provides each person in every part of the organization with a holistic view of economic value. Maintenance personnel become utilization sensitive and operations personnel become availability sensitive. As such, all groups within the operation become sensitive to economic performance of the plant as a whole. It is this consideration of economic performance that is the key to performance-based asset management — or Asset Performance Management.

Author Information
Kevin F. Fitzgerald, PE is a Senior Program Director in the New Ventures group of Invensys Process Systems. He is responsible for developing asset performance services that help users identify and balance asset availability and utilization. He also serves on MIMOSA’s executive board and is heavily involved in the Open O&M initiative. Fitzgerald has held technical, engineering development and service delivery positions at Invensys; and has considerable experience in the chemical, oil and gas as well as pharmaceutical and food industry segments. He can be reached at (508) 549-2779 or .