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Asset performance management Driving maximum value from assets

Dec 1, 2015

It is becoming more important than ever for all industrial operations to drive maximum value from all assets, due to increasing financial and competitive pressures. With the technology and know-how available today, organisations can drive profitability from all industrial assets by creating a cooperative and collaborative environment, underpinned by the appropriate measures of performance and enabled by real-time technology.

With the rapid rise in industrialisation came a corresponding rise in the complexity of industrial operations. Prior to the industrial revolution, most people involved in the production of goods were generalists. They had skills and abilities that crossed multiple disciplines. But with the rise of highly complex industrial operations, leaders of these companies quickly learned that the best way to manage the complexity was to train specialists in key areas of the operation. No longer was the operator of a piece of equipment responsible for the maintenance of the equipment. Rather, separate maintenance and operations departments were established. The same was true for accounting, engineering, production planning and scheduling, and a number of other disciplines.

Even within the field of engineering, multiple specialists areas were established, such as mechanical engineers, chemical engineers, electronic engineers and industrial engineers. Although creating these areas of specialty was initially critically important to getting these complex operations working effectively, it also led to today’s often disjointed industrial organisations.

With time, each of these specialised disciplines developed their own vernacular and working practices, and subsequently became islands of specialty within the overall industrial operation. And it became more and more difficult for the specialists in one island to understand and communicate with those in other islands. Perhaps the largest impact of this “island of organisation” phenomenon has been right at the operational levels in a plant. In most industrial plants, the maintenance teams and the operations teams do not cooperate very well. In many plants, they actually seem to conflict with one another as they each try to carry out their responsibilities. Since these two teams work on the same asset base in the operation, this conflict may result in suboptimal operations and reduced profitability. Many industrial operations are feeling financial and competitive pressure as never before, and it is becoming more important than ever to drive maximum value from all assets.

Root of the conflict

The conflict between maintenance and operations teams in industrial operations is not very surprising, once it becomes apparent how the performance of each team is measured.

In industrial operations in which operations and maintenance performance are measured, the most common measure for maintenance is asset availability, while the most common measure for operations is asset utilisation. A cursory analysis of these two measures clearly shows that they tend to be inverse functions. That is, when the assets are running in a reasonable manner, increasing asset availability typically requires the reduction of asset utilisation and vice versa. This presents a real conundrum to industrial plants as illustrated in Figure 1. The problem this creates is that the maintenance department and operations department have to be in conflict with each other almost by definition. And the better each team is, the greater the level of conflict.

It is difficult to identify an industrial factory or plant today in which the operations and maintenance teams really work cooperatively. This conundrum has become a major barrier to the performance improvement of many industrial operations.

Asset performance measures

Before moving to approaches for resolving the conflict, it may be helpful to evaluate asset availability and asset utilisation with respect to their appropriateness for industrial assets. One issue with these two terms is that they are not very well defined. Also, asset availability typically is measured as the percentage of time an asset is available to the operation. This is an extremely limited view. An asset may be available, but in such poor repair that it can only output a small percentage of its designed capability. Although the asset may be available it is certainly not maintained to be in the condition that it should be.

Perhaps a better measure of performance is the current maintained state of the asset. That is:
Maintained State = Actual Full Asset Output / Designed Maximum Asset Output

And, perhaps the best measure of operations is a measure called effective utilisation defined as follows:
Effective Utilisation = Asset Output / (Maintained State * Designed Maximum Output)

Using these two measures would at least provide well defined metrics that relate to operations and maintenance while helping to reveal the true value of an effective plant maintenance program. The problem with these measures is they still do not solve the conflict since these new measures are still inverse functions (Figure 2).

It is sometimes helpful to draw analogies from other performance driven operations to identify a solution. In car racing, which is an extremely well defined, performance-based sport, a similar relationship exists between the operations team (drivers) and maintenance team (pit crew).

In discussing this with one of the most successful automobile racing organisations in the world, Hendrick Motorsports, the key to success was revealed. Rather than having the primary measures of maintained state or effective utilisation, the primary measure is winning the race. The other two are relegated to secondary measures.

By defining a primary measure that both the pit crew and the drivers can effectively strive to meet they have managed to create an incredibly cooperative relationship across their race teams. And the results are phenomenal.

Clearly, in industrial operations “winning the race” is not the primary objective nor is it the primary measure of success. But industrial operations can learn from performance-based sports teams by trying to identify what the common objective is across industrial maintenance and operations teams. If such a common objective and resulting performance measure can be identified, the results in terms of both cooperation and performance improvement may be astounding.

The difficulty is in defining the equivalent of the “win” in industrial operations. In other words, what is the overriding objective for both the operations and maintenance that should take precedence over the individual operating and maintenance KPIs? The effective answer to this question may be much simpler than it initially appears to be. The reason for the operations and maintenance teams in industrial organisations is directly tied to the overall objective for the organisation to begin with— to make money. Since real world constraints limit the ability to continually operate any asset at 100% maintained state and 100% effective utilisation, there must be some ideal position at which the performance of the asset is optimal from a financial perspective (Figure 3).

If this point can be determined, it may be the equivalent of the “win” for that asset. The recent invention by Invensys of sensor-based, real-time accounting and operational measures provides the basis for effectively measuring the financial asset performance vector. By building a software model of the ideal operation of the asset, the current operational output of the asset at any point in time can be divided by the modeled ideal operational output, to provide an operational asset performance measure that can be trended in any historian.

This can in turn be compared with the financial asset performance trend to provide the critical information required for profit-based asset performance management. Decisions on how long to operate assets between preventive maintenance activities, whether to extend asset operation to meet critical production schedules and when to consider asset upgrade or replacement can be made from both an operational and financial perspective.

The asset performance information can be provided to both operational and maintenance teams in simple contextualized dashboards or scorecards to provide guidance and feedback to those employees on how their activities favourably or adversely impact the operation. Since both teams are primarily measured to the same objective, the degree of cooperation and collaboration naturally increases. This new level of collaboration can produce impressive results in the form of increased profitability.

Although this real-time perspective is a step forward on traditional asset-centric performance measures in industrial operations, it is limited because it only considers the instantaneous asset performance at any point in time, but does not take into consideration the lifecycle performance degradation as assets are utilised and either soil or wear down. This can be effectively accomplished by evaluating the asset performance from both an operational and financial perspective over time (Figure 4).

Asset performance improvement

Once the appropriate performance measures are installed, and the operations, maintenance, engineering, supervision and management teams are empowered with the information required to make better, collaborative and timelier decisions, the performance and profitability of the operation will start to significantly improve. But this should be viewed only as a first step in the process of optimising the profitability from the assets. Figure 5 shows a simplified view of the traditional improvement progression from operations and maintenance teams. The right side of the model shows the operational progression from basic control, to advanced control, all the way to process optimisation. The success of these programs was typically measured by operational KPIs.

Likewise, the left side of the model shows the traditional asset management progression from reactive, through preventive and all the way to predictive maintenance.
The key step forward is when these two perspectives join together to provide a combined performance view and when the real-time financial and operational metrics provide the convergence mechanism. With the measures in place, industrial organisations can undertake a continuous profit improvement approach by identifying specific improvement projects and executing them. The key advantage provided by the asset performance system is that each improvement will be clearly measureable from both operational and financial perspective. This enables industrial operations to effectively understand what truly drives value and what doesn’t. With time, organisations learn to focus on those activities and actions that drive the most value. The result is unprecedented improvement in the profitability of the industrial operations.

Conclusion

The technology and know-how is available today to help industrial operations better drive profitability from all industrial assets. Success in this area requires that companies break from traditional perspectives and create a cooperative and collaborative environment, underpinned by the appropriate measures of performance and enabled by real-time technology.

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