This continues to happen regularly throughout the world. Prior to 2003 maintenance was often seen as a secondary rollout of   large-scale system originally selected for financial or supply chain reasons, regardless of whether the solution was truly fit for the purposes of asset management or not. In even worse case scenarios, maintenance processes are built to suit data anagement or information technology requirements.

Outsourcing of the maintenance function is another area likely to feel the effects of these changes. This is often one of the more predictable proposals by managerial consultants the world over as a means of reducing direct costs, increasing the level of access to specialized skills and of avoiding the complication inherent in finding and maintaining a skilled workforce. This has resulted in dramatic shifts in employment throughout the globe. Technical and repetitive roles such as software development, call center management and some engineering functions such as drafting are frequently being transferred from first-world economies to countries where labor costs are much lower for people with similar competency levels.

In asset management this has resulted in more specific forms of outsourcing ranging from specialized services such as predictive maintenance, short-term / high volume works such as outage or shutdown execution up to outsourcing of the entire asset management function. This separation of asset owner and asset manager provides a particular set of difficulties in the area of physical asset management. While it is possible to outsource the responsibility for such tasks, there is currently no form of outsourcing the accountability for the consequences of such decisions. Recent events throughout the world have shown that this remains with the asset owners regardless of any contractual arrangements in place.

With the prospect of punitive individual measures such as twenty-five years in jail, in the case of the Legislation introduced in Canada, outsourcing contracts may need to be managed in a different manner than has traditionally been the case. Asset owners may find themselves needing to become more involved in decisions over what work is done and how such work is carried out.

It is this combination of “doing the right job” and “doing the job right” that is at the core of responsible asset management. As such, outsourcing contracts may need to include a higher degree of control, even involvement, in how these decisions take place. Also they must be able to prove that decisions have been taken in a manner that ensures every reasonable precaution is taken to minimize and mitigate risks in the areas of safety in particular. This goes far beyond ensuring that safety procedures are in place and involves a deeper understanding of what maintenance tasks and policies are in place, when these are done, and how these are done.

Today’s maintenance-intensive organizations are no longer able to ignore the corporate risk exposure generated in areas such as these. This global trend appears set to continue as it has over the past ten years and, as awareness increases of its implications, may force a re-thinking of asset management as well as a review of past decisions to understand fully their implications. While there is some justification in the use of quasi -experts in other areas of corporate activity, this is not the case in asset management; the stakes are simply too high. This is equally true for the use of third parties to make decisions that asset owners may find themselves having to defend.

Although this phenomenon will impact upon a very wide range of areas of corporate activity, fundamentally it means that there is a need to change the way that physical assets are viewed and managed within corporations. This applies particularly to the areas of who makes decisions, the knowledge and information used to make them and the process by which they are made.

Fuelling Economic Growth

Asset management, as with all functional sections of an organization, needs to contribute to the economic growth of the company. Over the past thirty years there has been a great increase in the level of understanding regarding exactly how asset management is able to contribute in this area.

More than at any other time in history we are dependent on machinery to perform many industrial tasks. Many of these tasks were formerly performed by people; however, as levels of automation in particular have increased, so too has our reliance on mechanization. While this has been responsible for dramatic increases in productivity levels, it has also placed considerable pressures on the direct costs of asset management over the past fifteen years in particular.

However, as we go into the 21st century there is even more upward pressure on the direct costs of maintenance management. Through increases in legislation, regulation, the complexity of the machines and capital costs of new assets, organizations are being challenged to rein in direct maintenance costs in a manner that is not only effective but also sustainable over the medium and longer term.

At the same time global competition is at a higher level than ever previously. Years of opening market barriers, waves of privatization and increasing technology have placed pressures on corporations that were unheard of a mere decade ago. In some companies, such as recently privatized transport and utilities companies, these pressures are being experienced for the first time during the last ten years.

These opposing pressures are what initially attract the attention of corporate boards to the areas of asset management. The drive for increased competitiveness and reduced costs draws attention to the cost of operational maintenance in particular. In many capital-intensive businesses this cost, although able to be reduced through the adoption of best practices, still takes up a large percentage of the operating budget. (OPEX)

Asset replacement and new asset acquisition are prominent features of the operating environment of capital- intensive industries. This is particularly the case in the mining industry and some of the recently privatized utilities and transport infrastructure services throughout the world. The resulting perception of a need to replace aging assets has led to multi-billion dollar capital expenditure plans. (CAPEX)

It is the combination of these two factors that have placed asset management as one of the dominating elements of corporate expenditure. In some industries it has come to represent the largest single area of costs; in others it remains a vitally important influence on future effectiveness of the organization.

This array of pressures poses a unique economic challenge for organizations as we enter the 21st century. Primarily this challenge is to release as much economic value from the investment in asset management as possible. This challenge manifests itself in three areas in particular-

-          Minimization of the life cycle costs of asset ownership

-          Minimization of direct costs associated with asset management

-          Minimization of the costs associated with new asset purchases and asset renewal programs (overhauls and renovations)

These issues, and the manner that organizations respond to them, are determining factors in the ability of organizations to achieve economic growth in the management of their physical asset base. This is a difficult task that has been made even more difficult by the fact that much of what has previously been recognized as common sense in these areas has been proven to be either false or, at best, only partially correct.