Physical Asset Management Basics

What are the top 10 worst-performing assets at our sites?

First, let’s establish a formal definition of assets and reliability, ensuring they are used consistently by all stakeholders across our sites.

Too often, we use those terms without knowing what we’re talking about. You may feel like you know what these terms mean on their own. However, do you truly comprehend what they mean when used in conjunction with one another?

Maintenance & reliability professionals must come together to benefit your business. How can we use these terms and form a strategy for success?

What Is an Asset?

Costly to acquire and operate.

Critical to the business's operation, if it is not functioning, the company suffers significantly.

A focus of maintenance activities, whether corrective, preventive, or predictive.

A key element in defining what an asset is to your business is identifying those pieces of equipment that are valuable and worth caring about, in other words. This investment adds value to your operation and provides a positive financial return. The initial acquisition cost of the item may be an obvious parameter, but we must also consider its life cycle cost or Total Cost of Ownership from cradle to grave.

As part of your overall asset management strategy, you need to define what an asset is to your business:

Are the costs to maintain (corrective, preventive, calibration, inspections, etc.) significant percentages of the budget? Are these costs fixed or variable, requiring management?

Is there a difference in how accounting, maintenance, and operations view what constitutes an asset?

Is the equipment public-facing? Is there a risk that, despite the equipment functioning correctly, the public may develop a perception of a problem with it?
Does the equipment pose a risk to the business, and how is this risk managed or mitigated? Is the risk less than the highest acceptable risk to the organization?
On a fundamental level, physical assets cost money to acquire, maintain, and dispose of. Your professional responsibility is to maximize the return on that investment throughout the asset's lifecycle. This is true whether you are a non-profit, governmental, or profit-centered organisation.

An asset could be a room in a building. An asset can also be a 6-foot crowbar that is issued from inventory, returned for servicing, and put back on the shelf, awaiting the next mission. Additionally, an asset may be mobile equipment that requires preventive maintenance, such as oil changes, which can be outsourced.

The bottom line of what an asset is can be defined as just that: assets are the physical things that either enhance or detract from the company's bottom line. By keeping them operational or by disposing of or replacing them at the right moment, the business benefits. These are considered your assets.

The Difference Between Assets and Reliability

The term reliability is a well-defined and understood term; it is:
“The probability that equipment, machinery, or systems will perform their required functions satisfactorily under specific conditions within a certain time period.”

No matter how you mathematically arrive at the reliability of a piece of equipment, there are two important considerations:
1. Is the percentage of reliability acceptable?
2. Is it doing anything to increase its cost-prohibitive?

If a pump is deemed to be 95% reliable, does it matter? What does that mean to the business? Does that 5% loss of service translate into millions of dollars in lost production or fines?

To do the math, you need valid, uncorrupted data from your CMMS for your formulas. If you want to come even close to establishing a reliability number with any degree of confidence, you will need consistent quality control and data collection that supports your calculations.

Given that there will always be variation in data captured in the field, how are you accounting for this? Nothing worse than coming up with a 95% reliability result for a pump when you only have two downtime events recorded, when you know there were more.

It’s all about the data, folks. And there are many formal processes, software tools, and Artificial Intelligence (AI) applications to help not only capture good data but also visualize and gain insights from raw data in the field.

It has been stated that incremental changes — fractions of a percentage point of reliability increases — are very expensive to achieve. This remains true. Making it a goal to increase equipment reliability sounds good on paper, but it will come at a cost. There is always a trade-off between Initial pricing, long-term operating costs, Design for Maintainability (DFM), and Design for Reliability (DFR). A more reliable asset may cost more to purchase, but it will incur much less in maintenance and downtime costs throughout its life.

DFM and DFR factors to consider:
1. Simplicity
2. Standardization and interchangeability of parts
3. Modularization
4. Identification and labelling of assets
5. Testability and diagnostic techniques, including AI
6. Preventive maintenance
7. Human factors
8. Environmental factors.

Is the equipment itself simpler? Perhaps not, but what it takes to operate it is, and that lends itself to sustained high reliability.

One caution when evaluating the reliability of a piece of equipment is attributing root causes to its failures or the supporting equipment surrounding it. Could the predominant root cause be the equipment itself, the process, or administrative factors?

What about the environment in which the equipment is located? How is a particularly harsh climate considered when analyzing reliability?

The overall reliability of an asset, as you can see, is a function of many things. Indeed, reliability is built into a device, but the environment in which it operates, how it is operated, and how it is maintained have a significant impact on the result.

Perhaps for non-critical equipment failure that doesn’t impact health, safety, the environment, or operations, running to fail may be the most cost-effective solution. You use it up and replace it with a new or refurbished one. This is a perfectly valid approach if the context is right and the business benefits are substantial.

Thinking Strategically

A strategy puts you in a position for success. Plans are formed to support the strategy. As a maintenance and reliability professional, you want to be in a position where you can put your finger on what specifically you are doing and to what, for defined reasons, objectives, and goals. A formal Strategic Asset Management Plan goes a long way in ensuring everyone is aware of what is happening and their respective roles.

Look up and take advantage of the ISO 55000 standard to develop your Strategic Asset Management Plan. While you may not need or want to achieve ISO registration, this standard provides a solid framework for your approach to asset management, ultimately leading to better reliability. Why reinvent the wheel when brilliant people have already developed excellent standards?

Wrap-Up

So, a simple two-word phrase has lots to think about, eh? It's always good to stop a moment and ponder the words and phrases we use without much thought. These words do have meaning, and with a better understanding of what that is to each industry professional, we can refocus our efforts in the right direction.