Sustaining the Enterprise through

Asset Management,
Reliability and
Operational Excellence

(Is It Asset Management, or

Maintenance Management Re-branded?)

November 2015
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 Contents
 Asset Management – Some Cautions
 The Reliability Program for Asset Management
 Reliability and Safety – A Bonus!
 Managing Cultural Change, Leadership, and
Aligning the Organization
 Implementation

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 Asset Management – Some Cautions
 ISO 55000 provides a management framework for
an asset management system
 It does not provide guidance for managing assets
for optimal value over their life. In fact, it specifically
excludes guidance and specs
 An asset is ANYTHING that adds value to the
business, not just equipment (Don’t forget - People,
processes, procedures, patents, etc. are all assets!)
 But, most people reading ISO 55000 are
maintenance managers, and focus on physical
asset management, i.e., maintenance
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 Asset Management – Some Cautions
 So, maintenance managers are developing the
(physical) asset management strategy
 Many use “asset management” and “maintenance
& reliability” almost interchangeably
 This is a mistake. It is not sufficient. Most
asset management strategies are simply
maintenance management strategies “re-branded”
 So, what’s missing, or poorly addressed?
(my comments focus on manufacturing, so analogies must be developed for
other businesses, e.g., railroads, hospitals, etc.)
Incidentally,
 Asset management strategy must be led from the top
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 How do we sustain, and grow,
the enterprise?
(Prices trend down over time. We create a future by getting our
practices right, driving unit costs down, and supporting gross profit)

Market Price

“Big” Innovation-
Your Future

Profit = (Price – Cost) x Volume

“Little” Innovation
Drives costs down C
A B
Unit Cost =
Cost
Capacity
Market Share
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 Asset Management – Some Cautions
 Does your asset management plan include:
 Business requirements of the assets over the coming
5-10 years?
 Production’s role?
 Design/capital projects’ role?
 Procurement/Stores’ role?
 Maintenance’s role?
 Disposal? Or other roles, based on the organization?
 Clearly define each role in managing the assets,
adding value, minimizing losses & risks, and
sustaining the enterprise!
 All must be aligned to the business strategy/goals
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 Asset Management – Some Cautions
 Asset requirements over the coming 5-10 years?
 Is the business is closing?

 Is the business being sold?

 Is the business stable, with little or slow growth?
 Is the business growing rapidly?

Each business scenario requires a different asset management strategy

Each requires a different staffing and personnel development strategy
Each requires a different capital allocation strategy
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 Asset Management – Some Cautions
 What is Production’s role in each scenario?
 In data from 100’s of plants, production controls ~70-90%
of all production losses (potential value); maintenance
controls very little value!
 So, production plays a key leadership role day-to-day,
and strategically!
 Production determines its role in each scenario for
supporting business objectives and creating value!
 For example, if the business is growing rapidly,
production takes the lead in eliminating production losses,
(think OEE) before requesting capital investment for growth
 Maintenance is a support function in helping identify and
minimize the losses and capital requirements
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 Asset Management – Some Cautions
 What is Design/Capital Projects’ role?
 Before new capital investment, production must
assure excellence in the use of current assets, e.g.,
taking OEE from 60% to 80%
 Some capital may be required to support maximizing
current performance, but no major capital is required
 Capital projects works with production & maintenance
to develop policies & procedures for applying lowest
life cycle cost principles, vs. lowest installed cost
 Including an asset registry and maintenance strategy
in all capital projects for sustaining the assets!
 Data from large companies indicate that 3 months of
production are lost during startup; maintenance costs
are 25-50% higher in the first two years after startup
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 Asset Management – Some Cautions
 What is Procurement/Stores’ role?
 Procurement must apply the concept of Total Cost of
Ownership – only ~25% is price!
 Much more focus must be given to the ownership
costs, e.g., ease of operation & maintenance, energy
consumption, ergonomic issues, quality/ease of supply
 Stores must balance the cost of working capital
against risk of loss – risk of production losses and risk
of maintenance inefficiencies due to lack of spares
 Stores must make it easy to do maintenance, while
controlling working capital and overhead costs

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 Asset Management – Some Cautions
 What is Maintenance’s role? Most of you are all
over this, e.g.:
 Asset registry and bill of material

 Equipment criticality ranking and equipment strategy,

including risk management where appropriate
 Work management, planning, then scheduling

 Condition monitoring

 PM, including addressing specific failure modes

 Operator care tasks

 Skilled trades competencies

 Precision maintenance; quality build plans; etc.

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 Asset Management – Some Cautions
 What about disposal?
 Residual value of the assets, if any?
 Disassembly costs? Abandon in place?

 Decontamination costs?

 Hazardous waste disposal costs?

 Transportation costs?

 Other costs?

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 Asset Management – Some Cautions
 If your asset management strategy is
maintenance led (most are):
 You’ll be “pushing on a rope”
 You’ll only do more efficiently work that you
shouldn’t be doing at all
 Your ability to “add value” will be limited
 Maintenance is an enabler for adding
value, much like Accounting, HR, etc. –
and they are absolutely essential!

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 Asset Management – Some Cautions
 Finally, and most importantly, a strong asset
management program must address:
 Effective Leadership/Sponsorship (vs. permission)
 Alignment of the Entire Organization to the Strategy
(See ISO 55000, 2.4.3)
 Teamwork among Functional Groups to the Strategy
 Systems Level Thinking (“Line of Sight” in ISO 55000)
 Changing the culture - People do want to change:
 IF given compelling reasons,
 IF there’s something in it for them for the changes,
 IF they participate in creating the changes!
“Culture eats strategy for breakfast” Peter Drucker
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 Asset Management – Some Cautions
 Strong leaders will make sure all this happens!
 According to Terry O’Hanlon, a member of the
ISO 55000 committee:
“Financial asset management and ISO 55000 asset
management are the same!” I agree!
 Asset management is about managing ALL the
assets – people, processes, and equipment -
minimize risk, while assuring financial success!
 It’s about value creation! (not just managing
equipment) so that you sustain and grow the
enterprise!
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 Asset Management – Some Cautions
Reliability Web’s Asset Management Model:

The focus!
Is this enough?

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 The Reliability Program –
Sustaining The Enterprise
by
Managing the Assets

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 The Reliability Program Doing better Mtce will not
contribute much to Reliability

(note where most defects occur)

Install/
Design Buy Store Operate Maintain
Startup
(Life Cycle Cost) (With Discipline) (With Care)
(Cost of Ownership) (“Like a Store”) (With Precision)
Defects Defects Defects Defects Defects Defects

Root Causes
Rate Losses & Downtime
Unneeded Work - $$
Source: In Cooperation with
Injuries (& Env. Events)
Andrew Fraser,
Reliable Manufacturing Assoc. Asset Utilization Minimum unit cost
& of Production
Necessary Work
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 DESIGN -
For Reliability, Operability,
Availability, and Maintainability

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 Minimum Adequate Design (MAD)
Some companies use minimum adequate
design.
 Focus tends to be on budgets and
schedules, often ignoring longer-term effects
 MAD will vary widely with your perspective

According to SMRP, 86% of companies do

NOT use “life cycle cost” for capital projects

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 World Class Design
Requires specific processes:
 Disciplined method for lowest life cycle cost
 AU/OEE targets & reliability in the design
 Maintainability: access, lifting, monitoring, etc.
 Post installation support and review

 Intense application of Operations and

Maintenance knowledge base
 Use of FMEA/RCM* principles in the design
*Failure Modes and Effects Analysis
Reliability Centered Maintenance
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 Phases of Life-Cycle Cost Commitment

100 95%1 97%1

85%1 85%2

Construction/Startup
75 66%1 65%2

50%2

Preliminary
50
30%2

Design
Planning

25

0
Life Cycle Phases
Sources: 1) Ben Blanchard, Design and Manage to
Life Cycle Cost, MA Press, Forest Grove, OR, 1978;
2) John Schultz, Allied Reliability, Charleston, SC
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 Life Cycle Cost and Cash Flow Considerations

Life Cycle
Cost Policy
Cash ROI
Flow
($)
Lowest installed
Cost Policy

Time

Minimum Life Cycle Costs =>

Maximum Long Term Profits

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 INSTALL and STARTUP–
with precision for long life

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 Startup and Commissioning-
Critical to Reliability
 You’re ~10 times more likely to
introduce defects during startup
than normal operation
 92% of rotating machinery has
defects at startup that result in
premature failure

Source: 1) Reliability Magazine, February 2001, and 2) Machinery Reliability

Conference, Phoenix, April, 2001

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 OPERATE RELIABLY –
with care and precision,
and within process limits

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 Reliability Based Operations

Reliability cannot be driven by the

maintenance organization. It must be
driven by the operating units, …and
led from the top. Charles Bailey, VP of Operations
Eastman Chemicals (Retired)

To expect maintenance to “own” reliability is like

expecting the mechanic at the garage to “own”
the reliability of our cars. Ron Moore

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 Of all production losses from ideal (AU/OEE),
~2/3rds are NOT equipment related;
~1/3rd are, but most of these are Ops driven;
Only ~ 10% of losses are Mtce driven
JIPM: 70% of eqpt. failures are preventable by operators

Changeovers, rate/quality losses,

raw material, market demand, Equipment Related
production planning, etc. Losses-Maintenance
Equipment Related
Losses- Operation
Non Equipment
Related Losses

Source: Author experience;

Similar findings reported by BASF-UK,
Eastman Chemicals, Whirlpool, and Borg-Warner-US
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 The Five Manufacturing Domains
World Class Manufacturing
Performance Levels
Strategic
Domain
Proactive Organizational
Domain Learning-
Eliminate Industry
Planned
Defects; Leadership
Domain
Lowest Cost
Reactive Fix it beforeCompetitive
Domain it breaks; Advantage
Least Stable
Fix it after No Surprises,
Regressive it breaks; Competitive Parity
Domain Most
Expensive
Don’t fix it
Overtime
Meet Budget, Source: W. Ledet
Heroes
Staged decay The Manufacturing Game;
Kingwood, TX
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 Correlation of Operator Care/PM and
Maintenance Costs (Avg data at each level for 200 plants surveyed)
16
R = 0.85
Original Equipment Cost

14
R2 = 0.73
12
Mtce Costs as a % of

10
8
6
4
2
0
0 1 2 3 4 5

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 MAINTAIN –
For Reliability

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 Excess Defects Lead to Reactive Behaviors-
Typical Maintenance Practices
60
50
40
30 Time-based
20 Condition-based
Root Cause-based
10
0
Reactive Preventive Predictive Proactive

Source: Author’s surveys and The Reliability-based Maintenance Strategy: A Vision for Improving Industrial
Productivity, R. Moore, F. Pardue, A. Pride, J. Wilson, September 1993, CSI Industry Report.

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 Eliminate and/or Manage Defects-
Benchmark Maintenance Practices
60
Planned and/or Scheduled
50 Condition-based

40
30
Time-based Root Cause-based
20
10
0
Reactive Preventive Predictive Proactive

Source: Author’s surveys and The Reliability-based Maintenance Strategy: A Vision for Improving Industrial
Productivity, R. Moore, F. Pardue, A. Pride, J. Wilson, September 1993, CSI Industry Report.

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 Reliability and Safety -
Excellence in
Asset Management
and
Sustainability
are Critical for a Safe Operation

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 Safety is a Top Priority
 Most all organizations say safety is a
top priority
 They have policies, standards,
processes, systems, etc. to support this
 They are committed to enforcing these
policies

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 Safety Policy Statement
 All injuries are preventable

 No task is so urgent that it cannot be done safely

 Management must provide a safe work place

 We are each responsible for preventing injuries

 Everyone is empowered to stop unsafe behavior

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 Reliability and Safety Relationship
 Ifexecutives were truly committed to
safety…
 They would be committed to reliability,
and would have similar policies,
standards, processes, and systems
 They typically are not, and do not
 Consider a typical sampling of the data

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 Injury Rate v. AU/OEE
over Time - Company A

OEE/AU- % of Base
R = 0.80 120
135 R2 = 0.64
115
115
110
95
105
75
100
55
35 95
Injury Rate
15 90 OEE/AU
13
17
21
25
28
33
37
41
45
48
53
1
5
9

Month
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 Correlation of Corrective & Reactive Work
Orders with Injury Rate – Plant No. 1
400
Total Injuries per Year

350 R = 0.827
R2 = 0.684
300

250

200

150

100
6000 8000 10000 12000 14000

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 Correlation of PM & PdM Work Orders
with Injury Rate – Plant No. 1
400
Total Injuries per Year

350 R = 0.955
R2 = 0.911
300

250

200

150

100
4000 6000 8000 10000 12000 14000

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 The More Disciplined Your Maintenance,
the Fewer Injuries you have
(normalized to a base number)

5
R = 0.95
2
4 R = 0.90

2
Injury Rate

0
60 70 80 90 100

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 And, is More Cost Effective -
Reliability Index v. Production Unit Costs
(As reliability increases, costs decrease)
Production Costs $/Unit

120 R = 0.632
R2 = 0.40
110
100
90
80
70
60
50
30 40 50 60 70 80 90

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 From the data we should conclude:

Safety is everyone’s responsibility &

Reliability is everyone’s responsibility

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 Defects & Process Errors Reduce
Reliability and Increase Hazards

Major Major
Incident Accident

Loss of
10 losses
Containment

6,500 repair work orders Process Safety Breach

20,000 defects Numerous Minor Process Errors

Operational Discipline is essential to eliminate defects and process errors

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 Establish a Policy Linking
Reliability and Safety
 All injuries are preventable…
All injuries, and failures, are preventable
 No task is so urgent that it cannot be done safely…
No task is so urgent that it cannot be done safely, and reliably
 Management must provide a safe workplace…
Management must provide a safe, & reliable, workplace
 We are each responsible for preventing injuries…
We are each responsible for preventing injuries, and failures
 Everyone is empowered to stop unsafe behavior…
Everyone is empowered to stop unsafe, & unreliable, behavior

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 If you truly believe in
Safety, then

Reliability is a MUST
to minimize the risk of injuries,
costs, and environmental incidents

(Should be given comparable executive attention

as any high-powered consulting recommendations)

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 Leadership,
Organizational Alignment,
and
Managing Cultural Change

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 Leadership
Leadership- the ability to inspire ordinary
people to consistently perform at an
extraordinary level

Leadership begs the question “How do I

get people to genuinely look forward to
coming to work every day?”

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 Aligning the Organization

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 Align the Organization
 Organizing creates naturally competing groups-
shifts, areas, plants, etc.
 With increasing task inter-dependence,
collaboration and teamwork are essential for
organizational success. (e.g., production and maintenance,
between shifts, between marketing and manufacturing)
 Alignment requires the creation of superordinate
goals that take priority over “group” interests:
 Remind people often to focus on the higher level goals
 Think at a systems level – don’t optimize at the
suboptimal level in your little silo – ask ‘what effect will
this have on the system’?
 Develop shared measures between “competing”
groups and partnership agreements
Source: Edgar Schein,
Organizational Psychology
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 Managing Cultural Change-
A Process Model

“Culture – what people do when the boss isn’t around.”

Ian Fyfe, BP (now w/Ineos)

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 Facilitate Employee Implementation
 People do want to change,
 IF given compelling reasons for change
 IF there’s something in it for them:
 More secure future
 Better pay or rewards
 Less stress and hassle
 Less personal risk or fewer injuries
 IF they participate in the design of the changes:
 Set up structured improvement time, e.g., small action teams
 Train and apply the appropriate tools for their needs
 Remove the obstacles from their success
 Routinely solicit, and act on, their ideas for improvement
 Show gratitude and appreciation for their contribution
 All three IF’s must be addressed, aligning
employee interests with corporate interests
 “People own what they create” – help them create!
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 Strategy for Implementation

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 Strategy for Implementation
 Led from the top- executive sponsorship
is essential (Permission is not sponsorship, or leadership!
Active engagement is essential)
 Production & Maintenance Partnership-
Clear goals and expectations must be set,
and reasonably achievable
 Shared KPI’s for reliability & business
results must be in the annual management
appraisal and bonus system
 Shop floor engagement process,
including cross-functional teams, structured
improvement time, and a support system
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 Keeping all this in mind,
Are you sustaining the enterprise?
Is your asset management strategy…

Maintenance Management
Re-branded?
Or

Holistic Asset Management?

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 Appendix - Contact Details
Ron Moore
Managing Partner
The RM Group, Inc.
12024 Broadwood Drive
Knoxville, TN 37934
Tel/Fax: 865-675-7647
Email: RonsRMGp@aol.com

Ron Moore is the author of Making Common Sense Common Practice-

Models for Operational Excellence, 4th edition; of What Tool? When? A
Management Guide for Selecting the Right Improvement Tools, 2nd edition,
both from MRO-Zone.com; and of Business Fables & Foibles, and Our
Transplant Journey: A Caregiver’s Story, both from Amazon.com, as
well as over 50 journal articles. Ron’s latest book, Where Do We
Start Our Improvement Program? is scheduled for release in
September, 2014.
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