CHALLENGES FACED BY COOs
Balancing CAPEX/OPEX and risk
Organizations operate assets in a dynamic environment. Operational context is in a constant state of flux – and asset performance is continually affected by changing environmental conditions, duties, and business performance goals. Given this, the strategy for how assets are managed and maintained to deliver efficient and reliable performance can quickly become outdated or sub-optimal if not regularly reviewed and updated.
The impact? A COO’s ability to gain foresight and visibility into the optimization of CAPEX/OPEX to deliver target asset performance or maximum throughput is severely limited. It is compounded by the unknown level of risk associated with asset performance and how it compares to the optimal position.
The function of Asset Strategy Management is to constantly assess the gap between actual risk and costs and optimal risks and costs; and drive updates to ensure the reliability strategies keep pace with the operational context.
IIoT, AI and Machine Learning
Within asset-intensive industries, organizations are increasingly adopting various equipment monitoring methods to improve equipment performance and protect against failure. These organizations are taking a predictive approach to maintenance.
The fundamental objective of Asset Performance Management (APM) is to predict impending failure using increasingly sophisticated techniques, to provide advance warning. APM is driving the growing IIoT industry and, coupled with Machine Learning, is making it easier to detect impending failure more accurately and with more warning.
While APM monitors performance, it doesn’t drive performance. ASM manages and evolves the reliability strategy that delivers the performance we see. By providing sound strategy and by extension a predictable level of performance, ASM provides a much-needed foundation and performance basis for Machine Learning to be applied and to be of value in an industrial environment where it can be scaled across an asset base and enterprise.
The state of asset reliability strategies
Many organizations set asset reliability strategies in silos, treating them as one-off projects. A true reliability strategy should incorporate routine maintenance, major overhaul/replacement decisions and renewals or upgrades. However, many of these decisions are not connected; they are often made by different departments, with competing priorities and goals.
A typical example is where constraints dictate that capital for a major replacement is deferred, but there is no connection or change to routine maintenance to account for the expected life extension.
With no formal ASM function in place, and without regular review or updates, reliability strategies deteriorate over time, resulting in most organizations investing in a costly major strategy review every four or five years.
With ASM, once a strategy review is completed, it is not set in stone. Rather, the strategies are dynamic and evolving, and continually managed over time.
Gaining ROI from Work Execution Management, ERP systems and Master Data
Many organizations have already moved or are planning to move to a single instance of their ERP, EAM or CMMS, with the goal of improving the consistency and completeness of Master Data and, as a result, boosting performance. Yet moving to a single instance will not improve performance by itself. Performance outcomes are delivered through sound strategy and efficiency; and productivity gains are achieved with accurate, consistent Master Data.
Without ASM, the ROI on any investment in ERP or the work execution management process is limited only to gains associated with the efficiency of execution. A high-quality reliability strategy is what will manage risk and costs and improve performance. COOs should be challenging their organisation’s ability to make effective reliability strategy improvement decisions, and their ability to keep those strategies live and responsive to changes.