In the face of scarce capital for manufacturers and producers across many industries, optimizing the performance of existing assets often increases in priority. In an ARC Advisory Group whitepaper, Driving Maximum Asset Capability (summary), author Dick Hill notes:
In today’s highly competitive global manufacturing environment, it is essential that all opportunities to invest capital be considered on equal basis. This includes the potential value vs. potential risk of the respective opportunities. These opportunities must be expressed in terms of business value, such as return on assets (ROA), net present value (NPV), and other measures that align with the corporate governance process, so they can be evaluated equally with other opportunities for capital expenditures.
Getting more capabilities from your existing assets:
I caught up with Emerson’s Will Goetz for his thoughts on the whitepaper and how get the most out of these plant assets.
…can improve productivity, product quality, and environmental performance, while lowering risk.
He agreed with the author that the place to start is with an assessment of the current state to better understand the potential to uncover unrealized business benefits and put them in ROA improvement terms. Will referred to a Top Quartile Performance post, Top Three Sources of Dead Money In Your Operation (And How to Revive them) that noted:
…the best place to start is an assessment of the three most common sources of dead money —stranded technology, unproductive labor and overstocked spare parts.
You need to understand where there are pockets of opportunity to optimize asset performance… Then, you must define the return you expect and develop a roadmap to optimize this performance.
The ARC whitepaper stresses the importance of a strategic plan composed of a multi-disciplinary team that:
…should first look at the “current situation,” followed by a determination of the “desired situation.” Then, a list of criteria must be defined to identify the characteristics and capabilities that would be required to help the company close the gap between the current and desired situation.
Will described how following the three paths—stranded technology, unproductive labor and overstocked spare parts could help the team to identify opportunities that often fit within the strategic plan. On stranded technology, he explained:
There are process management and condition monitoring capabilities in these multimillion dollar information systems that can help predict failures that are not being applied… More information can be extracted from these investments to fix equipment earlier and plan repairs at times when the output of an asset is least valuable. Even more importantly, this information can be used to evaluate when continuing operation of an asset could pose a safety risk.
Will defined unproductive labor as the difference between planned and unplanned work:
Planned work is twice as productive as unplanned work… By having earlier insight into when machines will require maintenance, work crews can be managed more efficiently from a time utilization standpoint… Asset condition drives the planned work…
On overstocked spares, knowing the equipment condition helps. By:
…better understanding when a problem might arise, a plant can buy only the parts needed when a situation requires action, freeing capital for more immediate needs.
With a clear understanding of the potential of the installed assets and strategy, Will and members of the Reliability Consulting team advise a path to:
…always tie the technical solution back to the impact on the business and then follow through and measure the effectiveness of the actions taken to validate the improvements, and then benchmark the results against peers. Once assured of the benefits, confidently extend these actions enterprise-wide.
You can ask a reliability expert questions and/or connect and interact with other reliability and maintenance professionals in the Reliability & Maintenance group in the Emerson Exchange 365 community.