Cover Your A$$ets. John L. Ross
Undoubtedly, your company has many lofty and laudable objectives and mission goals, but making money for its stakeholders and shareholders has got to be at the top of the list. This theme has to be central to our understanding of the true value that assets have to the success of an organization’s objectives and mission. This not only applies to capital assets, but all forms of assets. It is the capital assets that require our focus in this book.
So, where do assets come from? In the space below, please record all the different means of acquiring a capital asset that you have experienced.
Here is my short list that might match yours:
■ Another plant within the company
■ Another plant from another company
■ From surplus sales, rebuilt or as-is
■ New from an OEM (Original Equipment Manufacturer)
■ Modified version of another existing machine
■ Made in our own shop
Assets, it seems, can come from many sources, but there are some qualifications that need to be met before they are truly assets. Give this some consideration. What details or information do you feel you should have or have determined before you commit to purchasing an asset or modifying an existing asset? If assets make income, and they are the only things in business and life that do make income, what are some qualifiers? List your thoughts here:
The objective of this simple exercise is to try and connect an asset purchase to an asset purpose.
For instance, if I were in the trucking business, I might consider such details as:
■ Hauling capacity
■ Distance per tank of fuel
■ Fuel mileage
■ Turning radius
■ Height of the vehicle
■ Ease of operation and maintenance
■ Standardization with the rest of the fleet
■ Annual operating costs
■ Insurance and taxes
Here is a scenario to consider: I’m in the market for a new truck to add to my trucking fleet for my trucking business. The list just provided are the attributes that are most important to my purchase decision. In order for my new truck to contribute financially to the plan that I have for it, these are the characteristics that I need to look for, ensure, and guard. I do this to generate the most income from my asset.
This section is titled “Where Do Assets Come From?” We started off with a listing of possible places that an asset can physically come from. How often do our aspirations for a new asset (new or used) fail to pan out because of the compromises we make along the way when landing the new asset?
If we buy a used or surplus piece of equipment, what are the odds that the new (new to us) asset will live up to the reason we are buying it in the first place? In the truck purchase example I gave earlier, for the categories I listed, it would seem reasonable that I have real interest in specific performance deliverables. It is unlikely that a used truck would hit all the gates, exactly as I’ve listed them in my concerns. Yet I still believe this ‘new’ vehicle is going to deliver as I hoped; essentially, becoming the asset that will make the projected income that was anticipated.
Where assets come from is as critical to establishing a reasonable performance and income curve as it is practical to understand that any compromises and alterations on the ‘needs’ list of an asset will absolutely also alter the ‘deliverables’ list.
Has it ever been your experience that your company bought a used asset and expected the maintenance department to fix it up to use for allout production? How did that work out? There is nothing wrong with used equipment, but just keep in mind that a rush for the fiscal sensibility of buying used equipment doesn’t always lend itself to dovetailing perfectly into our production model. Neither does buying an off-the-shelf new item either. This is a very important dance that is done to make sure we get the right asset for the purpose.
If we are going to manage assets to make income it would make sense that we go into the proposal with the greatest level of confidence in pulling that off, if for no other reason than for the longevity of the production effort. Asset availability is equally important to asset capability.
Darrin Wikoff mentions in his work, Leader’s Guide to ISO 55001: Asset Management System Requirements, that “Availability is the result of the asset base being both Reliable—the probability of conforming to the desired function without failure—and Maintainable—the ability of your management system to restore functionality after a non-conformance has occurred.” (p. 9)
Regardless of the origin of the assets in your facility, they need to start their history at your location fulfilling the purpose they were purchased to fulfill. We manage assets to make income. If they weren’t designed to perform the work in the first place, it is likely that we will have a history of frustration and disappointment.
But who is responsible for ensuring asset capability in the first place?
Who determines what asset to purchase and when to actually get it? In your organization, who is chiefly responsible for making asset decisions? (It could be a group of people.) Write that source here:
In business, asset purchase considerations are often, if not always, determined based on a projected benefit to the company. These purchases will certainly include facility assets such as boilers, air compressors, and even plant roofs. In manufacturing and facilities industries we want to focus on capital assets that actually make our product or allow us to provide a service. Note: if you are in the facilities maintenance position, of course the facility assets themselves are the target of our study.
Regardless, these purchases are often made as part of a projected business case that was conceived well in advance. Couple that with the lead time required to design, build, and install assets and it’s apparent that any project must have the timing of a moon landing to fully capitalize on the gains that were projected much earlier. Figure 1-8 is meant to show this intercept between planning for a capital asset and actually gaining value from the asset decision.
Figure 1-8 From project planning to asset operation to disposal
The ‘who makes the decision of what assets to purchase’ is pertinent to an asset management discussion because it begs the question, “Are you more engaged with an asset’s care and use if you are intimately responsible for it?” ISO 55000 directs those adhering to this standard that an organization’s top management, employees, and stakeholders are the groups responsible for conceiving and executing what is referred to as “control activities.” These activities might include: policies, procedures, and performance measuring and monitoring techniques. This is done to identify and capitalize on opportunities and to reduce risks. Interestingly, ISO 55000, in its direction to reduce risk, indicates that risk should be lowered to an “acceptable level.” It would not be uncommon in our factories and facilities