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Reminders of Asset Management Challenges in the Railroad and Other Asset-Intensive Industries

Guest Post by

Bob Ferrari is the Executive Editor of the Supply Chain Matters Blog, and a periodic guest blogger on the Infosys Supply Chain Management blog.

Efficient asset management has become a far more critical need for asset-intensive businesses and service providers. The cumulative impact to U.S. and other international railroads during the recent global recession, along with changing customer service models are keen reminders to how important enterprise asset management (EAM) process management capabilities have become.

Within the U.S., the impacts of the sudden downturn in supply chain shipping activity had a rather dramatic impact on railroad assets.  As an example, industry shipments of railcars declined by 64% in 2009.  According to the Association of American Railroads, 2009 was the worst year for freight rail traffic, reaching its lowest levels since 1988.  In that same year, 28 percent of rail fleets were parked in storage, and one estimate noted that there were $43 billion in idle assets representing both leased and owned locomotives and railcars.  As an observer of global supply chain activities, I vividly recall reading news articles indicating that railroads were challenged to find all sorts of storage locations for these idle assets.  The BNSF railroad alone had rail cars that sat idle for up to three years on unused track stretching more than 30 miles in some places.  Similar reports came from other U.S. and European railroads as well.  It seemed like every available rail spur was utilized as a storage location, a virtual real estate warehouse, as it were. As observers, we speculated on how railroads were able to track and account for all of these scattered idle assets. 

Now that global economies have begun economic recovery, these same assets are being re-activated for service.  An important consideration however is the re-deployment plans and current condition of these assets.  Has subsequent damage occurred, and if so, what repairs are needed?  Have scheduled maintenance procedures lapsed or are overdue?  Have leases changed hands or have customer leased assets been reallocated?

In a past Infosys SCM posting,it was observed that EAM, traditionally viewed as an internal or regulatory function of an organization,has now become more customer service oriented with the advent of the service economy.The objective of EAM has always been to increase asset availability, but the evolving post recessionary economy adds new dimensions of procurement, service and repair efficiencies.  Assets, either physical, facility, or IT related, need to classified, tracked and prioritized as to utilization, maintenance, service requirements, probability of failure and customer service requirements. EAM has the potential to be the early warning system for managing asset and overall operational efficiency.  Integration with operational and other business systems increases efficiency and reduces lead times for scheduling. Expensive and highly utilized assets such as locomotives need special attention. Equipment warranty and claims tracking insure that organizations avoid lost opportunities, while the advent of new mobile and GPS technologies add new capabilities for real-time tracking.

Another important consideration is that capabilities included in EAM are often sensitive to specific industry needs, more so than certain other process capabilities.  While we commented on recent developments in the railroad industry, other asset-intensive industries such as utilities, energy services, retail, transportation, process or discrete manufacturing will each have their own unique EAM requirements.  Industry knowledge and experience has special meaning for EAM.

The recent incidents of scaling-down and scaling-up of fleet assets is an indication of the 'new normal' of business volatility.  Customers demand reliability flexibility and up-time, and assets must be managed to yield maximum efficiency. Effective asset management positively contributes to both customer and business responsiveness and bottom line results.

Comments

Well said Bob.
Additionally, gone are the days when maintenance functions or departments were treated as cost centers and didn’t have much say or importance in running the businesses. Situation has changed now. Maintenance functions play very important role in successfully producing the commodities or delivering the services. Hence asset management is going to a more and more critical business function for an organization to run efficiently and be more productive. Every industry has its unique requirements, hence knowledge and experience of the industry would be one of the critical factors for successful EAM implementation.

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