Enterprise Asset Management is an emerging strategic tool enabling optimal utilization of assets contributing to business goals of an organization. Come join us as we uncover the hidden potential of Asset Management with our deep insights spanning industry domains and technology

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June 26, 2014

Role of Supply Chain in Effective Maintenance and Asset Management - Part II

Overcoming the Complexities:
There are many complexities that create hindrance to the formulation of an MRO stockholding strategy.  Infrequently required spares, the mechanical complexity of spares, wide range of spare part components used in asset intensive companies and sourcing from multiple suppliers leading to lack of purchasing leverage are few of them. Standardization of spare parts required, optimization of the inventory held at site and supplier collaboration can lead to the formulation of a MRO stockholding strategy.

Standardization of Spare Parts: Identify the spares that are common for the assets throughout the organization. These standard spares can then be sourced from the same supplier throughout the organization even if they are being used across sites. This can lead to
1) Drastic reduction in working capital and stockholding at site level.
2) Negating the practice of looking for the same item at different vendors for the best deal and
3) Overhead costs and additional transaction costs can be curtailed by sourcing from a single supplier and volume discount can also be obtained.

Optimize Inventory Held at Site:  Routine Analysis should be done to ensure accuracy of on hand inventory and also alignment with the key spare parts. Real time analysis of demand patterns provides the basis for inventory optimization. In case of an asset having numerous spare parts some of which might be complex and is being used across sites of the organization, it would be a better idea to store only few parts at a single site. The total number of spares should be distributed across sites within an organization and in case of emergency the spare part needed can be transported. This not only optimizes the inventory in a site but also reduces the lead time required for procuring the spare part.

Supplier Collaboration for Tighter SCM Integration: A tighter SCM integration is possible by dealing with only few suppliers for all MRO spares needs. Benefits of supplier collaboration can manifold if, in the organization's site a warehouse fully managed by the suppliers is positioned. This ensures that the requirements of the organization in terms of spare parts needed are taken care of always especially during the erratic demand pattern times. An onsite storage facility managed by the suppliers also ensures that critical spares are available nearby; delivery requirements for maintenance schedule can be met just in time and most importantly a reduction in administrative work due to reduction in number of invoices. All these will ensure that significant cost reductions and operational benefits are achieved. When a component is failing more frequently than the other components, the onsite supplier facility can provide the value added service of testing and analysis to understand the behavior and suggest the ways forward.

Data Driven Approach to Achieve Strategy Alignment:
Any strategy alignment activity will not be fruitful unless the most important gap is addressed i.e. Data. Master data of the assets should be in order before any strategy alignment can be attempted. By identifying the asset data that are actually maintained in the system and what needs to be maintained we can prepare a master list. Critical assets are defined from the asset master data and lists of critical spares that cater to these assets are identified. The spares thus identified are reviewed and validated with the warehouse records to ensure that there is no mismatch in data. Once this one time activity is completed the organization can strive to achieve the strategy alignment.

A strategic fit between the maintenance and supply chain is always in the best interest of an asset intensive organization. Even if a near perfect strategy can be achieved this can lead to enormous benefits. The strategic alignment of maintenance and spare part management strategies ensures the business is benefitting from the best of both the strategies and ensures maximum optimization of its needs operationally.


Role of Supply Chain in Effective Maintenance and Asset Management - Part I

Manufacturing companies across the globe are facing the heat of the unique and unprecedented challenges posed by the economic crisis. Rising raw material costs, increased supplier lead times, subdued investment mood, drastically reduced operating budgets and bleak employment outlook have all hampered the recovery of these companies. But the silver lining through all these challenges is that the output has been steadily increasing in the past few months. Manufacturing companies across the globe are facing intense pressure to maximize profitability by reducing cost and optimizing production. Overall competitiveness of any manufacturing firm is based on the Manufacturing Efficiency and a company's maintenance and asset management strategy is core to improving the competitiveness of the companies vis-a-vis their competitors. Effective sourcing and management of MRO spares is integral to ensure the success of the maintenance and asset management strategy. The effectiveness of the supply chain for the MRO spares and how it is managed has a direct relationship with a company's ability to optimize its asset manangement strategy and reap the benefits.

Low Inventory - High Availability Mantra
One of the key performance measures in a successful MRO strategy should be the availability of critical spares. Companies usually experience the Just-in-Case syndrome where spare stock may be purchased for critical items in case it's needed for future use. With the passage of time these items becomes non-moving stock, tying cash at the time of purchase and then often ultimately becoming obsolete and requiring a balance sheet write-off. On the other hand an inventory run out in asset intensive companies can result in increased operational, safety and compliance risks. These risks can lead to a significant production impact which in turn affects the profitability of the companies. Having access to the right spares when and where they are needed is critical to maintaining the continuity of production and avoiding costly downtime. Successful strategies therefore need to find a balance between the availability of spares and other considerations such as the need to minimize inventory thereby reducing the working capital. An efficient MRO strategy coupled with solid asset data maintained helps to minimize the risks associated with non-availability of spares, improve asset availability and increase profitability.

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Misaligned Strategies
Companies attempting  to find a balance between the number of spares to be held in hand and the reduction in working capital ends up spending huge amount of cash in two areas a) Optimize Maintenance and Reliability strategies and b) Optimization of Internal supply chains.

The outcome of both the projects will be in direct conflict with each other. Maintenance strategies focus on continuous improvement by monitoring the performance of assets. The different maintenance activities that should be performed on the assets and the frequency/interval within which such maintenance activities should be carried out are also detailed in the Maintenance and Reliability strategy.

Since internal supply chain optimization is a corporate initiative, the common practice is to view the entire corporate supply chain under one umbrella and MRO supply chain forms just a small part of it. As a result a general recommendation is made to reduce the total inventory to be held in the warehouse or storerooms.

 After spending millions of dollars in strategy formulation the outcome might be as follows:
1) Maintenance strategy optimization projects recommend an increase in number of spares inventory not less as expected by the optimized supply chain.
2) A generic inventory reduction recommendation from supply chain optimization and this fails to consider the fact that asset reliability and performance might get affected.

June 24, 2014

Mobile Asset Optimization

Organizations dealing with several mobile Assets / Equipment often face challenges with respect to effective management and different lifecycle processes for mobile asset. A feasible yet little expensive approach is to have these assets in store to make sure they are available when required. As mobile assets are considered fixed-cost, an organization inclines to concentrate on two in-hand factors while managing their costs - the direct costs incurred acquiring the asset and then it's maintenance cost. However a very important and critical variable -  efficient Asset utilization is diluted.100% efficient utilization of asset may not practically be possible due to various factors including life cycle of equipment, asset maintenance needs, and asset workflow considerations. However, it is evident that firms boost their utilization substantially by rethinking equipment distribution, management, and tracking. 

Let's look at below steps for a feasible optimization framework.
  • Assessment of asset data:
    The data regarding current workflow of the asset is important to know the project baseline and target dates. This early information helps when and project is getting deviated such as in smaller firms where asset demand is low or when trade-offs between inventory reduction and labor costs are not acceptable.
  • Workflow Redesign
    Each department has its own "asset ecosystem." Once the users are acquainted with the current state of assets, they should be trained in lean-based mapping in which every step of asset lifecycle is pointe out and analyzed
  • Asset Change Management
    Transitioning from a dismantled / dysfunctional asset workflow to the one where assets are readily available demands different set of actions from the engineering. The end users should be assured that new system will serve the purpose before they stop applying work around that worked in past.
  • Real-time Location Technology
    After an optimal asset lifecycle is successfully adopted (designed, piloted, and implemented) unit wide, many organizations look towards asset optimization--adding a real-time asset location system to monitor asset usage, status, and location. An ideal solution would be to tag the asset with Real-time Location System (RTLS) that talks to central visualization system, enabling users to see data on asset location and its status. This helps the users take better decisions on workflow issues such as asset optimization, efficient utilization, rental / lease management. Real-Time inspection along with alerting system and utilization reports help in adopting new processes and a sustaining positive changes.
    Managing mobile assets is always challenging, however if utilization is optimized efficiently, one can reap high benefits as they are by nature mobile and save infrastructure and maintenance costs.

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