Considerations of Alignment in Asset Management

 ISO 55000:2014 Asset management - Overview, principles and terminology considers that asset management is based on a set of fundamentals, one of the fundamentals is Alignment, it means asset management translates the organizational objectives into technical and financial decisions, plans and activities.

 Asset management decisions, such as technical, financial and operational, collectively enable the achievement of the organizational objectives. This includes:

• The implementation of risk-based, information-driven, planning and decision-making processes and activities that transform organizational objectives into asset management plans.

• The integration of the asset management processes with the functional management processes of the organization, such as finance, human resources, information systems, logistics, and operations.

• The specification, design, and implementation of a supporting asset management system.

 The development of benchmarking and key performance indicators (KPIs) is an excellent tool to ensure Alignment.

 ISO 14224:2016 Petroleum, petrochemical and natural gas industries - Collection and exchange of reliability and maintenance data for equipment - Annex E (informative) Key performance indicators (KPIs) and benchmarking proposes the following process for using KPIs and benchmarking:

• Benchmark performance, to determine the performance of the organization in key areas, these benchmarks can then be used for comparison, usually external, against organizations in the same or similar industry, or against organizations in different industries that have similar business processes.

• Identify areas for improvement, these areas are not necessarily the areas where the performance is poor against the other benchmarks, as the areas of poor performance might not correspond with the areas that are critical for the business objectives.

• Develop KPIs for improvement, each one should have a targeted performance level, the target should be specific, measurable, achievable, realistic, and time-based. The frequency at which the KPI is measured is determined by a realistic expectation of the amount of time required for any corrective action to have an impact on the performance level.

• Measure KPI, it is necessary to compare the result against the target and to identify any causes for deviations.

• Take corrective action, the causes for deviations should be addressed and corrective actions performed, and the process should be repeated continually.

 KPIs are aligned to the organization's objectives for the assets and improvements are identified and implemented in order to achieve the organization's planned objectives.

 Benchmarking helps determine the reference point and standard from which world-class performance can be measured. the process of benchmarking can be broken down into three steps:

• Evaluate and measure your own operation or specific process to identify weaknesses and strengths using a data collection. 

• Initiate a benchmarking study and document processes by referring to peer groups that are more productive or efficient than yours.

• Identify best practices and implement them.

 Two peer-group distinguishing factors that have been found in studies on asset management are:

• Process family, for reasons of equipment types, process severity, and operation and maintenance complexity.

• Geographic region, for reasons of labor regulations, employment and contracting practices, safety and environment-protection norms, climate, management culture and industrialization level of the region.

Considerations of Value in Asset Management

 ISO 55001:2014 defines asset management as the coordinated activity of an organization to realize value from assets, and ISO 55000:2014 states the value (which can be tangible or intangible, financial or non-financial) will be determined by the organization and its stakeholders, in accordance with the organizational objectives, so the standard considers that the value is subjective and is determined by the organization and its stakeholders, and it is not limited to a specific type of value.

 But as the value is subjective it specification could vary, even within the own organization. Look the following examples from ISO 55002:2018 Asset Management - Management systems - Guidelines for the application of ISO 55001 - Annex A (informative) Consideration of "value" in asset management:

• Potential investors or lenders, finance managers, accountants, and valuers can be focussed on the organization's carrying value, risk exposure and return on investment.
• Some stakeholders can be focussed on the value of the assets and related financial representation of asset deterioration for taxation purposes.
• Shareholders can be focussed on the return on their investment, value determination and value generation.
• Customers can be focussed on the price-quality relationship of the product or service.
• Public service providers can be focussed on the value perceived by the community and its relationship with the cost.
• Regulators can be focussed on legal and regulatory compliance.

 As the value does not focus on the asset itself, but on the value that the asset can provide to the organization to determine as best as possible the value of the asset consider how the asset management objectives align with the organizational objectives, the use of a life cycle management approach, and the establishment of decision-making processes.

 It is important to insist on the value derived from assets can change over the life cycle of the asset, so during the investment or acquisition phase assets are only incurring costs to the organization, but they have potential value that can be generated once in operation; some assets can have a time delay before the generation of value and as higher the delay is higher the value; during the operation and maintenance phases, circumstances can lead private organizations to price outputs at a price point that ignore the original acquisition cost; and during disposal phase, the functional obsolescence due to changes in technology, changes in organizational objectives, or changes in customer preferences can mean that the value of the asset decrease dramatically.

 To support the concept of value some standards are available, like IEC 60300-3-3:2017 Dependability management - Part 3.3: Application guide - Life cycle costing, that establishes a general introduction to the concept of life cycle costing and covers all applications. the life cycle includes the phases of concept or definition, design or development, manufacturing, installation, operation, maintenance, and disposal.

 Related to risk and opportunities the ISO 31000:2018 Risk management - Guidelines, that provides a framework and a process for managing risk, The standard helps organizations increase the likelihood of achieving objectives, improve the identification of opportunities and threats, and effectively allocate and use resources for risk treatment based in a risk assessment process.

 Finally, related to the performance of assets the standard ISO 14224:2016 Petroleum, petrochemical and natural gas - Collection and exchange of reliability and maintenance data for equipment - Annex E Key performance indicators (KPIs) and benchmarking provides a methodology to create KPIs and benchmarking aligned to the objectives organization.

 To create an Asset Management System that balances these three parameters to define value for organization and stakeholders and change it during the life cycle of the asset to adapt the real conditions is a challenge to overcome in order to establish a good decision-making process.

https://streamanity.com/video/3BnaijbrRiyUuR

ISO 55001 Asset Management as a tool for Value Investing

 Value investing is the strategy of investing in stocks that trade at less than their intrinsic values. In other words, the goal of value investors is to determine companies that they believe are undervalued relative to the market or are trading at a discount to their intrinsic worth. 

 Therefore, this estimation of the intrinsic value is key when selecting companies to invest in, given the difficulty of calculating them and the uncertainty of the sectors, investors, exchanges, security, and the distortion of the process.

 Valuation of companies is mainly done by considering indicators such as the Price-to-Earning ratio (P / E ratio), Price-to-Book ratio (P / B ratio), Debt-to-Equity ratio (D / E ratio), Free Cash Flow (FCF), and  Price / Earnings to Growth ratio (PEG ratio).

 In addition to this, it should be considered that this investment strategy is based on the long term, so that a good administration by the management team will add value to the investor, while a bad administration will destroy it, regardless of the initial values of the indicators evaluated.

What's about physical Asset Management?

 Correct physical assets management has as its main function to coordinate the activities of an organization to obtain value from physical assets, that is, that these assets must be capable of generating value, whether by their use, ownership or custody.

 But in addition, these assets have an intrinsic value, which can be determined as their sale value at a given time, correct management will be able to maintain and even increase this value.

 Physical assets management, according to ISO 55001, considers that these assets must have objectives that must be completely aligned with the objectives of the organization; and it must extend to the entire life cycle of the physical assets.

 The life cycle includes CAPEX, understood as the costs of design, acquisition, installation, and commissioning; OPEX, which covers operating, maintenance, and risk costs; and renovation, disassembly, and disposal.

 The management of physical assets increases the value that this generates by improving the Overall Equipment Effectiveness - OEE, which is an indicator that combines the availability of equipment, its performance and the quality of products or services produced.

OEE = Availability * Performance * Quality

 In addition, it increases the intrinsic value of the physical asset by optimizing its life cycle and controlling its obsolescence.

The analysis and evaluation of the management of the physical assets of a company are fundamental for Value investors since this management has a direct impact both on its capacity to generate value and on its intrinsic value throughout its life cycle.

Asset Management System: A Plan to Manage Obsolescence

Last week I did a consultancy work with a client and we raised an issue that I think is of great interest. How would an Obsolescence Management Plan be developed within the Asset Management System ISO 55001?

 It seems clear that correct management of obsolescence is necessary for the management of an asset, especially in long-life assets or in assets with rapid technological advances, let's see some ideas on how to raise it.

1. Assets Class Information.

Description of the assets covered by the Plan (that could be all) including description, role, criticality, quantity, and distribution. A good practice is to identify and classify them based on the ISO 14224: 2016 Standard.

In this section, targets of the Plan can be included.

2. Owners and Stakeholders.

Indicating roles and responsibilities related to the asset class and the application of the Plan.

3. Current Level of Obsolescence.

Defining the current situation of obsolescence of the assets covered by the Plan.

4. Factors Affecting Obsolescence.

Identifying factors that accelerate or reduce obsolescence, operational considerations and, mainly, safety, hygiene and environment factors related to the assets obsolescence.

5. Obsolescence Management Programs.

Describing programs used to manage the obsolescence of assets, they could include the following proposals:

• Creation of a list of assets subject to obsolescence risk, including details of risky elements.

• Creation of a technology observatory, in collaboration with other companies or universities, for trends to anticipate technological obsolescence.

• Programs to avoid obsolescence, in agreement with the manufacturers involved, could include carry out modifications and retrofits of assets to reduce risk, or Last Time Buy decision making and End of Life for both equipment and spare parts.

• Obsolescence mitigation programs, including measures for the asset to continue operating, such as the reserve or the manufacture of components that may increase the useful life of the assets.

• Programs to eliminate obsolete assets and inventory, either in the form of assignment, resale or, even, cannibalization of equipment.

6. Budget.

A summary of the required funding to carry out these programs.

7. Risks.

Identification, analysis, evaluation, and treatment of current risks associated with the application of the programs included in the Plan.

8. Support Elements.

Description of resources, competence, communication plans, information requirements, and documented information necessary to carry out the different programs.

9. Implementation deadlines.

Calendar of activities, with milestones and final deadlines, to carry out programs.

10. Controls.

Description of program performance indicators, as well as of the acceptability criteria.

Blockchain and Asset Management

 One of the most exciting challenges in the years to come is the integration of BlockChain technology and Physical Asset Management.

 BlockChain could be defined as a distributed database of records that have been executed and shared among participants. Every executed action is verified by consensus of most of the participants of the system and, once it is recorded, never can be deleted or modified because it is distributed in thousands of computers.

 So, BlockChain provides a right, verifiable and immutable record of every operation that has been fulfilled. This is especially interesting in physical Asset Management because it provides a smart property of assets.

 A real application combines smart contracts, for example, acquisition and sale contracts, insurances, warranties, or maintenance contracts; check of origin in parts and components acquisitions, and decentralized internet of things to do easy the asset operations, all of them with their required records and proof of evidence; they are applicable to the four phases of a life cycle of an asset: Acquisition, Operations, Maintenance, and Decommissioning.

Benefits to apply BlockChain to asset management.

 BlockChain technology provides several practical benefits to ensure the asset management plan execution and the fulfilling of the ISO 55001 standard, the main ones are:

1. Keeping a decentralized verified and immutable asset historic log, that provides value as the asset is older and, above all, during the decommissioning phase or sale as a used-asset, providing important financial benefits.

2. Right identification of assets, including it and its components and parts traceability, it makes easy to make decisions related to the life cycle cost optimization.

3. Automatization of maintenance and operation tasks based on asset condition, reducing the number of operations, controlling risks and increasing availability and productivity.

4. Ensuring completion of contracts, mainly related to design, acquisition, insurances, warranties, maintenance contracts, recycling or sale as a used-asset, that could be carried out based on info recorded in BlockChain, it ensures contracts are executed and payment are automatized.

5 Security of information, that is no possible to misplace, modify or destroy, as well as it ensures transparency among authorized participants.

 AlterEvo Ltd. works in the development of blockchain and asset management integration projects, focused on financial benefits and ensuring fulfilled of ISO 55001 standard.

Book a Free Consultation / Solicite una Consulta Gratuita

 Do you need consulting about Asset Management or Design for Reliability (D4R)? Now you can book a free consultation about the following topics:

- Asset Management (ISO 55000 / PAS-55)

- Operational Excellence, by Lean Manufacturing and TPM.

- Maintenance, Reliability and Reliability Centered Maintenance (RCM).

- Risk based Maintenance and Risk Assessment.

- Design for Reliability (D4R).

- Lubrication, Reliability Centered Lubrication.

- Failure Analysis and Forensic Engineering (Mechanical Engineering).

 Just click I Want a Free Consultation and send us an e-mail with your name, company name, some details about your consultation, and days and times you are available, so we arrange a 45 minutes meeting, by Skype, Hangouts or FaceTime, with one of our Chartered Engineers.

¿Necesita consultoría sobre Gestión de Activos o Diseño para Fiabilidad (D4R)? Ahora puede solicitar una consulta gratuita sobre los temas siguientes:

- Gestión de Activos (ISO 55000 / PAS-55)

- Excelencia Operacional, mediante Lean Manufacturing y TPM.

- Mantenimiento, Fiabilidad y Mantenimiento Centrado en Fiabilidad (RCM).

- Mantenimiento basado en Riesgo y Evaluaciones de Riesgo.

- Diseño para la Fiabilidad (D4R).

- Lubricación, Lubricación Centrada en Fiabilidad.

- Análisis de Fallos e Ingeniería Forense (Ingeniería Mecánica)

 Solamente haga click en Quiero una Consulta Gratuita y envíenos un e-mail indicando su nombre, el nombre de su compañía, detalles sobre la consulta, y su disponibilidad, para organizar una reunión de 45 minutos, por Skype, Hangouts o FaceTime, con uno de nuestros ingenieros colegiados.

Dairy Industry Crisis: Technical Solutions

 The European dairy industry is suffering a deep crisis during the last months due to the low prices of sales, under the production costs.

 According to the European Commission, the crisis has been driven by Russia's trade ban on Community food industry, added a demanding fall of milky products in China P.R. and other BRICS countries to a lesser extent, and a slight increase of the world production especially emphasizing Australia (2.5 %), USA (1.6 %), New Zealand, world's largest producer, (0.9 %) y the European Union (0.8 %).

 Summarizing, there has been a temporary drop in demand that joined a slight increase in production.

 The practical impact is the milk price is between 15 % and 35 % (depends on the EU area) under a price to give profitability enough to the producers.

What solutions can be applied?

 Both, the dairy producer associations and European Union governments propose the following measures:

• Setting minimum retail prices.
• Re-introduction of production quotas.
• Financial grant, to compensate for the drop in profitability. 
• Encourage innovation and develop new dairy products, to consume milk production.
• Creation of new cooperatives and associations, to apply economy of scale.

 Innovation and development of new dairy products are an excellent solution, it must be carried out at all times, but due to its high risk, high cost and high period of phasing, it doesn´t look the best short-term solution.

 Creation of cooperatives and associations will reduce costs and increase efficiencies, but supposes a short-time staff reduction by duplicities elimination.

 Regarding setting prices, re-introduction of quotas and financial grants, they don't suppose an improvement of producer's productivity, so the producers will be grants dependant and will lose market share.

An engineering solution.

 We can define productivity as a ratio of outputs (milk production) and inputs (resources needed for the production).

Productivity = Actual Outputs / Actual Inputs

 Let's analyze each term.

Actual Outputs: It's the result to multiplying production Capacity, Availability of the process (ratio of gross operating time and available production time), Performance of the process (ratio of net operating time and gross operating time), and Quality of the process (ratio of valuable operating time and net operating time).

In accordance with Lean Manufacturing methodology, the result of multiplying Availability, Performance, and Quality is defined as Overall Equipment Effectiveness (OEE):

Actual Outputs = Capacity * OEE

Actual Inputs: It's the result of the addition of human resources and physical resources; physical resources are the addition of Acquisition Costs, Operation Costs, Maintenance Costs, and Disposal Costs.

Resources = Human Resources + Acquisition Costs + Operation Costs + Maintenance Costs + Disposal Costs

 Therefore, to improve productivity is possible by the OEE increase, Acquisition, Operation, Maintenance and Disposal Costs; without increase the Capacity or reduce Labor Force Costs.

 To implant Lean policies, as Value Stream Mapping and pull system to eliminate wastes, to increase availability by Kanban and reduce human errors by Poka-Yoke allow increasing dramatically the real production without big capital investments.

 On the other hand, to implant a Physical Asset Management plan allows the physical resources optimization by implanting specific measures as Reliability Assurance programs and Reliability Centered Maintenance (RCM), taking into consideration the implantation risk.

 A sustainable solution.

 The implantation of both Lean and Physical Asset Management results in a quick rise of productivity, without the need for a large investment, without reducing the labor force, and controlling the risk associated.

 It provides a sustainable solution because it is focused on reducing costs; consequently, it increases competitiveness, at the same time increases production, and allows to rise of the market share and business profitability, releasing resources that may dedicate themselves to research, development, and innovation.

Crisis del Sector Lácteo: Soluciones Técnicas

 Durante los últimos meses se está sufriendo en Europa una profunda crisis del sector lácteo debido a los bajos precios de venta, por debajo de los costes de producción.

 De acuerdo a la Comisión Europea, esta crisis viene motivada por el veto comercial impuesto por Rusia a los productos agrícolas y ganaderos de la Unión Europea, al que se suma una caída de la demanda de productos lácteos en la República Popular China y, en menor medida, de otros países emergentes, y un ligero aumento de la producción mundial destacando la de Australia (2.5 %), EEUU (1.6 %), Nueva Zelanda, primer productor mundial, (0.9 %) y la propia Unión Europea (0.8 %).

 En resumen, se produce una caída temporal de la demanda junto con un ligero aumento de la producción.

 La consecuencia práctica es que el precio del litro de leche está entre un 15 % y un 35 % (depende del país de la UE) por debajo del precio que ofrece rentabilidad a los productores.

¿Qué soluciones se pueden tomar?

 Tanto las asociaciones de productores de lácteos como los gobiernos de la Unión Europea proponen varias medidas, como son:

• La fijación de precios mínimos de los productos lácteos.
• La re-introducción de cuotas que reduzcan la producción.
• Las ayudas económicas que compensen la pérdida de rentabilidad. 
• Fomentar la innovación con nuevos productos lácteos que absorban el exceso de producción.
• La creación de nuevas cooperativas o asociaciones que permitan aplicar economías de escala.

 La innovación y el desarrollo de nuevos productos siempre son buenas soluciones, que se deben llevar a cabo en todo momento, pero dado su alto riesgo y el elevado coste y tiempo de implantación de nuevos productos no parece el más adecuado para obtener soluciones rápidas a corto plazo.

 Tanto el asociacionismo como el cooperativismo reducirá seguramente costes y aumentará la eficiencia, pero supondrán una inmediata reducción de mano de obra al eliminar duplicidades.

 Respecto a la fijación de precios, introducción de cuotas e implantación de ayudas, no supondrán una mejora de la competitividad por lo que los productores se verán dependientes de estas ayudas y perderán cuota de mercado respecto a otros productores.

Una solución de ingeniería.

 Si definimos la productividad como la relación entre los productos obtenidos (en este caso volumen de leche) y los recursos necesarios para su producción.

Productividad = Producción / Recursos

 Analicemos cada uno de los términos.

Producción: Se puede calcular como el producto entre la Capacidad de producción, la Disponibilidad de los medios de producción, la Eficiencia de estos medios, y la Calidad o porcentaje de productos producidos válidos.

De acuerdo a la metodología Lean Manufacturing, el producto de Disponibilidad, Eficiencia y Calidad se define como la Eficiencia Global de los Equipos (OEE), de manera que:

Producción = Capacidad * OEE

Recursos: Podemos calcularla como la suma entre los Recursos Humanos y los Recursos Materiales, y estos últimos como la suma de Costes de Adquisición, Operación, Mantenimiento y Eliminación de estos Recursos.

Recursos = Recursos Humanos + Costes de Adquisición + Costes de Operación + Costes de Mantenimiento + Costes de Eliminación

 Por lo tanto, es posible mejorar la productividad aumentando el OEE y reduciendo los Costes de Adquisición, Operación, Mantenimiento y Eliminación; sin necesidad de aumentar Capacidad y, lo más importante, sin reducir los Recursos Humanos.

 La implantación de políticas Lean, como son la identificación de la cadena de valor y la implantación de un sistema "pull" que elimine ineficiencias, aumente la disponibilidad mediante sistemas "Kanban" y elimine errores mediante "Poka Yoke" permite aumentar de forma rápida la producción real sin necesidad de realizar grandes inversiones en capital.

 Por su parte, la implantación de un plan de Gestión de Activos Físicos (Physical Asset Management) permite optimizar los costes de los Recursos Materiales mediante la implantación de medidas específicas, como pueden ser programas de Aseguramiento de Fiabilidad y programas de Mantenimiento Centrado en Fiabilidad (RCM), para cada uno de los costes, teniendo en cuenta los riesgos que suponen su implantación.

 Una solución sostenible.

 La implantación conjunta de políticas Lean y de Gestión de Activos dan como resultado un rápida aumento de la productividad, sin realizar grandes inversiones, sin reducir la fuerza laboral y controlando los riesgos.

 Proporcionan una solución sostenible en el tiempo ya que se centran en una reducción de los costes, por lo que se aumenta la competitividad, a la vez que aumenta la producción, pudiendo aumentar la cuota de mercado y la rentabilidad del negocio, a la vez que liberan recursos que se pueden dedicar a la investigación, el desarrollo y la innovación.

Trainings in Madrid / Cursos en Madrid

 En estos meses voy a impartir los siguientes cursos en Madrid. / Next months I'm going to give the following trainings and workshops in Madrid:

- Jornada sobre Gestión de un Sistema de Mantenimiento Eficaz, con Ángel Partida, en el COITIM el 6 de mayo. / Conference about Management of an Effectiveness Maintenance System, in collaboration with Ángel Partida, in COITIM, May 6th.


- Curso sobre Mantenimiento Lean y TPM, en Preditec 20 al 22 de mayo. / Course about Lean Maintenance and TPM, in Predictec May 20th to 22th.

- Curso sobre Gestión de Activos basada en Riesgos, en Preditec 17 al 19 de junio. / Course about Risk based Asset Management, in Predictec June 17th to 19th.


- Curso sobre Ingeniería de Fiabilidad y RCM, en Preditec 25 al 27 de junio. / Course about Reliability Engineering and RCM, in Predictec June 25th to 27th.


 Los cursos en Preditec son totalmente prácticos, utilizando la metodología de manos a la obra para que los asistentes puedan aprender el contenido de una forma sencilla y entretenida. / The courses in Preditec are full practical and use the hand-on methodology to ensure the attendants learn the topics in a easy and funny way.