The 2011 Asset Performance Management Outlook

The year 2010 has been uncertain until now, especially in the context of asset management.

While the economic recovery has been in process, capital and operational budgets are still very tight in a majority of companies. At the same time, industrial accidents such as the Gulf of Mexico oil spill and Virginia coal-mine explosion have constantly been in the headlines this year, driving immense pressure on the executives in asset-intensive industries. While the key for companies has always been bottom-line performance, it is very clear that this goal cannot be achieved by jeopardizing safety and maintenance of plant assets.

The early results of the fourth annual study on the topic of Asset Performance Management (APM) revealed that the top two pressures driving companies to asset management are reduced operational budget (selected by 67 percent of total survey respondents) and reduced capital budgets (48 percent). This is not very different from the pressures that were seen in last year’s research study on a similar topic. This confirms that cost and economic uncertainly is still haunting maintenance organizations. Maintenance professionals are feeling the pressure of unfunded projects from senior management.

This trend is further exemplified by the fact that reducing downtime (57 percent of respondents), improving asset utilization (55 percent) and reducing maintenance costs (36 percent) are the top three goals selected by responding organizations. Asset-intensive companies are looking to maximize production by improving asset utilization and minimizing downtime, while at the same time reducing maintenance costs. An interesting trend that came out of the analysis is that Best-in-Class companies (defined later) are four times as likely as the Laggard companies to focus on minimizing safety incidents. The results puts forward an interesting point—while driving business value is important; Best-in-Class are ensuring that they are not jeopardizing the safety of plants and employees to achieve business benefits.

Improving results

Aberdeen uses four key performance criteria to distinguish the Best-in-Class from Industry Average and Laggard organizations. These metrics measure the success of an organization not only from how it has improved plant operations, but also how successful these programs are in achieving financial goals.

Best-in-Class companies are performing at 32 percent higher Overall Equipment Effectiveness (OEE) and 25 percent less unscheduled asset downtime compared to Laggard organizations, while reducing annual maintenance costs by 8 percent. This has directly resulted in Best-in-Class companies over-achieving their return on assets (RoA) targets by 11 percent, as compared to Laggard companies, which missed their RoA target by 7 percent.

There are several business capabilities and technologies that are key to achieving Best-in-Class status. A successful APM initiative requires organizations to operate beyond functional boundaries, and balance asset availability and utilization by improving collaboration among maintenance and operations teams, while closing the loop by connecting asset performance to corporate performance. This requires visibility into all aspects of the asset life cycle, in addition to having real-time information about asset condition. This will allow companies to maximize asset life and improve not only asset performance, but also financial and operational performance.

Top Performers Earn Best-in-Class Status

Definition of Maturity Class
Mean Class Performance
Best-in-Class: Top 20% of aggregate performance scorers
• 91% overall equipment effectiveness
• 3% unscheduled asset downtime
• 8% reduction in maintenance costs
• 11% return on assets vs. plan
Industry Average: Middle 50% of aggregate performance
scorers
• 80% overall equipment effectiveness
• 13% unscheduled asset downtime
• 4% reduction in maintenance costs
• 6% return on assets vs. plan
Laggard: Bottom 30% of aggregate performance
scorers
• 58% overall equipment effectiveness
• 28% unscheduled asset downtime
• 3% increase in maintenance costs
• -7% return on assets vs. plan

Another critical aspect of APM is managing risk. Best-in-Class companies have established a risk-management framework and are able to provide a harmonized view of risk to the executive team by enabling visibility into how asset performance impacts safety, cost, profitability and RoA. Finally, the Best-in-Class are investing in technology to automate the processes discussed above. Investing in technology will enable companies to understand the value of both production and maintenance data to make timely and effective decisions.

Mehul Shah, mehul.shah@aberdeen.com, is a Research Analyst at Aberdeen Group Inc., in Boston.

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