Analyzing / Quantifying Your Company’s Asset Management Opportunity and Selling the Program to Management, 2003 Fall Technical Conference

In recent years, major manufacturing companies have begun to realize the importance of asset management as an enterprise strategy, when, properly implemented, will improve their financial performance. Typical results of an effective asset management strategy include a 20% - 50% reduction in maintenance cost accompanied by a 5% - 10% increase in real production capacity, with no capital investment in production equipment.

The race to acquire and implement enterprise-wide asset management is fueled by the pressure for companies to be increasingly cost-effective and competitive in global markets. In a recent study, Asset Productivity: The Next Wave, the Boston Consulting Group (BCG) stated that, “In order to compete for funds, companies must offer investor returns that are competitive with other opportunities [1]. Alternative investments such as dot-com and others with non-traditional business models have raised the bar.” (A PDF version of the study can be downloaded at www.bcg.com). BCG views fixed asset productivity as the most powerful mechanism for increasing shareholder return.

The BCG author believes that the most effective way to increase fixed asset productivity is to maximize asset utilization by increasing the reliability of the manufacturing assets (equipment and systems).

This paper addresses specific techniques for conducting the two most critical activities necessary to initiate an asset management program:

1. The process of analyzing your current status and quantifying your reliability opportunity in terms of financial improvement goals.
2. The technique of developing a “compelling argument” for senior management to gain support and commitment for your program.

It provides a methodical approach to measuring your company’s current reliability profile and establishing your “Asset Management Opportunity” in dollars and cents for upper management.