Asset Performance Assessment

Asset performance management is a multi – disciplinary management process, which provides a critical support for heavy and capital – intensive industry by keeping the assets like machinery and equipment in a safe operating condition. Managing the asset performance is critical for long-term economic and business viability. Asset performance assessment is a complex issue involving multiple inputs and outputs besides various stakeholders’ dynamic requirements. Lack of integration between various stakeholders and their changing requirements in strategic asset performance assessment is still a major issue for industries (Parida, 2012).

From some time there has been considerable interest in performance measurement.

It is established that companies using an integrated balanced performance measurement system perform better than those not measuring their performance (Lynch and Cross, 1991).

From literature, it emerges that measurement systems must reflect the context and the objectives of the organization. The nature and the design of performance measurement systems has been changing during these years to ensure that they reflect the environment and the strategies of organizations (Kennerly and Neely, 2003). During the last two decades, competitive and dynamic business environment requires the asset utilization and performance optimization throughout their life cycle.

In order to know the efficiency and effectiveness of asset management, the assessment of asset performance has become an integral part of the business today (Parida, 2012). The introduction of technological instrument such as embedded and wireless sensors, automated controls and data analysis management has allowed to overcome the barriers of distance, to transfer real time date and, hence, to develop new performance assessment systems (Toran et al., 2000). Again the IS is a fundamental lever for the development of performance assessment systems

Maturity assessment for Physical Asset Management: Evidence from Manufacturing Plants and Infrastructures

2.5.1 Issues related to Key Performance Indicators

The management of the organization needs to convert the corporate strategy and objectives to the specific objectives of different hierarchical levels of the organization.

The asset performance needs then to be measured and managed for achieving the objectives.

In order to achieve the asset performance objectives, derived from corporate objectives and strategy, critical success factors are normally identified and, starting from these, Key Performance Indicators (KPIs) are developed for measuring the assets performance. KPIs are periodically measured and also used in benchmarking activity and to send feedback improving the assessment performance systems (Parida, 2012).

For many asset intensive industries, the operation and maintenance costs of assets are a significant portion of the total cost. Further, breakdowns and downtime have an impact on the plant and asset capacity, product quality, and cost of production, as well as on health, safety and environmental issues (Parida, 2012). Hence, there are a lot of research in literature concerning KPIs maintenance performance.

Galar et al. (2011) identified the following issues about KPIs Maintenance performance and their challenges/problems for implementation:

1) Too much data and little information: The acquisition of data has become relatively simple and cheap through the introduction of modern and powerful hardware systems and software. But having too much data could be useless if they are not understandable by the users.

2) The number of performance indicators, ownership of the data and the aspects to be covered are too high: hence, the number of indicators used for each figure, or department, should be limited by identifying key features or "key factors". On the other hand, scorecards with huge quantities of indicators without user or defined personal responsible provide only hinder to the work for which they are made.

3) Clear objectives and measures: There are situations where departments within the same company have conflicting interests in relation to the maintenance of their equipment. The purpose of the objectives is to ensure that departmental efforts are aligned with business needs. The objectives should be transmitted in a downward cascade, including all departments, and

Maturity assessment for Physical Asset Management: Evidence from Manufacturing Plants and Infrastructures

subsequently taking appropriate steps according to the measures adopted by the selected sensors, ensuring that everyone is going in the same direction (i.e. aligned with business objectives / strategy).

4) Time lag between action and monitoring results: Sometimes there is a delay between a policy change and the appearance of clear and apparent results associated (or expected) with that change. A second delay can be found between the appearance of results and the time taken for the measurement.

This should be taken into account when assessing asset performance.

5) The cost and reasons for data collectors: The success of any measurement system is based on the method used for data collection. Poor or incorrect data entered into a reporting system will result in poor and little value. Human factors involved in the collection of data are an important aspect, as the data collected by personnel are closely related to indicators of their ownership and responsibility, towards achieving their own objectives. The technicians and operators will collect data only if they believe it is worthwhile and the results are made available for free consultation and use. If the time passes and data have not been used for anything, have been forgotten and feedback produced by them has not been transmitted through good communication, people will inevitably feel a waste of time, and reduce their effort and/or attention to data collection.

Asset performance, which include KPI maintenance performance and other aspects (i.e. business and technical aspects), can be applied all these challenges. In fact, the system of asset performance measurement should cover all processes related to it within the organization.

2.5.2. Frameworks of Key Performance Indicators

In literature, one can be find a lot of authors who define a set of indicators divided into different groups, aggregations. For example, Wireman (1998) divided indicators in corporate, financial, efficiency and effectiveness, tactical, functional performance;

while Càceres (2004) segmented maintenance indicators according to the organization’s area of influence, due to interactions of the maintenance department with finance, human resources, purchasing and, of course, production to achieve corporate objectives.

Maturity assessment for Physical Asset Management: Evidence from Manufacturing Plants and Infrastructures

Another interesting approach is proposed by Tsang’s (2002), in which the author adopted the scorecard method developed by Kaplan and Norton. It designs the maintenance performance measure using the following four perspectives:

- Financial (the investor’s view)

- Customers (the performance attributed valued by customers)

- Internal process (the long-term and short-term means to achieve financial and customer objectives)

- Learning and growth

Tsang (2002) considers that by using the Balanced Score Card, the company could link the maintenance strategy with the overall business strategy and develop performance measures for maintenance that are linked to the organization’s success.

Kumar et al (2011) extended Tsang’s model, considering also health, safety, security and environment and employee satisfaction to make the MPM (Maintenance Performance Measurement) system balanced and holistic from the organizational point of view.

In order to help managers in their decision process there must be an interconnection between the different indicators (Galar et al., 2011).

According to Mitchell et al. (2002), a hierarchy of different parameters, all linked to business goals, is vital for the success of a program to manage corporate physical assets.

Also Grenčík and Legat (2007) analyze the consistency of the indicators and their management classification levels. To select the relevant indicators, the first step is to define the objectives at each level of the company. At the company level, the requirement is to determine how to manage maintenance to improve overall performance (profits, market shares, competition, etc.). At the level of production, performance factors which have been identified through prior analysis are more important; these include improved availability, improved intervention costs, safety, environmental preservation, improvements in maintenance costs, value inventory, contracted services control, etc.

Parida and Chattopadhyay (2007) developed an APA (Asset Performance Assessment) framework in which considered different set of indicators and link them

Maturity assessment for Physical Asset Management: Evidence from Manufacturing Plants and Infrastructures

with the needs to define a hierarchy, considering three levels: strategic, tactical end operational, as we can see in Fig.2.14.

Fig.2.14 Multi-criteria hierchical MPA framework for Engineering Asset (adapted from Parida and Chattopadhyay, 2007). HSE = Health, Safety and Environment; ROMI = Return on Maintenance Investment; OEE = Overall Equipment Effectiveness; MTBF = Mean time between; MTTR = Mean

time to repair

Concluding, all the above mentioned references provide examples of Frameworks of KPIs proposed initially for a maintenance scope, but soon extended in order to have a business perspective, and to be finally claimed as frameworks for engineering asset performance assessment.

Maturity assessment for Physical Asset Management: Evidence from Manufacturing Plants and Infrastructures