Competitive Market Forces

One of the key elements of the increasingly open global competitive environment is pressure on costs. There are pressures to increase profit margins, or in worst case scenarios retain profit margins under lowering retail prices.

As one of the largest elements of both operational and capital spending, asset management is often an obvious target for reductions in this area.

Maintenance costs are high, in some cases artificially high. Not only are they high but there is increasing pressure on maintenance costs to rise. Areas such as increased regulation, complex and automated machinery, as well as the rising costs of physical assets themselves are pushing maintenance operators to the wire. Pressures to do more are increasing while the pressure to spend less is greater than it has ever been.

One of the major factors behind this trend is that we are more dependent on machinery than at any time in the past. Where previously we would use people to do work, today we use machinery.

This conflicting situation of pressures to increase the work done combined with pressures to reduce the costs of doing that work, has been one of the principal drivers behind many of the vast range of product and service "solutions" that have appeared over the past three decades. These have generally been focused on appealing to this management concern over rising direct costs.

This situation has unfortunately led to more poor decisions and misunderstandings in asset management than any other influencing factor. The results of decisions based on these concerns alone, while often bringing some short-term gains, are rarely sustainable and can even be dangerous in the medium to long term.

Ad-hoc or isolated cost cutting often leads to the eradication of skills or activities that assist in achieving production goals. In worst case scenarios they impinge on the safe operating environments of assets.

This does not mean that direct cost reductions are not achievable in asset management.

Much of the maintenance that we do today either achieves very little, or is actively counter productive. As such there is always scope for reducing areas of redundancy. Added to that are other areas of inefficiency such as planning and scheduling, stores management, and other key areas.

The concept of direct cost reduction needs to be replaced with the focus on reducing maintenance unit costs. This requires a redirection of costs from the present activities towards activities that we truly must do to achieve adequate performance levels. Any increase in attention, no matter where it comes from, is of course welcome. However it needs to be reinforced with knowledge of the true nature of asset management, as well as the strategic importance to many facets of corporate activity.

This may include regulatory and legislative compliance, safety and environmental integrity as well as the standard economic requirements of quality, production and efficiency.