Redefining the Role of Industrial Asset Management
In the world of business, companies often delegate the responsibility for defining and auditing strategies related to the management of their industrial assets to maintenance organizations. These maintenance organizations typically operate in a middle management or supervision role, lacking representation at the top management level, also known as corporate leadership. This stands in contrast to other strategic assets such as financial assets, human assets, and information technology assets, which are directly managed by corporate leadership.
For the purposes of this article, we define industrial assets as comprehensive systems, encompassing inputs and outputs, controls (DCS, SCADA, IACS, HMI), condition monitoring, protection, digital twins, and management information systems (CMMS, APM). ISO 55000 provides a widely accepted definition of asset management as "the coordinated activities of an organization for the purpose of generating value from assets." It's essential to note that asset management is not merely an extension of maintenance organizations.
By analogy, it's illogical to relegate the management of industrial assets, which play a pivotal role in the business value chain's success, to a secondary position or disregard them within the organizational structure. Instead, they should be seamlessly integrated, without intermediaries, into top management. Industrial asset management should not only be an interdisciplinary facilitator but also a technical authority with the jurisdiction to legislate and arbitrate matters related to operational reliability management and mechanical integrity within the operational context.
This organizational paradox, due to the risks it poses to strategic business objectives, requires careful consideration and assessment, considering the potential corporate risk associated with each business.
Objectives of Industrial Asset Custodianship
Custodianship of industrial assets involves meeting and sustaining the expectations of:
Asset Owners: Satisfied when industrial assets yield returns on investment and prove profitable over their service life.
Asset Users (typically operators): Satisfied when industrial assets continue to perform as expected within specified performance standards, including mitigating risks to users' safety.
Society as a whole: Satisfied when industrial assets operate without posing threats to human safety or environmental integrity.
These expectations highlight the strategic importance of industrial physical assets within the business value chain during their operational life cycle.
Industrial Asset Management vs. Maintenance Management
ISO-55000 defines Asset Management as "the coordinated activity of an organization to obtain value from assets." This broad definition marks the emergence of a new discipline distinct from traditional maintenance management.
Maintenance management traditionally involves planning, programming, and controlling activities to maintain the functional integrity and performance of physical production systems. However, recent expansions of maintenance scope, particularly into the realm of operational reliability, have led to functional disconnection with corporate top management.
Given these developments, it's vital to reconsider how to properly integrate the scope and responsibilities of asset management into existing organizational structures. This prompts critical questions:
Does the current hierarchical organization, with maintenance departments overseeing industrial asset management, effectively meet strategic and tactical company needs?
What are the limitations and potential issues associated with the current organizational design?
What are potential solutions to address these organizational issues?
Should the management of industrial assets hold the same level of jurisdiction as other strategic assets in the business?
In the following sections, we delve into corporate paradigms related to industrial asset management, providing a critical analysis to better understand and address these potential issues within the hierarchical organization.
Custody of Financial Assets: An Analogy
Drawing an analogy with financial assets, we can appreciate how Luca Bartolomeo de Pacioli's double-entry accounting system, invented in 1494, laid the foundation for responsible financial asset custodianship. Even today, financial analysts and accountants rely on these principles to manage financial assets. Responsible financial custodianship entails precise accounting, balance sheet recording, and rigorous audits. This process is highly standardized and a fundamental part of corporate finance practices, despite its resource-intensive nature.
Industrial Assets Custodianship
In contrast, the discipline of industrial asset management is relatively new, with less than 30 years of practical experience. It is evolving amidst a rapid digital transformation, leading to increasingly complex industrial assets with stringent operational requirements, automation, and strict regulatory mandates.
However, the strategic importance of industrial physical assets within the business value chain has not been fully recognized and integrated into corporate leadership. While financial asset management relies on failure modes/causes to establish risk management criteria, industrial asset custody requires a more comprehensive approach.
Custodians of industrial assets must address various aspects:
Describe asset functions and their performance.
Detail functional failures and their causes (failure modes/causes).
Evaluate the consequences and assess risks for each failure mode/cause.
Define and implement cost-effective management strategies to mitigate or eliminate consequences.
Monitor asset performance and reliability using performance indicators (KPIs and scorecards).
Conduct periodic reliability strategy audits.
These responsibilities extend beyond traditional maintenance roles and indicate that simply transferring such a broad scope to maintenance departments may not be adequate.
The Organizational Paradox
In summary, the expanding responsibilities of maintenance departments, combined with their structural limitations, pose a potential corporate risk. This risk escalates with the increasing complexity of industrial assets and their operational contexts.
Stakeholders demand direct involvement of corporate leadership to mitigate the consequences of industrial asset failures effectively.
This article underscores the need to reconsider the organizational structure to recognize and relocate industrial asset management within corporate leadership. It focuses on the importance of appropriate jurisdiction for industrial asset management rather than questioning the technical and managerial capacity of engineers and maintenance technicians.
Maintenance management remains a specialized and complex discipline with significant responsibilities.
In conclusion, the consequences of irresponsible industrial asset custodianship are more severe than those in the financial realm. Therefore, organizations must evaluate the organizational structure to effectively manage the strategic risks associated with this new discipline.
Kleber Siqueira - 09/24/2023