This article addresses some of the frequently asked questions regarding implementation of The Maintenance Scorecard (MSC) as a tool for developing, implementing and monitoring strategy. In particular, it will focus on the need for a balanced point of view when creating measurement systems, and discusses various methods that the author has observed while implementing the MSC globally.

Introduction

Maintainers are used to change, after all that has happened in the past 15 years who wouldn’t be? But few could have foreseen the incredible surge of attention that physical asset management has started to attract over the last 5 years in particular.

Events such as the swift adoption of PAS55 by a range of global infrastructure companies, the Energy Act of 2005 in the USA, and the recent resignation of Lord Brown of BP following the Alaska Pipeline and Houston refinery incidents, all point to one undeniable fact. Physical asset management is now a very serious business!

So much so that today we are seeing the convergence between physical asset management and financial asset management in many areas of human endeavor.

• Financial regulators in the United Kingdom are placing an increasing focus on the rigor that is put into their plans for capital spending, a multi-billion dollar area of activity for each 5 year period.
  
• Private equity firms the world over are acquiring infrastructure companies such as Thames water in the UK, BAA – the airport owner in the UK, Alta Link in Canada and practically everywhere else where there is an opportunity. Interestingly, these companies are not being stripped of their assets. Rather, they are being re-structured to maximize the income from those assets over the long term.
  
• Many European governments now use their infrastructure assets, and the contracts for their management, as a means of financing public spending in these areas. A modern and innovative spin on asset management.
  
• Many large estate owners now use comprehensive asset management contracts designed to shift risk of asset failure away from themselves and onto those providing the service. Another unique feature of modern asset management.
  

In response to this many companies find themselves wrestling with how to extract maximum economic value from their assets while ensuring their continued environmental integrity and safe operation. This is no small feat given the scale and complexity of modern asset management, and the limited funds available to it. It is a challenge that has caused problems for even the most expert of asset-intensive companies.

Without an organizational compass many find themselves implementing one initiative after another. Many of these initiatives by themselves are sound and will provide some of the benefits sought, however often they are in conflict with each other and sometimes they are actively counter productive.

The Maintenance Scorecard (MSC) provides such a compass to for the development, implementation and monitoring of strategy in a unified and consistent manner, ensuring that all of the company’s resources are focused on the corporate goals.

One of the first questions to arise when learning about the MSC process regards the creation of perspectives. What are they? Why are they necessary? And which perspectives are recommended? All valid questions and can be difficult to gain agreement on.

A balanced point of view

In the past we were always stereotyped as being a center where cost needed to be controlled. Often maintainers were involved in decision making only when things were already going wrong, and when there were costs to be reduced. As such we were viewed from two very simple perspectives by senior management, that of failure reduction and cost control, and normally in a reactive manner only.

Today, if we were to run our asset management departments with only these two over riding priorities we would definitely be limiting the potential of our assets, and potentially be managing things in an almost unethical manner.

So this is the essence of the perspectives. They provide a framework for viewing the asset base, and modern asset managers need more than one or two simplistic views of how their assets are performing.

Even today many efforts at building a scorecard end up focusing on only the one or two area related to direct performance measurement. Normally some form of measurement of uptime, and some form of measurement of direct cost spending. Forgetting the focus on value for money, as opposed to reduced spending, and often leaving safety indicators to the tock standard incident frequency indicators safety departments have been using for decades.

CEO’s of many asset-intensive companies today realize this. Recent events such as the Baker report into the Houston BP Refinery explosion, the fall out from the Hatfield and Potters Bar train crashes and rafts of new legislation globally have ensured that every senior asset manager takes a more rounded view of how assets perform.

If you look back over all of the requests for additional information from senior management, they generally fall into one of the following four categories: (In no particular order)

1. How much are they producing?


2. How much is it costing me?
   
3. Am I getting good quality output on a consistent basis?


4. Are we hurting anybody or damaging the environment in the process?

If we analyze these questions we can see that they provide the basis for all areas where physical asset management can provide a substantial impact on the companies responsible for managing them.

Often attempts to define perspectives go off the rails because people are focused on how we manage the assets, rather than the impact they create for us. For example; a common misconception is to try to generate indicators in perspectives that align to functions within the company. Maintenance, operations and reliability are common groupings when this is done.

There are many issues with this approach. As always we need to be conscious of the behaviors we are driving. In this scenario we have a clear cut case of pitting existing silos of activity against one another, when what we need is the realization that all areas of activity contribute to asset performance.

Another frequent approach is to use break the perspectives down into the different resources required to achieve success. A focus on human resources, equipment performance, systems, knowledge and other areas is often included. Like the approach above there is one classic flaw in this, all of these perspectives cut across all areas where physical asset management can have an impact.

So any measurement in one area can often be used in another area, confusing the scorecard and watering down its ultimate message. So what is the ultimate message of the Maintenance Scorecard?

Basically the message is to manage the performance of the assets in a balanced fashion, so that our goals can be weighted in each of the areas where assets have an impact, in other words, to provide the company with an organizational compass for managing their physical assets.

Recommended Perspectives of a Maintenance Scorecard

We have already seen how the Executive branch of many companies sees their physical asset base. We can begin to classify these into perspective as below:

1. How much are they producing? (Productivity (1))


2. How much is it costing me? (Cost-Effectiveness (2))


3. Am I getting good quality output on a consistent basis? (Quality (3))


4. Are we hurting anybody or damaging the environment in the process? (Safety (4) and Environmental Integrity (5))

These four ways to view the asset base provide a pretty comprehensive picture of overall performance. However, there is still one point of view missing, and it is an area that is often forgotten or dramatically overdone.

The perspective is that of Learning (6), and it measures how well we are developing our corporate information to power future improvements. Of all areas of managerial activity, asset management is possibly the most reliant on information to sustain good performance over the medium and long term.

In modern asset management we suffer at both ends with regard to managing information. On one hand companies either collect far too much data on their assets, often wasting a lot of effort and time in doing so, or they collect next to nothing. (And what is collected is limited in its ability to help) Much has been written on data in asset management, the fact that it is vital for high confidence decisions and of the complexities of obtaining it. But what is not often written about is that successful asset managers will actually reduce failure data, not increase it, making this area even more difficult.

On the other hand maintenance departments all over the world are leaking knowledge at a dramatic rate. Much of the experienced workers we have relied on for decades are retiring, in fact many were cut during the cost cutting that went on during the eighties and nineties, and many young people are opting for other careers other than those of engineering and asset maintenance.

So the learning perspective covers a wide range of areas, but it all revolves around the management of information. (Data + Knowledge) For example; quality and integrity of data, effectiveness of training, and codification of knowledge into usable data all represent areas that we need to focus on in order to ensure that our successes are not short lived.

So in summary, a maintenance Scorecard that provides a company with a balanced view of how its assets are performing will need to cover the following 6 areas of performance.

• Productivity – How well are our asset performing? How well is our workforce performing? Is there any hidden productivity that we can unlock in any place?


• Cost-Effectiveness – Are we getting the best value for each dollar spent on the maintenance effort? If not how can we lever even further value out of it? Note: This is not the same as low cost which is not a concept supported by the author. Low cost has a tendency to become high cost in the mid term, either directly or indirectly.


• Quality – Are we delivering the level of quality required in terms of production? Are we delivering the level of quality required in terms of asset maintenance performance?


• Safety and the Environment – Instead of the reactive measures of number of incidents, how can we proactively measure our exposure to risk of asset failure in these areas?
  
• Learning – How well are we managing the information (data + knowledge) we are learning from today’s activities, in order to fuel tomorrow’s improvements?

If you have previously considered a more thorough and sophisticated method for developing, implementing and monitoring strategy in your physical asset base then I hope that this article has provided you with something useful or at least something to ponder.

If you are still developing long lists of unconnected indicators, which bear only a passing resemblance to any objectives that your organization currently has, then I hope it has opened up additional areas where you may be able to continue to improve the performance of your physical asset base.

For language options please use the babel fish icon at the side of the page. THis article was a joint effort with Dr Paul Davies Head of Global Risk Management for Lloyd's Register.

As companies move towards risk-based asset management, they need to be confident that their decisions will increase the profitability and productivity of their asset bases while minimising the exposure to the risk of catastrophic events. According to Knowledge Based Management's Daryl Mather and Lloyd's Register's Paul Davies, this is particularly important for the chemical industry where the integrity of physical assets is a source of competitive advantage.

For chemical and process plant engineers the integrity and performance of assets is a key requirement to the safe and efficient manufacture, storage and distribution of products.

In simple terms: “It's looking after the plant, the kit, the tools we need to do the job – it's common sense, it ain’t rocket science, and we've been doing it for years.”

All true, but as we know, common sense isn't that common and rocket science certainly isn’t beyond the wit of the chemical engineer. So why is asset integrity management (AIM) moving up the process industry's agenda?
Asset maintenance first hit the headlines during the late 1980s when it became a target for efficiency improvements throughout the process and chemical industries globally. Initiatives at the time focused upon traditional methods of improvement such as reducing the numbers of staff and trying to work smarter with fewer resources. Despite these cuts, the pressure remained for asset managers to continue to reduce costs and increase efficiencies.

At a similar time, industry in general began to be more aware of the unique responsibility of asset managers in minimising asset failures and so reducing the potential for incidents involving injury. This is reflected in global legislative changes, including the following examples:

• Changes to the way corporate incidents are investigated within the Australian state of Victoria in the wake of the Longford explosions of the late 1990s. A change that has altered the way jurisprudence is applied within that state.
• The introduction of bill C-45 into applicable law at the beginning of 2004 in Canada in response to the Westray mine disaster; bringing with it fines of up to CND$100 000 (Euro 70 000) and prison terms of up to 25 years for negligent actions or omissions leading to a safety event.
• Efforts to reinforce UK laws relating to corporate killing in response to the trial and acquittal of five people after the Hatfield train disaster.

Society in general is becoming less tolerant of preventable incidents causing harm or death, or incidents leading to degradation of the environment. Today we see the reaction to this in the response to recent events within BP, and the investigation into the Buncefield explosion in England.

For those of us who are active in the management of physical assets, as opposed to financial assets, there is one startling observation to be made from the above examples. There is no doubt that in the future, when things go wrong, there will be a requirement for greater accountability of individuals and organisations.

These twin pressures, continuing economic pressure combined with growing accountability for safety and the environment, are driving asset-intensive organisations to seek a more sophisticated means of managing physical assets, one that reduces risks of failure to a tolerable level, while enabling companies to increase the net present value (NPV) of the asset base.

When considered in conjunction with pressures from industry watchdogs, contractual obligations, and pressures from insurers, financiers and stakeholders, as noted previously, something more than common sense is needed. Asset integrity management becomes business critical requiring rigorous and professional management.

In response to these pressures an institutional change is taking place in the way that assets are managed and maintained. In the UK for example, back in 2002 the British Standards Institution (BSI) accepted the proposal for a Publicly Available Specification (PAS) that could be used to help manage asset integrity. Commonly referred to as BSI PAS 55 (specification for the optimised management of physical infrastructure assets), the specification was sponsored and developed by a team drawn from industry, regulatory bodies, and other interested parties from a wide range of sectors. It was formally launched in May 2004 .

On 2nd February 2006, UK water regulator Ofwat issued letter MD212 for managing directors in that industry. This letter spoke of the progress of the Common Framework, an initiative of the UK Water Industry Research (UKWIR), and referred to its evolving role as a framework to guide capital maintenance planning .
On the 14th July 2005, Ofgem, the regulator of the UK energy utilities released a letter titled “refocusing Ofgem's Asset Risk Management (ARM) activity” which referred to a voluntary comparison process against the principles contained within PAS 55 as a tool that “promotes requirements, which allows operators to demonstrate effective asset management”.

Recent history has also included a report commissioned by the Office of the PPP Arbiter (OPPPA) to review good practice in asset management evaluation and to draw on this to develop an Asset Management Evaluation Framework, using PAS55 as one of the key evaluating tools. PAS55 has also been used in recent signalling management evaluations prepared for the UK Office of Rail Regulation.

Regardless of the nuances between the various benchmark tools, and the differing approaches in each of them, it is now obvious that there has been a fundamental step change within asset intensive industry towards a risk-based approach to managing physical assets.

Only recently have the first companies achieved certification against PAS 55; examples include: National Grid’s electricity transmission business in the UK, and Essent Netwerk’s electricity and gas distribution activities in The Netherlands. As it becomes more widely known that the specification ‘fits’ well with modern “risk-based” standards such as ISO14001 and OHSAS 18001 the number of organisations undergoing, or planning for assessment is growing in Europe, Asia, and America.

This provides welcome guidance for companies as they make the change towards higher yields from their physical assets for lower risk of asset failure. As with every new method of management there are challenges as well as rewards. The change to risk management brings with it a range of polemical problems such as the lack of the right quality and quantity of data, the need to consider aspects such as man-management issues relating to communication, leadership, roles and responsibilities; the intangibles of reputation; information on performance and condition of assets; and costs such as capital investment and operating budgets.

The future is clear for those of us engaged in asset management in the early part of the 21st century, particularly within the process and chemical industries where the integrity of physical assets is a source of competitive advantage.

Companies need to be able to make high confidence asset integrity decisions, enabling them to increase the profitability and productivity of the asset base while minimising the exposure to the risk of catastrophic events. Failure to do so will allow competitors to gain a significant lead with regulators, financial markets, stakeholders and profitability.

Bibliography

1. British Standards Institution. PAS55, Specification for the optimised management of physical infrastructure assets.
2. MD212, 2nd of February 2006, Ofwat, www.ofwat.gov.uk
3. Refocusing Ofgem's Asset Risk Management (ARM) Activity,14th of July 2005, Ofgem, www.ofgem.gov.uk
4. Asset Management Evaluation Report, © Lloyds Register, prepared for the Office of the PPP Arbiter, 2005
5. Independent Assessment of SICA using PAS 55 as a guide, © Lloyd's Register Rail, prepared for the Office of Rail Regulation, July 2005
6. Mathematical Aspects of Reliability-centered Maintenance, H. L. Resnikov, National Technical Information Service, US Department of commerce, Springfield
   

Mining companies are at the top, (or near the top) of a boom in commodities prices that looks set to continue for some years yet. The entrance into the consumer markets of China and India has irrevocably changed the familiar boom and bust scenario of this sector. As long as these economies continue along their pathway of rapid development, then the high levels of demand for commodities such as metals, and petroleum, will also continue. This issue is discussed at length in my new book, The Maintenance Scorecard.

For those in the mining community, this represents a once in a lifetime growth opportunity. Yet at the same time it poses unique pressures and problems for asset managers within this sector. Increased demand has everybody running to increase supply, so far so good!
The problem is that there are limited resources for doing so! Instead of feeling the competitive pressures that manufacturing regularly feels, they are feeling the pressures of not being able to increase profits quick enough! A good problem to have!

In the field of heavy mobile equipment there are a limited number of suppliers, each of whom require relatively long lead times for delivery of new fleets or equipment. This is not like buying a Ford motorcar, haul trucks, dozers, electric rope shovels and blast hole drills are multi million dollar pieces of equipment. Not only that, but supplies of parts are also extremely limited.
So, one of the many goals for asset managers in mining during this growth period is to extract the maximum economic value from their existing physical assets. This will require targeted strategies aimed at decreasing unit costs, extending asset life, and combining reliability and production strategies to ensure maximum possible output.

Easy to say right! But how is this going to come about? There are ranges of possible options. Mining is an old industry and one that has been the subject of many studies in productivity and efficiency. Principally, however, the goal needs to be on maximizing the whole-of-life net present value of the asset base. This means the value of all the fleet will ever be able to earn for its owners, minus the costs, in today’s money. (Deflated)

To do this there is a need to look at several key aspects:

How to minimize down periods (Not downtime, but operational down periods)

Why do haul trucks, in particular, have operational down periods? Various reasons. Service times, lunch breaks, checks of nagging faults, tire changes, and a range of other reasons.
So to minimize these there is a need for high levels of choreography between the maintenance and operations departments. In-pit services, breaking service periods into smaller parts, small modifications or changes to extend time between service periods, and in pit tire changes, are all effective means of tackling this problem.

Effective use of all potential haul time can increase the ability of the company of reducing the overall fleet size also. This is a particularly important aspect of fleet management. If the fleet can manage the same amount of tonnage, with a reduced number of producing units, then overheads can be reduced. (Large scale overheads, last time I checked tires for these trucks were at USD$40,000 new)

This is a particularly sensitive issue in mining companies. Many companies are still highly capitalized for the production levels that they are trying to produce. The ability to deploy these assets more economically can have a dramatic and immediate effect on profit and loss equations.

Maximizing uptime from the asset management point of view!

Challenges in this area are three fold. Sustained increased opportunities for making profits have created an almost unique situation for miners. But, this is also coupled with some new and extraordinary challenges, increased unit size, and increasing complexity of mineral deposits, has added to the challenge facing asset managers in raising the reliability of the haulage fleet.

While electric rope shovels reached their maximum before the turn of the century, haulage trucks are still growing and are regularly getting larger and larger. Sounds good right? From a productivity point of view this is generally great news! But what strains does it put on the asset management function? When you have larger productive units, then the impact of losing one of them suddenly grows also. So keeping these units running takes on a dramatically higher level of importance when compared to a mere ten years ago.

The challenge of mineral complexity basically means traveling greater distances, over more arduous terrain, all of which puts greater strain and pressures on the mobile fleets. With all of these factors together, there is a driving requirement for asset managers to look at more sophisticated ways of managing their fleets.

Having maintenance periods driven by on board condition diagnostics, instead of time-based interventions is one option that will reduce the time away from the coalface. (So to speak) Ensuring that maintenance is driven by the changing performance and risk requirements is another potentially rewarding strategy. Fleet manager do have the benefit, on one hand, of modular equipment. Standardized parts components and processes. However, where mobile fleet management differs from anything else is the potential variability of the operational staff, and operating terrain, and this changes again depending on location and other factors.

These combinations of conditions make the performance and risk profiles of each unit almost unique. It definitely will differ from company to company and from site to site. So the maintenance regimes in place need to be built based upon these issues, not just some one size fits all regimes that worked for some company somewhere.

Tight project control and turnarounds of refurbishment projects
With supplies limited, the other option is that of refurbishment of existing fleets. A smaller cost option initially, but generally with a reduced return on investment than that of fleet renewal. This project, in the modern asset management era, can be managed in ways that previous projects were not able to be.

There are obvious areas of increased efficiency such as parts lead time management, just in time replacement, tight control over the actual refurbishment process, (sacrificing initial costs for speed of return where the cost/benefit equation justifies it, and ensuring that hand-back is one that is smooth and free of run-in failures. Grouping of all major tasks due in that year is also an option, designed to increase the operational uptime by doing everything at once. The small cost of early replacement of age-related components is easily offset by the production opportunities offered by increased uptime.

If we are going to be focused on getting the maximum economic value from the physical asset base then there is a need for some “smart” planning and scheduling. For example, for the large (200 ton +) haul trucks there is currently a world shortage on tires. One strategy for this is to try to source good quality second hand tires. Some other strategies include rotating tires from haul trucks undergoing refurbishment, or mid-life overhaul, to be used in other units in the fleet. Amazing as it sounds, haul trucks are often out of service due to no tires being available. (A situation not dreamed of 5 years ago!)

However, the actual setting of the refurbishment timeframes is something that today should be able to be done with a greater degree of accuracy. Advances in the fields of reliability modeling, deterioration modeling, and Whole-of-Life thinking have made prediction of refurbishment and replacement intervals a real possibility in a way that previously it was not. By managing carefully constructed reliability models, companies can pinpoint outage times, designed to make full use of the economically useful life of the asset. This could mean extensions to the normal mid-life overhaul, or end of life refurbishment. These are major opportunities not only to increase overall NPV, but also to delay spending on large-cost items.

Vendors as Partners

When purchasing a new fleet, most mining organizations are looking to involve the vendors as partners in the whole-of-life management of the fleet, and seek guarantees over costs. Managing these relationships, or MARC (Maintenance And Repair Contracts) is an art form in itself, not only from the point of view of the mining organization, but also for the vendors. There are many techniques to managing MARC contracts for maximum benefit, and at the heart of all of them is a comprehensive view of Whole-of-Life asset management.

From the company’s point of view they need to be careful to get all the benefits out of the contract arrangement, so close management is a key issue. But from the vendors’ viewpoint, they need to make sure they deliver at least the minimum costs per period that has been contracted. Many vendors have lost money on the management of MARC contracts, and it is an issue of vital importance to both sides of the contract.

Net present value

All of these are important contributors to the net present value of your mining fleet. However, there are obviously ranges of other areas that will need to be considered. Planning and scheduling, large part change out and life extension, and continually improving operating procedures are just some of the day-to-day rigors of this challenging area.

However, one of the most valuable aspects of a useful whole of life model is that is accurately represents the cost profile of the equipment. Many of the current methods in this area take forecast maintenance routines only into account. While this is by far the largest part, when done correctly, there is also the accurate prediction of corrective or reactive actions that are often overlooked. This is one of the fundamental downfalls of all CMMS and EAM systems that I have seen in today’s market.

Using “an average of the past X years worth of history, minus 10% for improvement”, as many NPV models do, means almost nothing in terms of forecasting real corrective costs. WoL models need to be built to capture not only the predictive task but also the predicted task, not only the detective task but also the detected task, as well as the likelihood of those tasks that we have determined are managed most cost effectively in a run to fail fashion. (Which may change as the operating environment changes)

When you establish a true proactive whole-of-life model, then you can determine, almost live, what the expected profit will be from the fleet, thus modeling the effects and impacts of changes and decisions made along the way. Current functionality in CMMS and EAM systems does not generally cater to the possible, merely forecasts of the likely based on history. (With all of the flaws that this can bring with it)

This challenges one of the fundamental misconceptions regarding whole-of-life costing, that it is about minimum costs. It is not! It is about minimum costs for a given level of performance and risk! (A dramatic change in focus)

The final challenge

With all of the challenges currently faced by the mining industry one stands out above the others. That is the retention of knowledge within the industry, and within specific companies. The mining workforce, as a result of many reasons, is aging rapidly. It is retiring, moving to more hospitable locations, changing industries, and not entering the industry at the rate that is was a mere twenty years ago.

So good quality human resources are becoming scarcer, not only that but as ore bodies are being exhausted and new ones found, mining locations are becoming more remote and inhospitable, so there is less incentive to move there for many people. As well as scarcity of resources, there is a dramatic increase in the demand for them. So companies are fighting to keep hold of good people, and the skill base is becoming spread thinly over many of the newer and expanding sites trying to exploit the opportunities in the marketplace.

The retention of knowledge is one of the principal challenges that this industry has and one that will impact on every other aspect of its profitability in the short term. While things are good, and profit margins are up, there is a need to look towards the days when they wont be again. All long term miners know that every bubble bursts, and every boom busts, eventually.

While you are in a position to do so, look at getting things right for when the lean times come again. Riding down the unit cost curve was not so difficult when everybody was coming from an era of inflated resources, inflated inventory, and over capitalization. It will require a much more sophisticated approach now that these easy benefits have been taken out of the industry. An approach focusing on knowledge engineering, net present value management, and sophisticated means of managing the mining haulage fleet, workforce, and information management assets.

Performance measurement is one of the methods at the heart of propelling an organization towards breakthrough performance. This generally takes the form of performance indicators, key performance indicators, and measurement programs all designed to focus the attention on various areas of performance.



Within the Maintenance Scorecard, MSC, the approach taken is to create metrics based on desired performance levels, rather than employing some form of measurement by pick-list approach to building a metrics program.
The old adage is “if you can measure it you can manage it”. The Maintenance Scorecard takes a slight turn from this. Before you think about how to measure it, fist work out what it is you want to manage!


Regardless of the approach taken, at some stage the organization finds itself considering some of the advanced techniques within performance measurement. These include strategic theme key performance indicators, leading and lagging indicators, opposing indicators, risk-based indicators, and modern display techniques.


Within this short article I am going to try to clarify how Leading and Lagging indicators are treated within the Maintenance Scorecard, and how they can add immediate value to your companies’ performance management efforts.


What exactly are Leading and Lagging Indicators?


It pays to remember that we are talking about measuring and managing performance within this area of the discipline. So we need to directly relate these titles back to the measurement of performance.


Quite simply leading indicators lead performance, and Lagging indicators lag performance. In other words, one tells you where the performance of your assets, teams, processes, or other resource, is going to, and allows you to act in a proactive manner. While the other tells you where it has been, and allows you to take reactive action!


At first glance this seems counter-intuitive doesn’t it. How can we measure things that have happened, and think we are going to be able to predict future performance levels? The trick is to fully understand the processes you have in place, and how that fits into the rest of your day-to-day management of the physical asset base.


Some examples of Leading Indicators


So, Leading indicators allow you to take action proactively. So to truly be a leading indicator they need to predict, or provide some indication, of future performance levels and/or issues.


For example: most work order systems are managed through some form of priority rating of the corrective, or reactive, work orders in progress. This rating is often related to time and is used to determine how soon after creation the work order should be done.


It is used in capacity scheduling, ad-hoc work order execution and a range of other business processes that have to do with work management. The basis of this process is a link to time. This is done, normally, using a combination of the consequences of the failure mode if it is left unattended to, and the importance of the equipment to the company.


Within this process a performance indicator, or report, would be the Age vs. Priority Report. This report displays the number of work orders, in their respective priority groupings, that have not been completed on time. Some of these also display how late the work order is.


Figure 1: Age versus priority example



The graph in figure 1 clearly shows that a number of Priority1 work orders are between 5 days and 1 week late. In this case we don’t know what the time horizon is for Priority 1 work orders. But it is probably less than one week! If you look at the 3-week mark on this graph one or two have made it out this far. Not good!

So, what is this telling us? It really depends on the underlying work order prioritization method being used. But basically it is indicating that we are faced with a higher level of risk than our system is supposed to manage. This probably means that something is about to fall apart within the very near future.


This metric, as with any other, should be produced in such a way as to be able to drill down into the data that produced it. This would take us to the late work orders, the equipment they were raised on, the failure mode, or potential failure, that has triggered them and possibly even the consequences of them going horribly wrong.


This is the essence of leading indicators; they tell you where performance is likely to go. Things aren’t bad in the priority example yet, but it looks like they soon will be! If used correctly leading work orders can add a proactive element to what is normally a reactive activity.
Leading performance indicators are few; the best proactive measures come from a specific need within a specific company, rather than selecting from a range of “off-the-shelf” measures.
Schedule compliance (Yup, that one) is a good example of another leading indicator. (But with a twist) Normally this metric is used to evaluate how the scheduling and execution functions are working together, how the workload is being managed, and as an indicator to how much unexpected work occurred and pushed it out.


For instance: from RCM we learned that an On-condition task is scheduled to occur at a frequency less than the P-F Interval. I won’t go into why as that is a whole different area, but for the sake of this article we will take this as the principle.


Therefore there is only a limited timeframe for the on-condition or predictive task to be carried out. If the P-F Interval is 4 weeks, the frequency of inspection is, say, two weeks, and the actual inspection frequency is 6 weeks. Then we can see immediately that we are only going to predict this failure mode occurring by dumb luck!


Once is okay, we can react to that, but if the task is regularly done at periods longer than the P-F interval then the most likely outcome is that we will have an unpredicted failure on a failure mode that our analysis told us needed to be predicted.


Again, the underlying concept is a deep understanding of what it is that your processes and regimes are trying to accomplish, and the effects of these on other areas of performance. And again a standard metric can be used to give a vastly different viewpoint.
Some examples of lagging indicators


Lagging indicators are just about all of the rest. These are indicators that tell you when something has gone wrong or is in the process of going wrong. MTBF, Availability, Planned versus reactive ratios (if these are still used) are all examples of lagging indicators.


Although we have spent most of this paper on leading metrics, that these are also very important. Without lagging indicators we have no idea of the impact, good or bad, of the work we are doing on a daily basis, or of the improvement initiatives, or of recent modifications and so on.
I hope this has cleared up some issues regarding leading and lagging measurement of performance in asset management. The intention of this article was to enable you to apply these principles to your workplace immediately, so if you do, or if you can see how they would be applied. Please send me an email and let me know! daryl.mather@gmail.com

For language options use the babel fish icon to the right.

We spend a lot of time looking at asset management rather than at the business of managing assets. This weeks column looks at some of the issues associated with changing culture and sets out a roadmap of sorts to help you in driving through corporate change.

Falling resource levels, rising competition levels, increased regulation and legislation, and increased needs for high levels of reliability have resulted in a growth in the importance of asset management to capital intensive companies. This, in turn, has resulted in an increase in the number of companies looking to extract additional economic value from their physical asset base.

In my recent book, The Maintenance Scorecard , I refer to something called the benefits plateau, which is a result of companies trying to implement too many options at once without the right level of focus on what is really required to achieve corporate goals.

However, once the initiatives are off and running companies need to make sure that they are going to stick, and that they are going to become a permanent part of the day-to-day activities of the organization. This means changing the way that the company does business, and it is one of the key areas where reliability initiatives continue to fall over! This means changing the workforce culture! Great! Got it! The last five consultants I spoke to told me the same thing.

So… what’s culture?

Culture can be identified as the way that a company, as an entity, thinks thus driving how it acts. Lets look at that in some more detail. When one person thinks a certain way this is referred to as a mindset, his or her way of looking at things and of interpreting the world. When a group of people think in the same way then it becomes a paradigm, and the culture of any organization is made up of the paradigms of its people.

One of John Moubrays’ more regular quotes was “if you want to change the way that people act, you have to change the way that they think.” If we tie this in with the paragraph above then it becomes a powerful tool for changing workplace culture. So, to put this into practice we need to change the mindsets that make up the paradigms of an organization. You are probably thinking, that’s easy for you to say, harder for us to do! And I would agree with you 100% on that!

How then can you, and your company, go about implementing some advanced reliability technique, method, or tool, and ensure that it is both effective and permanent? The rest of this short article focuses on some of the techniques that I personally use in my working life every day.

As a consultant, managing through change is what I have been doing for the last 12 – 15 years and I would like to share with you some of the lessons that I have learned in a way that makes them a lot more painless for you to learn, than they were for me to discover. This is not what I think this is what I do! So these are road tested to the extreme!

Breakthrough cultural change tip #1: Create a new belief system

As we have looked at earlier, changing culture requires a change in thinking. So we need to begin at the beginning. What are the new paradigms that your organization needs to have? How do they differ from what “we” think today? And most importantly, how can we introduce these to the workforce in a way that will get them to understand and buy into them?

These are the first questions you need to ask yourself. Define what it is you ultimately want to achieve then look at the thinking that will be needed to support that. Adult learning is different from learning in infancy. Adults are smarter, (mostly), more experienced, more cynical, and generally less willing to believe things that they are told.

So you don’t tell them, you show them! Adult learning needs to be delivered in such a way so as to ensure that the people on the course, seminar, or training event, build their own conclusions supported by logic, fact and their inherent ability to reason. In all my time consulting I have yet to come across a single person who did not respond positively to something that agreed with their internal logic!

Sub-tip: Elements of adult learning

To be effective, any adult learning program, whether it be developed in house or delivered by en external provider, needs to contain the following elements in order to be effective in challenging long held belief systems:

Socratic teaching. This is often referred to as teaching through questioning. As the title suggests it comes from methods Socrates used to teach his students. (As opposed to didactic teaching) So it has stood the test of time I would say! Socratic teaching is about being inclusive, continually getting the course participants to respond to questions and to drive the lesson forward.

The trick, and it is a practiced technique, is to get them to arrive at a point where the limits of what they know, or the errors of how they think, becomes immediately obvious to them.

This sounds difficult and the first couple of times that you deliver this sort of a lesson it will need to be very carefully structured and focussed. After a while it becomes an almost instinctive method of teaching key learning points.

Why is this so powerful a technique? Because they participants arrive at the conclusions themselves, through their own reasoning abilities. You didn’t tell them anything just pointed them at something! And if they thought of it, rather than you telling them, then they are more likely to believe it and remember it. (Don’t ask me why, I don’t know why. I just know it works)

Participative learning. If you do something you are far more likely to remember it than if you are told it. Think about it in your own life, if you learned a craft, the theory side of things was only interesting once you got into the field and did it for real. If you learned an engineering discipline, then it was only once you got into the real world and put it into practice that the reality of it became obvious.

Most modern training courses have an element of interactive exercises and practice sessions. However, sometimes these are unrelated to what’s actually being taught and can often just be something to fill the time. In worst case scenarios exercises are the unimaginative kind that say “Now make a list of the high priority items in your plant”. Wow! What’s to learn here?

If exercises are going to be effective they need to challenge those doing them. Argument, in these situations, is not a bad thing at all. In fact it is a good thing and shows that people are thinking, being challenged, and are going through the pain of changing the way that they think.
Participative learning can be group driven, or individual. It can be focussed on an adult learning game, a set exercise, a group discussion, or any other range of variables. In designing your exercises, don’t make the mistake of revealing everything at the beginning. Structure it so that they reveal things to themselves, or with your guidance, during the process.

Apply the techniques to their day-to-day activities. This is a key element that is often overlooked. It is overlooked because it can often throw up things that are weird, out of the ordinary, extremely difficult to deal with and sometimes controversial. Why? Because no matter who you are, it is likely that they know their plant a lot better than you will ever be able to!
So, if you are going to include a session where they apply the techniques to their own equipment then you need to be 100% sure that you understand your subject matter thoroughly. If so then you can deal with the curve balls that will come at you once people start to apply it to their own situation. Thinking on your feet is not a nice-to-have ability for asset management trainers it is a must-have!

Why is this so powerful? Because it combines the elements of the other two steps. Socratic learning through questioning current practices and using their new found logic and understanding to solve them, and doing rather than hearing about, so they can learn from the results.

As a quick warning, unless you are looking at something very simple, don’t think that you are going to get a fantastic result that you can use in the plant immediately. Take the pressure off everybody and let him or her learn through making mistakes.

So this is the basis of changing culture. Why do we need to do anything else? We have changed the way they think. Right? Wrong! We have only just begun. After the workshop or training session they are going to go out into the workforce with a range of people who think nothing like the way that they now do. And these people are not going to “get it” just from a passing conversation.

If you don’t follow up immediately then the results will be, changes to thinking 0% - 20%, changes to the way they do work 0%-15%, changes to the way the company works 0%!

Breakthrough tip #2: Prove it!

This is key to success. As a consultant it is my job to continually be backed up by a successful track record. In my business, having a scorched earth policy will only lead to reducing levels of business and ultimately a forced career change! If you are going to put in place a successful change program you need to think like a consultant. Think end of life, not end of project. How will this go on to be a fantastic reference for you within your company and beyond? Through its success!

So, to prove it you need to get the course participants to apply it to their areas of activity almost immediately after the training! Get them to apply the principles of what they have learned, under your expert guidance, to an area of their daily work. Whether it is RCM, root cause analysis, knowledge engineering or any of the other activities that are available to you, this is a fundamental step towards your ultimate success!

Using their logic and new understanding of a particular area, get them to reason through a problem or issue Arrive at a result, and then go about putting the result into practice. Through it all, make sure you remind them, and yourself, of what you have achieved. This means tracking the benefits. Make sure that they are aware of how their efforts translate into an impact on the corporation. Either through increased productivity, profitability, reduced risk or any of the other key areas that your company is focussing on.

Why is this a powerful cultural change tool? Because they see that what you have taught them actually works! It is not just theory, whiteboard magic or “slide-ware”. It is a real, practical method that they can apply to change their situation.

At this point we start to get into some of the myths surrounding cultural change. Most people are afraid of changing their current situation. This much is true. But, people do want to contribute, they do want to make things better, and they do want to improve the way that their company works. (And often want to better themselves personally in the process. Nothing wrong with that!) Despite what you may hear, it has been my experience that this is the “what’s in it for me” factor.

Breakthrough tip #3: Check it!

Put in place a monitoring regime to ensure that what we said we would do, we actually did. This is where elements of the MSC may be of use to you also. Place some form of scorecard or performance monitoring regime around the asset, department or whatever it was that you applied the techniques to.

Learning about new ways of doing things will challenge their belief system and allow them to look at accept that there are better ways of doing things. Putting it into practice will enable them to see that it really does work and is not just some theoretical program of the month! But, seeing for real that it did work, monitoring the metrics in place to watch the benefits they said would appear become reality. That’s a sealer! And it drives home all of the things that they have learned, in a number of different ways, up to this point.

Breakthrough tip #4: Re-apply it!

As things go on, changes to the way that the company operates, changes to the quality of data available, changes to the way that the workforce is structured and any number of other variables could mean that what you wanted to achieve didn’t come about. Or what you wanted to achieve has been affected by changes in the environment. At this point there is a need to revisit the exercise, re-apply the techniques with the benefit of new knowledge and hindsight, and begin the process of monitoring it all over again.

This is the essence of continual improvement. A workforce, now thinking along the lines that we set out to achieve at the beginning, monitoring and adjusting processes and other tools to ensure maximum performance to what the company requires at all times. Steps three and four become the core of the day-to-day application of the new culture, and the company has successfully changed an element of the workforce culture in a way that will drive it further along the road to breakthrough performance.

Good luck and I hope this was of interest!

The Modern Asset management blog is now available in Spanish, Korean, Russian and a range of other languages. Please use the Babel Fish icon at the side of this column.

By Daryl Mather, author of The Maintenance Scorecard

After decades of cutting costs through traditional methods maintainers are finding additional efficiency gains to be either limited or physically impossible. This article looks at sophisticated new metrics and methods to unlock the hidden maintenance workforce in your plant.

Increasing challenges for maintainers

After decades of evolving in virtual isolation, the discipline of physical asset management is now attracting interest from corporate management, institutions, regulators and government bodies. Asset managers are feeling the impact of this attention in two areas:

1. First in the increasingly sophisticated requirements that they generate. For example; the requirement for detailed and defensible budgetary submissions to regulators, accurate whole-of-life cost forecasts for shareholders, and confidently managing asset risk to tolerable levels.
2. Second in the increased level of pressure to increase the return on capital through traditional areas of efficiency and cost savings. (Labor and materials)

On one hand this has invigorated the interest globally in techniques and issues related to reliability, which is a welcome change to what maintainers have been used to in the recent past. On the other hand it has also created a significant issue for asset managers.

After decades of cutting costs using traditional methods such as reducing staffing and inventory levels, maintainers often find that further reductions in this area are either limited, or nearly impossible. And in the rush to embrace reliability methodologies, it is often forgotten that reliability initiatives are not effective unless they are implemented correctly, and executed efficiently.

For example; a routine predictive maintenance task, generated from an RCM study, may call for 3 monthly, say, vibration analyses of the bearings of critical motors. (Such as the ventilation fan motors in incineration plants) In defining this strategy the approach used is logical and follows the criteria set for selection of a predictive maintenance task. However, if we do not perform the predictive task at the desired time, then we run the risk of missing the warning sign that it is designed to detect.

Once or twice is not an issue generally speaking, but when a task such as this is routinely performed late, deferred or not carried out at all, then we are facing the very real threat of having an unpredicted failure on what we have defined as a critical asset. Similar can be said for all of the different types of routine and proactive tasks generated in an RCM analysis.

So how can asset managers improve their efficiency even more than they have over the past couple of decades? And do so without causing the performance of the assets themselves to suffer?

Many companies are implementing methods such as LEAN as it was originally applied in manufacturing environments, and often with good results. This has also bought with it measures such as Overall Equipment Effectiveness (O.E.E) for monitoring plant and equipment performance.

However, to adapt LEAN into the world of maintenance management requires a modified approach because the operating characteristics are fundamentally different from those of production. There are many reasons for this but within this article we will be focusing on the way that work is performed.

Unlike their production counterparts, maintainers often work on a wide range of tasks. Some are routine, some are regular but infrequent, and sometimes they are confronted with tasks they have never come across before. Each day in the maintenance workforce is a different day that could bring with it any combination of these tasks, often under the pressure of lost profits, and requiring a combination of skills, technical knowledge, and information resources.

If somebody set out to design an environment that provided continual and sometimes sudden logistical challenges they would be hard pressed to beat maintenance in asset-intensive industries.

Revealing the “Hidden Workforce”

If maintainers are going to effectively meet all of the challenges outlined above, then they are going to need a measure that unlocks the “hidden workforce” in the way that Overall Equipment Effectiveness unlocks the “hidden plant”, revealing a resource that can be tapped into to reduce the unit costs of maintenance.

Such a measure can be found in the Maintenance Productivity Factor (MPF) family of metrics.

Maintenance Productivity Factor (MPF) is a metric that combines efficiency in execution, quality of maintenance work and the impact of organizational effectiveness to measure the productivity of the maintenance workforce.

The formula is:

Estimated Work Time x Quality of Work x Organizational Effectiveness
Hours Worked (Paid)

Estimated Work Time (ET)

As the name suggests this relates to the estimated labor hours for a task. In order for MPF to be a useful measure the work and labor estimates contained in your job card system or in your CMMS need to be relatively accurate. Often when companies embark on a productivity measurement exercise this is one of the first areas where they focus their attention. A tip here would be to make sure that your work estimates are not the best possible time, nor the average time, but the time the task should take if it is properly planned and scheduled and the right skills are available to do the task.

Even if your work estimates are not to a high level initially, MPF will still provide a productivity indication based on what you think it should take.

Quality of Work (QW)

This refers to the level of rework required after maintenance is carried out; these are the losses due to things intangibles such as training and skill levels, knowledge levels, workforce morale levels, poor components and a range of other issues.

This is notoriously difficult to get agreement on and then to measure. However, once there is a clear definition within the company, and then a clear and easily followed process to record this, it is a useful statistic for many additional measures of maintenance performance.

It is in the recording of issues such as rework that we confront head-on the major stumbling block to good measurement systems, that of culture and corporate attitudes. For example, if somebody is aware that recording rework is going to get them clobbered, well, what would you do?

Recording it is sometimes as simple as a code on the work order, or a link to a past work order indicating a connection. Either way, once it is accurately recorded it can be managed.

Organizational Effectiveness (OE)

Here we look at how effective the organization is at allowing people to do the work assigned to them. Within MPF this is usually defined as hours of delay time. Many companies first come into contact with how effective their corporation is once they start with basic initiatives such as Capacity Scheduling for example.

For example, waiting for parts, equipment availability, labor resources, attending meetings, permits and a range of other day-to-day issues that you would be aware of where you work. All of these represent the lost time that occurs each and every working hour, a large part of the hidden workforce that we are trying to uncover.

Most work order systems available today have the ability to record work delay codes in some form or other, if you are not doing so now then this will need to be built into the work processes for the maintenance teams.

Hours Worked

Even today with all of the technology available to us many companies have great difficulty in accurately tracking hours worked per task. In most cases this is just an effort in applying easily used systems and processes in a disciplined manner. However, sometimes there are road blocks in terms of changes to information systems in particular. Although surprising in the 21st century, there are still some enterprise level systems that cost an army of consultants to make minor configuration changes.

A Worked Example

Let’s take for example a strip out and repair of the drive end bearing on a centrifugal pump within a process industry plant. The pump is a redundant item so there is no direct impact on production. However, the time to repair the pump and return it to service is 8 hours, 2 hours more than the 6 hours on the accurate work estimate.

During that period there was a need to remove the new bearing once as it had been installed in a way that had done damage to the outer races. This took an estimate of 90 minutes, which is roughly 20% of the total time allotted.

In the course of carrying out the work there were also a number of delays in finding the correct parts, the correct tools, and then in finding some bench space to work in due to other large scale projects currently underway. This also took an estimated 90 minutes of the total time.

In this case our formula would be:

6 x 0.8 x 0.8
8

Where:

• Estimated Work Time is given as being 6 hours
• Quality of Work is a total of 8 hours minus the 90 minutes that were required for rework purposes. In percentage terms this is 80% good quality work during that time. (or 0.8)
• Organizational Effectiveness is given as being a total of 8 hours minus the 90 minutes that were spent looking for parts, space and tools. In percentage terms 80% of working time was not impacted by these delays. (or 0.8)
• Hours worked is given as being 8 hours.

The result:

6 x 0.8 x 0.8
8

Is equal to a MPF of 0.48 or 48%

This means that only 48% of the hours that are paid for are productive.

To take this a step further we can use the metric Maintenance Productivity Cost (MPC), which is:

Rate of Pay
MPF

Or

$35 (say)
0.48

So, the actual cost for every productive hour of work in this example is $72.96. A startling figure when the company is only paying $35 per hour for labor. This is where part of the concept of the hidden workforce comes from, there are hidden costs associated with poor productivity that we know about, but often we are not able to accurately measure.

Most companies do not need to go into the actual costs of productivity (MPC) and will be able to make use of the Maintenance Productivity Factor figure as a useful guide to their levels of efficiency. Yet once a company does make the relationship between productivity and cost it often provides a pretty powerful indication of the level of hidden productivity that exists in their plants.

Although we like to think we can eliminate inefficiency in one blow, the fact remains that it is cyclical in nature and is related to the ebbs and flows of the workforce itself. As older more experienced people leave the organization, newer and less experienced people enter. The probability of rework, which is normally limited anyway, begins to rise, as does the probability of work delays due to unfamiliarity.

It is sometimes the case that MPF is equal to or greater than 1. In the cases where the author has observed this either the workforce is working at maximum levels of efficiency in an effective work environment, or the work estimates are too conservative.

Using either MPF or MPC we can establish pretty quickly how productive our maintenance efforts are for each task that we do. But if we want to find out how productive the workforce is as a whole then we need to look at not only the time when we are doing work, but also at the times when we are not doing work.

For example, due to delays in gaining access to equipment, or due to lack of planning resources, a workforce may not be fully utilized during a given period. In these cases the metric Workforce Productivity Factor (WPF) is useful and is calculated below.

Paid Hours

Utilized Hours

A problem with this is honesty in recording, and again we come against the problem of cultural issues in measuring maintenance performance. Here there is a strong chance that even when the workload is light or non-existent, people will book hours to other tasks, confusing the picture for all of these areas. This is particularly true when we are measuring the productivity of a contract workforce.

In this case we will say that for the period we had a total paid time of 5000 hours, and total utilized hours of 3000 hours. Giving us a Workforce productivity factor of 1.6, meaning we have paid 1.6 times what we utilized.

The final indicator, at a workforce level, is Workforce Productivity Cost (WPC) as detailed below:

MPC x WPF

Or

$72.96 x 1.6 = $116.74

This means that at a workforce level we are paying $116.74 per productive hour worked, even though the figure on the accounts is a mere $35 / hour.

Summary

The Maintenance Productivity Factor family of metrics represents a sophisticated index to drill down into already challenged maintenance departments to find areas where even greater efficiencies can be made. These indicators are used regularly in asset intensive industries in applications such as:

Driving out poor working practices in the quality of maintenance work; such as identifying frequently occurring human errors and other intangible causes of rework.

Comparing outsource service providers and internal labor on a like for like basis. (Rather than on hourly costs alone)

Targeting and improving delay reduction initiatives

Highlighting poor organizational practices that are leading to poor workforce productivity.

It goes without saying that the MPF goes hand in hand with a rigorous data based root cause analysis technique. So that as problems are observed they can be addressed immediately.

As organizations become more familiar with using MPF figures and formulas it can also start to be applied to various sections within the maintenance workload such as determining the productivity of routine work, or of corrective or reactive work and so on. However, even though all are useful, a company need only start with the initial Maintenance Performance Factor to begin to highlight the amount of productivity they are getting out of the hours they pay for.

If you would like to receive a short article on how to implement the Maintenance Productivity Factor (MPF) in your plant please send me an email to daryl.mather@gmail.com quoting this article.

Bibliography

• The Maintenance Scorecard, Daryl Mather, Industrial press ISBN 0831131810
• Asset Maintenance Management, Dr Alan Wilson, ISBN 0831131535
• Unleashing the power of O.E.E, Robert Hansen, MT-Online article

Daryl Mather is the author of The Maintenance Scorecard and writer of the Modern Asset Management blog. He is a specialist in the fields of asset management and has assisted companies to increase profits and productivity in over 25 countries. He works in the Middle East and can be reached on daryl.mather@gmail.com