Asset discovery is key to understanding business risk
Organizations know the value of Business Intelligence (BI) in monitoring sales performance, analysing the quality of manufacturing processes or customer service and tracking financial indicators. How many, however, are leveraging this technology to assess the corporate risk associated with the tough capital investment decisions now required across an organization’s asset estate?
With the economic outlook becoming more conservative, senior managers can be prone to rewriting investment strategies and business plans while under pressure to make rapid changes. There are, of course, huge risks associated with such decisions – from escalating maintenance costs to business damaging equipment downtime. Irrespective of financial conditions, organizations cannot risk making hasty changes to capital investment strategies; as Karen Conneely, Group Commercial Manager at Real Asset Management, explains, it is the use of BI to pull together information from fixed asset registers, maintenance systems and finance that will deliver the trusted, real-time information required to identify opportunities for asset savings and, critically, predict the risk/reward associated with reining in investment today.
Changing Investment Strategy
Carefully crafted growth plans and expansion strategies are hastily being rewritten as organizations look, once again, at how to withstand a volatile economic climate. The implications for every part of the business are significant but one area that is really bearing the brunt is capital investment across the asset estate. Given that many companies have extended the asset lifetime already in recent years, such decisions are critical: but how can they assess the implications of changes to capital replacement programs and maintenance budgets on operational performance and business risk?
What, for example, is the likely downside and associated cost of equipment failure – as with medical equipment that could result in operational delays and expensive rescheduling or even patient damage? What is the likelihood of additional maintenance expenditure as a result of extending the life of equipment? Will this outweigh any savings achieved by postponing capital investment? These decisions simply cannot be made without trusted insight into the historical data of and directly related projections for the asset estate.
Having the ability to access the information required to maximize the value of the existing assets whose records are located in a range of databases will prove invaluable in providing answers to these difficult questions. To assess the implications and costs associated with changing asset strategies, organizations need to combine information about the existing asset base, concerning what is due to be replaced and the true cost of replacement. This information has to be weighed up against the expense of on-going maintenance and the risk of escalating the downtime of aging equipment. Additional insight into decision making should be attained through comparison of performance across asset types or classes – does equipment from one supplier offer a better lifetime cost of ownership than another and, if so, would it make sense to swap out old assets or systems for new?
In the past, organizations have laboriously opted to pull data manually from diverse sources, including systems for fixed asset management, maintenance and finance, and have used spreadsheets to support investment decisions, today’s rapid pace of strategic decision making demands far more accurate and timely asset discovery insight that in turn meets the PAS 55 standard.
Organizations need to leverage business intelligence (BI) to pull together information from all of these systems. This holistic approach will enable them to understand asset importance and to identify opportunities for investment reviews, tying in directly with specific objectives for asset replacement, capital investment, and maintenance.
Real Time View
This asset discovery process is critical to minimizing the risk associated with investment decisions. But, in the current market, undertaking the process on an incremental basis may not be enough. Once the BI tool is in place, organizations can utilize this intelligence to build dashboards that provide real-time views of Key Performance Indicators (KPI) to deliver strategic management-level insight.
KPIs would typically include the current net value of an asset, the replacement cost of an asset and its current maintenance cost. Using such an approach, it is possible to set up a simple traffic light system so that organizations can see at a glance performance by asset, category, cost center or site. For example, an asset can be automatically highlighted if the business is currently spending more on maintenance than its actual net value and/or replacement cost, allowing it to prioritize underperforming asset areas to both reduce costs and improve overall efficiency.
A consolidated source of fixed asset, maintenance, and finance information allows senior managers to assess the implications of different investment strategies – a crucial requirement with today’s fast-changing economic outlook.
Maximizing the value of the asset base is critical and correct timing is key. Organizations need to make decisions fast, but with so many vested interests involved in asset decision making – from the maintenance team to budget holders within different departments and, of course, the finance team – it is almost impossible to achieve the insight required in a timely or relevant fashion using traditional manual techniques.