CRL 1-hr: 9/26 Introduction to Uptime Elements Reliability Framework and Asset Management System

Asset management (AM) services form part of what management publications refer to as industrial services or business-to-business services. In general, a service is a process that consists of a series of activities taking place between a client and service provider in response to the client's problem(s). 5 Applying this definition to AM, an AM service refers to activities targeted at optimizing the use of physical assets to increase their value for the client.

The AM standard, ISO55000, 6 refers to outsourcing, which implicitly includes AM services. According to the standard, outsourcing forms part of the operations requirements of the asset management system, which refers to the contracting of external service providers to perform certain activities impacting asset management objectives. This exchange of activities, a result of the outsourcing decision, can be described as an AM service.

AM services can be classified according to the value proposition for the client and the revenue model of the service provider. Figure 1 illustrates four service classifications.

The most basic AM service is transactional and oriented at the asset itself. Such installed base services include installation, training in the use of the asset and the selling of spare parts.

The next type of AM service is also transactional, but oriented at the asset owner's AM processes. Client support, training and consulting form part of this service type.

Outsourcing services are relationship-based and oriented at the asset. The outsourcing of certain maintenance activities is an example of this type of service. The last type of service is integrated solutions. With these services, there is substantial value co-creation between asset owner and service provider. An example is an organization contracting out its entire maintenance function. Integrated solutions often involve performance contracting and gain sharing agreements.

Why Are AM Services Important?

The increased focus that standards like PAS55 and ISO55000 are bringing to the asset management industry, as well as industry and technological pressures, are leading to an increased need for AM services. Some of these pressures are the technological advancement and complexity of assets; the shift to whole lifecycle asset management; the requirement for industry best practices and processes in support of AM standards; and the shift to software as a service (SaaS) in the enterprise asset management system industry. In the midst of this increased need for AM services, it is important for AM practitioners to be cognizant of the underlying factors that will increase the likelihood of successful service partnerships within the AM services arena.

Critical Success Factors

The critical success factor (CSF) approach is appropriate for supporting the synergy between asset management and services. CSFs are those characteristics, conditions, or variables that, when properly sustained, maintained, or managed, can have a significant impact on the success of an organization competing in a particular industry.8

Both CSFs and goals are required to fulfill the organization's mission (see Figure 2). They are interdependent and neither can be disregarded without affecting the other. When managers define their goals, they intuitively consider the factors that are required to successfully accomplish them. The influence CSFs have on goal attainment, therefore, is made explicit, even if the actual CSFs are not.

For example, a person might set a goal to lose three pounds in a year. To achieve the goal, the person needs to be mindful of two things: improving his or her diet and exercising regularly. Close attention to these two CSFs will help the person realize the goal of losing three pounds. Conversely, failing to manage these factors will, in all probability, lead to the goal not being achieved.

A Global Study of the CSF for AM Services

A global research study was conducted by Stellenbosch University to identify the CSFs that are required for collaborating in a successful AM service environment. A mixed method research approach was used. The content of existing literature was analyzed and developed into a Delphi study to identify the success factors relevant to the field of AM services. (A Delphi study is a technique that allows consensus to be reached among a panel of experts on a certain issue or topic by using multistaged questionnaires.)

The outcomes from the Delphi study were developed into a survey questionnaire that was used to identify the critical success factors for AM services. For the questionnaire, data was collected from a sample of AM service providers and asset owners. The questionnaire's outcomes were used to construct a prioritized list of the CSFs for AM services. English and Portuguese versions of the questionnaire were created for data collection. A total of 392 responses were received, of which 254 were valid and statistically usable. Figure 3 shows the four response distributions of the sample.

The ratio between asset owner and service provider responses is 1:2. Of the respondents, 82 percent work in a strategic or tactical capacity. The majority of the responses originate from Africa (38 percent) and South America (25 percent). A further 11 percent of the respondents indicated they work globally and 10 percent in Australasia. The remaining 16 percent originate from Europe, North America and Asia. Respondents operating in the manufacturing industry represent 29 percent of the responses, while 21 percent of the responses come from the mining industry. Respondents working in multiple industries represent 13 percent and a further 11 percent is attributed to responses from the electricity supply industry.

Key Findings

All respondents unanimously agreed on the CSFs. Statistically, there is no evidence that the responses from any one of the response groups within the role, industry, region, or organizational level distributions in Figure 3 differ from another.

The CSFs are shown in Figure 4 with the corresponding phase of the service's lifecycle. The top ranked CSF is the continued and sustained commitment and support for the service from the asset owner's senior management. This support forms part of the organizational environment and capabilities, and is continuous throughout the lifecycle of the AM service.

The second, third and fourth ranked CSFs are all related to the operational services phase. Effective communication (ranked second) and mutual trust and respect between asset owner and service provider (ranked fourth) are critical as part of the day-to-day service operations. In support, a focused improvement process for improving the service relationship is equally important (ranked third).

Ranked fifth is the alignment of AM service requirements with overall business strategies during the initial needs and value proposition activities. During the service implementation phases, the active involvement of the asset owner in the solution design is critical (ranked eleventh). An adequate training program (ranked sixth), combined with a formal change management process (ranked seventh), should support the service implementation.

The remainder of the CSFs focus on the sustainability of the ongoing AM service activities. The eight ranked CSF states that proof of operational and financial performance achievements as a result of the AM service is fundamental towards the success of an AM service. These measures should form part of a formal performance measurement system (PMS) for measuring the service (ranked ninth). The PMS should further have the ability to measure the quality and value added through measures that are not only limited to operational and financial (ranked thirteenth). The active participation of the client in improving the service is equally important (ranked twelfth).

Conclusion

This is the first study that explores factors affecting the synergy between AM and services. It supports the outsourcing requirements, as stated in ISO55000, with the CSFs, which should be managed for a value adding AM service relationship. A prioritized list of CSFs is presented. These factors should be actively managed by all role players for the best probability of a successful AM service partnership.

  • There needs to be continuous support from the asset owner's management for the AM service.
  • The AM service needs to be built on sustainable cooperation between the asset owner and service provider.
  • A performance management system needs to be in place. The system should include: a measurement system and process; measures for operational and financial benefits resulting from the service; and measures for the service's quality and value added, including, but not limited to, operational or financially oriented benefits.
  • Active management for the improvement of both the service relationship and the value creation as a result of the service.

The findings presented in this article are part of ongoing doctoral research. Based on the reported data, a decision support model is being developed to further assist the AM industry in AM services decision-making.

References

  1. Vandermerwe, Sandra and Rada, Juan. "Servitization of business: Adding value by adding services." European Management Journal Volume 6 1988: pages 314-324.
  2. Quinn, James Brian; Doorley, Thomas L.; and Paquette, Penny C. "Beyond Products: Services-Based Strategy." Harvard Business Review Volume 68 1990: pages 58-67.
  3. Gadiesh, Orit and Gilbert, James L. "Profit Pools: A Fresh Look at Strategy. Harvard Business Review Volume 76 1998: pages 139-147.
  4. Wise, Richard and Baumgartner, Peter. "Go Downstream: The New Profit Imperative in Manufacturing." Harvard Business Review Volume 77 1999: pages 133-141.
  5. Hytönen, H (2005). A model for value-based pricing in industrial services. Department of Engineering Physics and Mathematics Thesis. Helsinki University of Technology.
  6. International Organization for Standardization. ISO 55000:2014 Asset management - Overview, principles and terminology. Geneva: ISO, 2014.
  7. Kujala, Saara; Artto, Karlos; Aaltonen, Pertti; and Turkulainen, Virpi. "Business models in project-based firms - Towards a typology of solution-specific business models." International Journal of Project Management Volume 28 2010: pages 96-106.
  8. Leidecker, Joel K. and Bruno, Albert V. "Identifying and Using Critical Success Factors." Long Range Planning Volume 17 1984: pages 23-32.
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