Five Key Asset Management Strategies
At the end of 2016, the Organization of the Petroleum Exporting Countries (OPEC) agreed to cut production. However, the new year ushered in serious doubts whether OPEC and other key oil producers would cut output as promised. Even if all OPEC cuts take place as announced, it will take at least a year before sufficient inventory reductions allow prices to move much higher. If the cuts are not introduced, lower oil prices will continue to hold a while longer.
Viewed in the context of broader market trends, such as the growing collective consensus to reduce global warming by curtailing fossil fuel consumption and the implications on downstream industry – a need to reconfigure operations to accommodate biofuels and emission-abatement technologies – that begs the question whether the companies are prepared for the next market shift?
All organisations in this sector will need to think and act smarter to generate profit in a sustainable manner that also mitigates enterprise risk.
This paper focuses on five critical areas that all organisations should consider, and briefly describes their potential impact on operational strategies. It further draws attention to the imperative of strong cultures and processes that allow companies to exploit the cooperation between operational tactics in maintenance and reliability, and risk management governance processes. It also considers the impact of asset lifecycles – the need to evaluate the lifecycle stage of the asset, what it can deliver, its long-term value and expected end of life outcome. This has a significant effect on maintenance strategy, for example.
1. Identify your risks and connect the dots
Not all risks are the same. They fall into different categories. That may be stating the obvious, but the number of businesses who do not have a process to define or identify their biggest risks is quite astounding. As global risk management consultants, we regularly also come across businesses who might have a process, but don’t revisit or review it on a regular basis.
Risk is dynamic, and it changes with time.
Risk is dynamic, and changes with time, but the three critical steps in managing risk always remain the same:
- Risk profiling;
- Risk containment and critical risk controls;
- Governance and KPIs.
Defining and quantifying key risks makes it possible to put the correct barriers in place to prevent the events identified. Normally, these can fall into the various categories outlined in Figure 1 such as management of people or management of emergencies. These are the necessary steps to connect the dots and establish corresponding Governance and KPIs. To mitigate each of the risks, there are several tactics and processes that will help to ensure the corresponding barriers are robust and healthy.
But risk is about much more than the ability to protect the asset, important as that is. There is another risk we mustn’t lose sight of: the ability of the asset to deliver value over its lifecycle. Put simply, how can we get the most from it? The ISO55000X series dating from 2014 is a management system focused on value. It is not, however, an engineering standard that delivers the panacea of all solutions to everything – just having it will not solve technical issues on its own. Nonetheless, it can provide a framework on which to build the system and is particularly useful for developing a Strategic Asset Management Plan, as tactics such as maintenance may change over time as the asset ages.
That, in turn, begs the asset management and related reliability engineering question - have you already identified your risks? Do you have the proper processes and systems in place that do not depend upon tacit knowledge of key individuals who, if they left the organisation, would take that capability with them?
2- Know where your losses occur
The goal of any business is to generate profit and to do so within tolerable and acceptable risk levels. Of course, this is a lot easier said than done. Best practices and guidelines such as ALARP and ISO31000 define “tolerable” and “acceptable”, but losses an organisation can incur include:
- Loss of production
- Loss of containment
- Loss of knowledge
Whatever the source of the loss, it is important to stay abreast of and actively track the situation. In certain instances, there can be mass-balances that show and reveal internal leaks and failures that are not immediately obvious. Some of these can have major risk potential e.g. hydrocarbon leaking into the cooling water exchanger on the shell side.
When it comes to the loss of uptime or equipment availability, it is also important to track the root causes. These often fall into the categories of Overall Equipment Effectiveness (OEE) shown in the figure below:
Fig.2: Overall Equipment Effectiveness Model (Example)
Best-in-class practices contain processes to drive accountability for each category. In many cases, they will trigger investigations, including RCA, and other mini continuous improvement initiatives. It is when carrying out these routine processes that patterns will start to become evident.
If there are a lot of breakdown losses affecting availability, for example, the type of questions that need to be answered include:
- Do we have the most suitable operating strategy?
- Do we have the right maintenance strategy? Is it time to change it?
- Are we solving the true root cause, or only treating symptoms?
- Are we seeing repeat failures?
- What is happening with our list of “bad actors”?
- How can we prevent failure, or predict it earlier?
- Where do we tend to play on the PF Curve? Are we reactive or proactive?
Managing loss is about ownership, accountability and visibility. You need all three.
Managing loss is about ownership, accountability and visibility. You need all three. It is important to have daily, weekly, monthly or quarterly reviews to drive the accountability of the losses so that leadership can remove barriers to progress and make better informed decisions about the appropriate reliability improvements or required investments.
3- Build robust systems that focus on people and processes
One of the biggest traps businesses often fall into is to focus on technical solutions, but neglect to underpin their tactical use with solid processes and systems that drive the right results. When processes are weak but things “still happen OK”, this is often due to key people with key tacit knowledge, or command and control sub-cultures, or sometimes down to just pure luck. In driving business excellence, we want to take the “luck factor” out. It is mission-critical for businesses to have strong, standardised processes in Planning and Scheduling, Work Execution, Continuous Improvement, Reliability Solve Problem and Reliability Prevent Problem, and that people know, understand, and follow them with operating discipline. The figure below shows an excerpt from one such example. It is based on the principle that reliability is a process, not a department or “silo”.
When examining the opportunities to improve “equipment reliability” in a business, the task is too often delegated to “the reliability department”, the static or rotating team, or the inspection team. However, truly sustainable reliability relies on equipment owners (Production, Operations, etc.) taking a leading role and driving the outcomes and taking on the responsibility for directing proactive reliability improvement efforts. This role is included as the Operations Reliability Champion in the figure above.
As businesses in the Middle East, whether in O&G downstream or upstream, or other regional sectors, look to improve efficiency and build upon good strong technical models and emerging areas to exploit such concepts as the Internet of Things, Big Data and EAM, they must also address the question of people and processes. Choosing the right roles, empowering people to think, to act and to drive matters independently, and designing robust supporting rituals and processes, is key.
4- Aim for a culture of interdependence
“Culture” is one of the most discussed areas of asset management and one of the most challenging ones to change or fix. Culture is NOT what the CEO says it is, or what the company policy states, or what the procedures outline, or what is on nice “values” posters in the HQ lobby. It’s what really goes on when no-one is looking. So, it’s important to understand the difference between best practice and the illusion of best practice.
You can determine the current culture of an organisation by examining its leading indicators, such as mindsets that drive behaviours. For example, how would you honestly answer the following questions in a maintenance and reliability context?
- Who feels that they own the equipment? How does it show?
- What is your balance between planning for equipment failure and planning for reliability? How do you know?
- What behaviours are recognised most in your organisation? Big reactive responses to fixing a crisis, or quiet backroom processes that pre-empt the crisis, and prevent it from arising in the first place? How do you determine which is your predominant approach?
- Does the CEO/Plant Manager take an active interest in the efforts of the reliability process through his presence in the process to sample the outcomes?
In the Figure 4, we can see one possible culture where operations drive the reliability process and the typical behaviours in this “culture”. This behaviour centres on appropriate ownership, accountability, empowerment, continuous improvement, and proactivity. Leadership dictates this culture by adjusting its own behaviour and measuring people against the desired values, beliefs and ultimately, preferred behaviours and outcomes. Only this approach will allow a culture to truly change for the better.
Fig.4: Behaviours that affect Operations-driven Reliability
In an intellectually honest assessment of culture, our many years of experience have taught us that cultures generally fall into four categories:
- Reactive – where the predominant behaviours are silo-based and corrective after an event;
- Dependent – where strong supervision drives behaviours by telling people what to do and when;
- Independent – where people start to think and act for themselves in doing the right thing;
- Interdependent – where people and processes are aligned to make the sum of the whole greater than the sum of the parts.
These cultures, and the behaviours exhibited in them, determine the longer-term value creation of a business and the sustainability of its growth and acceleration away from the competition. In this regard, Interdependence is the goal.
5- A reliable plant is a safe plant is a cost-effective plant
As mentioned briefly earlier, much is being made of the emergence of new asset management system standards. This is generally a good thing. However, one of the traps that many businesses in the Middle East fall into is thinking in silos: “This is a risk, as well as a safety challenge. Next, we need to address profitability issues and the imperative to be cost-effective.” But what if they are all interconnected? The good news is that, in fact, they are.
There is a lot of established science around the connection between good reliability and safety and risk outcomes. We can state, with certainty, that a safe plant is a reliable plant – in fact they are sides of the same coin. Studies have shown that if businesses want steady sustainable improvements in safety and risk reduction, they must have good equipment reliability. This makes obvious sense because one of the highest risks to businesses occurs during “transient conditions” – situations that are outside of normal standard operations, such as maintenance activities. So, if you can improve the reliability of the equipment, you remove or reduce the transient conditions and the opportunity for an incident as depicted in the figure below.
Fig.5: Reliability and Safety Hierarchy of Leading and Lagging Indicators
We know from long experience with addressing new and continuously evolving operational challenges that, by sustainably solving our risk areas whilst simultaneously improving our reliability processes, we obtain a third benefit - the unnecessary cost of reactive remedies decreases, and the value realised by proactive mitigation increases. This is illustrated in this DuPont Bradley-Value Curve
Fig.6: DuPont Bradley-Value Curve
As we move to the right-hand side of this diagram, the cultures move to the optimum “interdependent” phase. The risk profile is sustainably mitigated and better value is returned from the asset.
Connect with us
When we help businesses to address their main risk areas and to improve the capability of their teams to recognise and mitigate risk based on our own experience as an Owner Operator, we challenge them on their maintenance and reliability tactics and the underpinning culture and processes. In our experience the two are directly connected and proportional.
In fact, in the context of ageing equipment or changing workforce personnel, which holds a potential high impact risk, it is vital for businesses to understand the factors that play to the tactics that deliver good reliability and good safety results simultaneously. And having done so, to make the best economic decision regarding what they must do with scarce resources such as investment, capital resources and people. With our help, they can do so.