An asset management strategy is a document that outlines where your current asset management efforts stand, assesses changes that need to be made within the next 3–5 years, and outlines the high-level actions you need to take to get there.
This guide will explain the difference between an asset management policy and a strategy and share the information you will need to write your strategy with real-life examples.
Where does the asset management strategy sit in the document hierarchy?
Businesses use an asset management strategy to describe the high-level goals they need to achieve in order to meet the company’s asset ownership, use, and care requirements. The document usually includes a business case showing the potential benefits the company can achieve by following the outlined strategy.
The image below illustrates where the asset management strategy sits in the asset management document hierarchy.
Here are quick explanations to help differentiate between a policy, strategy, and plan:
- Asset Management Policy: The policy outlines the company’s objectives and requirements for asset ownership, use, and care. It provides guiding principles for asset management, including applicability, responsibility, high-level procedures, and a clear statement of the company’s overall approach to maintenance.
- Asset Management Strategy: A strategy document takes the company objectives and requirements from the policy, and turns them into specific focus areas for the next three to five years. It outlines the current state of asset management within the company and its goals for improvement. It often includes a business case that predicts potential benefits of pursuing the strategy.
- Asset Management Plans: A plan takes the high-level aspirations and goals in the strategy document and turns them into shorter-term, actionable tasks. One strategy document will result in many plans, usually one for each department or business unit.
Now that we know its purpose, let’s see what it takes to create a proper asset management strategy.
The Essential Guide to CMMS
The Essential Guide to CMMS
The steps for developing your asset management strategy
There are clearly many details and considerations that go into creating an effective asset management strategy. So how does an organization create one?
By taking the following steps, you’ll end up with an asset management strategy that captures all the necessary details, fits the needs of your company, and sets the stage for effective asset management that supports your business plan.
Step #1: Identify a project sponsor
Creating an intricate, strategic approach to improving your asset management processes is a waste of time if nobody acknowledges or follows the guidelines.
Appointing a senior manager as a project sponsor provides several benefits:
- Their involvement gives authority to the strategy production and provides line of sight to its impact across departments.
- Active involvement by the sponsor removes organizational roadblocks and helps with work prioritization — which keeps the strategy on track.
- A member of senior management will facilitate buy-in and decision-making from other leaders and ensure accountability for the strategy.
Step #2: Identify the project leader
The project leader manages the development of the asset management strategy. In this role, they are responsible for:
- Ensuring the process gets completed within time and budget constraints.
- Liaising with the project sponsor to brief them on progress.
- Considering all relevant data and other company information necessary for a thorough and thoughtful outcome.
In a small company, the project leader may also perform the data collection and writing of the strategy document. Larger companies may use a small team, which the project leader will manage.
Step #3: Assemble and analyze all data and documents
This is a time-intensive step that often requires data from multiple departments including engineering, maintenance, finance, procurement, and production.
You will analyze this data to evaluate the effectiveness of your current asset management strategy and how well it meets business objectives. We will discuss more details of data analysis in a later section.
Data collection and analysis is considerably easier if your company uses a centralized database like an asset management software, a computerized maintenance management system (CMMS), or an enterprise resource planning system (ERP).
Step #4: Outline the strategy
After analyzing the data, you should have clear insights into your current asset management practices, their effectiveness, and their efficiency. The data will point you to:
- Current activities and processes that deliver less than desirable results.
- High-level changes and initiatives to include in your strategy to work toward improvement.
- Potential benefits of pursuing those high-level changes and shifts in strategy.
During this process, the project sponsor will be a key resource providing guidance, insight, and support from management and other departments.
Step #5: Write the strategy
At this stage, you should have all the necessary pieces to formalize the strategy.
The writing process should present a narrative explaining the current state of asset management in your company and the benefits of making a change. It should also outline general actions, deadlines, and targets.
This can sound a little abstract. In the following sections, we will look at a few real-life examples, show you how to structure the document, and review what to include.
Step #6: Get approval from top management
Top management must review and accept the proposed language for your new asset management strategy to ensure it aligns with business objectives. Approval from decision-makers means it is ready for implementation and employees will be held accountable for carrying it out.
Enter the document into your quality system for revision and amendment control. Any major changes should require resubmission for further approval.
Step #7: Implement the strategy
Sending out the document and expecting compliance will not work. There is an education component to implementation. Ensure all employee groups are trained and fully understand the goal of the strategy and their role in achieving it.
While they might have helped you gather data in previous steps, this is probably the first time they’re seeing the final strategy. They need to buy into the final product and believe it will be an improvement if you want it to be fully embraced and followed.
The data collection process
The data you collect in step four will be used for a gap analysis. This analysis will show the “gap” between how efficient your assets are today, and how efficient they could be at their best. It will also shed light on the operational and capital costs they incur.
There are two components to consider for the gap analysis: current performance and theoretical maximum efficiency.
Benchmarking current performance
Find out what key performance indicators (KPI) your production team uses to measure their efficiency and effectiveness. Examples include equipment downtime (or uptime) and setup time.
Many of these measures will be in percentages. However, we recommend translating them into actual, data-driven outputs — whether the numbers of products, frequency of stock turns, or the count of non-conforming products.
Remember, raw data is easier to relate to!
Identifying theoretical maximums
What could your plant achieve if everything ran like clockwork?
To answer that question, gather original equipment manufacturer data or the asset performance results from similar plants that are an example of best practice.
For example, if the KPI you are using is OEE (overall equipment effectiveness), an often-quoted best OEE rating for a pure manufacturing plant is 85%. That would require equipment availability, performance, and quality metrics to be in the mid to high 90-percent range.
If your OEE rate is 68%, you know the performance management gap you need to close through asset strategy management.
Capturing operational and capital costs
By capturing data on the cost of your current performance, you have a baseline against which you can compare future costs. Comparing these over time will show you the financial impact of the changes you implemented as part of your updated strategy.
Consider operational budgets — like engineering, maintenance, and spares turnover. Capital costs for asset replacements may also be important, as poor asset life cycles or frequent modifications require more capital spending, and thus can reduce profitability.
Revenues, cost savings, and operating costs will be key to measuring production efficiency.
Developing your asset management strategy
With the gap analysis done, you must define the strategies that will close the gap between current and desired performance. These will become the basis for your strategy document.
Articulate an operational vision
Define a clear production goal for the business. It should be a stretch goal with measurable targets on a five to ten-year horizon.
For example, you may choose to:
- Reduce maintenance costs by V%
- Improve cycle time by W%
- Increase production capacity to X units
- Increase equipment reliability to 93%
- Move the factory to total productive maintenance (TPM)
Define the required high-level actions
Identify the broad practices the organization must change or implement to achieve the goals. These action plans should span three to five years due to the impact on employee workload, the available resources, and the budget.
Stay away from operational details and optimization. Leave that to the people writing the asset management plans.
Establish a business case
The effect of the changes on costs and production will have to be explained in order to justify the strategy. The business case you present should lay out the financial and operational justification and the expected change in key performance indicators.
Structuring your asset management strategy document
While the layout of such documents varies widely across industries and countries, the following list provides a basic key components that you may want to include in yours.
1. Summary
The summary should come first in the document to allow senior management to review the document’s findings without wading through all the details. It must be concise, highlighting the strategy’s key points, costs, benefits, and outcomes.
2. Purpose and scope
Describing the purpose and scope in-depth establishes strategic alignment with business needs.
Describe why an asset management strategy is required and what it seeks to achieve. The strategy’s scope should explain the affected business areas and the time period — in years — to which the document applies.
3. Current assessment
This chapter summarizes the outcomes of the data analysis. Show how a world-class production environment in your industry performs in terms of output, delivery, or cost. Then describe how your business compares, based on your findings.
Cover maintenance and reliability comparisons, including:
- Overall equipment effectiveness (OEE) rates
- Reliability performance
- Cost per unit produced
This chapter should also clarify why effective asset management is important, why changes are required, and how far the business has to go to achieve best-in-class operations.
4. Vision for future operations
When crafting the vision, describe what the business could look like in five or ten years. Be sure to focus on more than just production and maintenance metrics. Illustrate:
- How the company culture may have changed
- What the organizational structure may have evolved into
- How roles and responsibilities will have altered
- Any physical changes or modifications that may have occurred to the structure of the business.
Avoid making unbelievable statements.
If your business is in the third or fourth quartile for industry benchmarks, promising world-class performance in three years undermines the document and the analysis that supports it. You’ll struggle to gain buy-in, and your strategy is likely to fail.
What creates support are realistic, continuous improvement targets, and a real business case that acknowledges the difficulty of the journey.
5. Strategic focus
Outline the key areas the organization needs to focus on over the timeframe covered by the strategy document. You had hundreds of areas for improvement to choose from. Yet, you selected only six to eight of them. Explain why.
Having clarified the focus, describe the expected outcomes. These must logically align with and help close the gaps between actual and theoretical performance.
Finally, outline the processes to follow.
For example, assume you have identified OEE as one focus area. Explain that the targets for improvement are equipment availability and performance, and the processes to be implemented will include reliability-centered maintenance and root cause analysis techniques.
6. Business case
This is the part of the document where you’ll need to make assumptions about the year-over-year improvements, the costs required to implement the changes, and the resulting benefits.
Remember to include financial costs and benefits, as well as cultural, political, environmental, or technological gains.
The business case is a justification for the strategy based on what the company expects to earn from improved production efficiency.
7. Program
This section is your project plan. It outlines major milestones and timelines, indicating the required resources and the expected deliverables. It becomes the guideline for managers tasked with writing asset management plans.
8. Responsibilities and KPIs
The company’s asset management strategy will affect a wide cross-section of the organization. Therefore, the stakeholders and roles that are pivotal to the plan’s success must have clearly defined responsibilities.
It should also include key metrics, describing what will be measured, how to calculate KPIs, and the results expected over the strategy’s life.
Examples of public asset management strategies
Most privately owned companies do not publish their asset management strategies, given the confidential information they contain. But many public entities like councils or government organizations must publish theirs.
Here are three examples, along with some notes on what they do right.
- South Australian Government: This asset management strategy works at the right level, without dipping into unnecessary detail. It describes areas of focus and gives guidance on things to consider when individual agencies formulate their plans. Great examples are the life-cycle costing and asset register chapters on page nine.
- Eastleigh Borough Council: This council’s strategy has a good example of a forward plan, describing key strategic objectives.
- Kent County Council: This comprehensive plan has a good introduction, context, and purpose section. The vision and mission descriptions are first-class, and the strategy breakdown into thematic chapters is a great example of clear communication.
Start sooner rather than later
An asset management strategy drives improvements by comparing actual with ideal performance. By highlighting this performance gap and identifying priorities, best practices, and problem areas, the strategy sets goalposts for maintenance and other middle managers.
It provides a clear case for change and sets expectations on timelines and results, providing a map for the organization to follow in the next three to five years.
When done well, it supports constant incremental improvement for businesses that are intent on maintaining competitiveness through best-practice asset utilization.
To learn more about asset management and maintenance, keep browsing the Limble blog.
