Asset Management Insights. Celso de Azevedo

Machines would become inoperable and we would stubbornly strive to repair them, unquestioning of our absurd condition as “luxury spare parts exchanger,” however qualified we may have been as engineers.

      Still, restricting the action of such a set of engineers to interventions that irretrievably would be limited to the replacement of a defective mechanical part or equipment would not provide us with solutions fit to break this vicious cycle. Sisyphean tinkerers, we incurably repeated the same patterns, without stopping to wonder whether our function was the right one. In this regard, the arrival on the market of CMMS (Computerized Maintenance Management Systems) or Operational Reliability softwares have only comforted us in the idea that we were doing “a good job,” by making the realization of the tasks we’d grown used to performing a whole lot easier.

      My role was confined to repairing what could be repaired in the rolling stock, as it grew more ancient and the failure rate soared. This type of operation, inscribed in the fields of short-term and reactive activity, seemed to content my employers—after all, this was precisely why I’d been recruited. Yet, I gauged the contents of my warehouse and noted, privately, that we were operating in an irrational fashion. We reached our output goals, of course, and that was enough to satisfy my bosses—but even then it seemed clear to me that our management of assets and infrastructures derived from a “wait-and-see” mentality. Thus I felt a real sense of frustration, which would only deepen throughout the rest of my training, which was far from complete at the time.

      With this in mind, I expressed my impressions to my former manager, only to find that he paid little attention to my reflections. A preventive maintenance–centered set-up, the likes of which I was beginning to envision, was, according to him, both costly and hazardous. Worse yet, when he would later come to adhere to the ideas I’d exposed, he would only do so out of self-consciousness and without resorting to a posture of technical objectivity in considering the issue and the models of realization that it should prop up.

      There are millions of ticking time bombs in factories around the world. They might be quiet, but professionals in charge of assets know them well. At the very least, they suppose their existence. Some of them are sensitive to the ticking sound: they try to prevent the explosion but can only postpone it. Others pretend not to hear the ticking sound in the belief that they can do nothing to stop it. Thus, one way or another, sooner or later, bombs will blow up.

      These bombs result from poor decision making in the field of industrial Asset Management. Such decisions are calibrated on the company’s targets set by superior management, then travel through the company and down the ranks. When they reach the plant, their impact is considerable. Cuts will be requested successively in the budgets of maintenance, engineering, and in the modification plans projected on machines. An increase in production capacity will be imposed regardless of the mid- and long-term consequences. A decrease in the stock of spare parts will be decided with no consideration for the risk incurred by their absence. Machines will be physically operated well beyond their economic life cycle, and so on.

      There are legitimate reasons behind these decisions: as globalization enhances competition, optimizing manufacturing and maintenance costs becomes vital.

      As it was, business was going steady, which seemed to demonstrate beyond all doubt the soundness of the task I’d been assigned. For the first time, I was confronted with a duality that underlies to this day the reflections linked with the production and the management of industrial assets: that which opposes effectiveness and efficiency. In a somewhat Machiavellian fashion and under cover of either oversized investments or not-so-demanding stakeholders (often a combination of both of these factors), organizations have consistently repeated a pattern of putting their managers in a situation where they are more encouraged to “display service” than to deliver it in an optimal manner.

      It was only a while later, as I was completing a post-graduate degree in France, that I finally managed to pinpoint and frame the precise purpose of my questions. A strikingly simple analogy dawned on me. The task I’d set for myself implied that I should behave, in my dealings with the machines, as a doctor would—but I’d never been handed the tools that would allow me to better understand their ills. I arranged a meeting with the dean of the nearest medical faculty, and asked for his guidance: “How does one make a young man into a doctor?” I enquired. The first year of medical faculty, he informed me, fundamentally relies on three complementary axes of study: primarily, anatomy (namely the physical composition of the human body); secondly, physiology (namely the functions that allow organs to interact between themselves); and finally, medical psychology, which qualifies the attitudes one should adopt when confronted with issues of illness and death. Biology and physiology, I mused, are rather self-evident; if one wishes to heal a body, it is logical that he should learn to know its particular workings. However, I realized at the same time that in my line of work, it was by no means required to be aware of what would constitute the “counterpart” of biology, namely the machines’ life cycles and reliability. Hence, it was only after leaving my functions as a maintenance manager that I finally realized that the heart of the Asset Management matter lay in the disciplines of reliability and life cycle.

      However, it was the third field of medical knowledge that affected me most profoundly: the psychology of death, which designates the idea that any organism will eventually collapse. Was that not the very notion that my peers so dearly lacked—these maintenance operators who stubbornly and beyond all reason strived to repair, heal, mend, and patch their machines, thus turning an eternal blind eye to their declining productivities and their ever-more-frequent failures?

      As these thoughts were taking shape in my mind (in the early 1980s), NASA, together with the military complex, was developing life cycle cost analysis or LCC, a tool allowing one to assess the total cost of an asset throughout the entirety of its life cycle. This method was a much-needed refining of and complement to the design-to-cost approach, which was prevalent in those days. Indeed, it featured in its results the entire array of costs tied with an asset on the totality of its life cycle, as opposed to being restricted to the budgets allocated to the design phase. LCC made it possible to realize a long-term assessment of the assets based on anticipations over their technical and economic performance, thus facilitating the first step on the path towards a preventive-centered management policy. The ultra-liberal movement of that era, conceptually embodied by the theses of the Chicago school, favored studies focusing on the Net Actual Value and Internal Rate of Return to analyses that took into account the costs and expenditures tied with investment projects in the long run. As of that period, the Reagan administration took up the question of the privatization of municipality-owned transportation in the United States, which undoubtedly marked a decisive impulse in the democratization of life cycle costing, which has become a most common notion in contemporary economics.

      That which derived from the synthesis of this innovative cost-analysis method and of the embryonic discipline of machine biology was the crystallization of a need to manage the asset on its integral life cycle; a need which evidently comes hand in hand with technical processes, but cannot be restricted to the latter since it is inevitable that inscribing such an approach in a long-term horizon will also induce an urge to create a specific management system. However, we now know that the extraction of value is only conceivable in a perspective that takes into account the entirety of an asset’s life cycle and, therefore, its global economy and management. It therefore transpires that parallel to the emergence of a necessity (to move away from a deficient model derived from the theses of the Chicago school), the scientific community was equipping itself with a technical arsenal that made it possible to extract the value from assets on their entire life cycles—which is to say that we were gradually giving ourselves the means to undertake a journey specific to Asset Management.

      We should furthermore observe that the blossoming of this new discipline was truly made possible only through the aggregation of competencies originating from diverse fields of knowledge. On one hand, we drew on the skills inherited from maintenance; on the other, we possessed a physical knowledge of the machines, derived from reliability-based studies, which had known a strong growth after the end of the Second World War; and finally, we had at our disposal a new perspective on economics, arising from the development of life cycle costing. These elements fueled and helped shape the new models of management that were arising