Physical Asset Management as a Profit Driver- A Back to Basics Approach

1. AMEU 60th Convention – Phezu Komkhono Physical Asset Management as a Profit Driver-A Back to Basics Approach Dean Griffin Divisional Manager – Utilities & Facilities 17th October 2007 – Durban ICC

2. Overview • Introduction • The Challenges at Hand • Lack of Maintenance • Effective Utilisation of Resources • Asset Management as a profit driver? • The Way forward

3. Asset Provision – making sure that the most appropriate asset is acquired for a specific application and also making sure that the asset is effectively disposed of (in a responsible manner) at the end of its useful life. Asset Operation – making sure that assets are operated in the most appropriate way that allows the asset to perform to its maximum capacity. Asset Care – making sure that assets are looked after in the most appropriate way that will ensure continued performance at its originally intended design capacity. Introduction

4. The Challenge at hand

5. Waste through inefficient processes Incidents, Reputation Damage, Recovery Costs Labour, Materials, Operation, & Contracts Visible - Direct Poor asset reliability and performance Hidden - Indirect Poor teamwork Lack of Communication Between Groups

6. Current Challenges • Backlog Maintenance estimated at R 5 Billion • Labour Shortage / high turnover • Most organisations have organisational gaps at all levels • Poor Asset Reliability • Low Public Perception of service • Lack of Asset information • Inaccurate Asset information • Under estimation of Asset Value • Quality of Work • 3-4 years of capacity problems ahead • Complexity of solutions employed

7. Lack of Maintenance Maintenance Program Maintains the Assets • There are 2 types of Maintenance • What we say we are going to do • What we actually do • Tactic creation performed by consultants or by in house staff • RCM, OMM, BCM etc • Technical ability is high • Developed tactics are comprehensive • Proactive tasks are scheduled weekly • Schedule attainment is often low due to reactive interruptions • Comprehensive IT management systems are in place • Maximo, On Key, SAP, Ellipse, GIS, MIS, Reporting tools, Scheduling tools • Refurbishment programs exist Current Breakdown and Ad hoc items Maintain the Maintenance Program New Tasks Managed Failures Good Tasks No Effect Tasks in place Failure Modes

8. Lack of Maintenance cont • Preventative tasks are established with the best intentions However!! • Organisational Culture invariably rewards reactive actions when problems arise • ‘You worked through the night to get the supply back’ well done! • ‘My team know how to pull out all the stops when the chips are down!’ • When did you last hear this sentence? • Well done for that inspection, we haven’t had a failure in the last 6 months!

9. BP/KPI Maturity Matrix Barrier removal PERF. LEVEL 5 World Classcontenders Can’t go thedistance PERF. LEVEL 4 PERF. LEVEL 3 RESULTING KPI PERF. LEVEL 2 Promising Back ofthe pack PERF. LEVEL 1 STAGE 1 STAGE 2 STAGE 3 STAGE 4 STAGE 5 ENABLING Best Practice

10. Lack of Resources • Most organisations have gaps in their resource structures • There is a country wide shortage of skilled labour across all industries • Refurbishment funding has been made available in a number of cases • There are no quick fixes to plug the organisational gaps • As Engineers we compensate • Over engineer and / or automate • Implement complex technical solutions • Outsource • Lack of detailed planning, Scheduling and Execution management • People are asked to perform tasks that they should not (Planning, expediting etc) • The level of actual job supervision is often low • Mainly due to constraints on supervisors to perform administrative duties, chasing tools, materials, labour • Not enough time in the day to inspect work which results in artisan acceptable quality

11. Lack of Resources Available Workforce

12. Simple WP&C in Context Asset Register WP&C Planned History Unplanned Condition-based Feedback Scheduled Work Orders ExecutionResources Data Collection

13. Work to be done Resources available

14. Lack of resources or low utilisation? • Wrench time is the measure of productivity within the workforce • Average wrench time for industry is between 25 -35% • For a 10 hour day the person is productive for 3½ hours. • Non-productive activities account for 6½ hours. • Necessary break times • Job delays • Waiting for spares • Waiting for instruction • Travel • Waiting for Tools • World class wrench time is between 55 - 60% • Implement a fundamental planning & scheduling system – 45% • Keep records and learn from previous mistakes – 50% • Detailed Asset register & CMMS – 55%

15. What does it mean? • Misconceptions • Being busy is not necessarily being productive or effective • Labour is invariably busy • Lets put in terms of people and cost • If we can take the productivity of a person from 35% to 55% by adding a planner then a planner increases productivity by 1.57 • Breakeven point = take 1 of every 3 workers and make them a planner Without Planner = 3 x 35% = 105% productivity With Planner = 2 x 55% & 1 x 0% = 110% productivity • Experiences states that a planner can plan for between 20 & 30 people • Therefore for a 30 man workforce 1 planner adds 17 extra workers making an effective total of 47 workers without adding heads.

16. What does it mean? • If you take 90 workers the you get an effective headcount of 141. That’s 51 extra people!! • If the organisation is predominantly reactive in nature then the workforce can be split into a proactive team and a reactive team. • The majority of the people reside on the fire fighting side initially • The ratio of the split can be adjusted as the organisation moves from reactive to proactive. • In a more proactive organisation the extra pople can be used to perform tactical tasks ensuring fires don’t occur. • In world class organisations where reactive and proactive work is well in hand then the extra resources are used for training and development of processes or projects to further improve the performance of the assets.

17. AM as a profit driver • Indirect benefits • If we have an effective support or care function then we should be performing the right task at the right time to the right quality at the right frequency. • Reliability will be high as will availability • Customer perception will change • Impact on industry and business will be reduced • Direct benefits • Maintenance backlog is reduced • Capital investment can be deferred • Saving in cost to perform maintenance due to planning & scheduling • More engaged work force • Lower turnover

18. Example - Jacksonville Electric Authority • In the late 90’s at Jacksonville Electric Authority in the USA the following was found • For their 1000Mw steam system • 1% increase in availability equated to $300 000/yr power transaction capability • Each 100 Btu/KWH improvement in efficiency equated to $400 000/yr • 1% increase in availability for 1000Mw system means 10Mw of future power plant that does not have to be built. At $1200/KW construction prices that equates to $12 Million Reference - The Leverage effect of Work order Planning – R.D. (Doc) Palmer, Jacksonville Electric Authority

19. The way forward - Asset Care Centre Methodology Performance Improvement Technology People Asset Base

20. Methodology Performance Improvement Technology People The way forward - Asset Care Centre ACC Reactive Urgent work Asset Base Feedback Feedback Planning & Scheduling Execution Control (Supervisor) Execution (In-House) Execution (External)

21. …..and finally

22. Thanks & Questions?

23. Can you do it again?