a stellar opportunity to effectively connect the preoperational phase with the remainder of the assets’ life cycles.
If an industry succeeds in making it so that tomorrow its Asset Register is more proactive and more effective in taking into account the entirety of the assets’ life cycles, then this industry will be ripe for establishing what is known as a one-to-one correspondence between the Asset Register and the Asset Costing. This step is a crucial one in the path towards implementing a strategic alignment, which, in turn, may give way to techno-economic alignment.2 Indeed, ISO 55001 requirements clearly demonstrate that operators have much to gain by having one-to-one correspondences between physical assets and their attached economic and accounting existences. In a truly functional and optimal alignment system, one must be able to identify physical codes that clearly correspond to the equivalent accounting codes. If this is the case, one can speak of a “paired” system.
Over time, the engineers who make up design offices have been able to develop very exhaustive approaches to the preoperational phase, in order to address every important question raised throughout the design, specification, and procurement stages. More recently, in parallel to the development of reliability anticipation techniques and to the emergence of systems that allow for a modelized simulation of technical and operational performance, the engineering world has witnessed the rise of FEED (Front-End Engineering Design) approaches (see Figure 1.1).
The FEED approach relies on a modelized simulation that primarily takes the form of Reliability Block Diagrams (RBD). Thus, Asset Management generates models that will allow engineers to visualize very early on in the process of architectural and technological arbitrages whether the assigned objectives, in terms of productivity and operational availability, are optimal. Nowadays, one can draft out scenarios of economic consequences—and not only of technical consequences—from these different simulations and project options. The qualitative input obtained from this type of approach is furthermore immense.
Obviously, even if one relies on such modellings, a number of uncertainties remain; however, we now have the tools to scan these scenarios and assess their levels of sturdiness (in mathematical terms). Thus, one can evaluate these scenarios both qualitatively and quantitatively (through the analyses of “best,” “worst,” and “basic” cases) in order to determine in an informed manner the ideal course of action.
These new methods endow us with a true choice panel in the sense that one can now elect to reproduce a design or to innovate completely, or even to freely reimagine the solutions that engineering may procure. One can only hope that these solutions will aim towards more value extraction in the long term rather than stopping at the oft-imaginary or self-imposed constraints that until now, impeded the horizons of potential scenarios.
FIGURE 1.1 FEED Process—Front End Engineering and Design
Reimagining the Procurement Function
In light of the remarkable weight of procurement operations within industrial budgets, it is quite clear that the procurement function plays a central role in organizational charts. Nonetheless, because of budgetary constraints or of imperatives tied with shareholder demands, this function is all too often reduced to a simplistic search for the minimal level of investment. This implies that more often than not, we observe that acquisitions don’t follow a rationale of clear and anticipated amelioration of value-generating processes for the organization, but rather derive from short-term calculations; this creates a situation where procurement appears primarily as a factor that aims to conserve shareholders’ interests through a reduction of CAPEX.
It is therefore quite clear that the generalized practice of the procurement function as it can be observed in recent years is in stark contradiction with the policies encouraged by the adepts of industrial Asset Management. We will thus try to go over the issues and the perspectives that derive from the modus operandi of procurement managers in order to bring forth an innovative and rational perception of what the procurement phase should become in order to comply with the requirements of a true “Asset Management” line of sight.
What is it that we find so reprehensible in the historical posture of procurement agents? And why do we oppose their practice so stubbornly? The answer is truly quite simple, but it shines a light on some of the cultural and internal rationales that have a lasting impact on corporate decision-making.
It is crucial to consider the very specific situation of the procurement phase in the overall life cycle of industrial assets. Indeed, this segment is regarded as being neither under the responsibility of engineers, nor under that of operators. It is a function whose limits are very well defined and almost partitioned—which comes with a fair share of problems. De facto, procurement has always operated in an isolated manner relative to the rest of the life cycle. Yet, the theory of constraints demonstrates that the optimum of the sum is not equal to the sum of the optimums; this means, in this context, that it does not suffice to adequately administer the procurement segment in an isolated manner in order to improve the global performance of the organization. For the enthusiasts of Asset Management, this is a systematic problem whenever one seeks to realize a function’s optimum without laying a simultaneous view on the entire life cycle.
No one is exempt from such pitfalls: in my own experience as a manager, I’ve conducted procurement deals without giving preliminary thought to their long-term impacts. I’ve done so without a hint of embarrassment, as it seemed at the time that I was doing what I was meant to do. Indeed, what is it that is expected from a buyer? Based on undeniably variable technical criteria, his role is to identify and select the correct service or the right product, in compliance with current specifications, and always at the lesser cost. Regardless, it seems obvious that the role of the buyer should be broader and more proactive: his function should come close to that of an internal consultant, or in other words to that of an agent capable of assessing the needs and wishes of every segment of the organization in order to establish a coherent line of action and to keep expenses under control. And de facto, there have been many procurement managers who have exercised their job in this fashion; however, over time, the increasing weight of economic pressures has reduced the role of buyers to a mere speculation on prices.
This rationale has reached a climax with the contemporary trend of public-private (or private-private) granting or Internet auctioning of infrastructural equipment or even complete infrastructural installations. This approach turns the notion of value extraction from the assets (dear to Asset Management thinking) into a mere calculation on instantaneous cost (contrary to the notion of life cycle) on a deal settled for the lowest bidder. We should even point out that some agents in the business seem to be very pleased with this trend, despite all its inherent flaws.
It is undeniable that firm control over procurement costs constitutes a crucial advantage for maintaining the financial health of an organization endowed with a heavy capital-intensive assets fleet, both in the industrial and infrastructural sectors. Indeed, purchases represent the equivalent of up to 80% of the organizational turnover in sectors such as the automobile or the distribution industries. It is no wonder, thus, that the price of the assets in which they invest appears as such an essential factor for industrial leaders worldwide. However, all too often this prevalence of the economic aspect tends to overshadow other trends that should also be considered—most notably, that of reliability. We are faced here with a certain organizational culture, very widespread nowadays, which has shunned all strategic and systemic vision in favor of a restrictive short-termism.
As we’ve already suggested, an exemplary purchase should respond to a definite need at the lowest possible overall cost,