Accenture Asset Reliability Maintenance Management
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Transcript of Accenture Asset Reliability Maintenance Management
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Asset Reliability and
Maintenance ManagementStrategic Levers for Driving Shareholder Value
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Complex asset owners,
operators and service providersoften view asset maintenanceas expendable. In reality, theopposite is true. Trimmingmaintenance costs may savemoney in the short term. Butover time, cost cutting canhave safety, legal and financialramifications. Moreover,proper asset management—
e.g., increasing equipmentavailability and reducing partsand labor consumption— canactually reduce costs. Emergingperformance-based businessmodels are escalating thecriticality of reliable assetsin driving new, significantrevenue streams.
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The bottom line is asset
reliability and maintenanceshould be an essentialcomponent of an asset intensivebusiness strategy to achievehigh performance.
Accenture has developed anadvanced set of tools thatcan help asset-intensiveorganizations identify prioritiessuch as asset reliability, workmanagement and capitalutilization—all of whichhave a significant impact onshareholder value.
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Higher asset reliability and
better maintenance canimprove operating margins—not just by reducing expensesbut by increasing revenue. Onereason is that higher equipmentavailability often increasesproduction capacity for a “sold-out operation.” Another (morecommon) scenario is improvingprofitability by maximizing
the most profitable andproductive units.
Despite these benefits,reliability and maintenanceare often overlooked leversfor improving shareholder value(Figure 1). They are viewed ascosts of doing business. Yet
the return on invested capital
(ROIC) made possible by theseinitiatives is frequently reflectedin operating margins andcapital efficiency. Key ratiosthat may be positively impactedby effectively managing assetsinclude opex/revenue, net PPE/revenue and (to a lesser extent)working capital/revenue.
Net PPE/revenue is the moststrategic lever associatedwith improved reliability. Bydeploying a formal programfor asset reliability andmaintenance management,high-performance businessesboth sustain the productivecapacity of their equipment
and extend the equipment’s
useful life. Getting longer andmore efficient use from yourequipment often makes itpossible to defer capital costsfor replacement.
Improved reliability alsoaffects working capital/revenue by allowing for reducedspare parts inventories. Forgoods producers, this maybe a relatively small impactcompared to production andin-process inventories. However,a focused effort in spare-partsreduction can be a high impact,short-term initiative that canoften pay for investment inreliability programs.
Shareholder Value Analysis for Reliability and Maintenance
Figure 1. Value Creation Roadmap.
Total Return toShareholders
(TRS)
Value of thediscountedcash flows to
shareholdersor Economic
Value Added(EVA)
Spread
Growth
ROIC
OperatingMargins
CapitalEfficiency
Cost of Capital
Organic
M&A
Value Creation
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The following examples
illustrate the benefits fromusing some of the abovemeasurements to driveoperational improvements.
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Opex / Revenue
Depreciation / Revenue
Operating Working Capital / Revenue
2007
2007
2007
2008
2008
2008
TTM
TTM
TTM
Peer
Peer
Peer
Pre-Tax ROIC
5.8%
2007 2008 TTM Peer
6.8% 5.8%
10.8%
19.6%
66.6%
13.7%
15.2%
Goodwill / Revenue
2007 2008 TTM Peer
50.4%35.4% 36.8% 26.6%
Net Other Assets / Revenue
2007 2008 TTM Peer
-14.3% -14.1% -13.6% -13.0%
Net PPE / Revenue
2007 2008 TTM Peer
285.2% 246.6% 270.0%191.1%
13.6% 18.1%10.9%
12.6% 12.9% 9.7%
68.2% 69.0% 69.4%Operating Margin
2007 2008 TTM Peer
19.1% 18.1% 20.9%
Capital Efficiency
2007 2008 TTM Peer
0.30 0.36 0.320.50
x
Figure 2. Power Generation Company ROIC Tree.
In the first case, a power
generation company was behindits peers in opex/revenue, but70 percent ahead of them innet PPE/revenue (Figure 2).The power company’s analysisshowed strong potential returnsassociated with improvingthe reliability of its low-costproduction units. Althoughopex/revenue was trending
upwards, a more detailedanalysis found this to be due torising fuel costs.
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In the second case—a mid-size
oil and gas producer—operatingexpenses were higher thanpeers while net PPE/revenuewas lower (Figure 3). In thiscase, the benefits of improvedreliability would come fromreduced maintenance laborand materials costs. In effect,variation in net PPE was aresult of capital improvements
for a refinery during a plannedshutdown. In order to cost-effectively sustain capacityover time, improvementswould be required in reliabilityanalysis (do only the rightwork at the right intervals)and maintenance planning andscheduling (be more efficientwhen doing the right work).
Understanding the processes
that have the greatest impacton shareholder value clarifywhat capabilities actuallyrequire detailed analysis.Accenture has developeda structured approach foridentifying improvementopportunities that yield thegreatest return on investment,while increasing safety and
regulatory adherence.
Opex / Revenue
Depreciation / Revenue
Operating Working Capital / Revenue
2007
2007
2007
2008
2008
2008
TTM
TTM
TTM
Peer
Peer
Peer
Pre-Tax ROIC
25.4%
2007 2008 TTM Peer
24.7%
7.0%14.7%
61.3%
11.6%
1.0%
Goodwill / Revenue
2007 2008 TTM Peer
2.6% 2.9%4.6% 4.2%
Net Other Assets / Revenue
2007 2008 TTM Peer
-4.7% -3.5% -6.2% -7.5%
Net PPE / Revenue
2007 2008 TTM Peer
78.2%107.5% 128.4%145.1%
2.3% 5.6%10.4%
7.4% 11.4%
15.3%
72.8%79.4%
71.5%
Operating Margin
2007 2008 TTM Peer
19.8%27.1%
9.3%13.2%
Capital Efficiency
2007 2008 TTM Peer
0.941.25
0.761.29
x
Figure 3. Mid-size Oil and Gas Producer ROIC Tree.
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Accenture has developed
extensive functional depthin operations strategy, talentoptimization, organizationalperformance and supplychain management. These areinvaluable for identifying andimplementing asset reliabilityand maintenance managementsolutions that address clients’unique business objectives.
We are uniquely positionedto diagnose issues notonly compared to industrystandards but specific tothe organizations businessobjectives and challenges. Ourindustry depth and functionalbreadth provides our clientswith a partner to enablestrategy through execution and
sustained improvement.
To increase competitiveadvantage, a mid-sizedintegrated oil companyinitiated a comprehensivemaintenance improvementprogram. A main focusof this effort was on
maintenance planning, thecompany integrated thisfunction through processreengineering, training andsystem enhancements. Theeffort yielded significantbenefits – reduced
Accenture’s Differentiated Approach
Increasing Competitive Advantage through Asset
Reliability and Maintenance Management
maintenance costs by30 percent, improvedthroughput by 5 percentand aligned leadershipwhich had a positive impacton morale and overalloperational performance for
the company.
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About Accenture Supply Chain
Management
About Accenture The Accenture Supply Chain
Management service line works
with clients across a broad range of
industries to develop and execute
operational strategies that enable
profitable growth in new and existingmarkets. Committed to helping clients
achieve high performance through
supply chain mastery, we combine
global industry expertise and skills in
supply chain strategy, sourcing and
procurement, supply chain planning,
manufacturing and design, fulfillment,
and service management to help
organizations transform their supply
chain capabilities.
Accenture is a global management
consulting, technology services
and outsourcing company.
Combining unparalleled experience,
comprehensive capabilities across
all industries and business functions,and extensive research on the world’s
most successful companies, Accenture
collaborates with clients to help them
become high-performance businesses
and governments. With approximately
177,000 people serving clients in more
than 120 countries, the company
generated net revenues of US$21.58
billion for the fiscal year ended
Aug. 31, 2009. Its home page is
www.accenture.com.
We collaborate with clients to
implement innovative consulting
and outsourcing solutions that align
operating models to support business
strategies, optimize global operations,
enable profitable product launches,
and enhance the skills and capabilities
of the supply chain workforce.For more information, visit
www.accenture.com/supplychain.
Copyright © 2009 Accenture
All rights reserved.
Accenture, its logo, and
High Performance Delivered
are trademarks of Accenture.
Contact
For more information on how
Accenture can assist your organization
with the implementation of an
asset reliability and maintenance
management program, please contact:
Thomas Schramm – Senior Executive
Munich Germany
+49 89-93081-68289
Erik Olson – Senior Executive
Atlanta, United States+1 678-657-6104
Robert Giacobbe – Senior Executive
Atlanta, United States
+1 678-657-6282
Patrick Scullin – Senior Executive
Austin, United States
+1 512-912-6582