Integrating physical asset management with business strategy

Koegelenberg, Johannes Josias Albertus (2005-12)

Thesis (MBA)--Stellenbosch University, 2005.

Some digitised pages may appear illegible due to the condition of the original hard copy

Thesis

ENGLISH ABSTRACT: A critical success factor for investment in high capital intensive business is to ensure that there is an integrated physical asset management plan in place that is integrated with the business strategy. The three fundamental aspects in modern physical asset management are to have a balanced performance measurement framework, self assessment system and benchmark review process in place to integrate, control and continuously improve the return on asset investment. There is a general lack of "hands-on" structured integration and performance management in the physical asset management environment. The result is ineffective assets with high life cycle costs that will have a negative effect on the business return on investment. A literature study was done on the most resent physical asset management models and business performance measurement systems to identify if the necessary methods and business systems exist to effectively manage the physical asset management function. A self assessment review and benchmark was done on Ticor South Africa and Kumba Resources centres to identify the gap in performance and what the main criteria is for improvement. The process was also used to identify the barriers that exist to effectively implement and integrate physical asset management with a link into business strategy. Achieving success in any strategy implementation requires a team effort among all stakeholders. A shared understanding and collaboration of all the role players is required. Very often physical asset management is not seen as core business, but as a cost centre that cannot be done without. This leads to sub optimisation and increased asset life cycle cost. It also promotes the tendency to make short-term financial decisions that do not have any longterm sustainability. A further downside to it is that if the function is seen as a service department it will only be reactive to business strategy and does not form part of the business strategy. This leads to a very reactive situation where the actions are driven by fixing what is wrong just to stay in business. A uniform performance measurement framework must be implemented across all business functions to align the entire organisation with the business goals. All functions have an effect on overall business performance, but they seldom have conflicting goals. Physical asset managers are sometimes not properly prepared and skilled to ensure that an effective and efficient physical asset management function is being maintained. Training and learning should be a major focus to ensure optimum use of employee potential in meeting the functional goals. Ignored leadership is a recipe for poor performance and frustration. The degree to which a company's business functions and processes are aligned with customers' needs makes a significant impact on the bottom line. The key objectives for the physical asset management strategy should be drafted with customer "needs and wants" in mind. The objective must be to maximise long-term profitability of plant and equipment through utilisation of the allocated resources. The opportunities and improvement methods that are possible in the physical asset management environment are endless and the potential that exists can be missed by the likelihood of failure to implement it effectively. The lack of managerial support is in many cases the only cause of failure to link physical asset management with business strategy. Secondly, the weakness of some of the solutions offered and the lack of embedding the solutions that are generated also contribute to the failure of linking physical asset management with business strategy. "The secret of managing success is choosing the right direction despite the uncertainties and conjlicting stakeholder expectations, and taking the whole organisation with you." - John Woodhouse.

AFRIKAANSE OPSOMMING: 'n Kritiese faktor vir die suksesvolle belegging in kapitaal intensiewe besighede is om te verseker dat 'n geïntegreerde fisiese batebestuurplan in plek is wat met die besigheidstrategie integreer. Die drie fundamentele aspekte in moderne fisiese batebestuur is om 'n gebalanseerde prestasieraamwerk vir bestuur, self-evalueringstelsel en doelwit-bestuursproses in plek te hê, om dit te integreer, te beheer en deurlopend opbrengste op bate-belegging te verbeter. Daar is 'n algemene gebrek aan vaardighede om die gestruktureerde integrasie en prestasiebestuur in die fisiese batebestuursomgewing te verseker. Die resultaat is oneffektiewe bates met baie hoë lewensikluskoste wat die besigheid se opbrengs op kapitaal negatief sal beinvloed. 'n Literatuurstudie is gedoen om die nuutste fisiese batebestuurmodelle en prestasiebestuurstelsels te identifiseer en te analiseer. Die doel was om vas te stel of die nodige metodes en besigheidraamwerke bestaan waarmee die fisiese batebestuur funksie bestuur kan word. 'n Self-evaluering analise en doelwitmeting is gedoen op Ticor South Africa en Kumba Resources-sentra met die doel om die gapings in prestasie te identifiseer en kriteria vir verbetering te bepaal. In die proses is die hindernisse wat in die pad van effektiewe implementering en integrering van fisiese batebestuur met besigheidstrategie staan, geïdentifiseer. Spanwerk word benodig vir die suksesvolle implementering van besigheidstrategie. 'n Gedeelde verstandhouding en samewerking deur alle belanghebbendes word benodig. Fisiese batebestuur word gereeld uitgesonder as een van die nie-kern besigheidsfunksies en dat dit slegs 'n kostesentrum is waarmee nie weggedoen kan word nie. Dit lei tot die suboptimisering van die bate se lewensiklus-koste. Dit skep ook die tendens om slegs korttermyn finansiële besluite te neem, wat geen langtermyn volhoubaarheid het nie. 'n Verdere gevolg is dat die funksie slegs beskou kan word as 'n dienste-funksie en dat dit baie reaktief raak teenoor strategie verandering. Die funksie word ook nie deel van die besigheidstrategie nie. Dit lei tot 'n baie reaktiewe situasie waarin aksies en inisiatiewe slegs gedryf word deur die noodsaaklikste bates te herstel net om in besigheid te bly. 'n Uniforme prestasie-bestuursraamwerk moet geïmplementeer word regoor al die besigheidsfunksies om die totale organisasie se besigheidsdoelwitte in ooreenstemming te bring. Al die besigheidfunksies het 'n effek op oorhoofse besigheidprestasie, maar daar is baie selde doelwitte wat totaal in konflik met mekaar is. Fisiese batebestuurders is soms nie ten volle voorbereid of bevoeg om te verseker dat 'n effektiewe fisiese batebestuursfunksie onderhou word nie. Opleiding en mentorskap moet 'n fokuspunt wees om te verseker dat werknemerpotensiaal benut word in die bereiking van funksionele doelwitte. Leierskap wat agterweë bly is 'n resep vir lae prestasie en frustrasie. Die graad waartoe 'n besigheidfunksie en proses ooreenstem met sy kliente se behoeftes sal 'n beduidende impak op die netto prestasie van die besigheid hê. Die kern doelwitte van die fisiese batebestuurstrategie moet opgestel word deur die behoeftes van die kliente in ag te neem. Langtermyn winsgewendheid van aanlegtoerusting moet die doelwit wees tydens die allokasie van hulpbronne. Die geleenthede en verbeteringsmetodes beskikbaar in die fisiese batebestuuromgewing het oneindige potensiaal wat verlore kan gaan as nagelaat word om die funksie effektief te implementeer. Gebrek aan ondersteuning deur bestuur is in baie gevalle die rede hoekom die fisiese batebestuurfunksie nie geïntegreer is met die besigheidstrategie nie. Die swakpunte van sommige van die oplossings wat aangebied word en die onvermoë om oplossings te implementeer, dra by tot die mislukking om fisiese batebestuur met besigheidstrategie te verbind. "The secret of managing success is choosing the right direction despite the uncertainties and conflicting stakeholder expectations, and taking the whole organisation with you. " - John Woodhouse.

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