A Guide to Understanding Asset Optimization. White Paper

Transcription

1 A Guide to Understanding Asset Optimization White Paper

2 Introduction Big Data and cloud technology has provided organizations new ways to drive efficiency and productivity. Among companies recognized as industry leaders and innovators, Asset Optimization has become a trending initiative and is producing strong results for these adopters. So what is stopping other organizations from adopting Asset Optimization? The reasons vary across organizations, but include concerns that their data quality can t support optimization; that ambitious asset optimization projects will stretch tight budgets; that current operations are already so effective, they can t be further optimized; or that Asset Optimization is solely for large-scale organizations. An example of optimization done well is UPS No Left Turn optimization policy. A complex system of data science, algorithms, and proprietary maps, this optimizer directs drivers to avoid most left-hand turns even if it means driving around the block. This approach saves UPS every year: 10,000,000 gallons of fuel 100,000 metric tons of CO2 emissions equivalent to taking 21,000 cars off the road 100,000,000 miles from their routes Countless accidents as left turns are one of the top pre-crash events occurring in the U.S. UPS s optimizer has been in place for more than a decade, and its data shows a total savings between $300 and $400 million in fuel, wages, and vehicle operations costs. Whether your organization is holding off on its optimization journey until you learn more, or if you ve already started, this white paper will discuss how to achieve key bottom line benefits of optimization, and will initiate thought-provoking conversations on ways to optimize assets. This white paper will: Review the methodologies behind asset optimization Discuss how to leverage the value of optimization Reveal real-world results of asset optimization initiatives Optimization Defined Broadly, optimization is the process of leveraging data and technology plus combinations of algorithms and heuristics to enable an improvement in a business or operation. It is applied in many different functions, and in many different verticals, all with one common goal: to maximize revenue-driven productivity while minimizing costs. Optimization for assets is more narrowly defined as a mathematically based trade-off study that provides decision makers with the ability to meet or exceed targeted asset performance such as uptime, utilization, and production while minimizing the cost associated with achieving that performance. Decision

3 makers are then empowered to maximize the potential financial margin of revenuegenerating assets for the company. This optimization involves performing specific calculations to provide guidance for ideally operating complex machinery across a fleet. There are many interdependencies within any given asset that determine its productivity, longevity, and efficiency. Predictive analytics solutions for enterprise asset management take these complex variables into consideration to provide accurate and timely decision support, and build simulations of real-world events in order to predict and optimize future behaviors of assets. For true optimization of asset performance, it is paramount that future behavior of each asset is accurately forecast. Two Methods of Optimization While Asset optimization is a growing approach to managing assets, many organizations relying on forecasting using basic spreadsheets. It is easy to understand the reasoning: spreadsheets fit into most users comfort zones; the basic tools are often pre-loaded on organizational computers for a negligible cost impact; and the familiar interface eases learning curves. Companies that rely on past data instead of asset optimization will get left behind by competitors leveraging predictive analytics. But when using this kind of forecasting, organizations are making decisions based only on past data and decisions, which makes progression difficult to achieve. This historical method discounts the predictive approach, which includes future usage and operating environments. Approach by Industry and Size Virtually any organization, regardless of industry, can benefit from asset optimization. The approach and technology solutions available for each industry will differ based on pertinent variables, but there are significant opportunities for optimization for organizations in all verticals. Organizational size should also not be an inhibitor. In fact, for smaller organizations seeking to expand their reach or broaden their footprint, asset optimization can be considered something of a secret weapon. Over time, the gains of asset optimization initiatives can help create a competitive edge by increasing asset performance and longevity, crucial to small organizations, while minimizing related costs. The Current Optimization Environment Getting Stuck at Reactive Many organizations today don t know how to get started with an optimization strategy, and those that aren't utilizing optimization tools tend to be reactive. They are simply dealing with

4 problems as they occur, subjecting their budgets to the volatility of the business landscape. These organizations often have an incomplete view into which assets they own, creating surprise challenges that can severely impact operations. If an organization is not utilizing any technological optimization, brain- and manpower is often the solution. Organizations try to force-fit improvements, creating divisions that sit over various operational functions as part of planning teams and command centers, all trying to look across the organization to find the gaps. The teams attempt to tie things together by picking their best and hardest-working employees, and hope that asset management is handled. This approach can destroy morale and almost guarantee a negative impact on operations and revenue. Additionally, it will never be able to work as well or accurately as purpose-built software solutions on computers that run 365 days a year. Computerized optimization centers run seamlessly, without breaks, and without communicating between different planning teams that may be geographically dispersed and speak different languages. In the past, few optimization solutions were commercialized or readily available, so often proprietary solutions were built in-house. These approaches often had the unintended consequences of spaghetti code, upgrade issues, and integration challenges to name but a few; and could become a distraction from the organization s core competencies. Over the past decade, advances in asset management software, advanced analytic platforms, and the adoption of cloud, asset optimization is becoming more widely accessible and accepted. Data Problems Preventing Optimization A key reason many organizations hold off from asset optimization is data, be it too much, not enough, or simply not the right data. But as the saying goes, "You don t know what you don t know." Compiling what is available is like fitting together a puzzle to reveal a picture. Often it is surprising what can be found. Some IT teams are cautious about processing large amounts of data. This is precisely when cloud-based Big Data solutions should be leveraged. They can compute massive amounts of data quickly and accurately, while ensuring that organizational hardware support will not be diverted for the task.

5 Big Data processing enables stochastic optimization in minutes, not days, for fast decision making. Stochastic optimization of sparing strategies across all organizational assets Getting Stuck at Proactive Some organizations have begun their asset optimization journey. They try to plan ahead, run what-if analyses, use spreadsheets of historical data to do forecasts, and expect smooth sailing. While this is a more proactive approach, organizations are advised to make the leap to from proactive to predictive with the help of an optimization solution. Business happens too fast and people can t react quickly enough to respond to the real-time demands of business. Global organizations have an especially difficult time running seamless operations due to the handoffs between global centers, time changes, and geographical limitations. The Opportunities in Asset Optimization The How-Tos of Getting Started Optimization begins with a view of all organizational assets, to understand all assets that need to be managed, and to organize them as critical assets, support assets, and spare assets. Then it is time to gather a starting point of data to plug into the optimization software. Sort through the data to find relevant information, determine where gaps exist, and work across the organization to close those gaps to ensure the best predictive analytics modeling results. Look across the organization and rank and prioritize various opportunities by value. Once the areas of the business that would benefit from optimization have been identified, create portfolios of these opportunities to manage. This holistic, asset-based approach enables the continual ranking and prioritization of optimization initiatives for the entire organization in the face of change. For many, this may sound overwhelming, or simply that it will require too much time from too many team members. Quality solution providers can be relied on in these areas and others, from data mining; determining how to improve the fidelity of predictive analytics models; how

6 to prioritize initiatives; creating strong portfolios for ongoing optimization; and more. The key is to find the right provider for your organization. External Resources If the decision has been made to turn to an outside resource to optimize a fleet of assets, there are several key indicators to look for. Beyond a track record of success and referenceable customers, they should support you with the ability to: Provide tailored solutions and assist you in discovering areas of savings and cost avoidance Manage data and format it into the algorithms to build simulations of real-life asset behavior Provide the infrastructure to handle more and more data Continually clean and incorporate data into predictive analytics simulations Train and support your entire organization to maximize your experience most costeffectively Internal Resources A valuable resource in finding optimization opportunities may be sitting next to you. Other employees are a valuable and often untapped resource with deep experience and first-hand knowledge; they can often identify opportunities to optimize that can lead to huge savings for the organization. Best-in-class organizations often implement incentive programs for employees to identify areas for optimization. Solutions Organizations that adopt asset optimization projects must first decide what type of solution fits goals. The two main product categories are forecasting solutions and predictive solutions. Forecasting Solutions As referenced previously, forecasting solutions generally focus solely on historical data and decisions. This strategy looks at past data like inventory orders, OEM data, and maintenance schedules to try to predict future asset behavior. These predictions are likely to be an aggregate view of broad trends a short distance into the future. This approach can omit critical information and rarely allows for proactive problem solving, keeping organizations reactive and vulnerable. Their key strength is that they tend to be based on spreadsheet solutions, with their familiar interface and high cost-effectiveness. But given their shortcomings, it is arguable that these strengths are perhaps pitfalls, encouraging ongoing use while the organization remains unable to make the best decisions about its assets.

7 For those organizations that truly cannot afford any other solutions, this approach is certainly better than none as it affords some decision-making support. But for those that have a choice, the predictive approach is to be recommended. Predictive Solutions More complex predictive solutions use advanced analytics data science to create statistical approaches and algorithms that accurately leverage relevant past data, uncover missing data, and generates future data to help organizations answer questions and make decisions. Take your organization from reactive to proactive, then from proactive to predictive. Although implementing a predictive approach will involve a higher up-front cost and a steeper learning curve than forecasting solutions, the resulting approach enables organizations to look far into the future with high levels of accuracy to make strategic decisions their assets. The impact to the bottom line is immediate, positioning them well vis-à-vis their competition and markets. The Value of Asset Optimization While most asset optimization projects can easily justify a base ROI, the true value of these projects is in capturing unseen or hidden value. for organizations with smoothly running asset fleets, good availability, and an acceptable level of service, it can be difficult to find the motivation to implement an asset optimization project. But consider again the UPS No Left Turn Optimization policy. The company is continually upgrading its optimization program to stay in tune with changes in roadways and laws; this ensures that it continues to accrue savings while minimizing fleet wear and tear. Asset optimization initiatives empower organizations to uncover, How can we manage our assets most efficiently and cost-effectively? Clockwork Solutions for Asset Optimization Clockwork Solutions offers a proven predictive analytics platform and strategies that enables true asset optimization. Our deep experience in data collection and management and our consultative approach supports a granular look at asset usage so ROI can be achieved quickly, and decisions that boost profitability are clearly reflected in optimization solutions. Clockwork Client Snapshot How do clients benefit from working with Clockwork to optimize their assets? Here is one example.

8 A company included Clockwork asset optimization in its drillship fleet overhaul interval schedule and parts management. The results of the asset optimization exercise: An asset availability gain of 15% for the least cost $2 billion in increased revenue $16 million savings in unnecessary spare parts purchases This is just one example of how an already-functional company found hidden value and huge savings by adding optimization into its asset management plan. The Asset Optimization Value Equation How will your organization benefit? The hidden value can make it challenging to put a number on the savings, but history indicates that value is there and ready to be harnessed. Ultimately, the percentage value that can be derived from asset optimization will vary based on the size and scope of the organization, asset fleet, and opportunity. You can determine a rough estimate, based on Clockwork data science and past clients. Calculate the value of asset optimization by multiplying the number of your assets by the cost of your optimization solution, and then multiply that by the percentage annual lifecycle cost of the asset. Based on your current level of optimization, multiply that total by 5-25%. The value of asset optimization can be calculated by multiplying the number of assets by the procurement cost, and then multiply that by the percentage annual lifecycle cost of the asset. Based on your current level of optimization, multiply that by 5-25%.

9 Conclusion The hidden opportunities within asset optimization keep management awake at night. Implementing asset optimization strategies can take an organization company from stagnant to profitable very quickly. The first step is implementing a predictive analytics strategy with the goal of holistic optimization. Whether an organization has only a few data points or trillions, asset optimization strategies can be implemented to grow with the business and drive efficiencies and profitability as the process and data grow together. Consider implementing an optimization solution that enhances efficiency in one part of your business, and build on that success. One project can reveal the funding to fuel the next, raising conversations and building momentum that guides the organization along the path to enterprise-wide asset optimization moving from reactive to proactive then to predictive strategies for better asset management. The value of optimization has been proven time and time again through white papers, case studies, and real-life results from successful organizations touting from millions to billions in savings and or unplanned revenue. It s time to harness the hidden value of asset management with data-driven decisions that optimize your operation. Learn about Clockwork Solutions offerings for Asset Optimization at or info@clockwork-solutions.com for a complimentary demo.

10 Clockwork Solutions is a global leader in predictive analytics solutions for organizations with strategic, high-value fleets and assets with a focus on improving asset availability, reducing parts inventory, and controlling maintenance costs. With more than 30 years of experience delivering solutions for Fortune 500 enterprises across multiple industries and military organizations worldwide, Clockwork delivers a full range of solutions ranging from Extract-Transform-Load (ETL) data capabilities through to Condition Based Maintenance, Predictive Health Management, and full Lifecycle Management. For more information visit