Initial Risk Management at The Specification Phase of The Asset Life-Cycle
Organizations' desire to optimize to gain a competitive advantage is nothing new and can be argued as the basis of business from antiquity. Physical asset management (PAM) has been part of the research in gaining an advantage as organizations rely on machinery assets and have been further thrust into popularity as part of Industry 4.0 and IIoT. Early analysis was conceptual and acted as a substrate for novel Iso standards. Until 2020, no empirical research tied PAM implementation and best practices to optimized outcomes. Despite the growing popularity, the full consequences of PAM are unclear; however, a recent study has established the competitive connection between PAM and its positive impact on operational performance. The link was found holistically with the following five core components: (1) strategy and planning, (2) risk management, (3) life-cycle delivery, (4) Asset information, and (5) asset review.
Taking the relationship of PAM and performance one step deeper into risk management and life-cycle delivery, there exists a significant risk associated with the specification and acquisition of the asset that sets the path-dependent trajectory of the investment. From the research into the industrial distribution domain, several factors outside of reliability and performance significantly influence the specification and selection of critical components and systems of the asset. The research discovered that the supplier/distributor promise, defined as the perception of optimization and the removal of pain, could supersede documented better alternatives based on the relationship. The brand strength of components equally provided a bias as the path dependence and age of the organization often precipitated the weaker selection.
As an opinion, users will need to see a different perspective of risk and life-cycle management from the asset's inception and understand the key influencers to decision-making and the potential pitfalls of reliability and performance choices. The importance is that no brand or source is beyond the same scrutiny, as all are prone to suboptimization. Furthermore, the supply chain changes may also dictate choices unheard of prior to Covid-19. The priority is that the documented weakness is addressed in the other areas of the five core PAM such as asset information and asset review, fulfilling the holistic gains noted by the earlier research.
Carl Lee Tolbert PhD
Guest Blogger
