In the late 1960s, a toy appeared in the US market called The Visible Man. It was the model of a human with a clear shell that allowed you to observe the inner workings of the human body and the interrelationships of the skeleton, organs, and circulatory system. I remember being fascinated with how the systems of the body interacted to create a unique individual.
Supply chain professionals are sure to understand my analogy, in that supply chains also consist of a number of individual systems that form an organizational system. And the inner workings of the supply chain should be similarly visible.
The New York City Transit (NYCT) supply logistics vision statement reads, “We will accomplish our mission … while striving for end-to-end visibility and minimizing total supply chain costs.” Over the next several years, enterprise asset management is one strategy that the Metropolitan Transportation Authority will be using to improve operations and achieve end-to-end visibility.
Enterprise asset management
The Institute of Asset Management defines asset management as “coordinated activity of an organization to realize value from assets.” Assets are both tangible and intangible things that add, or have the potential to add, value. Enterprise asset management, in its simplest form, is the efficient management of an organization’s assets on an enterprise-wide scale. The methodology starts with the initial design of an asset and continues through its life—including disposal or recycling and possible re-use—and aims to optimize investment in the asset during all phases.
Enterprise asset management can be applied to all asset-intensive industries and is especially applicable to my organization, where our revenue-producing assets—buses, subway cars, trains, and infrastructure—form the bulk of our assets. My colleague Richard Trifan, NYCT’s enterprise asset management business lead, puts it this way: “It is through the transparent evaluation of interrelated assets and components that true root-cause problem analysis is greatly empowered.”
The supply logistics division plays a pivotal role in the implementation of our enterprise asset management. We are responsible for the receipt, warehousing, and issuance of materials used for repair and maintenance of revenue-generating rolling stock. This puts my department in the unique position of having a direct impact on NYCT’s ability to provide the highest level of Customer Relations by having the right parts in the right place and at the right time in order to repair our buses and subway trains and keep them operating. My team works closely with operations, inventory planning, and procurement in order to track parts from our suppliers to the actual bus or train on which those parts are used. When the organization can procure quality material in the shortest time possible, receive it into inventory, and issue it quickly, the supply chain positively affects asset efficiency.
Enterprise asset management’s role is to maximize return on investment by providing information on the best time to purchase assets or inventory, how much to invest in maintenance and repair, and when to dispose of the asset in order to reduce capital and operating costs while improving return on total assets. By coordinating asset activities, the organization increases value through reduced costs and risk of failure, improved Customer Relations, and the establishment of an effective process for managing all assets.
Imagine how effective an organization becomes when it has full visibility, knowledge, and control over all of its assets. Information such as mean time between failures can be calculated with greater accuracy in order to increase asset uptime. Amounts that are in stock, available to promise, on order, in transit, and more can be seen by all stakeholders. Forecasting becomes more efficient. Forward planning improves asset uptime. Additional savings result when enterprise asset management is integrated with sales and operations planning (S&OP) and visibility drives a more accurate and realistic production plan. Furthermore, warranty claims can be maximized because there is better information available on what parts are under warranty. And, in the case of product recalls, parts can be quickly traced to the piece of equipment on which they are used.
Different from the traditional siloed approach, enterprise asset management requires the entire organization to work together to manage an asset’s life. In doing so, best practices and best-of-breed systems advance both capital and non-capital assets— thus making the supply chain truly visible.
Gary A. Smith, CFPIM, CSCP, is vice president of the division of supply logistics for New York City Transit. He may be contacted at firstname.lastname@example.org.