The benefits of a professional asset manager

Asset managers help their companies increase efficiency, save money and boost profits from their equipment. The profession has come a long way since equipment management fell to the shop technician. The people who do the job today have come by their experience, expertise, knowledge and skills from a combination of on-the-job experience and advanced coursework, becoming experts in a range of interrelated areas that impact the bottom lines of all kinds of businesses, especially those that use machines.

From shop to front office

In the early ages of asset management, it was the responsibility of the shop technician or the shop foreman to get more value from the company’s equipment. These individuals were responsible for keeping the equipment in good condition, but as the business changed more knowledge and different skills sets were needed.

As fleet managers, they drew from their on-the-job experience to make equipment recommendations to the company’s leadership teams. They were responsible for the maintenance and full utilisation of every piece of equipment the company owned, and also for replacing specific machines at the best possible time to maximise value for their companies. These fleet managers developed the foundation for professional asset management.

Asset-based businesses progressed even further and the fleet managers became professional asset managers. This part of the evolution has been stratospheric. Where once they needed to keep multiple pieces of equipment up to par and deploy them to multiple job sites, as asset managers they now need to combine all the elements that impact efficiency into decisions that affect a company’s profitability. In short, they need to turn what has often been viewed as an overhead in a company’s debit column into a profit centre.

To do it well, professional asset managers have likely completed advanced study in a variety of disciplines such as finance, information systems and customer service. In the US, they may have obtained that additional training through the Association of Equipment Management Professionals (AEMP), which offers multiple educational opportunities for asset managers, both online and in face-to-face seminars. And, in many cases, they have progressed further by taking the Certified Equipment Manager (CEM) exam.

The position continues to evolve in positive, profitable ways as companies grasp the value of the profession. Asset managers could now more accurately be called fleet executives. These leaders are involved at a high level in their companies because they contribute a breadth and depth of knowledge and expertise in interrelated areas to the company’s decision-making processes.

Today’s fleet executives see the big picture. When one element of equipment utilisation and profitability changes, they can adjust the others accordingly. More importantly, they can anticipate when one element will impact another and make adjustments within the optimal timeframe. In the process, the company saves thousands, and sometimes hundreds of thousands of dollars, every year.

Unfortunately, many companies have not yet grasped the value – and the high return on investment (ROI) – of hiring an asset manager, let alone a fleet executive.

An art and a science

Even in increasingly complex operating and economic environments, leaders of many “traditional” companies still see a fleet only as a necessary evil. On the other hand, modern, evolving companies see that same fleet as a profit centre, a means for both saving money and making more. Those companies rely on their professional asset managers not only to direct, deploy and maintain their fleets, but also to maximise their utilisation to make the businesses more profitable.

Professional asset managers have the expertise, experience and knowledge to fully comprehend how equipment can be optimised to add more value to the balance sheet. They are analytical, financially astute and mechanically inclined. They can solve problems, assess risk and speak truth to company leaders – the CEO, CFO, COO and so on. And they are driven by an uncompromising dedication to efficiency.

Asset managers are involved in everything from procurement to benchmarking, evaluating life-cycle costs to purchasing technological tools, parts management to safety assurance. They ensure equipment is maintained, safe and utilised appropriately. They monitor equipment from hour to hour, or even minute to minute, so each piece is operating at peak capacity and in perfect harmony with all other equipment on a particular job.

Asset managers determine the ideal time for buying or selling a piece of equipment, or determine whether it would be better for the company to rent or lease, instead. They can help a company land more work in its core areas of expertise and make new projects possible. They do it by evaluating the equipment needed for a project, determining whether the company already has it and if it will be available during a project’s timeline.

They are technologically minded, too. Asset managers use advanced technologies to collect, interpret and apply data to both equipment utilisation and high-level planning. They are able to evaluate the complexities of fleet optimisation in ways that bring clarity to decision making. More than that, they provide the information and insights that leadership teams need to make decisions that increase profitability.

No other employee group brings the same breadth of understanding across disciplines. And because of that, good asset managers pay for themselves many times over.

A simple hypothetical

For a better understanding of the complexity of the relationships between the resources an asset manager oversees and the decisions they help make, consider the following everyday example.

An operations person at an earthmoving company has a job coming up, but part of the project is outside the normal work undertaken by the company. For this job, one of the parts of the contract calls for the company to erect a small overpass. It is a US$ 20 million project, and the company needs a US$ 1.2 million crane to complete the job.

The leadership team needs to decide if buying the crane will be advantageous. Say the bridgework is going to take two years and a new crane will depreciate over 10 years. Generally, at a value of US$ 1.2 million, the company will depreciate the equipment at a rate of US$ 10,000/month. Or maybe the numbers person at the company decides to depreciate the equipment over 24 months rather than 10 years. After those two years, the monthly cost of owning the equipment goes way up. And the situation will be compounded in every month after the initial job is done: if the company is not using the crane, it is taking a hit to the bottom line and compromising short- and long-term profitability.

If the decision is to buy the crane, where should the company buy it? The typical purchasing department might look only at lowest price, but maybe it will be better to spend 20% more on a crane with proven reliability from a more reputable OEM. Or maybe it would make more sense to buy a used crane, instead. Renting one could be a better deal. Or perhaps subcontracting that part of the job will be a better move.

All these factors need to be considered and can impact the future profitability of the company, especially if it is a small business for which US$ 1.2 million is a significant investment. The decision will impact not only current profitability, but also the company’s long-term success.

The question is: does the CFO, CEO or COO, or even the entire leadership team for that matter, have the experience and knowledge to make a fully informed decision? In most cases, the answer will be no. But it will always be yes if the question is about an asset manager who, based on solid data, expertise and knowledge, is capable of making these kinds of interrelated determinations.

Case study

The experience of RMCI Inc., an AEMP member based in Albuquerque, US, substantiates the value an asset manager can bring to a company’s financial and operational bottom lines.

RMCI provides general and heavy civil contracting services throughout the southwestern US for both public and private-sector organisations. The company does wastewater and water treatment work, utility work and heavy structure construction. Since its founding in 1990, RMCI has completed hundreds of projects worth nearly US$ 700 million, from installing high-pressure piping to building flood diversion control structures.

To accommodate that work, the company has incrementally grown its equipment holdings from nothing to a fleet valued at more than US$ 15 million. Rex Davis, president of RMCI and a CEM, attributes much of that growth to having a professional asset manager in charge of the fleet. He also says proper preservation of the equipment, which has given RMCI efficiency and profitability in the field, is just the beginning.

“Our asset manager pays for himself many times over through efficiencies, savings and sometimes through intangibles that are difficult to measure in dollars,” said Davis. “The intangibles are things like having your equipment maintained and ready to go out onsite when it is needed and determining the best utilisation across projects.”

And sometimes it is the biggest intangible of all. By bringing on a full-time asset manager, Davis is now able to focus on the things he does best, one of which is steering RMCI toward his vision for the future.

“Instead of talking about how much money an asset manager will save a company moving forward, its leaders need to talk about how much money the company can lose by not having one,” Davis said. “There is no doubt that without an asset manager you are going to lose money, [the question is] just how much it is going to be.”

Speaking of the future

As RMCI and thousands of other companies across the globe will attest, much is at stake when it comes to a company’s fleet. Proper care and utilisation can add thousands or even millions to a profit or loss, depending on the company’s size. But improper management can rapidly take those same dollars away.

The tighter the ship is run, with data-driven decision making and best practices applied consistently across the board, the more likely the company will be to thrive. Asset managers have the experience, knowledge and understanding of how all elements of profitability are interrelated and impact one another, and because of that they are able to provide valuable advice and guidance.

Written by Stan Orr, President and CSO of the Association of Equipment Management Professionals.

Read the article online at: https://www.hydrocarbonengineering.com/special-reports/26032013/benefits_of_a_professional_asset_manager_stan_orr_aemp/