Guru Goddess

During the dark ages of computers and asset management, the 1970’s and early 1980’s, there was a company that operated large ocean going integrated tug/barge systems.

The tug engines were twin 5560 HP V-12 diesels.

There were 5 parts of these engines that were tracked. There was an index card for each item and notations were made whan any piece was changed.

The vessels had no computer systems but the First Assistant Engineer brought a personal IBM type computer aboard while the Captain had purchased a Commodore 64 and was writing programs for it in Basic.

Each engine had a counter attached that gave cumulative operating hours and each piece tracked had the engine hours at installation noted.

The pieces and guidelines for changeout were:

Heads 10,000 hours, later changed to 12,000 hours

Right hand intake valve 3,000 hours

Left hand intake valve 3,000 hours

Right hand exhaust valve 3,000 hours

Left hand exhaust valve 3,000 hours

The above items were for each cylinder for both engines, giving 120 items to be accounted for.

The First Assistant Engineer wanted to create a program to track the data and find out the status of each part. He bogged down on his program and mentioned the problem to the Captain.

The Captain wrote a fast and dirty basic program that compared the engine hours at installation to the present engine hours for each item and gave a printout of the status of each item.

It took about 2 days to enter the data and write the program which ran through it all in about 30 seconds.

Conditions were, “OK”, if under the replacement hours, “Will need replacement in XXX hours” or “Overdue for replacement by xxx hours”

The entire Port Engine was overdue by no less than 1000 hours and sometimes quite a bit more.

This sent a shockwave through all Engine related personnel.

Although information had been entered on the index cards, no one had ever made any practical use of it.

The economics:

These vessels cost about $2,000 per hour to operate.

The failure of an exhaust valve meant stopping the engine and changing it out and took about one hour.

(In a true disaster, the Engineers had bypassed the air/oil interlock that prevented the engine from starting when it had no oil pressure. The interlock had failed and there was no replacement immediately available. They shut down for a failed exhaust valve and when they restarted, no one turned the lube oil pump back on. The engine was destroyed and replacement cost $1 million.

In addition, about 1/4 of the revenue of the vessel for a whole year was lost while waiting for a replacement engine to be built and delivered.)

The failure of an intake valve would be another disaster. In general, the valve head would drop into the cylinder where it would get mashed into pieces about the size of a marble. In the process, it would destroy the other intake valve, the head, the piston and liner. This would generally cause an emergency port call and take a full day or two to repair.

In about 14 years of operation we never experienced a head failure.

So preventive maintenance was essential but before the advent of computers there was no good way to keep track of it.

The end of this story is that the Company went into high gear and replaced every part that was overdue. Right after they finished, the engines were started one morning and the lube oil pump failed to provied full pressure to the Port engine. It was severely damaged but not destroyed as was the Starboard one on the previous occasion. But the money was not there to repair it and the Company went bankrupt.

Physical asset management is the practice of effectively using the physical assets of the company. Many companies have an in house department taking care of that but in some cases, an outside party is called in to help them out.

For this to work, the team has to know first hand the assets of the company. To prevent duplication, it should point out the depreciation value and the utility in the process of production. This process is better known as cost analysis as this will increase economic life and reduce component failures such as the incidence of theft and mistakes in the procurement of supplies and equipment.

It can also assist management in tax planning and forecasting business solutions which could save the company millions of dollars.

For instance, production suffers if machines break down frequently. This is normal if the machine being used is already old. The company can try to repair it but if the cost is much higher than a brand new one, then perhaps they should try to sell this at a reasonable price then use the money to buy a new one.

The same goes if a company has hundreds of stores and only a few of them are making a profit. Since the unprofitable ones are not really bringing in revenue, perhaps it will be a good idea to close them. You must first identify which are constantly unprofitable and it might be a good idea to find out whya and if the situation can be corrected.

This is something that a lot of companies are doing now due to rising costs of fuel and the economic slowdown. Rather than filing for bankruptcy, they would rather slash a few thousand jobs and close down stores. Some companies that have done so include Starbucks, American Airlines, JP Morgan and a lot more. Remember here that workers are also consumers and when they lose their jobs, they tend to consume (buy) a lot less. Other members of society may decide to punish those who lay off workers by not buying their goods or services. The other option is for some companies to merge just to stay afloat.

The bottom line is that physical asset management gives the company an idea as to what they actually have. This will help prevent them from missing out on opportunities when they present themselves.

One way of keeping track of the companyís assets instead of doing it by hand is by investing in asset management software. This will allow those in management to gain access to it whenever it is needed via the companyís intranet.

This can be done by bar coding everything similar to what is done in the supermarket. This will enable the in house team to just scan the item which not only increases accuracy but helps to save time on repeated inventories.

There are four stages which make up the physical asset management cycle.

First is planning and procurement. Here the company sees what is available and then decides what more is needed. They will look at various suppliers and then buy the machine that is affordable and efficient.

In the second stage, those who use it have to use the equipment in order to maximize its productivity.

Third, is called financial management. Here, the company will see if it was worth getting the equipment. It also includes ensuring accurate tax, depreciation and other costs.

Fourth is disposal. If the machine is obsolete, it has to be replaced in compliance with environmental regulations.

Companies will be able to practice effective physical asset management by following the life cycle. Sometimes tough decisions have to be made in order for the company to survive.