Asset Management: Moving High-dollar Fixed Assets from Cost to Profit

No two companies are exactly the same. Some Corporate Real Estate (CRE) groups within oil and gas companies manage assets directly, impacting the bottom line. Some manage surface leases for critical rights-of-way and even mineral rights, while others control asset maintenance “within the fence” at refineries or at upstream facilities. However, most oil industry CRE and Facilities Management (FM) organizations manage non-revenue producing facilities, making them major targets for cost reduction. How can they move these assets from the cost side to a direct-bottom-line contributor?

Largely, it’s an “efficient management of assets” issue. Thus, a company’s problem-solving baseline requires knowing: what they have, where it is and how it is utilized, along with assessing if it could be better used elsewhere or retired or disposed of. Bottom line success is impossible without a good handle on “where you are,” which demands accurate and appropriate data.

Begin by understanding the CRE/FM organization’s value proposition. Why are the managed assets needed, and how do they support the corporate mission? Then, clearly define services offered, and how they are performed – it is the application of the industry’s best practices around service delivery and asset management. These services must then be supported by an effective organization and enabling technology. Together, they deliver good, reliable and appropriate data for making informed management decisions.

Focus also on reliability-centered portfolio maintenance and management in a way that prioritizes and invests capital appropriately. Basic blocking-andtackling includes focusing on mission-critical assets—going beyond fundamental Preventive Maintenance (PM) and break-fix maintenance to avoid detrimental revenue losses from downtime or disasters.

If assets are well-maintained, the focus turns to whether assets are being used as originally intended and performing as expected. Using an enterprise asset-management system integrated with service management, such as within an Integrated Workplace Management System (IWMS), can provide service life and performance information, and total cost of ownership (TCO) leading to ROI enhancement. And all these details can be measured and benchmarked across the enterprise, enabling more informed decisions around purchasing, deferred maintenance and capital renewal budgeting for current/future bottom-line impacts.

The key is to optimize and standardize (utilizing best practices) because that creates the greatest efficiencies, driving down costs, with fewer bad decisions. And from a more tactical standpoint, efficiencies not only create cost savings but can also generate revenue, directly contributing to the bottom line:

• Optimizing utilization of owned space offers the opportunity to sub-lease, if not dispose of under- utilized space.
• Commit to an energy program whereby opportunities to reduce energy consumption through investment in newer building equipment and technologies can provide near-term ROI.
• Streamline and standardize processes allowing staff to concentrate on value-added activities.

Savings can be impressive, as much as eight per cent by streamlining lease administration activities, saving 10-15 per cent by streamlining space management activities and 15 per cent across the board savings if properties and portfolios are well managed. By making decisions at the right time, managers can also avoid paying premiums.

Alternative work programs, a growing trend also known as workplace mobility, are a major contributor to the bottom line. Although the oil and gas industry has not quickly embraced this, mobile workers are a CRE/ FM reality with significant financial impact. Adapting corporate policy enabling workers to work anywhere 24/7, not tethered to desks, not only significantly reduces the corporate portfolio’s footprint, but drives up productivity, directly adding dollars to the bottom line.

Re-allocating space can reduce a company’s RE portfolio by double digits, instead of typical reductions in e.g., energy usage. Some innovative companies have reduced their space by 25-50 per cent.

Overall, moving assets from the cost side to a direct bottom line contribution falls into two buckets: supporting revenue growth or optimizing profitability. Increasing the asset value, reducing environmental impact and allowing employees to be more productive all add a positive impact on revenue. Reducing costs, assuring critical asset uptime and optimizing asset flexibility all contribute to profitability.

Enablement starts with ensuring that RE/FM operations are strategically aligned with the corporate mission. Optimize work performance to assure a consistent and standardized level of asset performance. Perform core RE/FM functions efficiently and understand the state of assets being maintained. Decide which issues matter most and which are simply a nuisance. Manage highimpact assets proactively and look for opportunities to streamline operations using good data to stay on top of assets controlled.

Finally, look at ways to enhance workforce productivity through alternative work strategies and optimized work environments. By making it more effective for people to do their job, they will invariably perform better, with every dollar cut from RE operational costs turning into pure profit.

Phil Wales is CEO of Houston-based eBusiness Strategies LLC.