Benchmarking yourself against the leading companies in asset management globally is a tricky business. it is very easy to adopt something you read in a book without really understanding what the measure is actually showing.
For example, take the very common Asset Replacement Value (ARV) measure. This is a measure of all maintenance costs as a percentage of the ARV.
My own measures of this metric are:
Best in class - 1.75%
Average - 2.3 %
Worst in Class - 5.3%
But on further analysis... is this measure really of any use?
What about costs of labor? labor costs in Asia, The Middle east and eastern Europe are markedly lower than (say) Japan, the USA or Western Europe.
But this isn't the only factor that skews on this metric. What about other cost factors such as proximity to suppliers? Availability of skilled resources? Desireability of location?
All of these add to the maintenance costs and provide an unfair comparison between the two distinct plants.
Further, what about plant asset configuration? A plant with a lot of built in redundancy will have a much lower maintenance cost than a plant with lower levels of built in redundancy. (Given that reliability principles have been followed.)
So a good measure, sure. A good benchmarking tool? Well..... not unless you have a whole list of other things that you can either discount or easily calculate the weighted value of.
So what are good benchmarking measures then?
I thought you would never ask.
The best form of benchmarking is where you are able to quantify the plants performance against itself. The improvement year on year, and using metrics that don't really care where in the world the plant is being managed.
Over the next few weeks I will be running a series of posts on metrics as it is an area I really enjoy working in. But this time with a view to how do we benchmark, what are good benchmarking measures, and what is acknowledged leading practice? (Not just the views of a jaded or self interested consultant)
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