Why the C-suite are confused about Asset Management and Maintenance Cost

Asset management and equipment maintenance are crucial elements of a successful operation, so naturally the cost of managing and maintaining equipment and the resulting performance are always under scrutiny. ?This of course creates tension between the organisation leadership looking to extract the most value, and the asset management and maintenance teams tasked with execution.

For the leadership, they look at the total cost of maintenance, and that cost of is just one single element of the operations they are managing and one line on the P&L view of the world they have. Naturally the desire is to reduce the cost of maintenance, but its unclear what it can be reduced to. So, in many cases we embark on benchmarking exercises to provide some guidance on where we sit against our competitors, a typical method of performance evaluation for all elements of the business.

The challenge with benchmarking studies in the asset management and maintenance domain is the poor data it is based off (which is a whole other article…). Comparing costs from different organisations to get a sense of maintenance spend is fraught with danger, because of what’s included and excluded, how organisations are structured, use of contractors or outsourcing etc.

The danger is that if a benchmarking study tells us we can reduce the cost of maintenance, undue pressure comes onto the asset management organisation to swiftly cut their costs – this can lead to cuts of the wrong maintenance and naturally will not only decrease performance but likely increase maintenance costs in the longer run. This tension between leadership and asset management is then magnified and so the cycle continues.

There are four key complexities that the C-suite often don’t really understand that is at the foundation of the tension, when it comes to managing asset performance effectively. If we can create awareness, effectively communicate (repeatedly) and connect to a P&L view of the world then managing assets just might become a little easier.

1. The Balance of Preventive, Condition-Based, and Breakdown Maintenance

The first complexity lies in balancing preventive and condition-based maintenance with breakdown maintenance. The C-suite sees the total maintenance costs which of course does not convey this balance and dependability. Asset Managers understand the dependence and categorisation, but we confuse with acronyms and often don’t have the numbers to back the statements we may be making. So, while to the C-suite it seems straightforward to reduce maintenance spending, where even efficiency improvements will bring the number down, the reality is more nuanced. At times, there are some ineffective tasks we can remove, but of course if we remove or adjust effective tasks, we can negatively impact the costs. Also, it may be that increasing one element of the total cost, routine maintenance expenditure, and therefor total spend is necessary to decrease total maintenance costs in the long run.

2. The Connection Between Maintenance Spending and Performance

The second complexity is the connection between maintenance spending and asset performance. Reducing maintenance expenditure is a legitimate goal, but it must be done with caution. Cutting the wrong maintenance tasks can lead to a decrease in performance. However, since there may be some ineffective or duplicate tasks in the system, it is true we can cut some costs with no impact on performance. This inconsistency creates confusion within the C-suite because we create evidence of maintenance cost reduction with no performance impact.

Of course, cost optimization is the real goal, requiring a balance between reducing costs and maintaining high performance levels.

3. Grouping Maintenance Tasks for Optimal Availability and Performance

The third complexity involves the practicality of grouping individual maintenance tasks and plans to ensure optimal availability and performance. While it is relatively simple to determine the best maintenance task for individual components, combining thousands of tasks into a cohesive plan is a challenging process. This requires balancing equipment and resource availability to avoid disruptions in performance. Also, removal of ineffective or marginal tasks can have little impact on costs because they are part of a “package” of work or work plan that is still going to be conducted. The C-suite often underestimates the dependencies and complexities of this practical element of the maintenance effort and the strategic planning needed to group maintenance tasks effectively.

4. The Time Between Maintenance Plan Changes, Maintenance Cost Savings and Performance Impact.

Much of the tension arises because of the lack of clarity of the complexities listed above and the fact there can be significant time between any maintenance plan changes, maintenance cost savings and any performance impact they might create. Depending on the nature of the changes this time can span several budget cycles, so it is difficult for the C-suite to get a handle on costs today versus the impact on costs next or subsequent years. For example, if you make a change to a two-year plan to reduce costs, it can be up to two years before you realise any savings, at that point you may create an increased risk of failure which may not be realised for several more years. Now given we may be changing multiple plans of varying intervals, impacting risk in different ways and by different amounts, it is quite challenging for the C-suite to attribute a maintenance plan change in 2021 to the significant or repeat failures experienced in 2025.

In conclusion, the complexities of asset management and equipment maintenance require a nuanced understanding and strategic approach. The role of asset management must include communicating the dependencies and practicalities of the management of asset performance in a way that the C-suite can connect the decision making to the broader operation plan and budget.

Jason Apps is an Executive Asset Management Consultant, providing support to organisations in pursuit of high reliability, world class asset management practices. He is the Author of "ASMx: Asset Strategy Management - A leaders guide to reliability transformation in the digital age", a regular presenter, workshop facilitator and trainer.

Jason has delivered significant performance improvement, cost reduction and risk management to global, blue-chip clients, for 20+ years. With a proven, unique, pragmatic approach to identifying improvement initiatives, implementing for success and structuring for continuous optimisation.

Email Jason at [email protected] or visit exar-am.com