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Asset Productivity

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Today, industry leaders are looking at the economic earnings model from a new perspective — asset productivity. This view focuses squarely on the fixed asset base and directs a lens towards creating shareholder value by improving the productivity of that fixed base while avoiding significant new capital investment.

In contrast to a capital project approach which rewards efficient capital spending through completed projects and increased capital investment, the asset productivity model seeks to utilize existing assets to their maximum capacity, increasing productivity without additional investment. Greater productivity and asset effectiveness ultimately drives a sustainable competitive advantage by increasing revenue and profit, reducing capital investment, and achieving operational excellence.

The new asset productivity perspective of the economic earnings model enables top line growth, minimizes costs, and positions the capital infrastructure to compete, adapt, and win. Research shows that the best performers know how to measure and sustain asset productivity by depending on resources other than new capital as the enabler of operational excellence. This shift in mindset can have a significantly positive impact on shareholder value and economic value creation. Thomas Group’s asset productivity offering:

• Creates Shareholder Value: The asset productivity methodology emphasizes improvements with minimal capital and enables precise evaluation of return on investment through an analytically-derived metric. The result is higher economic earnings and growth in shareholder value
• Enables Profitable Growth: Asset productivity drives profitability by optimizing productivity, capacity growth, and adaptability to market conditions. Increased asset productivity enables operational excellence that drives a sustainable competitive advantage in both growing and mature market sectors
• Supports Capital Allocation Strategies: Companies make better capital allocation decisions when they employ metrics to identify opportunities for: 1) utilizing the most effective assets, 2) re-deploying under-performing assets, and 3) eliminating surplus or poorly performing assets
• Drives Cost Leadership: Asset productivity improvements yield significant increases in capacity, which can then be leveraged to increase revenue, decrease unit cost, and reduce capital. Asset productivity stands at the intersection of peak efficiency, optimal productivity and high quality assurance

The Metric: Operating Asset Effectiveness

Operating Asset Effectiveness (OAE) is the comprehensive metric that determines asset utilization improvement. The OAE formula combines utilization, throughput, and acceptance. It also monitors the impact of an asset productivity program which extracts the most value from the existing asset base. This value extraction enables companies to achieve the highest sustainable throughput rate at the lowest possible cost.

An asset productivity program collects and analyzes key data across several functions, including output volume, planning, engineering, operations, quality assurance, and maintenance. These indicators are then used to diagnose root-cause issues of underperforming assets. The overall OAE metric is a very powerful analytical microscope into an organization’s operational health and its ability to adapt to various business, market, or competitive conditions — in addition to its value creation role in capital preservation and optimization.

The Thomas Group Approach: Results

Thomas Group delivers breakthrough improvement through program management to propel a successful asset productivity program.

We have developed a cross-industry asset productivity methodology that is tailored to a client’s specific operating environment and business conditions. The methodology also addresses the existing cultural attitudes, values, and behaviors that are the foundation of a successful, company-wide adoption of the new approach.

Thomas Group’s asset productivity methodology offers:

• A systematic enhancement of operations, equipment performance, and process capability
• Industry-specific expertise and functional skills
• Clear evaluation methods and analytic process improvement models to determine asset performance benchmarks
• Root-cause analysis to drive operational and strategic adjustments for peak productivity and capacity
• A train and do approach that fosters successful process adoption across client organizations

Thomas Group’s methodology is highly collaborative with cross-functional client teams. It enables clients to infuse asset productivity into their unique corporate cultures. This approach effectively institutionalizes fundamentals and enforces their execution through tracking key performance metrics and management procedures.

This transformation not only requires asset effectiveness expertise, but also a strong culture and change management methodology, solid end-user training, and performance measurement. Our integrated, holistic approach sets us apart from other consulting firms.