The Importance of a Spatial-based Asset Management System

Background

Recently, I was hired to lead the relocation of several labs for a company. We relocated and installed over 100 tools that require special utilities, OEM support, certification, calibration or other special requirements.

While our team documented the equipment requirements in order to get them installed promptly and correctly, this data has remained in disparate spreadsheets. In addition, much of the critical equipment data, such as purchase dates, warranties, service contracts, calibration reports, etc. may not exist for many critical tools or is difficult to find because the information may be in other systems. The responsibility of equipment asset management at this company is left up to the lab department with no central oversight.

Here are some examples of problems when you don’t have a centralized asset management system:

  • Equipment falls out of calibration
    • During an installation of antennas and coax cables, a lab engineer checked each cable after installation to ensure the systems would perform as required. When he tested some of their cables, the test results showed that the installation went beyond the manufacturer’s specifications. Turns out, the cable analyzers were out of calibration; the systems tested satisfactorily when a different analyzer was used.
  • Equipment orphaned after a Project is terminated
    • A lab manager informed us that he might be purchasing a profilometer for his lab. When we informed him that an unused one might be available because a project had been cancelled, he wanted understand how he could procure it  rather than buying another one. Since there is no centralized asset management system in place, aside from word-of-mouth, he likely would have bought a new one had our tribal knowledge been lost.

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Benefits of CAD-Based Asset Management Systems

Simple: implement a centralized CAD-based Asset Management system. The system should:

  • Integrate with the organization’s financial system.
  • Be cloud based, Software as a Service (SAS), that can be updated in the field with mobile devices such as smartphones and tablets. You shouldn’t have to pay for this software, just a nominal subscription hosting fee.
  • Be provided by a reputable company with numerous satisfied customers.
  • Be supported by local, certified Implementation Partners who can quickly (inexpensively) implement asset data and maintain the system if the client chooses not to undertake this with in-house staff.
  • Be easy to search and update.
  • Have extensive and easy reporting functions built in and not pay for expensive custom reporting.
  • Be on a secure site that is backed up regularly.
  • Can easily generate work orders or tickets for service calls, maintenance or other required actions and updates. This is an important feature because oftentimes, an Asset Management system is just one benefit (module) that the provider can offer, which can include space management, move management and other useful FM / operational functions.

It is important to know the location of critical assets, not just the original financial data in a system such as Oracle. Not only does this greatly help to locate assets, but it will also help you to manage them if they need to move, change department ownership, retire, etc.

Other benefits of an asset management system include:

    • Entering contract terms associated with asset ownership, including attaching associated documentation
    • Lease or maintenance contracts & contacts to call for maintenance and repairs
    • Overall performance data for decisions about repair/replacement of assets.

This problem is not unique to this company. In my 20+ years experience as a Facilities Manager I have seen that many organizations have this problem: information in multiple disparate spreadsheets or databases. As a Facility Manager, access to real-time, accurate information about the operation’s assets in a centralized, spatial-based, dynamic database is critical for ensuring asset performance, reliability, optimal utilization and cost management.

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Mutually Beneficial Contracts – Fact or Fantasy?

Have you ever completed a Request for Proposal (RFP) for a complex service agreement only to realize that you are not satisfied with your best choice? You’re either not sure about the pricing (worried that you are overpaying or underpaying and will get hit with change orders later on) or whether the service provider can truly deliver the quality of service that you expect. I know that I have many times felt this way.

Now what? It may be time for you to pursue a “Mutually Beneficial Contract” with your service provider.

“Mutually Beneficial Contract”(MBC) is a term that I coined when I could not find the type of contract that I describe here after using several search engines.  So you heard it here first.

“Mutually Beneficial Contracts” definition by Ed Novak:

“A Mutually Beneficial Contracts is a contract or agreement between two parties, usually for complex services where a detailed scope may be difficult to define, based on shared values, Key Performance indicators and common goals that usually result positively for both the Service Procurer (buyer) and the Service Provider (seller).”

Since an organization (service procurer) and its suppliers (service providers) should be interdependent with aligned goals in a mutually beneficial relationship, a MBC between them strengthens that relationship and increases the ability of both to add value and ensure success. There are five core shared values in a MBC:

  1. Openness – willing to share information that one may not normally do when negotiating a service contract.
  2. Trust – believing that both parties are working towards a common goal that will be mutually beneficial for both. In typical negotiations, there is not a lot of trust; both parties try to maximize their financial position and believe that the other party is doing likewise.  main driver other is trying to maximize.
  3. Respect – treating each other as equal parties that both bring value to the relationship. One party may understand how the business runs while the other can provide insight on how to improve that type of business. The two parties work as a team to arrive at the best solution.
  4. Honesty – working together to achieve a mutually beneficial goal by sharing information openly, accurately and timely.
  5. Flexibility – willing to change positions and pricing as more information is obtained.

Both parties must practice these five shared values to ensure a successful Mutually Beneficial Contract. In addition, Key Performance Indicators (KPI) must be established prior to final contract execution which will be used as the basis for final financial cost of the service. Sound good? Here is how it works,

Steps for Implementing a Mutually Beneficial Contract

Step 1

The potential service provider and the procurer each submit a Rough Order of Magnitude (ROM) budget on a slip of paper and share the amounts with each other. In most cases, you can split the difference and make that your new baseline budget. Since I already have pricing from the RFP, I have a reasonably good idea what this should cost. Note: if the service provider’s ROM is significantly higher, then further analysis should be performed to determine the reason for the budget disconnect.

 

Step 2

Once you have two budget numbers that are fairly close, the procurer issues a Time and Material (T&M) Not To Exceed (NTE) purchase order or contract for and amount that is the difference between the two ROM budgets. This is not a final budget amount; both parties understand that the final amount will change because the scope requires fine-tuning.

 

Step 3

Part of the T&M expense will be used at this point to help with detailed planning to help get to the next budget, GMP. It’s only fair to pay the service provider for this service, but if planned well, it should more than pay for itself by resulting in a successful move or project.

 

Step 4

As the scope becomes more refined and the service provider has shared his proposed costs for hourly labor, equipment, etc., the service provider should be able to generate a detailed project budget and schedule that will replace the original ROM budget. This will become a Guaranteed Maximum Price (GMP) for the service and will not change unless either the procurer changes the scope or Key Performance Indicators affect the GMP price. OK, under a Mutually Beneficial Contract, the final price is not known until the work is complete because the procurer will place both incentives and penalties in the contract. Work with your service provider early on to establish the KPIs that will go into your MBC. Here are the areas that most project managers would consider when evaluating or being evaluated for a project:

Time & Schedule – Did the work get completed on-time? Were deadlines met? How responsive was the service provider to changes? Were agreed upon down-times met?

Cost – This should not be a factor with a GMP contract, but if your service provider asks for more money that were not caused or initiated by the procurer, then you have a problem

Customer Satisfaction – While I generally like customer satisfaction surveys, I don’t like them as part of the KPI that effects the final payment amount in a MBC because it is too subjective. I can measure time and schedules and waste (see next item) but perceptions are arbitrary.

Waste – In complex projects careful planning is required for flawless execution is required to minimize or avoid waste. If you project has the potential to cause waste to your inventory or product then you should include at least one waste KPI.

I don’t believe in using only sticks – I like to use carrots too. Therefore, if the service provider can exceed the approved KPIs, then it is worth giving the provider some of the money back that we removed from the budget in Step 2.

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Mutually Beneficial Contracts are not for every situation, but they are worth pursuing in the right situation as long as the five core values are shared and meaningful Key Performance Indicators are deployed.