National Transportation Asset Management Workshop

National Transportation National Transportation Asset Management WorkshopAsset Management WorkshopSeptember 24, 2001September 24, 2001

Establishing Goals and Performance Establishing Goals and Performance Measures:Measures:

Implementation of Enterprise Asset Implementation of Enterprise Asset ManagementManagement

and the Integration of Performance Measuresand the Integration of Performance Measures

ENTERPRISE ASSET MANAGEMENT AND ENTERPRISE ASSET MANAGEMENT AND THE INTEGRATION OF PERFORMANCE THE INTEGRATION OF PERFORMANCE MEASURESMEASURES

OMNITRANSOMNITRANS

SAN BERNARDINO COUNTYSAN BERNARDINO COUNTY

CALIFORNIACALIFORNIA

Durand L. Rall, CEO/General ManagerDurand L. Rall, CEO/General Manager


Sondra Kay Morison, CPASondra Kay Morison, CPA

Director of FinanceDirector of Finance


OMNITRANSOMNITRANS

16 million passengers/year16 million passengers/year

480 square mile service 480 square mile service areaarea

15 cities plus county15 cities plus county

294 coaches/vans294 coaches/vans

640 employees640 employees

$75 million budget$75 million budget

Charting new Charting new directionsdirections


I. Foundations for Integrated SystemsI. Foundations for Integrated Systems

II. Enterprise Asset Management (EAM)II. Enterprise Asset Management (EAM)

III. Integration of Performance MeasuresIII. Integration of Performance Measures

IV. Implementation IssuesIV. Implementation Issues


I. Foundations for Integrated Systems:I. Foundations for Integrated Systems:Different Perspectives of a Transit OrganizationDifferent Perspectives of a Transit Organization


1. Organizational Hierarchy 1. Organizational Hierarchy PerspectivePerspective


L oca l Tran s it A g en cy

O p era tion s A d m in is tra tion M ain ten an ce M arke tin g H u m anR esou rces

F in an ce

G M /C E O

B oard


Hierarchy describes Hierarchy describes authorityauthority. It is the . It is the traditional way of thinking about traditional way of thinking about organizations. But, it doesorganizations. But, it does

notnot describe intra-organizational communications describe intra-organizational communications and relationships or operational linkagesand relationships or operational linkages

notnot say anything about the organization’s mission, say anything about the organization’s mission, goals, and strategiesgoals, and strategies

notnot say anything useful about organizational assets, say anything useful about organizational assets, their value to the organization, and their coststheir value to the organization, and their costs


2. Systems Perspective2. Systems Perspective


The systems perspective illustratesThe systems perspective illustrates

relationships between the organization and relationships between the organization and its external environmentits external environment

relationships among the units of the relationships among the units of the organizationorganization

It’s like the weather: small or large actions (or It’s like the weather: small or large actions (or inactions) in one part of the organization may inactions) in one part of the organization may have profound effects on the other parts.have profound effects on the other parts.


Applied to EAM, the systems perspective Applied to EAM, the systems perspective demonstratesdemonstrates

the extent to which a transit organization the extent to which a transit organization may purchase needed assets is based on its may purchase needed assets is based on its relationship with its external environmentrelationship with its external environment

that maximizing asset value depends on that maximizing asset value depends on effective linkages among the organization’s effective linkages among the organization’s partsparts


3. Michael E. Porter’s Value Chain 3. Michael E. Porter’s Value Chain PerspectivePerspective

Primary ActivitiesPrimary Activities

BuyBuy Marketing Marketing PreparePrepare DeliverDeliver

VehiclesVehicles & Sales& Sales VehiclesVehicles ServiceService


Support activities add value to the links in the Support activities add value to the links in the primary activities chain or to assist other primary activities chain or to assist other support units make their contribution to the support units make their contribution to the value chainvalue chain

Human Resources Finance Planning Maintenance Human Resources Finance Planning Maintenance Procurement Information ManagementProcurement Information Management

Value Chain Primary ActivitiesValue Chain Primary Activities


Porter’s Value Chain Helps us Understand EAMPorter’s Value Chain Helps us Understand EAM it is consistent with the systems approachit is consistent with the systems approach it directs managers to employ a mindset in which it directs managers to employ a mindset in which

everything in the organization is directed toward everything in the organization is directed toward adding value to the final serviceadding value to the final service

it demands that managers subordinate parochial it demands that managers subordinate parochial priorities for the achievement of larger goalspriorities for the achievement of larger goals

it demands that managers eliminate the mindset that it demands that managers eliminate the mindset that assets are the property of their units of the assets are the property of their units of the organizationorganization

it requires that assets be treated according to what it requires that assets be treated according to what they add to the transit agency’s servicethey add to the transit agency’s service


II. Enterprise Asset Management II. Enterprise Asset Management (EAM)(EAM)


EAMEAM

describes a system that describes a system that integrates the integrates the management, management, support, and support, and utilization of assets in utilization of assets in an asset intensive an asset intensive organization (such as organization (such as a transit a transit organization).organization).

Focus-Fusion-ForceFocus-Fusion-Force


Premises of EAMPremises of EAM

an agency’s revenue is directly linked to the an agency’s revenue is directly linked to the available quality and quantity of its transit available quality and quantity of its transit assets (e.g. coaches, para-transit vans, trolleys, assets (e.g. coaches, para-transit vans, trolleys, trains, subway cars, boats)trains, subway cars, boats)

the purchase and maintenance of transit assets the purchase and maintenance of transit assets amount to a large percentage of most agency amount to a large percentage of most agency budgetsbudgets



the cost of buying, maintaining, and operating the cost of buying, maintaining, and operating transit assets is a variable expense, not a fixed transit assets is a variable expense, not a fixed oneone

an effective EAM will reduce the variable cost an effective EAM will reduce the variable cost and increase the effective utilization of transit and increase the effective utilization of transit assets, thereby maximizing the value of those assets, thereby maximizing the value of those assetsassets



an effective EAM will reduce organizational an effective EAM will reduce organizational friction caused by poor intra-organizational friction caused by poor intra-organizational communications, misunderstandings, and communications, misunderstandings, and conflicting notions about what the organization conflicting notions about what the organization is trying to achieve, and howis trying to achieve, and how


Benefits of EAMBenefits of EAM

focus is on the relationship between assets and focus is on the relationship between assets and organizational goals and strategiesorganizational goals and strategies

integrates organizational units and processesintegrates organizational units and processes• procurement with operationsprocurement with operations• maintenance with operationsmaintenance with operations• support functions with maintenance and operationssupport functions with maintenance and operations• executive management with operating and supportexecutive management with operating and support


Benefits of EAMBenefits of EAM

facilitates communication among units of the facilitates communication among units of the organization involved in asset purchase, organization involved in asset purchase, management, operation, support, and maintenancemanagement, operation, support, and maintenance

develops an asset information system and develops an asset information system and integrates that system with the organization’s integrates that system with the organization’s overall management system (e.g. a MIS to support overall management system (e.g. a MIS to support Performance Based Management)Performance Based Management)


Note well the caution of V.C. Note well the caution of V.C. Srikanth:Srikanth:

EAM integrates asset management with EAM integrates asset management with enterprise wide functionsenterprise wide functions

It is an integrated management system, It is an integrated management system, not just another information systemnot just another information system


III. Integration of Performance III. Integration of Performance MeasuresMeasures


Performance measures Performance measures inform an inform an organization of its organization of its goals and objectives, goals and objectives, and how successful it and how successful it has been in their has been in their achievement.achievement.

We won!We won!


Four Types of Performance MeasuresFour Types of Performance Measures

1. 1. InputsInputs are invested into and by the are invested into and by the organization. (e.g. FTA grants to purchase new organization. (e.g. FTA grants to purchase new coaches).coaches).

2. 2. OutputsOutputs are activities performed by the are activities performed by the organization (e.g. a group of actions (a strategy) organization (e.g. a group of actions (a strategy) to reduce the incidence of road calls in a given to reduce the incidence of road calls in a given period of time). period of time).


3. 3. OutcomesOutcomes measure the effect, if any, a given set measure the effect, if any, a given set of outputs (strategy) make to the organization (e.g. of outputs (strategy) make to the organization (e.g. the maintenance program listed above might show the maintenance program listed above might show a reduction in road calls by 13% in one fiscal year). a reduction in road calls by 13% in one fiscal year).

4. 4. RatiosRatios measure the relationship between two or measure the relationship between two or more sets of data more sets of data

a. number of road calls / total miles of transit a. number of road calls / total miles of transit service = service = Road Calls Per MileRoad Calls Per Mile

b. gross transit revenues / amortized value of b. gross transit revenues / amortized value of transit transit assets = Return on Assets (ROA)assets = Return on Assets (ROA)


EAM performance measures must be EAM performance measures must be directed by the organization’s directed by the organization’s overall strategic goals, objectives, overall strategic goals, objectives, and priorities.and priorities.

The most effective EAM is not simply The most effective EAM is not simply a parallel data and management a parallel data and management system.system.


IV. IMPLEMENTATION ISSUESIV. IMPLEMENTATION ISSUES


1. The planning and 1. The planning and implementation of implementation of the EAM system the EAM system should include all should include all parts of the parts of the organization.organization.


2. Use an incremental 2. Use an incremental approach--learn from approach--learn from and correct mistakes and correct mistakes as you proceed to the as you proceed to the next stage. next stage.

Don’t do efficiently that Don’t do efficiently that which should not be which should not be done at all. Peter done at all. Peter

DruckerDrucker


3. Pay attention to 3. Pay attention to the human side of the human side of EAM. A system EAM. A system that is not that is not supported is a supported is a system that will not system that will not work well or not at work well or not at all.all.


4. Software should be 4. Software should be designed to facilitate designed to facilitate the organization’s goals the organization’s goals and strategies; the and strategies; the organization’s goals organization’s goals and strategies should and strategies should not be subverted to not be subverted to facilitate a software facilitate a software package.package.

Let’s go in the Let’s go in the same direction!same direction!


5. Effective 5. Effective implementation of implementation of EAM depends upon EAM depends upon the visible and the visible and consistent support of consistent support of and participation by and participation by the organization’s the organization’s top managers.top managers.

Key to Key to success!success!


THANK YOU!THANK YOU!

Documents

National Transportation Asset Management Workshop