Manufacturing Asset Optimization: Pivoting for Growth of Nigerian Industries
Manufacturing Asset Optimization: Pivoting for Growth of Nigerian Industries
Manufacturing Asset Optimization
Asset Optimization is the process of analyzing the value of assets in an Institution to yield the greatest Return on Assets ( ROA). The post-financial crisis has made institutions to be forced to face certain market realities, which in the short term and potential the long term, entail a more proactive approach to managing their bottom line.
Asset Optimization is an Approach to using the Asset potential for revenue growth. It recognizes that assets – buildings, land, plants & equipment etc.- have an impact on both the balance sheet and income statement and that timing can play an important factor in getting the best ROA. Hence, the financial performance of these assets is directly related to the financial well being of your company.
The asset optimization process starts by conducting a strategic asset review. This is the first phase in manufacturing asset optimization. At this stage, you develop:
- A clear understanding of policy direction,
- Articulating the key business drivers
- Completing an inventory of high potential assets
The second phase in manufacturing asset optimization is the Assess Optimization Options. A clear optimization criteria is key to making a strategic options analysis. It helps in driving informed and transparent decisions.
Along with developing a strong understanding of the value created by the asset, determining manufacturing asset optimization options will require market analysis to assess macro trends as well as future price points for the asset.
It is critical that firms manage their assets to optimum value. Organizations often hold surplus assets and there is sometimes a strong reluctance to dispose of the asset even though it may not be meeting the organization’s goals. Policies around the acquisition and divestiture of such assets and in some cases its monetization are often lacking in organizations.
Identify Optimization Options is the third phase in distributing asset optimization. This process begins after the optimization options has been assessed.
In manufacturing asset optimization, when options have been assessed, we must identify the most strategic options and understand the value and impact of each, from a qualitative, quantitative and risk perspective. A gamut of optimization opportunities exist ranging from status quo to outright sale of the asset. In between both ends of the spectrum, a number of strategic alternatives exist for the Client to yield greater efficiency, effectiveness and value from its assets.
The spectrum of options selected also depends upon the degree to which the Client wants to transfer responsibility and risk from the Client to a strategic (private) partner. Advanced service delivery, such as selling an asset to an affiliated development trust, or creating a lease-back structure so as to generate cash and manage operations, would allow the Client the opportunity to capture value while sharing risk on non-core assets.
Selecting a preferred option and develop business case is the fourth phase in manufacturing asset optimization, while the fifth phase is the Preparation of a detailed work-plan.
The white paper put together by us at Brickstone Africa looks at the manufacturing asset optimization, its processes and its equipment with a forensic engineering lens, identifying equipment with the highest run time hours or lowest availability rating, to find the weak point in the production chain.
Download full paper below.
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