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Reducing the Cost of Test through Strategic Test Asset Management

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Abstract

For most aerospace and defense companies, test and measurement equipment is one of the largest, if not the largest, capital expenses on their balance sheets. With that said, few companies have a comprehensive, corporate wide program to effectively manage and maximize the utilization of test and measurement equipment over its projected lifetime.

Other industries, such as power generation, airlines and foundries, have been able to master optimization and utilization of their capital to maximize their return on investment.

This paper will explore the balance of the three fundamental aspects that make up test asset management and will focus on how to implement strategies to lower the total cost of ownership for test. The three areas addressed in this paper are:

1. Management of the “real” asset profile - the number and capabilities of assets across an enterprise.

2. The ability to maximize the optimization and utilization of the assets on a continuous basis.

3. Schemes to develop and implement life cycle strategies for test and measurement assets.

The implementation and usage of a test asset management program can have huge positive implications, not only on reducing capital costs, but on faster throughput, lower operational expenses, shorter time to market, and even better quality; all of these allow a company to be more competitive in the new firm fixed contract world.

I. Introduction

Much like life, there are certain rules in business that are absolute. You never can make enough profit, you never get paid enough and there is never enough capital budget. The first two are areas out of our control. The third one, capital budget, although may be out of our control, can be optimized.

The fact is, not only can capital budgets be optimized, operational budgets can also. In the world of test and measurement equipment, where capital tends to be the life blood of day to day capabilities and operational imperatives, this is becoming more and more critical. The focus has to shift from minimizing to optimizing. Although this may seem like semantics, it’s really all about strategies.

As we lament about the good old days of government furnished equipment, cost plus contracts and the almost limitless budgets for test equipment, those days are gone. The focus now needs to be on doing more with less.

Although that may send chills down people’s backs, in reality it is nothing that has not been done in the past with other commodities and processes. And in other industries.

There tends to be three camps when it comes to developing strategies for test and measurement assets. The first is, someone else takes care of that, like the calibration and repair folks, i.e. it is not my job.

The second is, I try but every time I standardize, someone wants something different, i.e. I’m powerless. And the third. It’s really complicated and no one really knows what we have and where all the assets are anyway, i.e. it is a hopeless cause.

Although any and all of these are legitimate, as anyone who has tried can attest to, none are reasons not to try again.

Although there is no hard data, the cost of test and measurement assets and their associated cost of ownership, is one of the largest capital and operational cost drivers in many electronic manufacturers (taking out the cost of raw material).

The simple truth is that most companies look at test and measurement assets at a micro-economic scale - how much is it going to cost me to buy that instrument to support that program? The reality is that when looking at it in a macro-economic view, the dollars are huge.

The real cost of procuring, running and maintaining test and measurement equipment encompasses many financial streams. This includes not only the capital to procure, but includes the engineering to develop the software, the people to run it, maintain, calibrate and repair it when needed, floor space, logistics, taxes, insurance and power needs, etc….these all add up to a large overall cost.

Multiply that by the number of assets a company may own and suddenly you have a gigantic number that has a massive opportunity to be paired down and those dollars going directly to boosting profits.

As with many other capital intensive industries like power generation and steel mills, asset management is a foundation for operations and a vital to basic business practices.

This paper will outline the fundamentals of a test asset management program focused at test and measurement equipment. It is felt because of the uniqueness of these types of assets, especially because they are used across the whole product life cycle, asset management needs to have some distinctive strategies.

II. Your “Real” Asset Profile

One of the most dreaded activities of the year, universally for almost all companies is auditing capital assets. This is especially true for test and measurement assets, requiring processing an endless list of serial numbers and descriptors that really have very little to do with the physical appearance of the asset.

Adding to this identity confusion, is the ease with which most of these assets can be transported from one location to another. They can be anywhere and everywhere - labs, production, warehouses, depots, offices, metrology departments, out in the field, or even stowed in closets or under people’s desks. At the end of the day, many are not found, some are found that were missing from previous years and others are new and added to the list.

This auditing nightmare is exasperated by several factors. These assets and their value can be very deceiving. There are many instruments the size of bread boxes that can cost anywhere from $10,000 to well over $250,000.

And, they can have life expectancies that can exceed 20 years, even more than the buildings that house them. And maybe the hardest item to identify is how they were acquired and who ultimately owns them; Government furnished, program owned, company capital, or other.

When looking at the “real” total number of assets, most companies are surprised at the number of test and measurement assets they manage. It is not unusual for large companies to have greater than 50,000 test and measurement assets at an individual site and greater than 500,000 in total. 

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