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18 October 2018

Make the most of your assets to gain financial advantage

First publishedon www.AggBusiness.com

In a capital-intensive business like aggregates, poor management of assets, from plant downtime to excess stock, can impact results and perhaps explains why aggregates businesses continue to focus on the same areas when measuring financial performance.

However, in the ten years since the Global  Financial Crisis of 2008, low interest rates, low inflation, infrastructure growth and improved information technology have combined to improve many world markets, which are now experiencing improved economic and technology conditions – ideal for aggregates businesses to create value.

For most of the last century, companies have directly linked financial performance measures to their strategic vision and gained competitive advantage by investment in and management of tangible assets, while financial measurements were deemed adequate to record investments.

Whilst this is not a wrong approach, what links these actions is a common area where the traditional approach is failing to help identify actions to extract further, as yet untapped, value. What is needed is a more holistic and integrated approach to the current traditional approach to asset optimisation (AO).

Modern organisations should use a mixture of financial and non-financial measures and seek to put in place measurement systems that are more ‘balanced’ than those that use financial measures alone. AO is critical in an asset-intensive operation like aggregates and is designed to ensure that operational performance is maximised relative to cost.

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