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What is an Asset Hierarchy?

by Jonathan Davis on January 20, 2022
 
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Your asset registry is a complete, accurate list of all the assets and equipment the maintenance team needs t o keep up and running. 

But to plan, implement, and track the right combinations of maintenance strategies, the team needs to know not only what you have but also how everything fits together. 

They need an asset hierarchy. 

What is an asset hierarchy? 

Any hierarchy is a system in which you place things in a series of levels, each with its own relative importance. In business, the standard organizational chart is a hierarchy, where you place each employee in relation to managers and direct reports. Although some organizations boast relatively flat charts, traditionally, most companies rely on a functional, top-down structure, where you put the C-suite executives at the top, next managers, and then everyone else in groups according to skillsets and specializations. The overall chart can end up having roughly the shape of a pyramid. 

In an asset hierarchy, you are doing basically the same, but now showing the connections between assets and their components. Asset hierarchies contain many different "parent-child" relationships between larger assets and the smaller components inside them. 

And you're doing it for basically the same reasons. While a comprehensive list of all the employees at a company can tell you a lot ab out each employee and, overall, how many employees there are, it doesn't provide any useful information on how they all work together. If you want to run things efficiently, understanding those relationships is critical. 

What are examples of asset hierarchies? 

Because every operation is different, no two asset hierarchies are the same. But asset-heavy industries have enough in common that there can be many shared elements. 

One common example starts with: 

  • Industry 
  • Business category 
  • Installation 
  • Plant / unit 

Here, you have the use and location data. You follow that with the equipment subdivision, which includes: 

  • Section / system 
  • Equipment unit 
  • Equipment subunit 
  • Component 
  • Parts 

Looking at the different levels, it's easy to see why the hierarchies tend to have the shape of a pyramid. For each piece of equipment, there are multiple components, which each have their own collection of parts. So, a fleet has a car, and inside that car is an engine, and inside that engine is a fuel pump, with: 

  • Pressure regulator 
  • Fuel level sender unit 
  • Impeller 
  • Armature 
  • Reservoir 
  • Strainers 

Another example would be a pump with multiple motors inside it. 

What are the advantages of establishing an asset hierarchy? 

The asset hierarchy makes it much easier for the maintenance team to drill down into each asset, giving them a better understanding of the relationships between parts. Because they know what's inside each asset, they can better schedule preventive inspections and tasks. When failures happen, knowing all the components and parts makes it easier to perform root cause analysis. 

Finally, the maintenance department gets a more accurate picture of maintenance costs. Instead of associating every cost to an asset as a whole, you can directly connect costs to individual components and parts, creating opportunities to fine-tune your inventory and purchasing decisions. For example, instead of reporting that it cost you $5000 in labor and parts to fix the forklift last quarter, you know that the real problem was with the brake shoes, leading to expensive damage to the brake drums. 

What are asset hierarchy best practices? 

A well planned and properly implemented asset hierarchy can deliver a strong return on your investments of time and money. But you have to do it right. 

Set up early 

Although you can establish a hierarchy at any time, it often makes the most sense to do it as part of a larger enterprise asset management (EAM) software implementation process. It is often the case that organizations making the move to digital solutions do not have a complete, accurate asset registry with a solid naming convention, prerequisites for any hierarchy. If you don't know what assets you have, it's impossible to arrange them at all. If you don't have logical naming conventions, it's impossible to arrange them properly. 

Once you have completed an audit of your assets and equipment and loaded them into a database, you have the key elements you need to build your hierarchy. 

Set up sparingly 

But that doesn't mean that you should add every asset. Some assets might be more "stand alone" than others, making it less important to add them to the hierarchy. 

You should also avoid "dead data," which is where you're creating and tracking data that you can never leverage into actionable insights. For example, you can likely leave out assets and equipment that third-parties service for you. Although you should have some data in your system about your elevators and fire suppression systems, you likely don't need detailed records on every asset, component, and part. Your internal maintenance team is not doing that work, so you don't need to add it. 

You can also leave off assets and equipment with low criticality or random, short runtimes. The overall goal is to have a lot of detail on your most important assets and equipment. Aim for quality and depth over quantity. 

Next steps

To find out how EAM software can support your goals, schedule a demo of ManagerPlus Lightning today.

Summary 

Much like the organizational chart at a business, an asset hierarchy shows the relationships between your assets and their components, allowing the team to better plan, execute, and track maintenance activities. And just like those organizational charts, asset hierarchies tend to have the shape of a pyramid. Because every operation is different, it's unlikely that any given businesses have the exact same hierarchies. That said, there can be many common elements and similar "parent-child" relationships. For example, section, equipment unit, equipment subunit, component, and then parts. So, a fleet has a vehicle, which has an engine, which has a fuel pump. You would also include all the parts of the pump. Once you have your hierarchy in place, benefits include easier, more accurate maintenance planning, faster failure root cause analysis, and better cost tracking. Generally, the best time to set up a hierarchy is when you're already implementing new EAM software. Instead of trying to include everything, you should focus on assets with the highest criticality. The goal is depth of information on your most critical systems. 

Jonathan Davis
About the author

Jonathan Davis

Jonathan has been covering asset management, maintenance software, and SaaS solutions since joining Hippo CMMS. Prior to that, he wrote for textbooks and video games.

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