The objective of this thesis was to prove how flexible asset management can be used in increasing the profitability of maintenance companies and networks in dynamic operating conditions. Table 7 summarizes the main features of the 5 publications in the thesis, after which the main results of the thesis are discussed in detail.
The thesis had three research questions, the first of which was: what kind of requirements for asset management models are set by the increasing dynamism and complexity of operational environments? A systematic literature review showed that the existing models were very heterogeneous, as there were various definitions of asset management. However, by analysing the previous models I identified four distinct research gaps which should be filled to match the dynamic operating conditions of today:
(1) Most of the existing asset management models consider only fixed, tangible assets, neglecting intangible, financial, and current assets. However, as proved in this thesis, it is important to manage the assets comprehensively, especially because the fixed assets tend to be inflexible and difficult to adjust when needed.
(2) Previous publications on asset management models do not actively take account of the perspective of inter-organizational networks or outside suppliers. Considering the recent trends towards networking and partnerships, this is a serious limitation.
(3) Many of the examined models are abstract or scientific by nature, and challenging for actual decision makers to use. To really contribute to the emerging need of novel tools suitable for the dynamic conditions, the user friendliness of the models should be promoted.
(4) Finally, most of the previous models have a long time span, therefore addressing the strategic level of asset management. However, as opposed to this, nearly all of the models consider either a single asset or an asset fleet. Again, to make the models more pragmatic, there should be at least some models for company- or company network –level strategic asset management.
Table 7. A summary of the publications of the thesis
Publication 1 Publication 2 Publication 3 Publication 4 Publication 5
Title
research Company Company Company Company
network
Company network
Research
methods Literature review Analytical modelling
The second research question of the thesis was: how can flexible asset management increase profitability in industrial maintenance companies and networks when operating in dynamic conditions? The study discussed adjusting to a decreasing market demand specifically. The investment needs created by a rapidly increasing demand were left out of the analyses and simulations. The starting point for flexible asset management was thus that if the net sales of a company crash, relative profitability can be saved through adjusting the amount of assets (fixed assets and working capital) in the balance sheet. Besides the changes in the net sales, in this study the dynamic conditions also included the development of the interest rate of debt funding and the capital structure of the company. The impact of flexible asset management on profitability was modelled through the ROI and the iE.
Based on the analysis of Finnish maintenance companies and networks it can be concluded that in general, significant decreases of the net sales cannot be compensated by just rationalizing the working capital management; thus there is also a need to adjust the amount of fixed assets in the balance sheet of the company. The changes in the iD and the debt-to-equity ratio, on the other hand, could be compensated for just through working capital. This is important in practice, since even though fixed asset management has a remarkably greater impact on the profitability than working capital management, it is almost impossible to adjust the fixed assets rapidly just as needed. This study showed that the effect of working capital management on the profitability was exceptionally strong in maintenance companies, as they operate usually with light balance sheets. In the Finnish maintenance industry this seemed to hold especially for the large maintenance companies.
Considering maintenance networks, profitability can be improved through increasing the flexibility of the assets, and through reorganizing the ownership of the assets among the companies in the network. The simulations in this thesis illustrated that the different features of maintenance customer companies and their service- and equipment provider companies can create additional value through inter-organizational flexible asset management.
The third and final research question of the thesis was: how should the companies operating in maintenance networks share the value created by flexible asset management to reach a win-win situation? The approach of this research to value sharing was that of maintenance contracts; the traditional typology of maintenance contracts was expanded to include a new contract type, flexible asset management contracts. These contracts include services of fixed asset and spare part ownership, in addition to the actual maintenance work. I concluded that a win-win situation is achieved when the ownership of the assets is priced somewhere between the incurred losses of the
company that takes the assets into its balance sheet and the additional profits of the company that gives up the assets. However, the amount of value created through flexible asset management in a network depends on the features of the contracting companies. Figure 13 summarizes how companies with light or heavy balance sheets can gain value from inter-organizational asset management.
Figure 13. Framework of how different companies should exploit flexible asset management in their maintenance contracts to gain value
Maintenance customer companies carry traditionally heavy assets compared to maintenance service companies. As a result, a specific monetary sum has a different impact on the relative profitability of these companies. This means that transferring assets from the balance sheet of service companies to the customer companies is a feasible way of creating value, but transferring them the other way around is more likely to destroy value than create it. In the Finnish maintenance industry, some maintenance service providers have benefitted from this through working in such close collaboration with their customer and host companies. Usually it is the amount of fixed assets that makes a balance sheet heavy, so I conclude that the role of fixed assets is emphasized in those
Integrating flexible asset management into maintenance contracts
Light balance sheet
Heavy balance sheet
The relative profitability of a contract can improve extensively
The relative profitability of a contract can change
only a little COMPANY
RESULTS COOPERATION The role of
working capital is emphasized
The role of fixed assets is
emphasized
companies. In maintenance service companies with light balance sheets, the importance of working capital management is highlighted instead. Finally, compared to the service providers, companies carrying heavy balance sheets need to adjust their assets extensively to gain a large increase in their relative profitability.
5 CONCLUSIONS