Road project Owners, Contractors and operators today are under pressure from multiple trends. To keep pace with projected growth in passenger and freight road transport, governments around the world will need to invest $900 billion per year once traffic returns to prepandemic levels. However, that investment falls short of $180 billion per year. Failure to address expanding capacity will exacerbate road congestion and will deteriorate road conditions—a factor in nearly a third of road fatalities.
Most road operators use past maintenance budgets and historical data to plan for O&M spending. However, such methods do not provide operators insight into how their current maintenance spending compares with its potential—nor into what others in the industry are doing differently.
There are no singularly good or bad road operators—merely pockets of outperformance or opportunity. Even companies with an overall good track record in road O&M have variable performance across their assets. Therefore, before considering cutting-edge practices to push maintenance efficiency holistically, companies could benefit more immediately by looking within their portfolios and addressing assets that perform in the lower quartiles, fostering the cross-pollination of ideas and best practices.
Higher technical complexity does not automatically mean worse cost performance. Contrary to popular belief, when appropriately normalized for technical asset characteristics, road assets with a high number of road infrastructures, such as long tunnels or viaducts, do not always exhibit a poorer cost performance. Assets with a high complexity index in our benchmark often exhibited better overall cost performance than simpler assets. Because performance and complexity are not inherently linked, operators can deviate from the typical mindset—“We operate a more complex network than others”—and are free to investigate potential gaps in the organization.
Almost 40 percent of all identified opportunities came from direct costs within operating expenditures. Benchmarking focused at the level of different cost drivers helps identify the largest improvement opportunities at an operational level (Exhibit 3). Given that the road industry is one usually associated with chunky capital expenditure to propel key strategic projects, the ability to find budgetary opportunities in a recurring element of the expense is significant. We found that almost 40 percent of all identified opportunities came from direct costs within operating expenditures—driven by management capabilities, processes within the organization, and the asset-management tools of road operators.
Data are key to improving performance. Most participants realized the power of advanced analytics and identified the opportunity to capitalize on precise data to improve their operations. The benchmarking effort prompted companies to rethink their data-collection processes and start their digital journeys by employing advanced analytics. We observed different levels of performance across companies regarding specificity of data, centralization, and operational key performance indicators (KPIs) used in day-to-day operation.
Changing how asset management is run is therefore critical in capturing this opportunity.
Strategy. Companies with mature IT systems and high data quality are able to run in-depth failure analysis on main assets and subcomponents. Transparency on asset performance and relative accuracy of failure-forecast models allow strategic maintenance choices on different assets—some could be made to run until failure, some maintained on condition, and others based on a calendar or predictive-forecast model.
Data quality. Technical knowledge, IT systems, and organization processes affect data quality at the company. More sophisticated companies have a greater share of digital (versus paper) reporting, complete inventory data, related organization data, sensor registrations, and updated measurements for more than five years—all collected in a consistent structure.
Technical knowledge. Best-in-class operators have a specific team with the required span of control and technical knowledge to make decisions on availability and use of data on different platforms.
Organizational processes. The penetration and level of standardization in data collection across the organization are also driven by organizational processes. Frequent and fluid communication among IT, operations, and analytics departments allows quick and clear deployment of use cases; implementation of initiatives to address identified value opportunities; and adaptation of KPIs, cost, or reliability targets.
IT systems. In mature organizations, assets have a unique, consistent identifier across all platforms and registration systems—or systems to reconcile different identifiers. IT systems are fully integrated, and all relevant systems have access to interrelated, available information. This information is often hosted on a central platform-as-a-service-style tool that the operator can access at any time. Systems have built-in data-validation tools that check the viability of the input data. Additionally, given the sensitivity of highways as an infrastructure asset, the organization employs relatively advanced cybersecurity practices.
Credit: McKinsey, IBEF, Economic Times