The reason this occurs is that profitability and cost improvement is a horizontal versus vertical issue, and must be attacked with a uniform and horizontally-integrated effort. This means that two elements must generally be recognized by management.

1. In mature industries with a diverse product mix, an Activity-Based Costing (ABC) system versus a Standard Costing system at some level of specificity will be required to successfully and comprehensively understand the true cost structure associated with each product manufactured and customer served. Without such a device in place, the knowledge of the actual cost and profitability of various product mix configurations will be elusive at best, and catastrophically deficient at worst¹. While it is not the intention of this article to discuss the nature and benefit of ABC, it should be recognized that the benefit of asset utilization analysis, which is the major thrust of this article, will be significantly improved in the presence and with the integration of this system.
2. A metric which allows for the analysis and improvement of productivity and efficiency on a horizontally-integrated basis, linked to maximizing profitability across the entire organization, must be deployed within the organization. Ideally, this measure will possess the following attributes:
   • It should avoid the flaw in traditional measures of productivity and efficiency, which tend to assign ownership of productivity improvement to operations, engineering, and maintenance personnel; rather than to multiple process owners across all units of the organization.
   • It should define productivity improvement on the basis of profit versus simple unit growth, avoiding the dynamic of a ‘feed-the-beast’ mentality prevalent in many commodity industries (such as Steel and Baking).
   • It should be equally useful in measuring productivity at the corporate, plant, department, line, or individual equipment level.
   • It should ultimately allow for the efficient analysis of improvement opportunities which will maximize the comprehensive reduction of costs for the organization as a whole.

These requirements, as well as a number of other benefits, may be realized through the introduction of a metric which allows for the assessment of Total Asset Utilization (TAU).