4 software functions critical to long-term capital planning success

David Berger explores how to avoid expensive surprises.

By David Berger

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No one likes surprises, especially big expensive ones. Senior management is no exception. That is why long-term capital planning is an essential function within any company. Any organization that owns or manages physical assets such as plant equipment, facilities, vehicles, infrastructure, or computer equipment, must be vigilant in anticipating the need for major repairs or replacement.

There are multiple software solutions that can be used to support long-term capital planning. This includes simple spreadsheets, specialized long-term capital planning software packages, a CMMS with some or all of the required functionality, or some combination of these solutions. Regardless of which software solution you choose, they all should adequately support the following functions, as described in this column: (1) building an asset registry, (2) condition monitoring, (3) work execution and documentation, and (4) multi-year analysis and reporting.

Building an asset registry

The foundation of any capital planning tool is an inventory of all of your physical assets, including key components, in the form of an asset registry. The asset registry consists of the following:

Asset hierarchy – The asset hierarchy organizes the inventory of assets and components into a logical framework showing parent-child relationships. Some industries have developed standard hierarchies that are widely shared across the supply chain for the industry. For example, the Vehicle Maintenance Reporting Standards (VMRS) codes were established by the American Trucking Association to standardize on the hierarchy of vehicle assets in terms of systems, sub-systems, and components. As well, progress has been made in building a hierarchy of essentially problem / cause / action codes related to the asset hierarchy. Some of the CMMS vendors will sell their software with VMRS codes preloaded, and will allow users to edit the coded fields to better match their specific fleet specifications or to provide greater detail.

Standards for facility assets also provide a similar example. One of the standards is ASTM E1557 UNIFORMAT II published by the American Society for Testing and Materials. It breaks down a facility into standard parent-child relationships, for example, level 1 – building interiors, level 2 – stairs, and level 3 –stair finishes.

Position hierarchy – Whereas the asset hierarchy provides the functional parent-child relationship amongst systems, assets, and their components, a position hierarchy provides the relative or absolute location of the assets. For example, the four wheel assemblies of a vehicle can be described in terms of their position, such as “left front”. The position hierarchy can also be used to denote the physical location of an asset, such as 50 pumps located along a pipeline or within a plant.

Asset master data – The asset registry should provide the ability to enter master data that describes each asset such as serial number, manufacturer, manufacturer product code, date of installation, asset criticality, and other static data. Most CMMS packages also allow users to define asset types and a specification template specific to each asset type. Thus, drywall can be described in terms of sheet length, width, and thickness, as opposed to say, motors that can be described in terms of AC/DC, voltage, amperage, and RPM.

Lifecycle data – Critical to long-term capital planning, lifecycle data should be recorded including information regarding the economic repair and replacement of at least the critical assets and components. For example, when is it most economical for a bus to be overhauled, replaced, or both over its lifetime, and at what anticipated costs? In what years will a given piece of production equipment or its major components likely require significant repair or replacement, and at what cost? The source of this data may be historical records, benchmark studies in the industry, the manufacturer, and/or engineering studies. Note that expected costs must be kept current somehow, through vendor quotations, similar work done recently, or by estimating periodic price adjustments using recognized indices such as the consumer price index (CPI), construction cost index (CCI), and other benchmarks.

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