You can minimize the risks of the asset management gamble

July 2, 2007
True asset management isn't a system you can buy. Instead, it's a business discipline that is enabled by the people, processes, data and technology involved. If you want an optimum outcome, apply risk management during the project's entire duration.

Asset management is a business discipline for managing the life cycles of infrastructural and production assets. In addition to physical assets, it encompasses management practices, financial reporting, customer service, engineering and other business processes that directly and indirectly affect reliability, total cost of ownership and, therefore, life-cycle cost. True asset management isn’t a system you can buy. Instead, it’s a business discipline that is enabled by the people, processes, data and technology involved.

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Too many corporations and plants lack a viable asset management process. There’s little or no formal focus on effective asset utilization, almost no focus on total cost of ownership and a total failure to recognize obvious risks. Of course, you want to improve your asset investment decision-making and achieve sustainable improvements in business performance. That’s why you should take a holistic approach that addresses not only infrastructure assets, but also supporting the critical people, business processes, data and enabling technologies. The holistic approach to life cycle asset management enables effective management of vast amounts of asset data so it can be leveraged at a practical day-to-day business level. Then, you can institutionalize asset management and make it a focus of the day-to-day business. Only by incorporating asset management into the daily business routine can you achieve measurable cost savings and performance improvements that are sustainable over time.

Management strategy development: A shared vision, strategy and action plan is the foundation for a successful life cycle asset management program. Vision statements give company stakeholders a common understanding of asset management, a basis for consensus on business objectives and a guide for planning successful program implementations. At the end of the vision development process, you will achieve:

  • A common understanding of strategic asset management concepts and benefits.
  • Defined service level targets on which to base a life-cycle asset management strategy.
  • An assessment of your current asset management activities and recommendations for improvement.
  • A structured plan, schedule and business case for improving your asset management capabilities.

The final outcome of your vision process is an asset management strategy that provides a plan, schedule, budget and business case for moving forward with a viable life-cycle asset management process.

Long-term asset planning: Your ability to forecast where and when infrastructure investments should occur is critical to your company’s product quality and performance reliability. Deciding how to invest limited capital, operations and maintenance dollars requires an understanding of the current condition and capacity of your infrastructure, as well as future capacity and reliability requirements. Also, it requires understanding the costs and risks associated with implementing or deferring system expansions and improvements. As a minimum, your planning process must:

  • Prioritize capital projects over a five year to 10 year period based on strategic objectives.
  • Forecast capital renewal, replacement and expansion costs over a 10-year-to-15-year period.
  • Forecast infrastructure-funding requirements based on long-term revenue and cost.

Risk management: A project’s life cycle is fraught with risk at every stage. If you want an optimum outcome, apply risk management during the project’s entire duration. The major stages in the life cycle of a facility are:

  • Concept
  • Design
  • Construction
  • Commissioning
  • Production
  • Decommissioning
  • Disposal

Effective life-cycle asset management (LCAM) is a fundamental requirement — a necessity — in any well run organization. Without it, you’re forced to operate in a purely reactive mode and in ignorance of impending risks that could result in permanent closure of the business. Over recent years, we’ve seen too many examples of plants, many of them profitable, that didn’t recognize incipient risks and, as a result, either closed or were seriously damaged by their failure to manage the facility’s asset and associated risks. Business is always a gamble, but that doesn’t relieve managers of their responsibility to manage risks and make every effort to reduce the probability of failure.

E-mail Contributing Editor R. Keith Mobley, CMRP, principal consultant at Life Cycle Engineering, at [email protected].