“Management”​ is Key to Effective Enterprise Asset Management!

We’ve talked about the enterprise and the asset, and their roles in EAM strategies. Now we need to act!

Determine Risk!

Risk is the ultimate measuring stick for gaining the biggest impact, and letting the important assets speak loudly to our investment plans. Determining risk across all asset types sounds like it could be a daunting process. But, we know what is important to our organization, and we know a lot about our assets, so if we combine it with a little more “real world” analysis, we can find a clear way forward.

Risk, simply put, is the product of the probability of an asset failing and the impact of that failure, less any mitigation strategies that we may have in place.

Probability of Failure (POF) and Failure Modes

Assets fail, but they can fail in different ways, at different stages of their lives, for different reasons. The trick is to make a prediction of failure far enough in advance that we can actually plan for it. The simplest way of determining the POF of an asset is to flip the condition curve upside down, and watch for the asset to hit the bottom of the curve. A method that has more usefulness as a key to managing risk is to look at failure modes.

The first step in figuring out the POF of an asset is to sit down with the people who actually look after them and list out all the reasons they need to replace those types of assets. Do they get hit by cars, fall down on their own, use too much power, cost too much to fix again?

There are four key modes of failure:

  • A failure of capacity, like a distribution network that cannot cope with demand.
  • A failure in the level of service, when an asset fails to deliver the minimum acceptable customer experience.
  • A failure due to economic efficiency, like an asset that costs more to operate than it does to replace.
  • Finally, and most common, physical mortality, when the asset simply ceases to function.

Consequence of Failure (COF)

Once we determine how an asset can fail, and how likely it is at any given time, we must determine just how much impact that failure will have on our organization. The organizational objectives and overall asset management strategy are a great reference when we start to try and quantify that impact.

Typically, we start by looking at an asset’s failure impact by creating several scales, and ranking the impact of a failure on those scales. A typical approach is to look at social, economic and environmental impact of failures, but your COF scales can take whatever form is important to your organization.

The critical thing is that the scales are relative – so that they can be applied across the asset inventory. This is the key step – allowing us to compare apples and oranges, wires and transformers, substations and properties, all on the same scale.

Ranking by Risk

Once we have POF, and COF, we can combine those to come up with a risk priority. Each asset can then be ranked according to the exposure that the organization would experience if the asset failed, based on multiple causes of failure. The end result is a risk priority number (RPN) value for each asset in the inventory.

This value can be used to drive inspection frequency, insurance valuations, environmental mitigation strategies, and other regulatory activities, and also rank competing events and activities.

By having a clear grasp on our asset data, we gain enormous clarity in understanding the scope of our activities. Not only does our reporting become simpler, but we are able to quickly answer questions about current valuation, condition and risk exposure. This flows automatically into our updated asset management plans. The result is we can separate out the most critical assets from the pack, and act on them first.

Building Asset Strategies

Knowing what we can do is critical to managing asset performance. Knowing whenand when not to do it is just as critical. Managing asset inventories is the art of balancing operating and capital costs, determining the best point on an asset’s life cycle to inject activities or interventions to keep the costs over the asset’s life at their minimum, while maintaining the value of that asset to the organization.

Capturing Asset Behaviours

The key to developing these strategies is to work directly with the asset managers, and extract the institutional knowledge they have about how those asset actually perform, and what we can do to them in order to keep them performing in the real world.

That does two key things for us: it gives us a great start in building a decision tree to predict future investment requirements, and it captures that institutional knowledge on how best to maintain those assets.

Once we’ve documented it, it will serve as the starting point for new staff as they come on-board, shortening their ramp-up time dramatically. The resulting decision logic, when applied to individual assets, generates a lifecycle forecast of what can be done to the asset over the course of its life, complete with costing, risk impacts, and value contributions.

The product of this is the list of pending asset events and activities, based on everything we know about our asset inventory, and using our own institutional knowledge.

This can then flow into the defined asset model and be used to generate ongoing forecasts of investment requirements.

Each asset contains all of the attributes defined for it, such as age, in-service, material, diameter, voltage, etc. It also contains a set of events and activities that have been generated for that asset based on our strategy, predicted values of future measures, and probability, consequence and risk profiles.

By doing it this way, we can make continual improvements to the asset-type definition and strategy, and apply it to our asset base to get better predictions and plans as we move into the future.

We can also set up alternative strategies, failure modes, and decision models to play what-if scenarios with our asset base. The key output of all of this is our needs list, for next year, the year after, or 10 to 50 years out.

Elements of the Asset Management Plan

All of the components of the asset management plan are now in our hands, and can be used to generate the plan at any time. These components include the textual entries that describe the current state of the asset group populating the plan, as well as the raw data that populates the tabular and graphical elements of the final plans.

A typical asset management plan should include:

  • Asset base (inventory counts by asset sub-type)
  • Asset failure modes (failure modes for each asset type within the group)
  • Asset costs (unit costs for replacement, maintenance and monitoring)
  • Projected inventory (graphical representation of asset counts for next 10 years)
  • Age profile (graphical representation of asset age by year)
  • Consumption profile (graphical representation of the percentage of asset life consumed)
  • Health profile (graphical representation of asset base condition)
  • Maintenance program (graphical representation of asset OPEX projections for next 10 years)
  • Planned replacements (graphical representation of asset replacement events for next 10 years)
  • Future cashflow (graphical representation of OPEX and CAPEX investments for the next 10 years).

So we have concluded our journey in developing asset management plans using enterprise asset management best practices. We’ve seen how defining organizational priorities help drive asset inventory improvement, and ultimately the format and function of the planning process itself. We’ve also seen that EAM without actual asset data is like paint-by-numbers without the numbers – pretty random! Finally, using management best practices to determine asset priorities is critical to getting the most out of every precious dollar!

Listen to Your Assets! Critical steps to an EAM Strategy.

You can do asset management without a strategic plan. It’s called “just-in-time” planning, and it is this reactive response that organizations should avoid by utilizing a more strategic approach. If we want to use asset data to inform enterprise activities, we need a pair of “what’s important” glasses first. That enterprise approach was discussed in my previous post.

Now, we need to focus on the actual THING we are attempting to manage: the asset! The “asset” in asset management is not just the object itself, but also everything we know ABOUT that asset. In many situations, asset managers are forced to make decisions about what to do with assets with little or no input, for a several reasons:

  • They can’t see ALL of the assets at once, so they have an invalid scope.
  • They don’t have a particular piece of information about the assets, so they need to assume some (perhaps critical) data, such as how old it actually is.
  • Data about real-world behaviour is scarce, so they can’t predict failure.
  • They don’t know how the asset fits into the overall system – is it active, a spare, in a critical role?

Once we have established our enterprise priorities and determined the guiding measures and outcomes we want to use in our asset management plans, we then start to fill in the blanks to ensure we are making the informed choice of what to do, when to do it, and what to do it to.

Build an Enterprise Inventory

The first step is to try and get a handle on EVERYTHING we own. Knowing WHAT we own is the basis for pretty much everything else that is important. Without an accurate inventory, how can we be sure of the true scope of our capital and operational requirements?

What Do We Own?

Assets exist in multiple source systems, and organizations can use a master data approach to bring them together in one consolidated view. The goal is to create a complete inventory of ALL of our assets, in one central space. This way we can be more confident in determining the scope of projects and plans. This inventory contains as much physical information about the asset as possible.

Where Is It?

Second, it’s good to know where our assets are physically located. Having all our point and linear assets in a GIS system will aid in filtering activities based on proximity or when we are looking for opportunities to do more in a specific location to reduce total costs. Being able to see where an asset is, and what is under or next to it is critical to define a synergistic approach to planning.

How Old Is It?

Third, we want to know how old that asset is – what’s its in-service date? In some cases, like older underground inventory, that information is lost or never existed in the first place. In those instances, we make assumptions about asset age based on other characteristics of the asset or where it is located. As we get better and better data via inspection and/or works history, that inventory will become more accurate over time.

These core physical characteristics form the foundation for starting to get our assets to “talk” to us and contribute meaningfully to the asset management plan.Working with the personnel responsible for managing the asset inventories, gaps in physical characteristics can be completed by applying assumptions to the asset inventory.

Extend Asset Data

Once we know the basics about our assets, we can start extending our knowledge with more analytical data.

What Is Its Condition?

Our first and most important piece of data is the condition of the asset. Wherever possible, we want to reference an actual inspection record. Age is NEVER the most accurate representation of this. Two assets that have the same “life” when they went into service can have dramatically different stories to tell, based on where they are. Wherever data is available, the organization can reference the latest inspected condition of an asset to reflect its true state of repair.

How Long Will It Last?

We also want to know how long each asset should last. What is its useful life? Manufacturers tell us one thing, but reality can be very different based on many other factors. Getting our engineering or works crews involved in defining how an asset will actually behave in the field, under real conditions, goes a long way to really getting a handle on our potential investment requirements.

What Is Its Organizational Value?

Ultimately, you will want to determine the actual value of that asset. Costing can be done on a unit cost basis for most assets or determined based on size or capacity. Or, there could be a detailed estimation or insurance valuation. The important thing to remember is that the real value of an asset to our organization is based not just on cost and condition, but also gets coloured by the strategic priorities of the enterprise!

Asking Our Assets Questions

So, because each asset in our inventory has an age (or approximation), how much it will cost to replace, how long it could potentially last, and what condition it is in, we can start asking questions of that asset inventory to form the basis of our plans.

Inventory Report

We can report on the entire inventory at once, across all asset types. A base count by asset type for all assets forms the initial part of the asset management plan template.

Age Profile

We start by asking for a purchase history, by asset type, by replacement cost. We follow that up with a consumption profile, showing how much of our assets’ lives are used up.

Health Profile

Health profiles are also available now, as we can ask our inventory to give us the breakdown of assets by their condition.

We start to project things too, at this point.

Condition Profile

We can generate a condition profile for individual assets or entire asset inventories, which shows the value or condition of assets in aggregate into the future.

Future Replacement & Repair

Using our projected remaining life, we can determine when we will need to inject CASH!

By putting everything into one place, and looking after a few basics, we are now able to get a much better handle on what the asset base is really looking like at any given time.

Creating an Enterprise Asset Management strategy? Start with the Enterprise!

Define Enterprise Priorities First!

In creating an enterprise asset management strategy, it is important to maintain a robust process for achieving a valid, defensible result. The core truths in Enterprise Asset Management (EAM) are that organizations and assets continue to have needs, and resources are always scarce in relation to those needs. Assets don’t care that we don’t have enough funding to cover requirements; listening just to the assets is like listening to a crowd – it’s just so much noise. Relying on unplanned maintenance to maintain inventory is akin to allowing a five-year-old to select dinner plans. You end up with no consistency, and high risk. Letting inventory data alone suggest a plan is just not sufficient.

So how do we decide what to do? How do we build our capital requirements in a logical way? In EAM, the question we need to answer is “Where do I best spend my first and last dollar?”

The answer is that the first dollar should be spent where you get the most impact, and the last dollar where you have no choice. Determining those points is a matter of defining guiding principles, building asset data, and designing a robust management strategy to achieve a balanced asset plan.

As asset stewards, we can’t afford to make wild guesses about what things are important to our organization, or we risk doing things that have little impact, or even worse, a negative impact on our current state. Assets themselves have no knowledge of enterprise goals and priorities; they just tell us that they need attention. Before we can make good decisions about which asset needs are important, we need to start by examining our own enterprise priorities. We start with a strategic plan.

That plan contains a set of value propositions that are core to your enterprise.

  • What is our target market?
  • Does that market rate level of service or value most?
  • What products or services are we offering?
  • What benefit are we providing your target market?
  • What other alternatives to our offering are out there?
  • What proof can we provide that we are telling the truth?

When we can clearly state what is actually important to our organization, we can get a foundation for solid decision making.

From Policy to Strategy to Objectives

By paying attention to the priorities of the organization, we can start to generate the guiding principles that will drive how the EAM process should function. Looking at the ISO-55000 standard for managing physical assets, we see that it closely follows the traditional Deming-based “Plan – Do – Check – Act” cycle.

The “Plan’ is the critical starting point of this process, and the new ISO 55000 model includes the development of an asset management policy based on our organization’s strategic plan. The policy outlines the organizational parameters that must be followed in managing physical assets.

This policy can then inform the development of a targeted asset management strategy, which defines the overall approach that should be taken for managing our assets, in light of the stated priorities.

The strategy then aids in the generation of the objectives that the organization needs to achieve in order to manage the asset base strategically, and build plans that reflect the needs of the organization.

There are many ways of doing this, but in the end, it boils down to creating a set of measures that take the value proposition and overall strategic plan of the organization, and turns them into scales that can be applied to balance asset requirements.

Risk, cost, value, condition, reputation, environmental impact, profit, to name but a few, all can come into play. They can then serve as a framework for balancing competing and conflicting activities, to gain the most impact.

Defining the Output Determines Requirements

Alexander Graham Bell said: Before anything else, preparation is the key to success. Once we have an understanding of what is important to our organization, and the strategy and objectives we need to achieve those things, we can define what success will look like.

Strategic objectives are great, but nothing helps find holes in our inventory or understanding quicker than starting to define what attributes, measures, graphs and analysis results we want to create. It’s tough to report on condition-based asset value if you do not have asset condition, or value, or both.

True preparation is deciding where you need to end up, and then allowing everything you do to contribute to that destination. For this purpose, it is important to have defined a standard Asset Management Plan template, which is to be used across the various asset groups. By keeping this template in mind, gaps in asset data and analysis can be addressed early in the process.

By defining what success looks like, based on true strategic objectives, we create greater clarity of purpose as we attempt to manage our assets. Using this new focus, examining asset requirements takes on new meaning, as each new need can be measured against the priorities of the organization. In the end, getting clarity and focus allows us to act strategically, with less wasted energy and more impact.