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Why it’s time to rethink your approach to asset lifecycle management

Why it’s time to rethink your approach to asset lifecycle management

Rising asset capital cost and complexity have resulted in a surge in operational and financial risk, such as the consequences of catastrophic failure. This has intensified pressure from shareholders and regulatory bodies to improve asset lifecycle costing and reporting. Fortunately, by following a total asset lifecycle management approach, you can better manage your assets for long-term business competitiveness. This starts with a clearly defined business need for the asset and associated care systems, all the way from design through to decommissioning.

The investment a company makes in its assets is often measured against the profits the company generates. This measure, known as return on fixed assets (ROFA), is often used in strategic planning when a company picks what facility to occupy or the plant in which to produce a product. Asset management focuses on achieving the lowest total lifecycle cost to produce a product or provide a service. The goal is to have a higher ROFA than your competitor, so as to be the low-cost producer of a product or service. This will not only ensure greater market share, it will also attract investors who will provide a sound financial base on which to build further business.

In recent years, as companies have begun to think more strategically about their assets, demand for a more integrated approach has steadily increased. Effectively managing assets throughout their lifecycle therefore requires that all involved departments work as a cross-functional team. The maintenance department, in particular, needs to understand their role in asset lifecycle management at each stage.

The asset lifecycle consists of eight main stages, each of which requires involvement from a specific department:

1. Business need

Depending on the industry, senior management develops a long-term capital plan that includes replacement of ageing assets, the acquisition of new assets that accommodate growth, as well as an ever-changing strategic plan for the overall corporation. They must clearly define the organisation’s key success factors and the manufacturing capability required to support those success factors. Documenting this information lays the foundation for a successful asset management plan.

2. Equipment planning and design

This step converts the business need into an asset plan and design. It may be a new facility, or it may be a modification to an existing facility to produce a new product. The facility design must meet the required process capability (CpK) to satisfy business-defined product supply requirements. The design team transmits the equipment master data and manuals, maintenance, repair and operations (MRO) master data, and equipment-specific maintenance plans directly into the CMMS or to the maintenance organisation.

3. Procurement

Once stakeholders accept a design, the asset is built, purchased or acquired through the efforts of the procurement department using external vendors. Procurement translates the facility design into clear equipment specifications, including code and fabrication inspection requirements. These specifications, together with reliability requirements and lifecycle cost analysis, are then used to help select the appropriate supplier. Procurement should also consider standardisation of materials such as pumps, transmitters and valves to simplify maintenance and MRO inventory processes in consultation with the maintenance department.

4. Construction and commissioning

Construction must be completed to engineering standards and specifications. Internal engineering, operations and maintenance resources work with external vendors to install and test the asset. Maintenance should be involved in setting up the original schedules. They also ensure that, during the construction phase, future maintenance actions are considered and planned from a facility point of view.

5. Operation

This stage provides the greatest source of revenue, and ultimately, the return on capital employed. It’s the longest and most expensive stage in an asset lifecycle, most often managed by the operations department. Operation and maintenance can potentially contribute as much as 90% to the total lifecycle cost. The greatest potential of reaping increased ROFA is thus in this stage, provided that activities are well planned, managed and optimised.

Early defect identification is critical for preventing catastrophic failures and providing time to plan and schedule maintenance activities. The introduction of user-driven maintenance practices will assist with achieving high levels of reliability during the operational life of the asset.

6. Planned and predictive maintenance (PM/PdM)

The maintenance department is responsible for maximising the availability, reliability, and performance of the asset at minimal cost during the Operation stage. PM/PdM are effective processes for improving equipment availability if the schedule is closely followed. During times of high reactive maintenance or cost pressures, the tendency is to skip scheduled PM/PdM. But this will only lead to greater downtime, more reactive maintenance, and higher maintenance costs. As the asset care practices mature, the organisation should upgrade the maintenance plans using risk and criticality, and reliability centred maintenance to define appropriate PM/PdM.

7. Restoration

The primary objective should be to prevent equipment failures. But from time to time, a business need or technology change precipitates a modification to the asset by engineering, maintenance or an outside vendor to, for example, boost performance. Restoration simply brings the asset back to ‘good as new’ condition, usually following a functional failure.

8. Decommissioning

The final stage of the asset lifecycle begins when an asset is no longer satisfying the needs of the business in a cost-effective manner or is at the end of its useful life. The asset must then be shut down in a safe manner, separated from continuing operations, and thoroughly cleaned of process chemicals.

A shared vision, strategy and action plan create the foundation for a successful asset lifecycle management programme. Developing a vision brings company stakeholders together to create a common understanding of asset management, reach consensus on business objectives, and prepare a plan for successful programme implementation.

The final outcome of the visioning process is an asset management strategic plan that provides a plan, schedule, budget and business case for moving forward with a viable asset lifecycle management process.

To find out if you have your asset management basics covered, read the article Asset care – a strategic imperative to make organisations more globally competitive.

 

About TRACC
The TRACC framework helps organisations build standardised and integrated good practice and performance capacity across their Plan, Source, Make and Deliver functions. Simultaneously it accelerates their collaboration and alignment capacity to build world class end-to-end value chains, enabling the organisation itself to become the ultimate source of sustainable competitive advantage.

 

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