Categoriearchief: Strategic

Asset life and life cycle of assets

The life of an asset is defined as the period from conception to end of life. Assets often pass through identifiable asset life stages. The naming of the stages differs between organizations. Asset life does not necessarily coincide with the period of responsibility.

Assets life cycle stages:

  1. Needs and feasibility assessments for assets;
  2. Concept design;
  3. Determination of asset solutions;
  4. Design of assets;
  5. Manufacturing or acquisition of assets;
  6. Installation and commencing;
  7. Utilization of assets;
  8. Maintenance of assets;
  9. Modernization;
  10. Decommissioning, retirement, and/or disposal of assets.

The detailed structures of lifecycle stages are different at the three levels of physical assets: asset portfolio, asset system and individual asset. Also, different kinds of technological environments may demand for different kind of stage structure. The stages concept, solutions, design of assets can be replaced by acquisition of an asset. The costs, risks and asset performance are controlled across all the asset life cycle stages. Such controls consider optimization of risks, costs and performances at each stage.

The role of maintenance management contains two-way influence:

  • The environment that influences strategies, plans and decisions and activities
  • The strategies, plans and decisions on the assets.

The maintenance of assets must be an integral part of the management system. The maintenance activities depend directly from the organizations’ business and technological environments. The characteristic and objectives of an organization affect the requirements significantly asset management activities.

First, organizations’ objectives, strategies and economic and technological characteristics have a great influence on asset management and maintenance management (see Figure 1). Secondly, the specific features of the market where the organization is acting have impact on the requirements the asset management is facing.

In addition to the market, the stakeholders where the assets are located have political, economic, socio-cultural impacts (legislations, regulations) on the asset management requirements and solutions.

At the early stages of equipment lifecycle maintenance priorities differ from the priorities of the aged equipment. The role of maintenance management in the planning and decision making system is also influenced by the business and technological environments. The maintenance function should contribute to operation function in order to optimize operation and to meet safety and environmental requirements.

An asset management system is a set of interrelated or interacting elements of an organization, that establish asset management policies and objectives, and the processes needed to achieve those objectives. An asset management system includes the organization context (structure, roles, responsibilities), planning, operation, etc. An asset management system also requires performance evaluation and improvement.

Technological factors as construction, inherent dependability and economic life cycle stage of equipment, influence also on the asset management strategies and practices. The four strategic dimensions and influencing factors are utilized as input in strategic analyses and strategy process. The strategic process results in a set of requirements for assets. Indicators or measures can express these requirements.

The factors can be expressed in a more precise way using key performance indicators (KPI’ s). These KPI’ s can be used for internal purposes when developing the performance of the physical asset management and maintenance functions or when implementing benchmarking projects.

Determination of critical requirements on physical assets gives framework and basis for asset strategy formulation and planning. The physical asset management strategy and asset management plans can be derived straightforward from these requirements and controlled with KPI’ s. As soon as the asset strategy and asset management plans have been determined it gives direction to maintenance management. Therefore, as the next step it is possible to define maintenance strategies and maintenance plans and needed KPI’ s.

As asset management is an iterative process, feedback from maintenance management to asset management and further to strategic analyses is paramount. The iterative strategic process is carried out continually across the whole life cycle of assets and not only when new assets or assets systems or asset portfolio are acquired. Consequently, the maintenance strategy shall must therefore be adjusted along with changing requirements.

Maintenance – Maintenance and asset management

The aging of assets and therefore the increasing cost of maintenance are the main reason why asset management has become an essential part of organizations’ activities during the last decades. In addition there are also benefits, which can be achieved with asset management. More accurate long-term life cycle decisions related to the maintenance function, an integrated approach (assets, operation and maintenance) and an increased assessment of performance and control. Further benefits are being found through improved credibility in the eyes of stakeholders (regulators, customers and other). Asset Management can also results in more sustainable, continual improvement of processes.

Asset management is therefore defined as the life cycle management of assets to achieve the stated business objectives. Asset management focuses on the value that assets can provide to the organization. Value is organization specific and depends on the organizational context. That context has also a strong bearing on the type of assets that the organization operates and the management capabilities. The organizational strategic plan must sets clear short and long-term objectives and an approach for achieving these. Asset management objectives must be derived from these business objectives by taking into account the dynamics and speed of technological change that affect their activities.

Ideas on maintenance

Before the industrial revolution, hardly any maintenance was carried out. Objects of use were usually produced as single pieces and were mostly designed on ‘run to fail’.

Later, maintenance consisted of a series of operations dictated to the user based on the manufacturer’s experience. Not all parts were designed with the same robustness. Some parts were more subject to wear and tear than others. The underlying idea behind that maintenance policy is that failure can be prevented or delayed. Especially for mass-produced goods it was and is possible to formulate generic maintenance rules. These rules are drawn up on the basis of average conditions of use. However, follwing these maintenance rules were no guarantee against failure. Often this failure was due to non or poorly maintained parts due to incorrect or incorrect material choices. Before the period of mass-produced consumer goods product were overdesigned, oversized and overdimensioned.

In the 1980s, the focus was on increasing the reliability of the various components of a composition. The sum of the reliability of a system was the result of the reliability of the individual components. Much effort was put into discovering and eliminating the weakest link in systems. If this was not possible, parts were redundantly designed. Maintenance activities focused in that days on increasing reliability. Later, attention was paid to the quality of the produced goods as indicators for maintenance efforts.

Today, perceptions about expected performance and presentation seem to shift slowly. In the case of maintenance, a balance has to be find between higher revenues due to better utilization of the assets on the one hand and maintenance costs on the other. The design, the materials used also affect the maintainability of an asset. In addition, the ‘licence to operate’ has to be taken into account, and regulations on the environment, safety and health are also increasing. The level of maintenance and its effectiveness depends on a lot of other factors: e. g. the availability of a sufficient number of trained staff, the availability of tools and spare parts and consumables. In addition, the operating conditions play an important role in the correct choice of a maintenance policy. Evaluation of choices of maintenance policy is difficult, sometimes before the end of the technical service life, a device needs to be replaced in favor for more advanced technologies. In short, there are (and were) different and shifting ideas about maintenance. Many of these are based on assumptions and short-sightness. Ideally, owners of capital-intensive assets should have a longer-term focus. Conscious choices in maintenance are often the result of a carefully chosen strategy. Maintenance must not longer regarded as a cost item.

ISO 55000 and maintenance

The different maintenance activities during each stage of the life cycle and their possible contribution to performance are in most organizations not proper identified. The effective management of physical assets consequently will go further and be more difficult to achieve than in the past. Effective management of assets implies activities to maintain, and often increase, operational effectiveness, revenue and customer satisfaction, while simultaneously reducing capital, operating and support costs (John Steward Mitchell & Amadi-Echendu, 2007).

The concept of integration or so-called terotechnology (Husband, 1976)and later the TUE model (Geraerds, 1988) where the first attempts to address the issue above. The methodology to achieve this integration is described in the PAS55 and later in the ISO 55000. Initially the PAS 55 was a British Standards Institution’s (BSI) Publicly Available Specification for the management of physical assets. PAS 55 was originally produced in 2004 and underwent a substantial revision. PAS 55:2008 was released in 2008. It provides definitions and requirements and specification for establishing a management system for all types of physical assets. Although the structure is different, most of these elements above are now incorporated into the ISO 55001:2014.

The focus of the ISO 55000 is on managing the performance of the assets for the long term. Asset management aims at improving the overall performance by making and executing systematic decisions about the design, use and maintenance of assets. The methodology includes strategic, tactic (maintenance) and operational (technical risks, reliability, performance) decisions. Asset management, as with a quality system such as ISO 9001, requires an environment in which all knowledge, instructions, processes and experience reports are secured. This assumes an intensive collaboration between professionals with a diversity of backgrounds and fields within an organization.

In recent years, asset management concepts as PAS 55 and ISO 55000 in management literature drew more attention of asset managers, asset owners, politicians, regulators and though more limited, of scholars. Asset management has been defined as: “a strategic, integrated set of comprehensive processes (financial, management, engineering, operating and maintenance) to gain greatest lifetime effectiveness, utilization and return from physical assets (production and operating equipment and structures)” (Mitchell & Carlson, 2001). While performance measurement in general has been discussed extensively in the literature, few of these discussions focus specifically on the maintenance function and even though ISO 55000 is presented as a generic management framework in practice it is in practice mostly seen as a way to minimize maintenance cost. The ISO 55000 still lacks the adequate consideration of the maintenance during the entire asset life cycle (Amadi-Echendu, 2004).

Complexity of maintenance

Capital-intensive infrastructural assets consist of various, complex systems and components manufactured by different Original Equipments Manufacturers (OEMs) and vendors. Since the operating conditions of each piece of equipments are diverse, and change overtime, deterioration due to usage and operating will be different. As a result, maintenance intervals of each system may differ. On top of that, when there are strict regulations on safety, the respective maintenance requirements are even tighter. How often and what type of activities must be performed is determined during the design stage. It is undesirable to stop normal operation for maintenance. Adding on to the complexity, the maintenance function requires support of other resources such as facilities, equipment, human resources and spare parts. Not performing or postponing maintenance jeopardizes the overall asset’s safety, reliability and operational risk. The maintenance of infrastructural assets is a complex problem and a meaningful approach to optimize maintenance decisions aligning with enterprise objectives is needed. Another important issue is the growth in cost of maintenance. Like many other countries the Netherlands experiences severe infrastructure needs, owing to ageing assets. Managing the maintenance function till now has primarily focused on costs related to technical and operational issues (Amadi-Echendu, 2004; Hoskins et al, 1999). Maintenance is a labor-intensive and therefore cost-intensive and relies heavily on human interaction or activities; there is little or no growth in productivity over time. Since the Baumol effect, a phenomenon described by (Baumol & Bowen, 1965), there is a rise of salaries in maintenance jobs without an increase of productivity, in response to rising salaries in other technical jobs.

Maintenance schedules and policies

In the past several decades, maintenance and replacement problems of deteriorating systems have been extensively studied. Thousands of maintenance and replacement models have been created. These models can be categorised in maintenance policies: age replacement policy, random age replacement policy, block replacement policy, periodic preventive maintenance policy, failure limit policy, sequential preventive maintenance policy, repair cost limit policy, repair time limit policy, repair number counting policy, reference time policy, mixed age policy, preparedness maintenance policy, group maintenance policy, opportunistic maintenance policy, etc. Each policy has, depending on the situation, different characteristics, advantages and disadvantages. A maintenance model within the same policy sometimes has different cost structures and/or different maintenance restoration degrees (minimal, imperfect, perfect).

Maintenance aims to improve system availability and reduce failure and downtime. Cost reduction is also necessary. Generally, an optimal system maintenance policy may be the one which either:

  • minimizes system maintenance cost rate,
  • maximizes the system reliability measures,
  • minimizes system maintenance cost rate while the system reliability requirements are satisfied, or maximizes the system reliability measures when the requirements for the system maintenance cost are satisfied.

An optimal maintenance schedule should therefore consider/incorporate various maintenance policies, system configurations, shut-off rules, maintenance restoration degrees, correlated failures and repairs, failure dependence, economic dependence, non-negligible maintenance time, etc

Dynamic Maintenance Strategy

For many complex capital goods, the cost of maintenance represent a large fraction of the Total Cost of Ownership (TCO).  These maintenance costs are often much larger than the procurement cost (AberdeenGroup 2003). Therefore, it is essential that asset owners develop strategies that minimize these cost whilst maximizing the uptime and safety. Another issue of maintenance is that the most one-off build assets are designed according to specific needs. As a result, there is not much failure data available at the OEM’s. This also explains why maintenance plans are often developed and performed by the company itself or by contractors, instead of the OEM’s. These characteristics ask for a dynamic maintenance strategy. That strategy needs to adapt to the increasing availability of data during the life-time. Whereas preventive maintenance may be appropriate at the start, other types of maintenance may later become preferable as more information becomes available. Later (when decisions could be based on available data) that dynamic policy should lead to reduced downtime.