Asset Management Summary

8/18/2019 Asset Management Summary

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Asset Management – SummaryExam material are all the articles, COT case wmv fle plus transcript and

the lecture slides

Lecture !ntr"ducti"n t" Asset Management

Asset# $s"mething that has p"tential "r acti"n value t" an "rgani%ati"n&'

Asset Management# $the c""rdinated activities "( an "rgani%ati"n t"

reali%e value (r"m assets&'

Asset classes# )eal estate and (acilitates, *lant and pr"ducti"n, M"+ile

assets, !n(rastructure, !n("rmati"n techn"l"gy, inance, !ntangi+le, and

-uman'

Assets characteristics .usually, perhaps n"t always/#

0 Expensive0 C"mplex0 Engineered0t"0"rder0 Techn"l"gy0intensive0 1elivered in a pr"2ect0li3e (ashi"n0 Service intensive0 !n supp"rt "( c"re .pr"ducti"n/ "perati"ns

Asset hierarchies assets can +e managed as#

0 !ndividual units0 Systems0 Systems "( systems

Example# c"nsider a +"iler inside "( a larger system# a +"iler a h"t0

water system the wh"le -4AC system the +uilding the campus

5hat is uni6ue in s"me "( the asset classes7- Real estate and facilitates

a' Asset hierarchies, value t" sta3eh"lder+' "cus "n l"cati"n, c"nstructi"n, lease management

- Plant and Production

a' )CM, )*M, *r"ducti"n )OA ("cus+' C"nfgurati"n management

- Infrastructure Assets:a' Asset hierarchies and data, +y l"cati"n+' 1epreciati"n and maintenance ("recasting ("cus

- Mobile assetsa' Asset c"nfgurati"ns, regulat"ry c"mpliance+' Trac3ing m"+ile asset l"cati"ns, timing "( planned maintenance

- IT assetsa' Asset c"nfgurati"n versi"n management+' Change management

5h" manages assets in a l"cal medium0si%ed manu(acturing c"mpany7*r"ducti"n manager, technical service department "r +"ard "( direct"rs 8


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9uesti"ns ("r an asset manager#0 1" y"u understand the risk prole ass"ciated with y"ur asset

p"rt("li" and h"w this will change "ver time70 1" y"u understand the +usiness c"nse6uences "( reducing your

capital investment or maintenance budgets +y :; "ver thenext fve years7

0 Can y"u justify y"ur planned asset expenditures t" eternal

stake!olders70 Can y"u easily identi(y which investment projects t" de(er when

there are (unding "r cash "r can

w"r3 irrespective "( decisi"n in the "ther phases in "rder t" "ptimi%e the

per("rmance "( the asset'


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0 1i?erent phases in the li(e0cycle and di?erent disciplines are "(ten carried"ut +y di?erent parties .departments, su+2ect gr"ups, suppliers/

0 eed0("rward and (eed+ac3 l""ps are needed within and acr"ss asset li(ecycle' Each party has own performance parameters, which can collide with

each other."# $ife cycle costs# ("r many c"mplex assets, the "perati"ns c"sts are

signifcant and in the same "rder "( magnitude as the c"st "( the initialinvestment'

%eed-for&ard# decisi"ns in a certain phase need t" ta3e the d"wnstream phaseof t!at asset int" acc"unt . li(e cycle "ptimi%ati"n/' E'g' c"nsider maintenancein engineering phase' 1ata, in("rmati"n, 3n"wledge "+tained in a phase als"need t" +e trans(erred d"wnstream' E'g' trans(er MEA t" maintenance phase'1ata, in("rmati"n, 3n"wledge als" need t"


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D"te that in the slide a+"ut "rgani%ati"nal c"nfgurati"ns, it has already

+een made clear that di?erent +r"ad ways "( AM exist#

0 Cust"mers wh" want t" d" it themselves0 Cust"mer wh" want us t" d" it with them

0 Cust"mers wh" want us t" d" it ("r themLin3ing with c"ntracting

0 *er("rmance0+ased c"ntracts are an imp"rtant way t" manage the

service pr"vider – asset "perat"r relati"nship in a serviti%ed

envir"nment'0 *C# service pr"viderHs payment is tied t" asset "perat"rHs

pr"ducti"n "utput .characteristics/ and n"t t" e'g' am"unt "(

maintenance h"urs' C"ntractual p"ssi+ilities'- C"ntractual p"ssi+ilities .-yp3" et al', ::/

)ote: the assumpti"n is made that the asset "perat"r is n"t the "wner "(

the asset anym"re'

'c!uman * +rent ,"./# Asset life cycle management: to&ardsimproving p!ysical asset performance in t!e process industry#

9uesti"n (r"m lecture slide a+"ut this article#

' "cus "n asset life cycle' Argue that $0perational reliability1 needs t" +e c"nsidered in

every li(e cycle phase'I' 1etailed descripti"n "( li(e cycle phase and h"w "perati"nal

relia+ility sh"uld +e tac3led'

2ore message – The A$2M model pr"p"sed in this paper, guides

decisi"ns made during the early stages "( a pr"2ect in the pr"cess industry

in "rder t" increase the l"ng0term per("rmance "( assets at reduced lifecycle costs ,$22/# -"wever, this m"del cuts acr"ss all strategic,


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"perati"nal and tactical levels and a distincti"n +etween these levels must

+e rec"gni%ed (r"m an "verall management perspective' !t is a t"p0d"wn

appr"ach'

Asset management in the pr"cess industry must c"nsider the

c"mmissi"ning, "perati"nal and end0"(0li(e phases "( physical assets whenc"mmencing a design and implementati"n pr"2ect'

Trends that drive the next wave "( asset pr"ductivity impr"vement#

0 The exhausti"n "( traditi"nal c"st cutting0 The d"wnside "( rapid gr"wth0 undamental changes in industry structure

Asset Management# a strategic, integrated set "( c"mprehensive

pr"cesses .fnancial, management, engineering, "perating and

maintenance/ t" gain greatest li(etime e?ectiveness, utili%ati"n and return

(r"m physical sets .pr"ducti"n and "perating e6uipment and structures/'

Mitchell F Carls"n, ::/

,Process/ Asset life cycle p!ases - T" gain even greater value, the

asset management pr"cess sh"uld extend (r"m design, pr"curement and

installati"n thr"ugh "perati"n, maintenance and retirement' This is "ver

the c"mplete li(e cycle "( an asset' The fgure +el"w presents the .pr"cess/

li(e cycle phases "( asset systems#

5hy traditi"nal system n"t suJcient T" gain greater value, the asset

management pr"cess sh"uld extend (r"m design, pr"curement andinstallati"n thr"ugh "perati"n, maintenance and retirement, i'e' "ver the

c"mplete li(e cycle'

The ac6uisiti"n phase and utili%ati"n phase are n"rmally d"ne +y tw"

separate departments'

*hysical asset management ("cused "n maintenance management

m"dels#

0 )elia+ility Centered maintenance .)CM/0 usiness Centered maintenance .CM/


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0 T"tal *r"ductive Maintenance .T*M/

1isadvantage "( these m"dels That (acility li(e cycle c"sts .LCCs/ are

fxed during the design phase, meaning that p"tential c"st +enefts are

c"nse6uently l"st due t" sh"rt0term c"st drivers during the ac6uisiti"n

phase in the assetHs li(e cycle'

Terotec!nology# attempted t" address the fxed li(e cycle c"sts .the

disadvantage "( the maintenance m"dels/' !t is a c"m+inati"n "(

management, fnancial, engineering and "ther practices applied t"

physical assets in pursuit "( ec"n"mic LCCs'

Question 2 - Challenge: The challenge in managing the entire asset li(e

cycle e?ectively lies in the (act that c"sts are is"lated and addressed in a

(ragmented way thr"ugh the vari"us stages'

Ac3uisition p!ase# the emphasis is "n implementing a techn"l"gy withinthe +"undaries "( the appr"ved +udget and prescri+ed time (rame, while

ensuring that the (acility c"n("rms t" the technical specifcati"ns'

)esp"nsi+le department# )F1 "r technical department'

4tili(ation p!ase# The primary drivers are the ass"ciated c"sts "(

pr"duct distri+uti"n, spares and invent"ry, maintenance, training, etc'

)esp"nsi+le department# "perati"ns department'

5uestion 6: 2!aracteristics of t!e asset life cycle management

,A$2M/

7oal of paper 8 This paper there("re pr"p"ses a !olistic asset life

cycle management ,A$2M/ model ("r physical assets in the pr"cess

industry +y aligning and integrating the relevant elements "( pr"2ect

management, l"gistics engineering, systems engineering, maintenance

management and li(e cycle c"sting' This ALCM m"del "ptimi%es the

maintenance preventi"n pr"cess during the ac6uisiti"n phase, there+y

reducing maintenance c"sts during the utili%ati"n phase' The pr"p"sed

ALCM m"del ("r the pr"cess industry integrates I di?erent (ramew"r3s,

namely#

0 The asset li(e cycle0 *r"2ect Management (ramew"r30 Operati"nal relia+ility (ramew"r3

The asset li(e cycle (ramew"r3 is descri+ed a+"veB herea(ter the pr"2ect

management (ramew"r3 and the "perati"nal relia+ility (ramew"r3 will +e

descri+ed'

Project management frame&ork - A +asic pr"2ect management

(ramew"r3, which is practiti"ner0"riented and ("ll"ws the descri+edstraight("rward appr"ach t" technical pr"2ect li(e cycles serves as the


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("undati"n "( the pr"p"sed ALCM m"del' The (ramew"r3 divides a pr"2ect

int" di?erent $stages&, which are separated +y $gates&' -"w this is

implemented in the ALCM will +ec"me clear in the ALCM m"del'

0perational reliability - A


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Phase 1 – Identify needs for assets

The ("cus during this pr"2ect stage is "n investigating and evaluating the

pr"cess re6uirements and there is very little detail "n the actual assets'

Phase 2 – Conceptual and preliminary design


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./ C"ncerns are addressed and practical "+stacles rem"ved as pr"ducti"n

and maintenance viewp"ints are all"wed t" in


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d"wntime' Standardi%ati"n and interchangea+ility are c"nsidered t"

reduce the am"unt "( st"c3 held and the num+er "( maintenance

pr"cedures'

.I/ Speciali%ed tas3s, re6uired ("r the (uture maintenance "( the

e6uipment, are identifed and special t""ls pr"cured "r c"nstructed duringthis phase t" ensure that all e6uipment can +e pr"perly maintained a(ter

start0up' As part "( the human relia+ility c"mp"nent, the necessary

maintenance training sh"uld als" +e c"mpleted during this stage'

.G/ An"ther emerging trend is t" enter int" a service c"ntract with a

supplier where+y the supplier is held resp"nsi+le t" maintain the

e6uipment'

.K/ At the end "( the stage all e6uipment sh"uld have a suita+le relia+ility

strategy and the CMMS must +e (ully p"pulated t" implement the

strategies directly a(ter start0up'

Phase 5 – System utilization and life cycle support

./ Operating the plant within the design parameters supp"rts pr"cess

relia+ility during system utili%ati"n' 1uring the previ"us stages these

parameters were defned and used t" devel"p relia+ility strategies' !t is

n"w re6uired t" "perate the plant within these parameters'

./ 5"r3 management plays an imp"rtant r"le in reducing mean time to

repair .MTT)/, the prime measurement ("r e6uipment maintaina+ility

.See "perati"n relia+ility (ramew"r3/

.I/ The relia+ility strategies that were devel"ped and entered int" the

CMMS during the previ"us stages are implemented during the system

utili%ati"n and supp"rt phase'

.G/ An imp"rtant aspect during this stage is the c"llecti"n "( (ailure data'

The "perat"rs gather the data "n the plant and (eed it int" the CMMS in

"rder t" +uild the ("undati"n ("r relia+ility analysis' This data is used t"

evaluate whether the relia+ility strategies are e?ective "r needs t" +e

revised' !t is als" the s"urce data ("r c"nducting r""t cause (ailure analysis

with the aim t" eliminate de(ects'

Phase # – $etirement

1uring all stages "( the system devel"pment, p"ssi+le .partly/ retirement

sh"uld +e 3ept in mind, and the system sh"uld +e designed such that, i(

re6uired, it can +e disp"sed "( at minimum c"st in the m"st

envir"nmentally resp"nsi+le manner' !( the retired system needs

replacement, the c"mplete pr"2ect management (ramew"r3 and

c"rresp"nding system devel"pment steps are ("ll"wed again'


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2onclusion - success(ul c"mpanies have dem"nstrated an understanding

and c"mmitment t" tw" 3ey issues that have +een identifed# increased

pr"ductivity and gr"wth'

!t is pr"p"sed that +"th "( these "+2ectives can +e achieved i( new pr"2ects

are identifed and executed while simultane"usly ("cusing "n "ptimi%ingthe value (r"m assets "ver the li(e cycle "( a (acility in the pr"cess

industry'

$imitations - The ALCM m"del must +e (urther tested within the pr"cess

industry t" determine i( the h"listic appr"ach d"es "verc"me the

disadvantages that cause the maintenance m"dels n"t t" address *M

ade6uately in the ac6uisiti"n phase "( assets' Als", in its present ("rm, the

ALCM m"del ("cuses "n the t"tal maintenance c"sts "nly' Additi"nal

aspects "( c"rp"rate sustaina+ility must +e

;icks< =arl * Mc7overn ,"/# An analysis of company structure andbusiness processes in t!e capital goods industry in t!e 4#>##%his article introduces &sset 'anagement from a supplier(s perspecti"e. D"te(r"m the lectures#

0 'upplier perspective "n asset delivery .in engineer0t"0"rder settings/0 !denti(y interesting mar3et and industry trends0 Already hint at the emergence "( serviti%ati"n .$integrated > turn3ey

s"luti"ns > thr"ugh li(e s"luti"ns&/

usiness pr"cesses are pr"2ect0+ased and interdependent' They include

sales, mar3eting, tendering, engineering, manu(acturing, pr"curement,

assem+ly, and c"mmissi"ning' A m"del is presented which gr"ups thesepr"cesses int" three categ"ries#

0 D"nphysical pr"cessesB in("rmati"n and 3n"wledge0+ased pr"cesses

such as tendering and engineering'0 *hysical pr"cessesB the physical reali%ati"n "( the pr"duct th"ugh

manu(acture, assem+ly, and c"nstructi"n'0 Supp"rt pr"cessesB sta? (uncti"ns such as fnance and human0

res"urce management'

There are tw" distinct stages "( interacti"n +etween a capital g""ds

c"mpany and its cust"mers and suppliers, namely#

' Tendering in resp"nse t" an invitati"n t" tender .!TT/ ("r a particular

c"ntract' C"ntract executi"n .a(ter a c"ntract has +een awarded/' !t starts

with n"nphysical activities including the devel"pment "( an "verall

pr"2ect plan, detailed design, and pr"curement' This is ("ll"wed +y

physical pr"cesses "( c"mp"nent manu(acturing, assem+ly,

c"nstructi"n and c"mmissi"ning'

Specifc pr"duct devel"pment is (ar less imp"rtant in MTO c"mpanies'


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ETO supply inv"lves a n"nphysical stage that includes tendering,

engineering, design0 and pr"cess0planning activities, and a physical stage

that c"mprises c"mp"nent manu(acturing, assem+ly, and installati"n' MTO

c"mpanies "perate in a similar way'

)on-p!ysicalprocesses

'upport processes.supp"rt +"th physical

and n"n0physical/

P!ysical processes

' Sales F Mar3eting' TenderingI' EngineeringG' *r"2ect

ManagementK' *r"curement

' 9uality' inance F

Acc"untingN' -uman )es"urce

Management

' Manu(acturing:' Assem+ly' C"nstructi"n' C"mmissi"ningI' I' Service F

spares

A vertically integrated c"mpany w"uld have n"nphysical, physical, andsupp"rt services' A pure design and c"ntract "rgani%ati"n w"uld have "nly

the n"nphysical and supp"rt pr"cesses with all physical pr"cesses

"uts"urced t" suppliers'

)on-p!ysical processes:

' Marketing and sales# identifes mar3et "pp"rtunities, devel"ps

p"tential cust"mersH awareness, and esta+lishes initial c"ntacts'

Challenges are that demand is hard t" ("recast due t" cyclical nature

"( mar3ets and l"w tendering success rate' P"ni2nendi23 suggests

that the c""rdinating "( mar3eting and supply in ETO c"mpanies has

three aspects#a. )peci*cation+' +olume and 'i # due t" the cust"mi%ed nature "( the pr"ducts,

medium0 and l"ng0term planning is +ased up"n aggregated

in("rmati"n expressed in terms "( value "r la+"r c"ntent'

1ecisi"ns regarding in0h"use capacity and "uts"urcing "(ten ta3e

place at this level'c' ead-times# the 6u"tati"n devel"ped during tendering n"rmally

includes a delivery date, +ased up"n an estimate "( lead0times'

This is usually pr"duced with"ut using in("rmati"n "n capacity

availa+ility' This may +e due t" Q


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' Tendering# the 3ey +usiness pr"cess resp"nsi+le ("r pr"ducing

s"luti"ns that are c"mpetitive in terms "( (uncti"nality, price,

delivery, and 6uality' Cust"mer re6uirements are deduced and

translated int" a c"nceptual design' C"ntact is made with

manu(acturing and selected suppliers t" "+tain in("rmati"n .c"sts,

lead0time and technical in("rmati"n/' Success rate is "(ten less thanI:;'

I' =ngineering# resp"nsi+le ("r pr"duct devel"pment that inv"lves

+"th c"nceptual and detailed design activities'G' Project management# resp"nsi+le ("r devel"ping "verall plans and

m"nit"ring pr"gress a(ter a c"ntract has +een awarded' Car"n and

i"re descri+e pr"2ect management in an ETO c"ntext' Once a

c"ntract has +een agreed up"n, a w"r3 +rea30d"wn structure .5S/

is drawn up' They distinguish +etween the ("ll"wing#a# Standard su+system w"r3 pac3ages# have defned +ill "(

materials and lead0time in("rmati"n c"rresp"nd t" standard parts"r 3its "( standard parts'

b# D"nstandard w"r3 pac3ages# include design activities that result

in the defniti"n "( the pr"duct and the +ill "( materials'

Manu(acturing w"r3 pac3ages apply t" MTO supply, whereas ETO

activities may have +"th manu(acturing and devel"pment w"r3

pac3ages'

K' Procurement# it sh"uld +e l"gical that in case "( ETO and MTO

c"mpanies the supplier has m"re p"wer +ecause items are +"ught in

l"w0v"lume in an irregular +asis' -ic3s identifed that +uyer0supplier

relati"nships in capital g""ds industry are in


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-"wever, it d"es n"t have the invent"ry management and c"ntr"l

(uncti"ns pr"vided +y M)*'I' 2onstruction: capital g""ds suppliers ta3e resp"nsi+ility ("r the

supply ass"ciated with the wh"le pr"2ect, which includes civil,

mechanical, and electrical engineering activities that need t" +e

c""rdinated'G' 2ommissioning: inv"lves the fnal c"nfguring and testing "( the

pr"duct, ("r example, ca+ling, instrumentati"n, and cali+rati"n'K' 'ervice and 'pares: demand ("r service and spares is easier t"

("recast than "riginal e6uipment as the plant0in0use, maintenance

schedules, and service intervals are 3n"wn'

'upport Processes: +eing lin3ed t" all the n"nphysical and physical

pr"cesses'

' 5uality# tw" aspects, 6uality assurance and 6uality c"ntr"l'

' %inance and accounting# it is di?erent in capital g""ds supply+ecause the l"ng0term nature "( c"ntracts, with lead0times

(re6uently spanning tw" "r m"re acc"unting peri"ds' D"rmally

include stage payments, ("r sta+le


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1esign and c"ntract c"mpanies have eliminated the physical pr"cesses

alt"gether thr"ugh "uts"urcing' The ma2"r driver was c"sts and "verhead

reducti"n'

The study revealed t!ree main aes along &!ic! markets are

distinguished#

' An axis runs (r"m c"st0plus t" c"mpetitive pricing ("r pr"ducts' Capital g""ds may +e supplied t" regulated "r c"mpetitive industriesI' Order winning criteria are imp"rtant (eatures "( mar3ets ("r capital

g""ds' These are necessarily c"mplex and multidimensi"nal +ut 3ey

varia+les will include price, delivery, "perati"nal per("rmance,

maintenance, and thr"ugh0li(e c"sts'

The m"del is +eing applied as a classifcati"n t""l ("r determining

appr"priate structures ("r particular c"mpany types'

R p"ssi+le alternatives t" the +usiness pr"cess m"del are +eing examined'


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Lecture r"nt0end devel"pment and T"tal C"st "( Ownership

!n(" lecture

?ecisions needed when devel"ping an asset vari"us which are need t"

+e ta3en#

0 usiness need0 5hich the "( asset0 Sta3eh"lder needs0 5hich techn"l"gy0 5hat type "( "rgani%ati"n0 Capacity0 C"st .investment, maintenance, "perati"ns/0 5here health, sa(ety envir"nment and "ther ris3 c"nsiderat"ns'

%ront =nd ?evelopment ,%=?/: is t" pr"vide the asset "wner with a

suJciently c"mplete image "( the opportunity t" decide whether "r n"t itis w"rth investing res"urces in' !t c"nsists "( the +usiness needs that lead

t" the initiati"n "( this pr"2ect and the c"ncrete path ch"sen t" meet these

needs .c"ncrete "+2ectives, sc"pe, design +asis, pr"2ect planning, re6uired

fnancial and "rgani%ati"nal res"urces and ris3s inv"lved/'

Time

*er("rmancC"st "(

)is


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est m"ment t" decide7 *hase I' C"mpanies use a $n"0change p"licy&,

pr"+a+ly (r"m phase G t" ensure that n" changes are +eing made in thepr"duct'

Ar"und K; "( all li(e cycle c"sts are $l"c3ed0in& +etween the defne and

execute phase'

r"und rules ("r any Qsystem&H

' 0rgani(e system devel"pment activities in a logical (ashi"n that

rec"gni%es that s"me activities must +e acc"mplished pri"r t"

"thers'' Identify the specifc activities needed t" +e acc"mplished in eac!

stage t" success(ully m"ve t" the next stage'I' E?ectively consider t!e impact of early decision "n later stages

"( the system li(e cycle especially with regard t" c"sts and ris3s .the

li3elih""d and c"nse6uences "( system pr"+lems/

ife cycle acti"ities until operate – system li(e cycle stage0 Esta+lish system need0 1evel"p system c"ncept0 1esign and devel"p system0 *r"duce system

r"nt End 6uesti"ns#

*hase B 1" we understand what we are starting7 0 initiation

*hase IB have we l""3ed wide en"ugh7 0 feasibility

*hase I G# have we selected the "pti"nal s"luti"ns – concept selection

*hase G K# is everything in place t" ensure success7 – pre-%I?

*hase K # are we ready t" "perate7

*hase # is l"ng term per("rmance acc"rding t" expectati"n7


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Asset plan#

0 A multidisciplinary0 !n which the wh"le li(e cycle "( a physical asset is ta3en int" acc"unt0 5ith the g"al t" achieve certain "+2ectives

0 5ithin the limits "( ris3 and relevant regimes, and0 !t sh"uld determine the all"cati"n "( res"urces

)esult "( $(r"nt end l"ading&B

0 Early start "( an asset plan0 Av"idance "( additi"nal pr"2ect c"st due t" delays, redesign,

rel"cati"n and retr"ftting c"mpensati"n, rec"very (r"m damaging

negative pu+licity etc'0 Signifcant ris3 reducti"n as result "( c"st e?ective design

impr"vements

0 C"nse6uential "perating c"st reducti"ns thr"ugh"ut the li(etime "( the plant0 C"st +enefts accruing (r"m p"sitive sta3eh"lder relati"ns

S" we have the aspirati"n t" ta3e int" acc"unt li(e cycle aspects t" +egin

with regarding c"st# T"tal C"st "( Ownership .li(e cycle c"sts/ intr" t"

5""dwardR Alsem

Li(e Cycle C"sting .LCC/ "r TCO is "ptimi%ing value ("r m"ney in "wnership

"( the physical asset +y ta3ing int" c"nsiderati"n all the c"st (act"rs

relating t" the asset during its "perati"nal li(e, (r"m investment t"

disp"sal' Optimi%ing the trade"?s +etween these c"st (act"rs will give theminimum LCC "( the asset' O+2ective#

0 T" ena+le investments "pti"ns t" +e m"re e?ectively evaluated0 T" c"nsider the impact "( all .(uture/ c"sts rather than "nly the

initial capital c"sts'0 T" assist in the e?ective management "( c"mpleted pr"2ects0 T" (acilitate ch"ice +etween c"mpeting alternatives

)esult# an "ptimal l"ng term decisi"n in any phase "( the asset li(e cycle

where+y TCO +ec"mes part "( the Asset *lan'

ramew"r3 ("r calculati"n "( TCO


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Li(e cycle c"st categ"ries

)F1 c"sts *r"ducti"n and C"nstructi"n C"st Operati"n and

maintenance supp"rt c"st )etirement and 1isp"sal c"sts

Cash l"ws# given a c"llecti"n "( pairs .time, cash


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!ncentives ("r TCO in daily practice#

' TCO is used in the tender pr"cess when selecting a c"ntract"r ("r a

l"ng term peri"d' Every fve year peri"d each asset get assessed "n the s"0called

Operati"nal Excellence, "( which TCO is a part'I' !n the past the maintenance and operations departments had little

in/uence "n what e6uipment the pr"2ects department hands "ver'

TCO can (uncti"n as leverage'

G' T" help specify the maintenance w"r3 that the c"ntract"r has t"per("rm'

K' 'anagers have recently +een made responsi0le ("r TCO within the

maintenance department'

1iJculties in practice "( T"tal C"st "( Ownership#

0 The statistical nature "( the uncertain input0 The determinati"n "( the timing "( (uture maintenance and

upgrading0 The inclusi"n>exclusi"n "( user and s"cial c"sts

0 The treatment "( uncertaintyarrier in the pr"cess "( TCO#

0 Cultural issues0 Educati"n>training issues0 )es"urce issues

ramew"r3 ("r the devel"pment and implementati"n "( TCO#

' !denti(y need>interest' 1etermine ("r which pr"2ect "r ac6uisiti"n

I' "rm a teamG' !denti(y relevant c"sts


22/70

K' Test>implement' ine Tune M"del' Lin3 t" "ther systemN' =pdate, m"nit"r and maintain'

T"tal c"st "( "wnership +enefts#0 *er("rmance measurement0 1ecisi"n ma3ing0 C"mmunicati"n0 !nsight>understanding0 Supp"rts c"ntinu"us impr"vement'

)e6uirements ("r a TCO t""l and applicati"n#

' Peep the t""l simple' Ma3e the s"luti"n c"mpati+le with the current "rgani%ati"n and

pr"cesses'I' Entire li(e cycle "( "pp"rtunity that is pr"p"sed needs t" +e includedG' )eas"na+le relia+ility "( c"st estimatesK' Clear list "( assumpti"ns under which the t""l is c"nstructured

hat else do we need 0esides Economic usti*cation3 .Chan et al', ::/

1raw+ac3s "( 2ust ec"n"mic investment decisi"ns meth"ds#

0 T""0narr"w perspective0 Exclusi"n "( n"nfnancial +enefts0 Overemphasis "n the sh"rt term0 aulty assumpti"ns a+"ut the status 6u"0 !nc"nsistent treatment "( in


23/70

Chan discussed next t" the ec"n"mic +enefts, als" c"nsider strategic and

techn"l"gy

1rivers ("r the inc"rp"rati"n "( sustaina+le devel"pment in +usiness

practice#

0 S"ciety – pressure license t" "perate0 )egulati"ns – pull license t" sell0 Asset sta3eh"lders 0 pus!0 C"rp"rate principles F culture 0 support

Analytic appr"aches $m"re realistic as m"re (act"rs may +e included in

decisi"n0ma3ing&

The fve perspectives "r ris3 in an Asset *lan#

0 Technical including health, sa(ety envir"nment

0 Ec"n"mic>fnancial0 C"mmercial0 Organi%ati"nal0 *"litical>s"cietal>reputati"n>c"mpliance

TECO* n"t 2ust ec"n"mic

"r any TECO* ris3 the purp"se ("r the ris3 matrix is t" help the team

pri"riti%e ris3 in a ris3 register' The m"st imp"rtant ris3s are rec"rded in

the upper right c"rner "( the ris3 matrix and the purp"se is t" devise

mitigati"ns t" m"ve them t" the l"wer le(t c"rner'

reen# manage ("r c"ntinu"us impr"vement

Vell"w – Orange – )ed# inc"rp"rate ris3 reducti"n measures, c"ntr"l t" as

l"w as reas"na+ly practical ."r t"lera+le/

Multi criteria decisi"n ma3ing .MC1M/


24/70

Attri+ute ramew"r3 ("r evaluating investments#

0 Manu(acturing lexi+ility0 System c"st0 4end"r supp"rt0 Technical and Management supp"rt

Alsem< @#;#M# ,"6/# Total 2ost of 0&ners!ip analysis in practice#=cerpt from a draft paper ,including appendi/#

%his article eplains how and when di4erent lifecycle cost estimating tools areused, depending on the phase in the asset lifecycle and the information which isa"aila0le.

Three ways exist t" estimate c"stsW0 y detailed engineering pr"cedures0 y anal"gy0 y parametric estimating meth"ds

Parametric models# use unit c"sts and sets "( ("rmulae ("r t"p0d"wn

estimating that are generated using statistical meth"ds t" c"llate c"sts


25/70

and pr"duct characteristics' M"st suita+le in the design stage and g""d ("r

+udgetary purp"ses'

Analogy met!od# identifes a similar pr"duct and reuse the c"st

in("rmati"n'

?etailed or analytical met!ods# m"re accurate than anal"gy and

parametric meth"ds and c"sts "( +"tt"m0up estimati"n analytical placing

a m"netary value "n res"urce c"nsumpti"n' A huge am"unt "( data is

needed, it is time c"nsuming and diJcult t" carry "ut'

C"st

estimati"

n

techni6ue

Advantages limitati"ns

*arametric

0 )apidly "( executi"n0 )epeata+le and "+2ective

0 Less in("rmati"n re6uiredthan analytical meth"ds

0 ""d ("r +udgetaryestimates "r +aseline

assessment

0 *arameters n"t includedcan +ec"me imp"rtant

0 =se(ul in c"m+inati"n with"ther meth"ds

0 CE)s are t"" simplistic t"predict c"sts

0 =ncertainty are high as CE)

specifcati"nAnal"gy 0 )eas"na+ly 6uic3 and +ased

"n actual data0 )e6uired (ew data0 =ser 3n"ws the "rigin "( the

estimate0 D" re6uirement "( (ull

understanding "( pr"+lem0 Accurate ("r min"r di?erence

(r"m anal"g"us case0 ""d ("r r"ugh "rder

magnitudes estimates in

a+sence "( ade6uate data

0 Su+2ective ad2ustments0 Accuracy depends "n

similarity "( items0 1iJcult t" assess e?ect "(

design change0 lind t" c"st drivers

0 M"re diJcult thanparametric meth"d as this

re6uired cases data+ase,

similarity measures,

adaptati"n (uncti"ns and

case indexati"ns0 1"es n"t handle inn"vative

s"luti"nsAnalytical 0 M"re accurate than anal"gy

and parametric meth"ds0 1etailed +rea3d"wn use(ul

("r neg"tiati"n0 Suita+le when all

characteristics "( pr"duct

and pr"ducti"n pr"cess are

well defned

0 Sl"w executi"n0 1etailed data may n"t +e

availa+le0 !nappr"priate ("r estimati"n

at design stage0 !naccurate all"cati"n "(

"verheads

Activity0

ased

c"sting

0 All"cates c"sts acc"rding t"

where they are incurred0 !mpr"ved accuracy and

relevance0 1etails the causes "( c"sts

and gives a str"nger

indicati"n "( p"tential

pr"fta+ility

0 Time c"nsuming0 C"stly t" implement and

"perate0 1iJcult in ma3ing it "nly

c"sting meth"d0 All"cati"n "( "verhead is

c"mplicated

Expert

2udgment

0 9uic3 t" pr"duce and


26/70

0 Can +e accurate as "therm"re expensive meth"ds

0 D"ndeterministic as eachexpert reaches a di?erent

estimate

The c"st (act"rs c"nsidered will depend "n the stage in which a m"del is

used, the 3ind "( in("rmati"n t" +e extracted (r"m the m"del, the data

availa+le as input t" the m"del and the asset +eing designed'

urtherm"re, the "+2ect "( maintenance and "perati"n in 6uesti"n

determines t" a high degree the extent t" which level "( accuracy a c"st

estimate is p"ssi+le and which meth"d is practical'

!n the C"nceptual 1esign *hase the sta3es are highest +ecause that is the

phase where the decisi"ns have much larger impact than in later li(e cycle

phases and a+"ut :0N:; "( the c"st is c"mmitted in the early stages'

igure 1 Conceptual diagram of the relati"e cost estimates accuracy and the relati"e degree of

in/uence on %C5 "ersus pahse in life cycle

This generates the th"ught that the extent "( a TCO sh"uld +e in +alance

with the criticality "( decisi"n ad that r""m must exist ("r lighter versi"ns

"( TCO estimates'

Estimating cost and economic elements

Ec"n"mic laws depend "n the +ehavi"r "( pe"ple, whereas physical law

depend "n well0"rdered cause0and0e?ect relati"nships'

2ost estimate: is an "pini"n +ased "n analysis and 2udgment "( the c"st

"( a pr"duct, system, "r structure' This "pini"n may +e arrived at in eithera ("rmal "r in("rmal manner +y several meth"ds'

=stimating by engineering procedures# inv"lves an examinati"n "(

separate segments at a l"w level "( detail' !t +egins with a c"mplete

design and specifes each tas3, e6uipment and t""l need, and material

re6uirement' C"sts are assigned t" each element at the l"west level "(

detail' These are then c"m+ined int" a t"tal ("r the pr"duct and system'

This may h"wever re6uire m"re h"urs than are li3ely availa+le' Als",

c"m+ining th"usands "( estimates int" a wh"le can +e wr"ng, as it "(ten

turns "ut t" +e greater than the sum "( its parts' V"u canHt includeactivities that are un3n"wn, and "(ten there are la+"r elements which are


27/70

(act"red in as a percentage "( the detail estimates' Thus small err"rs can

lead t" large err"rs in the t"tal c"st estimate' An"ther s"urce "( err"r can

+e the signifcant varia+ility in the (a+ricati"n "( successive units

=stimating by Analogy# =se(ul when entering int" a new activity'

1i?erence +etween macr" level .wh"le new mar3et>pr"duct c"st estimate/and micr" level .e'g' la+"r h"urs ("r a similar 2"+/'The +asis ("r the

estimate is the similarity that exists +etween the 3n"wn item and the

pr"p"sed part' Ma2"r disadvantage is the high degree "( 2udgment

re6uired' -"wever as c"sts "( this meth"ds are l"w, it can +e used t"

chec3 "n "ther meth"ds' esides itHs "(ten the "nly meth"d availa+le in a

preliminary stage "( devel"pment'

Parametric =stimating Met!ods# Finds a functional relationship between

changes in cost and the factor upon which the cost depends such as output rate,

weight etc. Utilizes statistical techniques ranging from simple graphical curve to

multiple correlation analysis. Is often the preferred method, but the needed data is

not always available.

Applicati"n "( estimating meth"ds

!ndustry wide la+"r and "verhead rates can +e "+tained (r"m statistical

pu+licati"ns and used t" give a r"ugh c"st estimate ("r a given item' As

m"re in("rmati"n is 3n"wn, m"re specifc data can +e used' 1uring the

early planning stages, availa+le data is limited .use parametric c"st

estimating/' As the system design pr"gresses, m"re in("rmati"n +ec"mes

availa+le .anal"g"us c"st estimating/' As the system design +ec"mes frm,design data are pr"duced which all"w ("r detailed estimates .estimate +y

engineering pr"cedures/ .fgure /'

igure 2 Estimating methods "ersus program phase


28/70

One "( the m"st imp"rtant steps in the "verall pr"cess "( li(e0cycle c"st

analysis is the ac6uisiti"n "( the right type "( data in a timely manner, and

presented in a managea+le ("rmat'

Developing cost data

!n devel"ping c"st data ("r a li(e0cycle c"st analysis, all p"ssi+le data

s"urces t" determine what is availa+le ("r direct applicati"n in supp"rt "(

analysis "+2ectives sh"uld +e investigated' !( re6uired data is n"t availa+le,

parametric c"st estimating techni6ues may +e appr"priate'

Cost data re6uirements

!t is imp"rtant t" ac6uire the right type "( data in a timely manner, in a

managea+le ("rmat' T"" (ew "r t"" much data can result int" p""r

decisi"ns' 1efniti"ns "( g"als and guidelines, c"m+ined with the

identifcati"n "( specifc evaluati"n criteria, will n"rmally dictate the data"utput re6uirements ("r the li(ecycle c"st analysis'

S"urces "( c"st date =isting data banks# standard c"st (act"rs which

have +een derived ("rm hist"rical experience that can +e applied t"specifc (uncti"ns "r activities .c"st "( engineering la+"r, "verhead rate,

training c"st, shipping c"st, c"st "( (acility "r material/'

Total cost of o&ners!ip in practice

Ta+le summari%es the advantages "( limitati"ns "( the vari"us c"st

estimati"n techni6ues' C"st is a measure "( res"urce usage, it never

includes all p"ssi+le elements +ut must include the m"st imp"rtant

.arringer N/' The c"st (act"rs c"nsidered depend "n the stage in

which a m"del is used, 3ind "( in("rmati"n extracti"n, data input and the

asset +eing designed' The "+2ect "( maintenance and "perati"n in6uesti"n, i'e' c"mp"nent level, aggregate level, pr"cess unit, (act"ry ,


29/70


30/70

pr"cesses that are design t" achieve sh"rt0term g"als' there als"

inc"rp"rate the strategic +enefts "+tained (r"m AMTB these might +e early

entry t" mar3et, perceived mar3et leadership, the a+ility t" "?er a

c"ntinu"us stream "( cust"mi%ed pr"ducts'

4iew "( managers# AMT c"ntains high investments and l"nger pay+ac3peri"d' The achievement "( the desired +enefts (r"m AMT re6uires

systematic and integrated planning rather than the ad"pti"n "( a new

system'

%our major steps in adopting AMT:

1. Strategic planning1.1. 507ecti"es identi*cation0 !dentifcati"n "( c"rp"rate strategic g"als and "+2ectives0 *"int "ut the pr"+lems hindering the g"als'0 *"int "ut the c"ntri+uti"n "( the pr"p"sed AMT

1.2. )upporti"e organi


31/70

!nn"vativeness1.>. %echnologies identi*cation

0 Stand0al"ne systems" C"mputer adied design .CA1/,

C"mputer aided pr"cess

planning .CA**/" ra+ricating> machine

and assem+ly

techn"l"gies# DC> CDC

"r 1DC machines,

Materials w"r3ing laser

.M5L/, *ic30and0place

r"+"ts

0 !ntermediate systems

" Aut"matic st"rage andretrieval systems.A)>)S/ and Aut"matedmaterial handlingsystems .AM-S/

" Aut"mated inspecting andtesting e6uipment .A!TE/

0 !ntegrated systems" lexi+le manu(acturing cells>

systems .MC> MS/" C"mputer0integrated

manu(acturing .C!M/" Xust0in0time .X!T/" Material re6uirements planning .M)*/" Manu(acturing res"urces planning .M)* !!/

' Xustifcati"n meth"d"l"gies# can +e partiti"ned int" three gr"ups#2.1. )trategic 7usti*cation approach

0 Less technical than ec"n"mic and analytic meth"ds0 Advantage# direct t" g"als

0 1isadvantage# p"ssi+ility t" "verl""3 the ec"n"mic and tactical

impact "( the pr"2ect'

0 Strategic appr"aches#" Technical imp"rtance" usiness "+2ectives" C"mpetitive advantage" )esearch and devel"pment

2.2. Economic 7usti*cation approach

0 "rmula appr"aches ("r ec"n"mic 2ustifcati"n "( e6uipment#" *ay+ac3 .*/B )O!B !))B D*4B 1isc"unt cash


32/70

" They d" n"t always indicate the +est acti"n

within an inter0related set "( decisi"ns" They are inherently incremental s" that l"ng0run survival

cann"t st"p'

" sensitivity analysis

0 -y+rid fnancial and strategic appraisal appr"aches are +etter'2.. &nalytic 7usti*cation approach

0 Largely 6uantitative and m"re c"mplex than the ec"n"mictechni6ues'

0 Several c"mm"nly used appr"aches#" Analytic hierarchy pr"cess

Advantage# descri+e the pri"rity changes and its e?ects in di?erent levelsBpr"vide agreat detail "( in("rmati"n "n the structure and activity "( a system in the

l"wer levels and give and "verview "( the act"rs and their purp"ses in the

upper levelsB and natural systems assem+led hierarchically'laws# the a+sence "( a the"retical (ramew"r3 t" m"del decisi"n pr"+lemsint" a hierarchyB the pairwise c"mparis"ns are +ased "n su+2ective

2udgementsB the estimated relative weights are set +y the eigenvect"rmeth"dB and with"ut ("rmal treatment "( ris3'

" Linear additive m"del" *r"fle charts and sym+"lic sc"recards" *r"gramming m"dels# "al pr"grammingB Linear

pr"gramming techni6ue'

" )is3 analysis' Main ris3s# The pr"+a+ility "( variance in the cash


33/70


34/70

pr"cess c"nsisting "( K steps# ./ stimulus ./ s"luti"n identifcati"n .I/

detailing .G/ evaluati"n and .K/ auth"ri%ati"n'

%here are four possi0le reasons why *rms may decide to omit a speci*c

stage?

0 T!e scope of t!e investment ,cost/, large scale investments are

("rced thr"ugh a m"re rig"r"us decisi"n pr"cess'0 T!e si(e of t!e rm +ecause the si%e "( the frm is p"ssi+le

related t" the th"r"ughness "( the decisi"n pr"cess' "r example,

large frms need auth"ri%ati"n ("r each step whereas smaller

c"mpanies g" thr"ugh the pr"cess with less extensive analysis'0 T!e managerial style of t!e rm' "rmali%ed management rules

re6uire a m"re rig"r"us decisi"n pr"cess than less ("rmali%ed

"rgani%ati"nal structures'0 T!e degree of eperience in AMT investments that a frm has'

The fgure "( the pr"cess is given +el"w and it is imp"rtant t" menti"n that

it is n"t necessarily a linear pr"cess, c"mpanies may decide t" return t"

previ"us stages i( a m"re detailed analysis "( that is re6uired'

'timulus

This frst stage is a+"ut recogni(ing t!e need or opportunity ("r an

AMT investment' This rec"gniti"n can +e stimulated +y a c"m+inati"n "(

internal and eternal (act"rs#

0 Internal stimuli are meeting cust"mer demands, capturing

"pp"rtunity, reducing la+"r c"sts, increasing


35/70

AMT investment decisi"ns are made t" capture mar3etplace "pp"rtunities

"( recti(y manu(acturing pr"+lems +ut n"t ("r crisis situati"ns' !nvestment

decisi"ns ("rm an integral part "( manu(acturing strategies'

'olution identication

This step is c"mprised "( three di?erent stages#

./managers must rec"gni%e the pr"+lem, "pp"rtunity "r crisis

./a diagn"se is made +y ("unding a s"luti"n t" the pr"+lem "r

"pp"rtunity and.I/ the s"luti"n rec"gniti"n phase that may identi(y AMTs as a p"ssi+le

s"luti"n +ut it can als" +e p"ssi+le that AMTs are n"t the s"luti"n ("r

this particular pr"+lem'

The s"luti"n identifcati"n is initiated when the internal and external

stimuli reach a certain level' The auth"rs ("und that s"me c"mpanies

"mitted the diagn"se and the s"luti"n rec"gniti"n phase and this may lead

t" an inaccurate initial assessment "( the "pp"rtunity "r pr"+lem'

?etailing

1etailing includes preliminary authori


36/70

The sec"nd c"mp"nent is the justication "( the AMT' The auth"rs ("und

that the literature increasingly stressed the imp"rtance "( (act"ring the

strategic +enefts int" the traditi"nally 6uantitative 2ustifcati"n pr"cess'

The m"st p"pular 6uantitative meth"ds include return on in"estment

@$5IA, pay0ac; periods and discounted cash /ow' The 6ualitative meth"ds

include the c"mpati+ility "( the strategic directi"n with the pr"p"sed AMT,impr"vements in the l"ng term c"mpetitiveness and the strategic +enefts

gained thr"ugh impr"ved pr"duct 6uality' One interesting p"int t" ma3e is

that large and small si%ed frms rely m"re "n the 6ualitative meth"ds and

the mid0si%ed c"mpanies rely m"re "n the 6uantitative meth"ds' The

auth"rs thin3 that mid0si%ed frms ("cus m"re "n the 6uantitative meth"ds

+ecause the middle layer management ("cusses heavily "n return "n

investment calculati"ns'

Aut!ori(ation

This last stage is "(ten a ("rmal presentati"n "( the investment analysis,

including the 2ustifcati"n, prepared ("r upper management appr"val'

Management can then appr"ve the ac6uisiti"n "r re2ect the pr"p"sal'

Implications of the model

The model provides a view of the total investment decision process$ )ustification is but one

activity in the decision process* as various activities are performed in each of the model+s

stages that contribute to the eventual acceptance or re,ection of a proposed investment$ The

thoroughness of the decision process can be evaluated in relation to the model$

@ood&ard< ,6CCE/# $ife cycle costingFt!eory< information

ac3uisition and application#

5ne of the *rst comprehensi"e papers on life cycle costing, at a fairly highle"el. It pro"ides insight into the "arious components it consists of.

*hysical assets ("rm the +asic in(rastructure "( all +usinesses, essential t"

m"nit"r their entire li(e cycle'

$ife cycle costing# "ptimi%ing value ("r m"ney in the

"wnership "( physical assets +y ta3ing int" c"nsiderati"n all the

c"st (act"rs relating t" the asset during its "perati"nal li(e'

$22 Analysis the li(e cycle c"st "( an time isthe sum "( all (unds expended in supp"rt "( the item (r"m its c"ncepti"n and (a+ricati"nthr"ugh its "perati"n t" the end"( its use(ul li(e .-arvey/

" 2ost elements of

interest - all the cash


37/70

li(e "( an asset'

" ?ening t!e cost structure 0 gr"uping c"sts t" identi(y p"tentialtrade0"?s'

" A cost estimating relations!ip – a mathematical expressi"n that

descri+es the c"st "( an item "r activity as a (uncti"n "(

independent varia+les' .usually hist"ric data t" create estimates/" =stablis!ing t!e met!od of $22 formulation 0 an appr"priate

meth"d"l"gy t" evaluate the assets LCC'

Pau(man devel"ped a ("rmulati"n +ased "n the eight0step appr"ach

indicated +el"w#

Step # the "perating pr"fle .O*/# the peri"dic cycle thr"ugh which eh

e6uipment will g", indicate when e6uipment will "r will n"t +e w"r3ing'

Step #4tili(ation factors:

indicate what way e6uipment will +e(uncti"ning within each m"de "( the O*'

Step I# Initial ac3uisition costs ."perating c"sts R maintenance c"sts R

"verhaul c"st R initial spares c"sts/

Step G# 2ritical costs parameters .Mt+(, Mttr .mean time t" repair//# are

the (act"rs which c"ntr"l the degree "( the c"sts incurred during the li(e "(

the e6uipments'

Step K# 2alculate costs at current prices

Step # =scalate current costs# all c"sts need t" +e pr"2ected ("rward atrates "( ininance C"sts

I' !nstallati"n, C"mmissi"ning, training c"sts- $ife 0f t!e Asset


38/70

' unctional ife 0 need "( asset' Physical ife 0 asset will lastI' %echnological ife 0 technical "+s"lescenceG' Economic ife 0 ec"n"mic "+s"lescenceK' )ocial and egal ife 0 human desire "r legal re6uirements

- ?iscount rate# a high disc"unt rate will tend t" (av"r "pti"ns withl"w capital c"st, sh"rt li(e and high recurring c"st'

- 0perating and Maintenance 2osts1. $egular planned maintenance' Bnplanned maintenance 0 resp"nding t" (aultsI' Intermittent maintenance 0 ma2"r li(e re(ur+ishment

- ?isposal 2ost

0 Information and %eedback 0 it is the data capture and in("

(eed+ac3 which cl"ses the c"ntr"l l""p and will +e the g"verning

(act"r in success "r (ailure "( LCC

igure %he maintenance-cost relationship

4ncertainty and 'ensitivity Analysis 0 LCC highly dependent "n

assumpti"ns and estimates' ec"ming m"re widely practiced as a directresult "( c"mputer s"(tware devel"pments' Ma2"r s"urces "( uncertainty#

' 1i?erence +etween actual and expected per("rmance' Changes in user activitiesI' Techn"l"gical advancesG' )es"urce pricesK' Err"r in estimati"n relati"nships C"st Trade O?s

The p"ssi+ility "( trading0"? initial capital c"sts against su+se6uent

revenue savings is "ne "( the underlying principles "( LCC analysis .see

fgure +el"w/' Examples "( trade0"?s#

' 1ev"te res"urces t" )F1 t" increase relia+ility thus reduce


39/70

maintenance c"sts'

' !ncrease eJciency .inv"lving high devel"pment c"sts/ t" reducescrap'

I' Spend m"re "n aut"mati"n t" reduce manning c"sts'G' uy a m"re expensive machine with l"nger li(e'

Information re3uirements for $22 Analysis

0 1istinguish +etween expenditure0r"utine maintenance, scheduled

"verheads, c"mp"nent (ailure etc' 0 illustrates the cause>reas"n ("r

w"r3'0 *r"vide the +asis ("r c"st estimates "( new e6uipment .+ecause new

e6uipment is rarely rev"luti"nary/

0 !mperative t" 3eep accurate rec"rds "( all data0 LCC analysis can "nly

+e as g""d as the input data'

iguur = ey factors in life cycle costing

?ata 'ources0 Essential t" have 3n"wledge "( relia+ility, capacity utili%ati"n and

maintenance pr"cedures, leading t" an understanding "( the


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relati"nship +etween the capital c"sts "( specifcati"n, design,

ac6uisiti"n and disp"sal, and the revenue c"sts "( "perati"n and

maintenance'

0 A+sence "( data c"llecti"n system leads t" manual searches "(

unsuita+le rec"rds t" the vagaries "( human mem"ry, n"t"ri"uslyunrelia+le i( the pers"n in 6uesti"n (eels that the c"rrect answer may

re


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Approac! II# "n leading indicat"rs, assess investment decisi"ns "n

pr"cess and inputs'

Exam elements "( COT part apply appr"ach .literature/ t" COT case

0 )elate what y"u have seen in the vide" t" what sh"uld have +een d"ne

as explained in the mandat"ry literature and slides +el"nging t" the

lectures0 e prepared t" answer 6uesti"ns "n the case "n what was missing, "r

what sh"uld have +een in place

0 e prepared t" answer 6uesti"ns "n the literature itsel('

'cope from articles:

1ecisi"n ma3ing pr"cess .Pumar et al'/ AMT implementati"n pr"ps .Chan/" 5hat specifc strategic, "rgani%ati"nal and techn"l"gical issues

sh"uld +e c"nsidered7" Sh"rt term "perati"nal decisi"ns instead "( l"ng term strategic

Summary#0 $r"nt end l"ading& is essential


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0 C"nsider an asset in a multidisciplinary integrated way0 Li(e Cycle Appr"ach is )e6uired0 V"u need an Asset *lan0 Strategic and Analytical meth"ds need t" +e used next t" Ec"n"mic'

Lecture I *"rt("li" management, engineering and integrity

Project Portfolio Management ,PPM/# deals with the c""rdinati"n and

c"ntr"l "( multiple "pp"rtunities "r assets pursuing the same strategic

g"als and c"mpeting ("r the same res"urces, where+y management

pri"riti%ati"n ta3es place am"ng pr"2ects t" achieve strategic +enefts'

.C""per et al', /

A p"rt("li" is the strategy0+ased, pri"riti%ed set "( all assets, pr"2ects and

pr"grams in an "rgani%ati"n rec"nciled t" the res"urce availa+le t"

acc"mplish them'

The purp"se "( **M#

0 Execute strategy0 Maximi%e value ."rgani%ati"nal, +usiness/0 *r"viding +alance

y enhanced decisi"n ma3ing, there+y ena+ling Organi%ati"nal

Change and enhancing dynamic capa+ilities'

Example

Strategic Portfolio Management

a' Strategy Executi"n+' )es"urce Management

$e"iew opportunities

!t is decisi"n ("cused, ch""sing the right path# deciding where t" spend

Tactical opportunity management


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a' 1evel"pment stages "alue promise

)esults ("cused' )unning well "n the ch"sen path +y managing h"w y"u

spend it'

*"rt("li" Management Opp"rtunity Management0 All pr"2ect>assets0 !nvestment types0 Strategic alignment0 Selecting the right assets

1"ing the right things

ating pr"cess

0 Singular pr"2ect>assets0 ">D"" decisi"n0 Standards +ased

1"ing things right

!nitial 1ecisi"n "cus

o Asset critically# asset imp"rtance .e'g' increasing revenue, ris3 "(

(ailure, ris3 "( n"t d"ing it/o Portfolio magnitude# p"rt("li" +readth .e'g' +udget, t"tal human

res"urces, +readth "( asset>"rgani%ati"n>p"rt("li"/o Portfolio t to t!e strategy

1imensi"ns# Change "( Success and 4alue

5e defne value as the D*4 "( the *r"2ect Li(e Cycle Cash l"w "ptimi%ati"n acr"ss the li(e "( the asset .cumulative net cash


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Criteria ("r *"rt("li" Secti"n

0 D*4>C"mmercial value and investment re6uired0 Strategic "als .current +ase versus extending the +ase/

r"m +udget0+ased t" strategic +ased, +alancing with#

0 Asset types0 Sh"rt term – l"ng term

0 it in c"re +usiness0 Techn"l"gy (amiliarity0 e"graphical l"cati"n0 C"mpetiti"n

Analytical meth"ds .Chan, ::/#

0 inancial m"dels0 *r"+a+ilistic inancial m"dels0 Opti"n pricing

0 Sc"ring m"dels0 Analytical -ierarchy appr"ach0 u++le diagrams

5ell Management portfolio means#

0 -igher return "n pr"2ect investments0 L"wer "rgani%ati"nal ris3s0 reater c"nfdence in meeting cust"mer c"mmitment0 alanced pr"2ect p"rt("li" w"r3l"ad0 Sh"rter "pp"rtunity cycle times

0 !ncreased pr"2ect thr"ughput0 -igher pr"+a+ility "( achieving the +usiness strategy


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0 Sh"rt and l"ng term is included

Once a p"rt("li" is esta+lished# c"re 6uesti"ns in an asset management

(ramew"r3#

' 5hat is the current state "( the asset7 – c"nsistence "( > c"nditi"n >

value > use(ul li(e' 5hat is the re3uired sustained level of availability0== "( an

asset7 AssetHs per("rmance g"als > physical capa+ilities > actual

per("rmanceI' 5hich .parts "( the/ assets are critical to sustained

performance 7 – can (ail > d" (ail > li3elih""d F c"nse6uences > c"st

"( repair Z core 3uestionsG' 5hat are the assetHs +est $Minimum Li(e0Cycle C"st& capital

investment and "perati"n F maintenance strategy7 alternative

management strategies > m"st (easi+le strategy ("r my "rgani%ati"nK' Can "ur "rgani%ati"n sustain an optimal asset life cycle7 it in

"ur capa+ilities >

Asset Integrity

.lac3 "(/ safety and tec!nical integrity# it is the lin3ing t"gether and

2"ining "( all su+standard acts that causes the "perati"nal distur+ance and

n"t the individual acts themselves' There("re it sh"uld +e addressed "n

management system level'

=nderstanding asset ris3s predict when an asset will (ail .i'e' li3elih""d/

and (ully understand c"nse6uences "( (ailure .i'e' impact/

est practices#

0 L""3 at the asset invent"ry list assets +ased "n criticality0 "r the critical assets#

a' C"nduct a (ailure analysis t" determine their pr"+a+ility "( (ailure+' Analy%e (ailure ris3 and c"nse6uences

Trends in asset integrity#

0 !ndustrial pr"cesses are +ec"ming m"re and m"re c"mplex

0 Expanding need "( pr"ducti"n capacity and


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%his paper descri0es the PP' process and the acti"ities it consists of, from pro7ect proposal and pre-screening to portfolio ad7ustment, pro7ect de"elopment and successful completion.

This paper simplifes the pr"2ect p"rt("li" selecti"n pr"cess +y devel"ping

a (ramew"r3 which separates the w"r3 int" distinct stages' Each stageacc"mplishes a particular "+2ective and creates inputs t" the next stage'

*r"2ect p"rt("li" selecti"n and the ass"ciated activity "( managing selected

pr"2ects thr"ugh"ut their li(e cycles are imp"rtant activities in many

"rgani%ati"ns' There are usually m"re pr"2ects availa+le ("r selecti"n than

can +e underta3en' There are many divergent techni6ues that can +e used

t" estimate, evaluate and ch""se pr"2ect p"rt("li"s' O+2ective "( this

paper#

' Evaluate +rie


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Portfolio selection p!ase# *"rt("li" selecti"n inv"lves the simultane"us

c"mparis"n "( a num+er "( pr"2ects "n particular dimensi"ns in "rder t"

arrive at a desira+ility ran3ing "( the pr"2ects' Classes "( availa+le

selecti"n techni6ues include#

./ Ad h"c appr"aches such as .a/ pr"fles where limits are set and anypr"2ect that (eels t" meet the re6uirements and .+/ interactive selecti"n

where interacti"n exists +etween pr"2ect champi"ns and resp"nsi+le

decisi"n ma3ers until a c"nsensus is reached'

./ C"mparative appr"aches# pairwise c"mparis"n where weights are

given t" di?erent "+2ectives and then the pr"2ects are ran3ed' The decisi"n

ma3ers start at the t"p pr"2ect and w"r3 their way d"wn until the

res"urces are exhausted'

.I/ Sc"ring m"del

.G/ p"rt("li" matrices

.K/ "ptimi%ati"n m"dels'

Multiple and "(ten c"n


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p"rt("li" selecting pr"cess/ are als" sh"wn in the lightly "utlined +"xes ("r

c"mpleteness'

Portfolio adjustment# The end result is t" +e a p"rt("li" which meets the

"+2ectives "( the "rgani%ati"n "ptimally "r near0"ptimally' An imp"rtant

aspect is t" achieve s"me ("rm "( balance am"ng the pr"2ects selected'

0ptimal portfolio selection# !nteracti"ns am"ngst the vari"us pr"2ects

are c"nsidered' Tw" steps# ' )elative t"tal +eneft is determined ("r each

pr"2ect' ' All pr"2ect interacti"ns, res"urce limitati"ns and "ther

c"nstraints sh"uld +e included t" "ptimi%e the p"rt("li"'

'creening: The purp"se is t" eliminate n"n0starters and t" reduce the

num+er "( pr"2ects t" +e c"nsidered simultane"usly' Care sh"uld +e ta3en

t" av"id setting thresh"lds which are t"" ar+itrary'Individual project analysis# A c"mm"n set "( parameters re6uired ("r

the next stage is calculated separately ("r each pr"2ect'

Pre-screening# =ses manually applied guidelines devel"ped in the

strategy devel"pment stages and ensures that any pr"2ect +eing

c"nsidered ("r the p"rt("li" fts the strategic ("cus "( the p"rt("li"'

Process

stage

-election stage "ctivity Potential

methodologies

Pre.process -trategy* methodology

selection* development

of strategic focus* pre.

screening

-trategic mapping*

portfolio matrices* cluster

analysis

Portfolio

selection

process

Individual pro,ect

analysis

-creening

Portfolio selection

Portfolio ad,ustment

/e,ection of pro,ects

which do not meet

portfolio criteria

#alculation of common

parameters for each

pro,ect attributes* resource

constraints

0anually applied

criteria1 strategic

focus* champion*

feasibility study

available$

Decision trees*

uncertainty estim*

2P3* /OI* etc$

Post.

process

4inal portfolio Pro,ect development Pro,ect management

techniques* data

collection$

?ecision support system application# (r"m fgure , in all pr"cess

stages the decisi"n ma3ers w"uld interact with the system' *r"visi"n ("r

c"ntinu"us interacti"n is re6uired +ecause# .a/ it is extremely diJcult t"

("rmulate explicitly in advance all "( the pre(erences "( the decisi"n

ma3ers .+/ inv"lvement "( decisi"n ma3ers in the s"luti"n pr"cessindirectly m"tivates success(ul implementati"n "( the selected pr"2ects


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and .c/ interactive decisi"n ma3ing has +een accepted as the m"st

appr"priate way t" "+tain c"rrect pre(erences' !( this m"del is t" +e

supp"rted +y a c"mputer +ased system a m"dule is re6uired t" manage

the related techni6ues>m"dels t" supp"rt the data needs fgure '

The pr"p"sed (ramew"r3 .fgure / is +asically an attempt t" simpli(y and

"rgani%e the pr"2ect p"rt("li" selecti"n pr"cess' !t matches c"nsiderati"ns

which are imp"rtant t" decisi"n ma3ers wh" need t" ma3e p"rt("li" selecti"n

decisi"ns' Since decisi"n ma3ers sh"uld +e directly inv"lved with the selecti"n

pr"cess at each "( its stages, supp"rt t""ls .either manual "r c"mputer +ased/

will +e essential t" implement each techni6ue used, and the (ramew"r3

leaves the ch"ice "( specifed techni6ues up t" the decisi"n ma3ers' This

generic appr"ach als" all"ws each techni6ue ch"sen t" +e integrated int" a

decisi"n supp"rt system which pr"vides (ar +etter and m"re accepta+le

pr"2ect p"rt("li"s than th"se which can +e generated +y any single techni6ue

we have discussed'

2!andima Ratnayake * Markeset ,"6"/# Asset integrity managementfor sustainable industrial operations: measuring t!e performance#


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%his paper eplains the three aspects that need to 0e ta;en into considerationwhen managing asset integrity and how it connects with the acti"ities in theasset lifecycle. It consists of !esign Integrity @pro7ect phaseA, 5perationalIntegrity @operationsA and %echnical Integrity @maintenanceA.

1efniti"n .Asset

/# An asset is defned as any physical c"re, ac6uired.i'e' the "rgani%ati"n has either the p"ssessi"n "r the cust"dy "( the asset/

elements "( signifcant value t" the "rgani%ati"n, which pr"vides and

re6uests services ("r this "rgani%ati"nH'

!t is vital t" view physical assets in relati"n t" "ther categ"ries "( assets

such as fnancial, human, in("rmati"n and intangi+le assets' This re6uires

e?ective and eJcient "rgani%ati"n and management pr"cesses'

E?ective Asset Management is n"t "nly maintenance, capital investment,

li(e cycle c"st analysis "r ris3 +ut als" +alancing fnancial and n"n0fnancial

metrics'Asset Management is (acilitated +y !T s"(tware'

1efniti"n ,Asset Management/# The set "( disciplines, meth"ds,

pr"cedures and t""ls derived (r"m +usiness "+2ectives aimed at "ptimi%ing

the wh"le li(e +usiness impact "( c"sts, per("rmance and ris3 exp"sures

ass"ciated with the availa+ility, eJciency, 6uality, l"ngevity an

regulat"ry>sa(ety>envir"nmental c"mpliance "( an "rgani%ati"nHs assets'

Integrity is essential when an "rgani%ati"n is surr"unded +y c"n


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The su+0categ"ries "( "verall A! include#

0 1efniti"n K .?esign integrity/# Assurance that (acilities are designed

in acc"rdance with g"verning standards and meet specifed "perating

re6uirements'

0 1efniti"n .Tec!nical integrity/# Appr"priate w"r3 pr"cesses ("rinspecti"n and maintenance systems and data management t" 3eep

the "perati"ns availa+le'0 1efniti"n ,0perational integrity/# Appr"priate 3n"wledge,

experience, manning, c"mpetence and decisi"n0ma3ing data t" "perate

the plant as intended thr"ugh"ut its li(e cycle'

The management "( these three categ"ries "( A! sh"uld lead t" sa(e

pr"cesses and securing the "verall A! "( an asset0centric "rgani%ati"n'

Management "( A! is necessary thr"ugh"ut the li(e "( the asset'

The necessity "( Asset Integrity Management ,AIM/ arises when theinternal expectati"ns are n"t aligned with sta3eh"lder expectati"ns,

resulting in a harm(ul atm"sphere t" the c"mpany "r its "perati"nal

envir"nment leading t" +reaches "( integrity' ridging the gap +etween

+"th expectati"ns c"uld +e d"ne +y impr"ving three types "( relati"nships

(r"m the A! p"int "( view#

0 The relati"nship +etween the "rgani%ati"n and its sta3eh"lders .i'e'

when the interests and expectati"ns "( the sta3eh"lders .fnancial and

-SE/ are inc"mpati+le with the interests "( the c"mpany/ thr"ugh the

refnement "( plant strategies, p"licies etc' [Strategic>t"pmanagement\0 The relati"nship +etween the w"r3("rce and the "rgani%ati"n .i'e' when

there are c"n


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AIM sh"uld ("cus "n the creati"n "( c"nditi"ns within which an

"rgani%ati"n0wide c"nsci"usness0raising e?"rt and internal interacti"n can

ta3e place' This will reduce the varia+ility and c"nse6uently impr"ve the

assetsH per("rmance'

"I0 tries to improve the performance of P" through increasing the awareness of thewor!force to realize the legitimate fundamental expectations of sta!eholders$ 5owever* "I0

should also focus on the creation of conditions within which an organization.wide

consciousness.raising effort and internal interaction can ta!e place$

An approach and a framework for measuring AI performance

"I refers to the degree to which assets satisfy the legitimate expectations of the surrounding

world$

#hallenges in "I0 strategy execution Ensure that all the sub.goals and departmental

action plans are themselves aligned with the larger strategy

The Analytic ;ierarc!y Process appr"ach has the a+ility t" synthesi%e

data, experiences, insights and intuiti"ns in a l"gical and th"r"ugh way ("r

ma3ing the "ptimum decisi"n' This appr"ach is the (ramew"r3 ("r

measuring A! per("rmance' The s"le idea "( using A-*0hierarchical

structure is t" inc"rp"rate a +alanced set "( measures .e'g' fnancial,

health, sa(ety/ within the measurement scheme and t" inc"rp"rate

industrial data and experts experience, intuiti"ns and intenti"ns in a

l"gical an th"r"ugh way'


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"ur di?erent dilemmas ("r devel"ping the hierarchical structures ("r

critical investigati"n "( A! have +een identifed#

0 %ormal epectations# explicit tas3s, guidelines, rules'0 Informal epectations # actual n"rms and values, cust"ms and

practices0 'take!older epectations# existing, realised and unrealised

expectati"ns, such as the ("ll"wing up -SE regulati"ns, implementing

+est availa+le techn"l"gy t" reduce the +urden'- 2on9icting epectations: dilemmas caused +y the inc"mpati+le

expectati"ns such as increasing pr"ft margin minimising -SE +urden'

This article is +ased "n the ide"l"gy that human intelligence cann"t +e replaced+y s"phisticated techn"l"gy'

Lecture G Operati"ns F Maintenance

!n(" lectureOperati"ns# "perating the asset t" achieve its intended (uncti"ns

Maintenance, repair, "verhaul .M)O/# all acti"ns which have the "+2ective

"( retaining "r restoring an item in "r t" a state in which it can per("rm

its re6uired (uncti"ns' The acti"ns include c"m+inati"n "( all technical and

c"rresp"nding administrative, managerial, and supervisi"n acti"ns'

Acti"ns d" n"t always ma3e a c"mp"nent as g""d as new

Strategic aspects "( OFM#

0 Maintenance is strategically imp"rtant0 Maintenance strategy

a' C"herent, uni(ying and integrative pattern "( decisi"ns in di?erentmaintenance strategy elements


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+' !n c"ngruence with manu(acturing, c"rp"rate and +usiness level

strategiesc' 1etermines and reveals the "rgani%ati"nal purp"sed' 1efnes the nature "( ec"n"mic and n"n0ec"n"mic c"ntri+utes it

itends 8''

S G Evaluate maintenance strategies

*er("rmance measurement EYAM s N draw

OEE# rather imp"rtant, 8

Six +ig l"sses#

0 D"n w"r3ed .unplanned/0 Set0up F change "ver

!mp"rtance criticism "n OEE preventive maintenance is n"t included in

the calculati"n'

Xe"ng F *hilips di?erent is that als" "ther department use the

pr"ducti"n line, sh"uld +e inc"rp"rated ("r s"me c"mpanies'

Maintenance c"ncept# an in(rastructural decisi"n t" implement

maintenance c"ncepts

)elia+ility Centered Maintenance main criticism is rather c"mplicated

and c"stly and ("cus "n relia+ility where relia+ility is n"t the always

imp"rtant part ("r a c"mpany' Steps#

' Select e6uipment' 1etermine (uncti"nsI' 1escri+e (ailureG' 1escri+e (ailure m"desK' 1escri+e e?ects' =se )CM l"gic t" select appr"priate maintenance "r engineering

acti"ns8

1etective maintenance and c"nditi"n +ased maintenance are similar

acc"rding t" 4eldman

Examples "( criteria ("r p"licy selecti"n#

0 -SE5 ris3s .all/0 Service times .t""ls, spares, technicians/

Maintenance planning – the end0result "( this exercise is a large "verview

"( c"mp"nents and their p"licy .part "( M!Ss/' And n"w7 !n reality#

0 Shutd"wn planning – c"nduct *M, CM, p"stp"ned CM R 1evel"p

"pp"rtunistic p"licies t" identi(y the c"mplete set "( maintenance0 $)""m& ("r smaller st"ps "r maintenance days ."r tas3s d"ne +y the

"perat"r/0 Optimi%ati"n cycle starts#


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a' Optimi%e shutd"wn planning .e'g' durati"n, (re6uency, c"st/+' 8

)CM a t""l t" c"me up with the right maintenance p"licy

)CM – appr"ach t" fll the maintenance plan#

' uncti"nal dec"mp"siti"n' Critically analysis – identi(y d"minant (ailure m"de t" determine

pri"rities using ris3 pri"rity num+er li3elih""d "( "ccurrence Y

li3elih""d "( detecti"n Y 8I' 1eterminati"n "( "perati"n envir"nment''G' MEA – ailure M"de and E?ect AnalysisK'

Tsang ,""/# 'trategic dimensions of maintenance management#%his article pro"ides a 0road o"er"iew of maintenance management, includinghow the maintenance function could 0e managed.

&0stract – The c"ntemp"rary +usiness envir"nment has raised the strategicimp"rtance "( the maintenance (uncti"n in "rgani%ati"ns which have signifcantinvestment in physical assets' "ur strategic dimensi"ns "( maintenancemanagement are identifed, namely service0delivery "pti"ns, "rgani%ati"n andw"r3 structuring, maintenance meth"d"l"gy and supp"rt systems' The

alternatives availa+le are reviewed# the guidelines ("r selecti"n "( thesealternatives, the 3ey decisi"n areas in each "( the ("ur dimensi"ns, as well as thecritical success (act"rs ("r the trans("rmati"n pr"cess are discussed' The tw"(act"rs that permeate in these strategic dimensi"ns are human (act"rs andin("rmati"n


56/70

igure 1 Input-output model for enterprise system

'ervice-delivery options# maintenance activities ("r which the c"mpany

has neither a strategic need n"r a special capa+ility are prime candidates

t" +e "uts"urced' 5hen c"mpanies c"nsider "uts"urcing "( theirmaintenance activities as a strategic "pti"n, they need t" answer three

3ey 6uesti"ns#

' @!at s!ould not be outsourcedJ The 3ey strategic issues are#

the p"tential ("r achieving a sustaina+le c"mpetitive edge +y

per("rming the w"r3 internally and the degree "( strategic

vulnera+ility i( the w"r3 is "uts"urced'' 2!oosing t!e type of contractual relations!ip' The type "(

maintenance c"ntract can +e divided int" three type, namely#0 @ork-package contracts# m"st +asic ("rm' The client tells the

c"ntract"r when they needed t" d" what maintenance activities'0 Performance contracts# a c"mprehensive range "( maintenance

services are awarded t" a single c"ntract"r' The c"ntract stipulates the

desired per("rmance'- %acilitator contracts: als" 3n"wn as term0lease c"ntracts' The client

is "nly the user "( the physical assets "wned and maintained +y

c"ntract"rs' L"ng0term relati"nship is re6uired'I' Managing t!e risks of outsourcing' The ("ll"wing ris3s are

exp"ses when "uts"urcing#- oss of critical s;ills

0 oss of cross-functional communication – c"ntacts +etweenmaintenance and "ther (uncti"ns that interact with it tend t" reduce'

- oss of control o"er a supplier 0 )hifts in the 0alance of power during the contract period# c"mpanies

that have l"st their maintenance s3ills will +e at the mercy "( their

service suppliers when the c"ntractual relati"nships are adversarial'0 Employee morale – m"st empl"yees perceive "uts"urcing as a negative

devel"pment0 Didden costs – c"mpanies "(ten underestimate the set0up c"sts "(

"uts"urcing, including sta?0redepl"yment c"sts and l"nger0than0

expected hand0"? "r parallel running c"sts'


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0 &ccess to eternal talents – frst, the "uts"urced w"r3 is "(ten

supp"rted +y the c"mpanyHs previ"us technical sta?' Sec"nd,

c"ntract"rs "(ten siph"n talented empl"yees t" w"" "ther acc"unts'

T" av"id these ris3s, c"mpanies may ad"pt the measures listed +el"w#

0 Ta3e care "( the a?ected empl"yees0 Av"id "uts"urcing c"ntracts that are set in c"ncrete0 Split maintenance re6uirements +etween tw" "r m"re suppliers t"

esta+lish a threat "( c"mpetiti"n0 !nsist the supplier use a sta+le team ("r service delivery0 =se three specialist teams in c"ntracting pr"cess'

0rgani(ation and &ork structuring 8 in traditi"nal "rgani%ati"ns, the

structure is hierarchical and highly (uncti"nali%ed# engineering is

resp"nsi+le ("r the design and pr"curement "( new plant, pr"ducti"n is

resp"nsi+le ("r "perating the plant and maintaining it' This type "(

"rgani%ati"nal design can result in p""r "perati"nal eJciency'

Maintenance w"r3 can +e classifed +y its planning and scheduling

charactertics as ("ll"ws#

0 %irst-line &ork # per("rmed "n daily +asis' Mainly emergency

c"rrective w"r3' X"+s "ccur rand"mly'0 'econd-line &ork # c"nsists "( de(erred c"rrective w"r3 inv"lving 2"+s

that usually ta3e less than tw" days t" c"mplete and re6uire relatively

(ew tradesmen'0 T!ird-line &ork # ma2"r shutd"wn, plant "verhaul, capital pr"2ects and

m"difcati"ns'

Clamp ./ pr"p"se an alternative way t" categ"ri%e maintenance w"r3#

' e"el 1 maintenance is per("rmed t" 3eep the plant running' !t

c"vers activities such as min"r repairs, pr"cess testing, pr"ducti"n

scheduling and envir"nment c"ntr"l'' e"el 2 maintenance c"vers th"se activities that pr"duce signifcant

changes t" the c"nditi"n "( the plant'I' e"el maintenance re6uires very special s3ills and (acilities' !t

c"vers activities such as "verhauls, rec"nditi"ning and plant

m"difcati"ns'


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The pertinent "rgani%ati"nal design issues ("r maintenance are discussed

+el"w#

Plant speciali


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G' ?esign improvement# the design is m"difed t" achieve "n "r

m"re "( these "+2ectives# impr"ve relia+ility, enhance

maintaina+ility, etc'

Reliability-centered maintenance# the maintenance appr"ach +est

suited' !t pr"vides a structure ("r determining the maintenancere6uirement "( any physical asset in its "perating c"ntext, with the

primary "+2ective "( preserving system (uncti"n c"st e?ectively' !t is an

asset0centered meth"d"l"gy with a primary ("cus "n ma3ing decisi"ns "n

the type "( maintenance tas3s t" +e used'

T"tal pr"ductive maintenance .T*M/# it ("cuses "n pe"ple and it an integral

part "( t"tal 6uality management' T*M redefnes the "rgani%ati"n "(

maintenance w"r3 +y applying the ("ll"wing principles#

0 Cultivate a sense "( "wnership in the "perat"r +y intr"ducing

aut"n"m"us "perat"r maintenance – the "perat"r ta3es resp"nsi+ility("r the primary care "( this plant'

0 Optimi%e the "perat"rHs s3ills and 3n"wledge "( his plant t" maximi%e

"perating e?ectiveness0 =se cr"ss0(uncti"nal teams c"nsisting "( "perat"rs, maintainers,

engineers and manager t" impr"ve pe"ple and e6uipment

per("rmance'0 Esta+lish a schedule "( clean0up and preventive maintenance t" extend

the plantHs li(e span and maximi%e its uptime'

The main reas"n ("r (ailures "( the strategic initiatives is that values,management +ehavi"rs and supp"rt systems that align with these

initiatives are n"t in place when the change pr"grams were implemented'

'upport systems – supp"rt "( maintenance "perati"ns is a critical issue'

Participation and autonomy – empl"yee emp"werment is a c"re c"ncept

shared +y change pr"grams, with the expectati"n "( creating internal

c"mmitment in empl"yees' T" get internal c"mmitment, management

must inv"lve empl"yees' Only then can it +e success(ul'

Dierarchy and communication – pe"ple tend t" classi(y "thers int" in0

gr"ups and "ut0gr"ups' !t explains why s"me gr"ups, such as "perati"nsand maintenance, within "rgani%ati"ns are s" diJcult t" mix, an

impediment t" c"mmunicati"n and "rgani%ati"nal learning' !n a culture

that stresses participati"n and aut"n"my, the (uncti"n "( hierarchy is n"t

c"ntr"l +ut supp"rt'

Education and training – emp"werment will degenerate int" a+and"nment

i( empl"yees (ail t" get the right t""ls, training "n their use and supp"rt in

their implementati"n'

$eward and recognition – the desire t" "+tain status in "rgani%ati"nal

setting in human nature' Managers sh"uld w"r3 with the human instincts,


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managers are there("re advice t" rec"gni%e and reward empl"yees

thr"ugh status rec"gniti"n'

Performance measurement – the c"mm"nly used maintenance

per("rmance indicat"rs can +e classifed int" three categ"ries .Camp+ell,

K/#

0 Measurement "( e6uipment per("rmance, such as availa+ility, relia+ility

and "verall e6uipment e?ectiveness0 Measures "( c"st per("rmance, such as la+"r and material c"sts "(

maintenance0 Measure "( pr"cess per("rmance such as rati" "( planned and

unplanned w"r3, schedule c"mpliance'

Can use alance Sc"recard .SC/ that pr"vides a +alanced presentati"n "(

strategic per("rmance measures ar"und ("ur perspectives# fnancial,

cust"mer, internal pr"cesses and learning and gr"wth' .Paplan F D"rt"n,/' !t is a t""l that pr"vides a sharp ("cus "n (act"rs that are imp"rtant

t" maintenance in ma3ing c"ntri+uti"ns t" +usiness success "( the

c"mpany'

E-maintenance – a ma2"r aspect "( maintenance management is

"ptimi%ati"n "( inspecti"n, maintenance and replacement decisi"ns' The

a+ility depends "n the availa+ility "( g""d 6uality and timely data captured

+y the vari"us c"mputeri%ed systems in supplier, user and service0

pr"vider "rgani%ati"n' E0maintenance is an emerging c"ncept that expl"its

the p"tential "( digital techn"l"gies, "?ers new "pti"ns t" deal with thepr"+lem "( maintenance' Tw" "( the e0maintenance initiatives are#

0 e0CM# rem"te sensing devices are depl"yed t" m"nit"r the c"nditi"n

and per("rmance "( physical assets' The data are transmitted via the

5e+, eliminates the need ("r s"(tware administrati"n at rem"te sites'0 e0CMMS# we+ ena+lement "( c"mputeri%ed maintenance management

systems .CMMS/' The way "( ma3ing the entire applicati"n availa+le

"ver the 5e+ and the emergency "( the applicati"n service pr"vider

.AS*/' !t pr"vides a t"tal s"luti"n – hardware and s"(tware installati"n,

cust"mi%ati"n and m"nit"ring'

Conclusion

1imensi

"n

Service0delivery

"pti"ns

Organi%ati"n

and w"r3

structuring

Maintenance

meth"d"l"gy

Supp"rt systems

Strategic

"pti"ns

0 ("cus "n

maintenancea c"re

c"mpetency0 "uts"urce

maintenance

activitieswhich are n"t

0


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a part "( thec"mpanyHs

c"re

c"mpetencie

s

meth"d"l"gy T*M

Pey

decisi"ns

0 activities t"

+e 3ept in0h"use

0 relati"nship

with external

service

suppliers0 managing

the ris3 "(

"uts"urcing

0 plan

speciali%ati"n

0 w"r3("rce

all"cati"n0 w"r3("rce

speciali%ati

"n0 structuring

"(

maintenan

ce w"r30 inter(ace

with"perati"ns

)CM# assets t"

+e c"vered*articipants

inv"lved inanalysis and

design

Asset

maintenance

meth"ds – )T,

*M, CM, design

impr"vement

T*M#0 sc"pe "(

applicati"n0 redefning

the r"les "(

"perat"rs

and themaintainers

Align the ("ll"wing

practices andsupp"rt systems

with the changepr"grams#

0 participati"n

and aut"n"my0 hierarchy and

c"mmunicati"n0 educati"n and

training0 reward and

rec"gniti"n

0 per("rmancemeasurement

0 management

in("rmati"n

systems0 e0maintenance0 we+0services

architecture0 *alm c"mputing

and wireless

techn"l"gy0 Trust

management

Pey elements "( the change pr"cess#

0 c"mmunicate the need ("r change0 educate empl"yees0 allay anxiety "( empl"yees0 devel"p implementati"n plan0 review pr"gress and ta3e c"rrective acti"n

tw" (act"rs that permeate these dimensi"ns are#

0 human (act"rs0 in("rmati"n


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Muc!iri< Pintelon 7elders * Martin< ,"66/# ?evelopment of maintenance function performance measurement - frame&ork andindicators# G

%his article recogni


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The c"nceptual (ramew"r3 pr"p"sed identifes 3ey elements and

pr"cesses that drive the maintenance (uncti"n t"wards delivery "(

per("rmance demanded +y manu(acturing "+2ectives' !t has three main

secti"ns#

' Maintenance alignment with manu(acturing and c"rp"rate

strategy

' Maintenance eortprocess analysis 6$ Maintenance results performance analysis#

*er("rmance indicat"rs supp"rt the identifcati"n "( per("rmance gaps

+etween current and desired per("rmance and pr"vide indicati"n "(

pr"gress t"wards cl"sing the gaps' !tHs a lin3 +etween strategy and

management acti"n'

""d per("rmance indicat"rs sh"uld#

• Supp"rt m"nit"ring and c"ntr"l "( per("rmanceB

• -elp identifcati"n "( per("rmance gapsB• Supp"rt learning and c"ntinu"us impr"vementB

• Supp"rt maintenance acti"ns t"wards attainment "( "+2ectivesB and

• *r"vide ("cus "( maintenance res"urces t" areas that impact

manu(acturing per("rmance'

Appr"aches "( measuring maintenance per("rmance#

• System audit appr"ach is measuring the per("rmance "(

maintenance system c"ntri+uti"n t" "rgani%ati"nal success called

value0+ased per("rmance management'• alanced sc"recard

• 5e+er F Th"masH (ramew"r3 defnes the 3ey per("rmance indicat"rs

("r managing the maintenance (uncti"n +ased "n physical asset

management re6uirements and asset relia+ility pr"cess' The

(ramew"r3 c"nsists "( maintenance planning, pr"cess impr"vement,

and maintenance c"ntr"l'

1i?erent categ"ries "( maintenance measures#

• Strategic, tactical and "perati"nal

• Overall e6uipment e?ectiveness .OEE/, pr"ducti"n c"st andpr"ducti"n 6uality


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• Ec"n"mic indicat"rs, technical indicat"rs, "rgani%ati"nal indicat"rs

Literature pr"p"ses lists "( P*!Hs +ut lac3s a meth"d"l"gical appr"ach "(

selecting "r deriving them'

?eveloping a basis of maintenance performance measurement

Maintenance per("rmance c"nceptual (ramew"r3 pr"p"sed in the paper is

given in fgure ' Maintenance per("rmance c"nceptual (ramew"r3

identifes 3ey elements and pr"cesses that drive the maintenance (uncti"n

t"wards delivery "( per("rmance demanded +y manu(acturing "+2ectives'

The c"nceptual (ramew"r3 adv"cates alignment "( maintenance "+2ectives

with the manu(acturing and c"rp"rate "+2ectives .secti"n maintenance

strategy ("rmulati"n/ and thus directs the maintenance e?"rts t"wards

attaining the re6uired per("rmance and c"ntinu"us impr"vement "( the

pr"ducti"n e6uipment per("rmance'

T!e maintenance performance indicators:

&$ Leading indicat"rs are the indicat"rs related with the maintenance

pr"cess, where maintenance pr"cesses are the determinant "( the

maintenance "utc"mes and results, see fgure I'

*art "( the leading indicat"rs secti"n is#

• 5"r3 identifcati"n deals with identi(ying the right w"r3 t" +eper("rmed at the right time +y the maintenance sta? +ased "n

maintenance "+2ectives

• 5"r3 planning devel"ps pr"cedures and w"r3 "rders ("r the

maintenance activities identifed'

• 5"r3 scheduling evaluates the availa+ility "( all res"urces re6uired

("r the w"r3 and the time (rame ("r executing it'

• 5"r3 executi"n ensures the scheduled activities are carried "ut

within the all"cated time and thr"ugh e?ective use "( res"urces'

Lagging indicat"rs are indicat"rs that are "nly 3n"w when a certain peri"d

"( time has passed "r a certain event happened, see fgure G'


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Maintenance results identi(y the per("rmance gaps and supp"rt c"ntinu"us

impr"vement "( e6uipmentHs per("rmance' The results "( the maintenance

pr"cess can +e summari%ed as relia+ility, availa+ility, and "pera+ility "(

the technical systems'

E6uipment per("rmance indicat"rs# can +e explained +y "verall e6uipment

e?ectiveness indicat"r .OEE/ and s"me variant "( OEE li3e the "verall

pr"ducti"n e?ectiveness .O*E/'

OEE# the measurement "( e6uipment availa+ility and planning rate The maintenance planning rate is determined +y the num+er "( planned

maintenance activities and the *M time' The measurement "( these

per("rmance elements in the OEE (ramew"r3 supp"rt maintenance

management t" d" r""t cause analysis ("r e6uipment availa+ility and

relia+ility impr"vement'

Maintenance c"sts# mainly instances in


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eliminates chances "( sec"ndary damage and thus minimi%e the

maintenance c"sts'

Conclusions

The c"nceptual (ramew"r3 pr"vides a generic appr"ach "( devel"ping

maintenance per("rmance measures with r""m ("r cust"mi%ati"n with

respect t" individual c"mpany needs' The aim is t" ensure that the 3ey

maintenance pr"cesses that lead t" desired results have +een carried "ut

and evaluated'

@aeyenberg!< * Pintelon ,""/# A frame&ork for maintenance conceptdevelopment#

& particularly important 0ut comple issue is how *rms determine

appropriate maintenance concepts @including policiesA for their assets.

Asset Management Summary

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