AAM Implementation Phase

This topic has a brief overview and covers:

When an organization considers the need for a lifecycle based asset management programs, it must consider how to manage the program in a structured and logical way.

Organizations may begin an asset management program because they need to:

  • Change to accrual or renewal accounting
  • Fully understand the true costs of operating passive assets
  • Identify the true liabilities associated with the organization’s assets
  • Optimize operations and maintenance or asset utilization.

Even if the organization only implements one aspect of total asset management, it is very important this work contributes to the outputs required for all of the other aspects of total life cycle asset management.

Thus, it is very important to adequately manage the program especially in the planning stages.

The following graph highlights the need for accuracy in a project’s early stages, as it has a tremendous impact on the project's:

  • Overall capital cost
  • Ultimate effectiveness and ongoing annual cost.

The organization must provide a management decision-making structure that takes into account its responsibility and accountability throughout the program.

The processes involved are complex and include:

  • Understanding the ramifications of life cycle asset management
  • Understanding the benefits derived and the needs of the systems
  • Implementing the program (s).

Providing the decision-making structure can be costly. The resources needed include software, hardware, data collection, and system operation. This could mean considerable work for staff and contractors, so it is best to have a project management team to oversee the process.

Changes in The Corporate Environment

As organizations change, they risk losing information about assets that is currently held in the memories of dedicated staff. It is vital to put this information into systems so that it continues to be available to staff who manage the assets.

Many people have worked for only one organization for over 25 years, and have often been responsible for only one or two facilities.

However, in most public sector authorities and in many private sector industries this practice is disappearing because of:

  • Restructuring and downsizing
  • Death and sickness of an aging workforce
  • Workforce mobility
  • Changing work practices
  • Aging assets.

An organization can reduce the effects of these changes by setting up and maintaining information systems.

Organizational Restructuring

Throughout the world, major service authorities and other organizations are restructuring staff and services to more clearly reflect business objectives.

In the past, people who managed assets stored most of the information about the assets in their memories. Our experience shows that staff easily recall information on the assets’ physical attributes, such as location, approximate condition, access to the asset, and asset function.

Many service authorities have reduced staff to less than half over the last decade. Voluntary retirement packages have been used as an incentive and can be most attractive to longserving people. Restructuring can also mean that experienced staff are reshuffled or transferred to new and better positions.

In many instances, considerable expertise and information about physical infrastructure assets have been lost.

It may be possible to bring back retired staff on contract to recover data for computerized maintenance management systems, asset registers, and fault histories and operations manuals. However, if the restructuring or change process is not handled effectively, the people who remain may become despondent and apathetic and refuse to co-operate in the new management structure, and they may withhold information.

Death and Sickness

If a key staff member falls ill or dies, organizations may have substantial problems in managing their assets.

As information is transferred from human memories to computer information systems, this problem may be reduced.

Workforce Mobility

People at all levels are now more willing to change jobs and location. To take advantage of this, all movements into, within, and out of the organization, including the training of staff, should be handled as cost-effectively as possible.

Information systems can provide all the information about assets that staff need, including objectives, policies and procedures for managing and operating the assets.

Changing Work Practices

With the demand for improved efficiency in service delivery, operations and maintenance crews, particularly emergency call-out crews, are being used more flexibly. It may even be cost effective to have a completely flexible workforce.

It is now unlikely that the same crew will respond to identical call-outs, so it is essential that information on all procedures is available to all crews.

Ageing Assets

In the past, asset managers may have not felt the need to gather information on assets that have operated effectively and delivered an adequate level of service with little attention. This is particularly true for passive assets. For dynamic assets, it is more likely that there would have been corrective and preventive maintenance programs operating for some time.

As assets age, failures become more frequent, and then staff need information to make appropriate operations, maintenance and renewal decisions.

The Responsibility for Managing Assets

In the private sector, the Companies Code clearly defines asset management as a custodial duty of Directors. By law, Directors must maintain or allow for the loss in value of their current asset stocks and are held responsible through their annual reporting and financial costing systems.

For many public sector companies and service authorities, the direct responsibility for maintaining the value of the organization’s assets is often not clearly defined. In some cases, the job specifications of senior executives do specify direct responsibility for assets. However, it is not always clear how their performance as asset managers will be measured.

The essence of responsible management is to:

  • Know the assets that are owned
  • Be aware of their condition and performance
  • Adequately cost their operations and depreciation
  • Assess the future cash flows required for replacement and rehabilitation of these assets, so they maintain an acceptable level of service or production
  • Provide renewal and maintenance programs that will give the lowest life cycle cost for the assets.

It is difficult and complex to evaluate the performance of asset management. No simple equation such as rate of return on assets or written value can tell the entire picture. In most cases, these indicators do not show the relationship between the asset and the customers, or the service that the asset must deliver.

Contemporary financial and technical training in asset management are usually carried out in isolation and they do not always look at the entire picture of advanced asset management. Life cycle asset management is a new area that integrates the financial and technical functions but also involves risk and uncertainty.

Tertiary institutions are beginning to emphasize the importance of asset management but very often they do not include topics such as:

  • Maintenance management
  • Optimized renewal decision
  • Infrastructure economics
  • Risk management.

Staff urgently need to learn how to manage assets effectively. The only way to achieve this in the short term is to:

  • Review the asset management activities undertaken by the organization
  • Judge the organization’s current performance against average benchmarks or world’s best practice, wherever appropriate.

Strategic Planning for Asset Management

Many organizations have commenced or completed strategic plans for their asset management activities.

It is relatively easy to identify the link between advanced asset management and effective performance in organizations such as service authorities and production-related organizations. However, it is difficult to transfer these strategic outlines into completed systems.

The process to achieving this include:

  • Identify the mission or strategic objectives of the organization
  • Complete an analysis of the business relationship to assets
  • Determine the key principles and concepts required to support this business area
  • Determine the activities required to achieve these outputs and determine their relative benefit cost to the organization
  • Determine an implementation program that delivers achievable benefits from the available resources
  • Monitor and review the program to ensure that it stays on track and achieves its aims.

In large organizations, this process can be fraught with difficulties, as advanced life cycle asset management requires the participation of diverse groups with vested interests such as:

  • Customer services
  • Finance
  • Economics
  • Technical services
  • Strategic planning
  • Maintenance management
  • Operations
  • Human resources
  • Materials management
  • Construction groups
  • Information systems.

Parochial attitudes in any of these divisions can extend the approvals and decision-making processes enormously and compromise the final product.

This is why executive management needs to drive these programs. It is also why an independent consultant can provide a valued and effective role in advising the executive and providing information to shorten the decision-making processes.

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Overview   Towards AAM