Inputs to Demand Analysis (Element Break-up)
The analysis must consider all factors that could possibly affect current and future demand. Some of the inputs to be analyzed are:
Environmental conditions Eg weather patterns, flora, fauna, salinity, erosion etc | The hotter summers with less rain have caused a significant increase in domestic water usage. Long range forecasts and historical demand are being used to predict future demand |
Key customer groups Eg actual users of the primary service, secondary users, bi-product users | Environmental awareness has created a new customer group that is prepared to pay a premium for 'green services'. |
Stakeholders Eg government, shareholders, community | Shareholders have voted to be paid dividends rather than investing in infrastructure development for the short term. Alternative sources of supply will be sought to meet demand. |
Demographics Eg age, geographic dispersal, affluence etc | A particular area has experienced economic downturn meaning essential service infrastructure is under-utilized. Re-routing of the service |
Geographic considerations Eg distance losses, transport costs | Satellite communities are located away from established infrastructure and additional costs are incurred to deliver the service to these areas. |
Development Eg industrial, residential | The demand created by new residential developments is outstripping forecast demand |
Government legislation Eg restrictions on supply, minimum requirements | Government has legislated the pricing regime for domestic users with an agreed level of service |
Economic constraints Eg cost of raw materials, currency fluctuations | The cost of the raw materials is making the service uneconomic to provide. Reductions in service levels are being implemented to minimize financial losses. |
Technology Eg control systems | A new control system is able to monitor the concentration of waste products and alter the treatment regime. It replaces a system that relied on reduced output to control waste. |
Alternative sources of supply Eg availability, cost, competition | Private service providers are able to supply the service at a cost less than that required investing in additional infrastructure to meet forecast demand. |
Asset Location and Customer Location
It is just as important to assess where the need will be, as what level of service is required.
Asset managers must compare the following options to achieve the projected level of service required:
- What is the penalty to be paid for providing the service a greater distance from the source, eg increased transport costs, greater transmission or head losses etc?
- What is the cost of relocating infrastructure to minimize distance costs?
- What is the cost of providing new infrastructure in this area to meet demand?
- What are the alternate sources of supply available, and the cost associated with it?
A cost benefitanalysis is the most useful tool in determining the best option.
Changing demographics may indicate relocation of assets. Where these are fixed and/or where relocation proves to be too expensive, some compensatory service should be considered.
These may provide a cost-effective way of meeting service delivery requirements without the need to relocate or expand expensive infrastructure.
For example:
- It may be more cost effective to extend school bus services than to relocate schools closer to new housing estates
- Some health services in rural areas (eg, child inoculations) could be provided by mobile clinics to minimize the impacts on the community of long travel distances to the regional hospital.
Economic or other constraints can mean that it is not always possible to satisfy the asset location requirements by relocation or by compensatory service measures. This is a valid outcome, providing the appropriate assessment has been undertaken.
However, the situation should be reviewed periodically for new opportunities that may arise.
The impact of asset location depends on the type of services provided. Those that involve personal contact or emergency response are obviously more sensitive than administration or information services. Advances in information technology can potentially reduce sensitivity to location by allowing more service interface at remote locations.
Alternative Sources of Supply
For alternative sources of supply the following inputs should be assessed:
- Total economic advantages
- Demand for other resources
- The need for inter-company agreements
- The impacts on service delivery
- The impact on customers.