The Benefits of Advanced Asset Management

This Asset Management Program Learning Environment (AMPLE) can be used to drive the potential benefits from Advanced Asset Management (AAM) practices.

The term "benefits" of advanced asset management is preferred to "savings" through asset management, as it embodies the philosophical shift towards a service delivery approach. Some of the factors of this approach are:

  • Understanding the full economic cost of service delivery especially:
    • The real depreciation or consumption of assets based on the cost of their life extension or renewal
    • The whole of life cycle costs including allowances for environmental and social impacts.
  • The issue of intergenerational equity, to make sure that each generation meets their real share of service provision
  • The recognition of future renewal liabilities and operational issues (the law of diminishing returns)
  • The realization that these services are unlikely to attract state or federal assistance and must be operated on a commercial business basis with a 'user pays' funding framework. Although there may be some form of government assistance, it is highly unlikely to meet the levels of the past. Large agencies will be expected to operate as the large business and the self-funding capability they represent.

These changes will result in substantial increases in costs. Therefore it is best to think in terms of what can be saved in future life cycle costs, rather than finding any immediate 'savings'.

It does not mean that there are no identifiable savings. However, there may not be significant initial savings.

From the experience of other jurisdictions that have moved down this path, the benefits of advanced asset management really come from three main areas.

Benefit No. 1

The ability to:

  • Better focus AM budgets on the activities that are critical to the business
  • Select the lowest life cycle cost options.

These benefits come from improving processes and practices and improving the use of existing data.

Benefit No. 2

The ability to reduce life cycle costs by:

  • Extending the life and improving the reliable performance of existing assets through optimal maintenance practices, thereby deferring major capital expenditure
  • Identifying assets for early intervention by rehabilitating or renewing them at a lower life cycle cost, before they need total replacement
  • Using optimal maintenance, repair, rehabilitation and replacement decision-making.

This will ensure that the resulting capital improvement program has an appropriate balance of timing, sizing and reasoning.

Benefit No. 3

The ability to improve the asset system performance and the levels of service delivered to customers and broader community.

AMPLE will help organizations gain productivity and managerial effectiveness through:

  • Using sophisticated computerized maintenance management systems and life cycle AM systems
  • Optimizing the collection of backlog data and setting in place appropriate data collection standards
  • Developing long-term strategy plans for asset replacement or rehabilitation and, through this planning, to develop the necessary income for revenue or capital funded programs
  • Correcting any financial imbalances that may arise in the costing structure by determining true maintenance and real renewal depreciation rates
  • Allowing computer modeling of the various asset systems by down loading asset data
  • Improving the ability to manage the operations and maintenance activities through optimizing processes such as reliability centered maintenance, resource management for labor, plant and materials, and by reducing downtime and travel time
  • Improving the ability to forecast workloads and allocate resources effectively.

The greatest impact is to be gained through Benefits 1 and 2, but these are long-term benefits and constitute sustainable asset management for present and future generations.

If the organization operates mostly aged systems, then Benefit 2 can have an immediate impact because the intervention before asset failure reduces the agency's risk profile.

The benefits of productivity and effectiveness improvements can be realized immediately. These benefits can be highly significant as they allow greater value to be obtained from existing budgets. They can represent efficiency / productivity gains of up to 20% on the existing operating and maintenance budgets, and can be realized within the first few months of implementing a new asset management program (as shown by studies carried out in Australia and New Zealand).

Overall the benefits of advanced asset management fall into two major areas:

  • Better focusing of existing budgets and long-term cost reduction opportunities (around 80%)
  • Improved system and organizational performance that deliver improved service delivery for equivalent expenditures (around 20%).

Other lesser benefits come from operating an advanced asset management system. They are:

  • Capacity and reliability modelling or computerized network analysis for facilities
  • Insurance premium reductions through greater confidence in the organization's risk exposure.

The benefits identified in this section are those generally realized by organizations in Australia and New Zealand. The following two diagrams provide a breakdown of these estimated benefits:

Source: GHD Australia and New Zealand benchmarking studies

Internal benefits for agency:

External benefits for agency:

Benefits for Industry

An advanced asset management system that is fully implemented offers the following benefits:

Extending the life of existing assets cost effectively

  • Optimal maintenance & operational practices
  • Mitigation of any causes of unwarranted decay (failure)
  • Intervene with cost effective rehabilitation strategies.

Identifying and understanding the whole business risk exposure

  • Reducing business risk exposure e.g. operational risks, unexpected asset failures, and associated emergency response plans. This can involve operational and long-term strategic planning risks.
  • Life cycle investment risks e.g. rehabilitating or refurbishing assets, thereby extending life at a lower cost before they need total replacement.
  • Natural events such as earthquakes, cyclones, floods and associated emergency response plans.
  • Vandalism or terrorism risks.

Optimizing maintenance planning and practices

  • Using Reliability Centered Maintenance (RCM) or Failure Modes Events Criticality Analysis (FMECA) techniques to develop logical and justified maintenance plans, which will:
    • Improve system reliability, Mean Time Between Failure (MTBF)
    • Reduce the Mean Time to Repair (MTTR) or failure response times.
  • Assessing and optimizing back up or redundancy assets to economically justifiable levels.
  • Balancing capital and maintenance by making due allowances for the opportunity costs of capital and recognizing the spent costs (WDRV) of the existing assets.

Improving the analysis on asset investments (Capital Investment Validation techniques)

  • Constructing or rehabilitating assets at the right time
  • Completing the most appropriate option or solution by:
    • Not overbuilding or gold plating
    • Only including warranted or economically justified 'redundancy or back up'
    • Considering non-asset solutions
    • Choosing what is to be done today with confidence that it will meet the future strategic needs or strategies for the parent and grandparent assets.
  • Understanding the full life cycle costs and not just considering capital, then choosing the most appropriate combination to suit the organization
  • Taking into account likely or possible changes in new technology and their associated benefits, e.g. predictive maintenance tools etc.

Improving Operational Efficiency

  • Improving inefficient work practices to reduce the cost of individual activities, and/or exposing the non-core activities to competition. Benchmarking the activities and driving efficiencies where warranted.
  • Improving system automation to a level where savings continue to provide adequate returns on costs:
    • SCADA, remote monitoring and control systems allowing integrated system operation
    • More targeted maintenance because of more data in accessible archives (data warehouses)
    • Trending to help operators and system planners operate systems better and more efficiently.

Management Effectiveness / Efficiency

  • Using sophisticated asset management information systems (AMIS) including mobile / wireless computing for field staff and contractors.
  • Better understanding growth through computer modeling of capacity and failures of the various asset systems, by downloading data from the AMIS and real time SCADA. The right time for intervention.
  • Improving the ability to manage the operations and maintenance activities through:
    • Resource management for labor (staff, workload forecasts), plant and materials
    • Reducing downtime, travel time, non-productive time
    • Allowing causal and activity based cost analysis to be completed. This also has a significant impact on the capital investment cycle, as organizations often justify capital and inefficient or excessive maintenance costs.

Changing the thinking about asset management

Changing the way the staff think about and go about managing assets can make a significant difference to the investment technique in operations, maintenance and use of capital.

By providing staff with best appropriate practice tools, significant benefits can be derived in the way the organizations operate and more importantly in the way staff work together.

Difficulties with capturing real costs

To understand these future benefits (or savings), it is important to understand the real current asset costs.

Understanding the full economic cost of service delivery, including the level of service and residual business risk exposure, involves considerable effort.

However until the current cost is understood, asset management plans need to be based on current knowledge. As the true condition and performance of the systems are learnt and the prediction of future real costs and performance can be made with high confidence levels, it may be found that the future costs are far higher than was first thought.

The difference between these cost models is the future benefits or savings that can be achieved, which is shown in the following image. This may be the case, but by then it can be proven that this predicted cost is the lowest sustainable life cycle cost that can be achieved. This is a vital piece of information for any business.

Tying benefits to the improvements

An asset management improvement program is a step-by-step work plan to improve asset performance and to sustain that performance over a long period of time. To make the "business case" for investment in an asset management improvement program, it is vital to link current asset performance to the benefits that can be achieved by each of the improvement tasks identified, as these tasks lead to improved performance or sustained performance at lower cost.

It is important to remember that the greatest benefits or savings realized by organisations in Australia, New Zealand, Great Britain, and other pioneers in asset management, were achieved by those organizations that were the worst performers when they commenced this improvement process. Depending on your current asset management practices and the performance of your asset portfolio, your benefits will, of course, vary.

Organizations with relatively young systems now have a "window of opportunity" to establish these improved practices and begin the necessary AAM programs, data collection and other TEAMQF improvements before their systems age and become due for major capital investments.

For organizations with aging assets, the application of these benefits will represent the best way to meet renewal problems, reduce or manage risks, and meet operating licenses, while eventually moving to a fully funded, sustainable asset business.

However, whatever the final cost/benefit, the key thing to realize is that advanced asset management needs to be practiced on all assets, no matter what size or current portfolio condition.

We, as managers and policy makers of this vital community resource, owe it to our customers and stakeholders to spend their dollars most effectively.

We can get there by following the risk-based, "best appropriate practice" model presented here in AMPLE.

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