Simplify Asset Management for Better Results

Asset management has become a complex, cottage industry filled with academics and consultants. Simplifying the approach provides value to facility and infrastructure owners.

Are you drowning in the many activities related to what to do in your asset management program? Are you spending valuable resources and little very few short-term results? Are you tired of paying large sums of money to consultants and software vendors? If so, simply with the Seven Questions of Asset Management to get better results.

The Evolution of Asset Management

The practice of asset management has grown in sophistication over the past 40 years. In some ways, it has become a cottage industry for consultants and academics. It has also become a niche professional career track in organizations that embrace it. Complexity has replaced straightforwardness.

The Seven Questions Provide An Effective Approach

The Seven Questions of Asset Management were developed in the late 1990s. They remain just as applicable now as they were then. More importantly, they provide a level of simplicity that is necessary for understanding by executives, senior managers, and beginner/intermediate practitioners. The seven questions are:

1. What do we have? (and where is it?)

2. What is it worth?

3. What condition is it in?

4. Do we need to renew or replace it?

5. When do we renew or replace it?

6. How much will it cost?

7. How will we finance it?

Questions 1, 2, and 3 are closely related to collecting data and developing a foundation for the current state. Asset management has its root in accounting and accountability. On one hand, the first three questions of asset management are essential to what asset management is. Unfortunately, many asset management programs are driven sequentially from this perspective. Too many resources are expended on documentation and accountability, leading to a failure to provide meaningful short-term value to their organizations. Many asset management programs collapse under their own weight.

Questions 4, 5, 6, and 7 address the ‘so what?’. These questions really dive into more advanced concepts related to system diagnostics and prognostics. This is the fertile ground for financial experts, reliability engineers, and maintenance engineers. These latter 4 questions provide the primary value related to asset management for most organizations.

Different guidance documents provide similar but slightly different overarching fundamentals of asset management. ISO 55000 has four fundamentals overlain onto seven components of an asset management system. The Institute of Asset Management (IAM) uses a taxonomy with six groups of 39 total asset management activities. Whether it is four fundamentals matrixed with seven components or 39 activities, it is easy for any organization to be overwhelmed by the “what” to do when it comes to implementing an asset management program.

Three Practical Solutions

There are three practical solutions for getting better results from your asset management program. First, use the seven questions of asset management as your guiding beacon. Second, achieve value by partially addressing the first three questions and then creating value by addressing the next four questions – the process should be iterative, not sequential. Third, incorporate some uncertainty analysis into the process to determine what provides the best bang for the buck for future activities.

Get better results from your asset management program. Replace complexity with straightforwardness. Simplify by using the Seven Questions of Asset Management.

---

JD Solomon Inc provides services related to facilities, infrastructure, and the natural environment. Contact us for more information on project development, asset management, and facilitation.

Yes! Send Me a Monthly Update from JD Solomon Inc!

Possibilities and Probabilities: Forecasting Your Future Financial Needs

What does it cost to operate and maintain an industrial facility over its lifetime? If you guessed 6 to 10 times what you paid for it, you would be correct. If you are surprised, you are typical of most business owners and management teams. The next question that most decision makers ask is related to the magnitude and timing of the expenditures.

The best forecasting approach in situations such as the post-COVID19 recession is to use spreadsheet models with Monte Carlo simulations. According to the international risk standard, ISO-31000, an approach using Monte Carlo simulations is the one of the most strongly applicable approaches for quantitatively accounting for uncertainty and risk. A prediction on the back of a napkin or a forecast using a spreadsheet with best-guess point estimates will not get the job done – at least in situations with complexity (multiple parts) and high amounts of future uncertainty.

What is this Monte Carlo stuff?

This is a common question that is asked by a wide range of business managers and with wide ranges of educational backgrounds. First, it originated in the 1940s by a nuclear physicist working on the atomic bombs that ending World War II. That makes it old. And probably smart (technical) too.

Second, it has nothing to do with gaming and a lot to do with statistics. The name comes from one of the creators and named for the habit of gambling through the ages at Monte Carlo. In essence, if we play enough hands, shoot enough dice, and spin the roulette wheel many times, then our results (possibilities) can be associated with frequencies (probabilities) that are driven by statistics and physics.

Third, it is not that hard to do. There are a number of affordable spreadsheet add-ins or simulations can be organically developed in Excel. The computer has taken the manual simulation aspects out of it. Monte Carlo methodologies went “quite” until computing became cheap in the latter 1990s.

What is wrong with traditional point estimates?

The short answer is nothing when situations are simple and there is limited uncertainty. This is not the case with most industrial facilities where there are thousands of parts and equipment and where products, operating environments, and maintenance practices are regularly changing.

The long answer to what is wrong with traditional point estimates is multi-fold and has several important ramifications. First, it is left up to the forecaster to select the value of each input variable. Most technical professionals tend to be conservative in order to avoid shortfalls or simply being wrong. This conservatism in the input parameters leads to overstated financial needs and/or early spending needs.

Second, the need to have really good estimates of input parameters leads to collecting vast amounts of data. Collecting data takes time and money – usually lots of both. It can be assumed that developing probability distributions takes time and money too; however, the difference is that existing history can be used or approximated so that a ‘spin of the wheel’ can be generated. Decision makers, not analysts, can then decide on the importance if, and what types, of data is needed to improve the decision.

Third, forecasts based on point estimate inputs generate a single output. The result is a ‘beat the budget’ which is the product of the analyst rather than the probabilities and probabilities. With a Monte Carlo approach, we understand the full range of probabilities and, more importantly, inform us of the chance of success if we only have a fixed amount of money for our facility.

Summing It Up

The best forecasting approach in situations such as the post-COVID19 recession is to use spreadsheet models with Monte Carlo simulations. No one can predict when a piece of equipment will exactly fail, the degree to which operating conditions will change based on market conditions, or the amount of organizational capacity that will be available to maintain our systems. The possibilities and probabilities are marked with high degrees of complexity and uncertainty. Our methods for forecasting our financial needs must be aligned to meet the challenge.

Integrate Maintenance and Operations for Asset Management Results

This document provides guidance for good practice asset management. It is part of a suite of Subject Specific Guidance documents that explains the 39 subject areas identified in “Asset Management – an Anatomy”, also published by the Institute of Asset Management. These subject areas are also acknowledged by the Global Forum for Maintenance and Asset Management as the “Asset Management Landscape”.

I was pleased to have served as the project manager for this effort. Our international team of more than a dozen subject matter experts worked diligently for more than a year. All of our team members made meaningful contributions. In particular, Georgia Smart, Adam Lea-Bischinger, Mick Saltzer, and Harry Sellers were extremely committed to the work from cradle to grave.

A very mature organization may choose a simple solution whereas a developing organization may think that a complex solution will solve all its problems. In truth, there is no universal best practice in Asset Management – only good practice that is appropriate for the operating context of any particular organization. What is good practice for one organization may not be good practice for another.

One of the most interesting aspects of this guidance document is that in blends Maintenance and Operations into an integrated approach. For those of us who work in both areas, we well understand that integrated Maintenance and Operations is a form of nirvana – much talked about but only seen in practice for a fleeting period, if at all. Yet intuitively we all know it is essential for organizations to realize full asset value and achieve full reliability of their facilities and infrastructure.

As the SSG explains, the delivery of effective maintenance is a key element in ensuring the reliability of an asset through its Life Cycle with optimal use of resources. The amount and type of maintenance and maintenance support depend on the asset's needs, the nature of the maintainable item, its condition, its required availability, and a range of other factors. As these components change over time, the level and type of maintenance support must be adjusted.

Asset operations are defined as the day-to-day activities to ensure value is delivered from your asset(s). These activities will focus on the varying demands placed on the assets and will vary based on industry and organization context. For a manufacturing plant, operations are focused on ensuring assets produce the required product at the desired volume and quality. For a hospital or school, operations are focused on ensuring the asset condition and environment are at the optimum level for the users. Historically asset operations were focused on the delivery of the end product and/or service, with minimal consideration to the interrelationship between maintenance, skills and competency, business longer-term objectives and process optimization.

The integration of maintenance and operations into an integrated guidance document is a crowning achievement that almost did not happen. The original team was chartered to develop the Maintenance Delivery SSG. About 6 months into the process, the fledging collection of experts that were to deliver the Asset Operations SSGs needed a leader. IAM noted that I, as project manager, had both the maintenance and operations background to pull off an integrated guideline. I agreed to give it a shot and more importantly the two teams agreed to give it a shot, albeit with some reservations. Like many aspects of asset management, achieving lofty goals is a function of context, creativity, expertise… and necessity. Timing is everything.

There are many useable observations and recommendations that make the SSG worth the read. The limitation, as this and all the SSGs state, is that this is a bridge document between the higher-level ISO 55000 international standard and the many detailed books, articles, and research. The Maintenance Delivery and Asset Operations Subject Specific Guideline is indeed a guideline. Practitioners will find its many ‘gold nuggets’ helpful in the asset management journey.

---

JD Solomon Inc provides program development, asset management, and facilitation at the nexus of facilities, infrastructure, and the environment.

Sign-up for Monthly Updates from JD Solomon Inc