ARC's Asset Lifecycle Management Concept offers a new, richer vision for asset lifecycle management that clarifies its role in organization and identifies the key processes and stakeholders.
Asset lifecycle management is high on the agenda of executives in manufacturing, energy. infrastructure, and every other enterprise where success depends upon complex equipment. They want top performance from all of their facilities across a wide range of KPIs including revenue, safety, compliance, quality, energy, and operating costs. They also expect new facilities and major upgrades to be consistently delivered on budget and on schedule so that market opportunities can be exploited. Shareholders and regulators are no longer tolerating poor performance nor are they willing to accept risks. They expect excellence in all asset lifecycle management activities and want managers to immediately take the necessary actions.
Asset Lifecycle Management (ALM) Model can Help Achieve Superior Performance
ARC has been doing research in asset lifecycle management for over two decades. In the process, we have developed numerous reports and concepts that help organizations take control of their investments in capital equipment. Our model for asset lifecycle management is the culmination of those efforts and provides a useful platform for analyzing problems and developing strategies to achieve better performance from all capital asset investments. It identifies the key lifecycle stages and the processes that must be managed to ensure success. It also explains why critical interdependencies constrain performance and how collaboration and teamwork can be used to integrate activities and fully exploit the capabilities of a rich ecosystem of external stakeholders.
Asset Lifecycle Management Principles and Goals
Physical assets used in the process industries can range in scope and size from a single instrument or controller to a full plant or multi-plant complex. These assets represent a significant investment and it is generally accepted that their respective lifecycles must be managed to achieve optimal return. As discussed in detail in previous ARC reports, overall asset lifecycle management (ALM) involves a set of interconnected, iterative processes:
- In the design and build phase of a project, programs are managed for project performance (PPM).
- During the much longer operate and maintain (O&M) phase, the process focuses on asset performance management (APM).
- Asset and project portfolio management (APPM) aligns the overall portfolio of investments in assets with the company’s strategic objectives.
Because of their interconnection, these processes require a continuous exchange of information. This is achieved through asset lifecycle information management (ALIM). ALIM incorporates the collection, management and distribution of information on design and construction, operation and maintenance of the asset portfolio and makes the data available to PPM, APM, and APPM.
The overall purpose of these processes is to maximize the net total value of ownership over the asset's lifecycle. Yet the multi-parameter optimization for this process typically involves tradeoffs because of parameter interdependency. For example, if a plant is built faster and is in operation earlier, the project costs may be higher, but this is more than compensated by the additional value of products sold. And while maintenance costs can be reduced, this is also likely result in reduced productions and possibly shorten the lifetime of the asset. Organizations have opportunities to exploit this potential for global optimization. To reach the optimum, timely, in-context, high-quality information is required and must be transparent from the controller or sensor up to the highest level of optimization
Asset Lifecycle Management Processes
While our asset lifecycle model has many more stages than the Traditional Model, the primary processes involved in managing asset lifecycle activities are similar. This should come as no surprise. Companies have been managing their assets on the basis of the Traditional model for many years and the people/processes required for certain stages naturally fall into a few major groupings. Weaknesses of the Traditional Model with respect to business processes is not what activities they covered, but the lack of enough granularity to see the underlying lifecycle stages these processes support and how the processes interact.
We have identified separate processes for Operate & Optimize and Maintain & Improve. While they may be part of one O&M organizational unit, the focus and goals of the people responsible for operating and maintaining the facility are quite different. Operators are responsible for using the assets to produce a product or provide a service. They measure their performance relative to the product, using criteria like quantity, quality and unit costs. Maintenance personnel are responsible for making sure that the assets are available and capable of operating at their design specifications. Their success is measured relative to the asset itself, using criteria like availability, capability relative to specs, lifetime, etc.
While our model expands, O&M, we have collapsed all of the activities involved in converting ideas into physical solutions into one global process which we call Design & Build. And, to avoid any confusion caused by our choice of terminology, it is important to note that our Design & Build process includes all of the activities related to Plan and FEED in the Traditional Model. This grouping of activities aligns with the way we see many owner-operators structuring their organizational responsibilities and recognizes the fact that engineering, construction and project management expertise plays a major role in the investment evaluation and planning processes.
The role of each of these business processes is defined by the asset lifecycle stages that it covers. And, this responsibility includes all forms of the asset involved in those stages, i.e. the Physical, Human and Virtual assets. The Traditional Model recognizes that Design & Build is responsible for sourcing material and building the facility. But our model highlights the fact that their responsibility also includes the management of all information created or collected in these stages, making sure that spare parts are acquired in time for commissioning, that IT systems used to operate and maintain the facility are in place and initialized with all needed information, that procedures are available in time for operating and maintenance personnel to be trained before accepting the facility, etc.
Design, Operate, Maintain (DOM) Processes
Another point to note is that the same Design & Build, Operate & Optimize, and Maintain & Improve processes, which we refer to as the DOM processes, are used for all of the organization’s assets. This is an important point that is missing in the Traditional Model. While some of the individuals who execute these processes may be attached to a specific project or asset, the processes themselves are not project or plant-specific. They are corporate strategies applied to all asset investments and should be managed as corporate programs, independent of any given project or facility.
Recognizing that DOM processes are corporate programs has critical implications for anyone designing an ALM program. First, it means that investments made in improving process performance will have global impact across all existing facilities and all future projects. Second, they lend themselves to continuous improvement, so it is incumbent on the managers of each process to make sure that information and lessons learned in one project or plant are captured and made available for improvement on other projects and other plants.
Different Assets Can Have Different Lifecycle Stages
As noted earlier, different classes of assets go through different lifecycle stages. Selecting commercial equipment like mining trucks and rolling stock may be major decisions, but the project stage is primarily one of acquisition rather than complex design and build. Similarly, stages like Commissioning, Pilot Operation and Ramp Up are probably quick events that need no special attention. But management of the various production stages still requires significant attention.
Similar comments might be made for Facilities, IT and Linear assets – each passes through lifecycle stages in their own way with their own unique challenges and requirements. They differ in the details and it is important for asset managers to recognize these differences and focus attention on those lifecycle stages that are most relevant and important.
How Can ARC Help?
ARC's analysts can help you analyze your current ALM situation and identify the best opportunities for improvement. They can also educate you on technologies and best practices that you can use to improve your performance and help you select the solutions that are most suitable for your company.
Functioning as members of your own ALM team, ARC's analysts can add our unique knowledge of technologies, suppliers and other ALM programs to accelerate your continuous improvement efforts. For more information, contact us.