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Design Considerations for Engineering Asset Management Systems Florian Urmetzer1, Ajith Kumar Parlikad, Chris Pearson, Andy Neely
Abstract This paper presents the key considerations to improve approaches to the design of asset management systems. Currently accepted definitions and guidance for the design asset management systems seemingly takes a monolithic approach and is more relevant when all asset management activities lie within the four walls of a single organization. In practice, it is often seen that the management of assets are done by a number of disparate organisations. In such a context, alignment of KPIs and visibility of value-drivers between the asset management systems of these organisations are critical to ensuring that all parties in the “eco-system” benefit from the assets.
1
Introduction
This paper outlines the key design considerations to improve approaches to the design of the asset management systems needed for effective service delivery [1, 2]. The recently published ISO 55000:2014 standard for asset management defines an asset management system (AMS) as “…a set of interrelated or interacting elements to establish asset management policy, asset management objectives and processes to achieve those objectives [3].” A simplified illustration of an asset management system as defined in ISO 5500x is shown in Figure 1.
Figure 1. A simplified “Plan-Do-Check-Act” illustration of an AMS
1
Institute for Manufacturing, Cambridge University Engineering Department, Cambridge, UK, CB3 0FS.
Prior to the publication of ISO 55000, the BSI PAS 55 [4] standard mentions the need for organisations to have an effective asset management system, but does not provide any details regarding how such a system should be designed or implemented. It is evident from these standards and best practice guides that the asset management system plays a critical role in organisations’ ability to generate value from their assets. Given this importance, it is surprising that there is very little literature from academia on asset management systems, in particular about the design of these systems. ISO 55002 addresses some of the shortcomings in the understanding of AMS by providing guidance on the implementation of an AMS. Recently, El-Akruti et al. [7] reviewed existing literature in asset management and reconstructed a strategic framework aimed at illustrating the detailed relationships and mechanisms between each specific asset management process and activity. An asset management system should fit it with the organisation’s strategy, objectives, and policies. The AMS should define the asset management policy, which describes the overall approach to how assets will be managed within the organization [6]. Following this the organization should define specific, measurable, achievable, realistic and time-bound asset management objectives; and a clear plan (with specific responsibilities) to achieve those objectives. Figure 2 presents the key elements of an asset management system as defined by the Institute of Asset Management.
Figure 2. Key elements of an asset management system
Although unintentional, the definitions and the above illustrations lead one to the belief that an asset management system is seen to be monolithic, and lies within the four walls of an organization. In practice, it is often seen that the management
of assets are done by a number of organizations. For example, in the rail sector in the UK, the trains are operated by the train operating companies (e.g., Virgin Rail, Southwest Trains), the trains are owned by a different set of companies (e.g., HSBC Rail), and they are often maintained by the OEMS (e.g., Hitachi Rail [9]). In such scenarios, it is not clear how existing definitions and guidelines should be implemented across the different organizations that derive value from the assets (trains in the rail sector). Evidently, each organization should have an asset management system that aligns with their own objectives that aims to extract maximum value from the assets. However, these objectives are often conflicting – so the question is “how can such a disparate set of asset management systems be designed so that the whole eco-system (or value chain) can benefit from the assets?” This paper attempts to take the first step towards answering the above question by providing some key considerations during the design or improvement of asset management systems. The structure of the paper is as follows. In section 2, we briefly discuss the approach taken for this research. Following this, we present the design considerations in section 3. Section 5 summarizes the key conclusions of the paper.
2
Research approach
This study focused on examining industrial practices in designing and improving asset management systems. The activities that informed this paper consisted of a series of interviews with asset managers in companies (see Table 1) across a variety industry sectors ranging from aviation, facilities management, utilities, heavy equipment, consulting etc. These interviews aimed at understanding (i) their asset management practices, (ii) the process they use for designing and improving their asset management systems; and (iii) the shortcomings of these processes and their implications. Interviews followed an semi structured approach, however because of the large different approaches of companies, e.g. one company did not have an overview of the status and usage of their assets, and others had to follow heavy regulations for provenance of maintenance and fulfilment of maintenance schedule, there were only high level similarities and the asset management system design described by the interviewees as well as the actual process applied was at times very varied. In general the interviews conducted for this research study revealed that there is a spectrum of approaches in organisations when it comes to Asset Management Design, but the common factor (unsurprisingly) was that the approach is usually driven by the market rather than by a pre-defined design approach. It was noticed that the value of the asset is mostly defined not by a lifetime view of a single asset, but if market conditions are favourable, then asset will be retired, or in many
cases exchanged against new machines. Interestingly, in some companies, there was not even any tracking of assets involved in servicing or being serviced by the company.
Table 1. Case study companies Industry description
Business description
1
Defence Industry
Supply of servicing and maintenance of aircrafts and attachment. Baseline is a complex servicing contract by which payment is only given when the airplane is ready to fly.
2
Electrical power supplier
Long standing servicing contract of large machinery which produces power for a national power grid. Payment is based on uptime of the material, hence a lot of the services has to be done based on idealised maintenance schedules to guaranteed uptime.
3
Enterprise Asset Management Consulting
Services and support contracting on designing and implantation of asset management systems.
4
Maintenance of large estate
A Department servicing and maintaining buildings and assets of a large education provider. Most buildings are “A listed” (heritage relevant buildings).
5
Building and maintenance
Provider of national level building contracts with a large fleet of heavy machinery (e.g. trucks, lorries, diggers etc.)
6
Monitoring and servicing of heavy machinery fleets
Offering servicing of heavy machinery (e.g. trucks and diggers) additionally they have a heavy machinery monitoring system in place
The detailed findings from each case study will be described in a full journal version of this paper. Here, we focus on presenting the critical factors that affected the success of the asset management system – with a view that consideration of these factors during design or improvement will ensure that the various companies that form the “asset management ecosystem” will be able to extract value from the assets.
3
AMS Design Considerations
The most interesting finding from the case studies is that the organisations examined do not have clearly defined or understood approach to “design” their asset management system. They see their AMS as not an outcome of a concerted design effort, but a system that has evolved over a number of years through external (e.g. customer requirements) and internal (e.g. organizational strategies) influences and market forces (e.g. competition, regulation). However, a common factor is that all the companies continuously strive to improve their existing systems for managing assets. We will now discuss the key lessons learned about what needs to be considered when designing an asset management system for services. Additionally these are seen as strategically important steps to be taken to upgrade or improve existing asset management systems.
3.1 Risk and scenario analysis Risk and scenario analysis is seen as essential in the literature [5, 6] this is however neglected during the design stage of an asset management system. The findings can be split into two sections. Firstly, as the interviews were done during the financial crisis in 2013 financial implications on the market and market changes, as well as changes in customer requirements had not been factored into an asset management system design. This means that existing asset management designs should be challenged using scenarios considering as well changing market conditions. It became clear from the interviews, that higher risk on the assets in circulation, for example lowers investment servicing of assets or keeping assets longer in circulations, was not be taken into account. This however indeed can be critical to the company’s survival when the market conditions (e.g. credit availability) would change. Secondly, it was found that in many complex asset management systems the design was done using a specification, which then was used as a basis for a mathematical risk model. While mathematical models were seen as a great way for optimization of system, it does not allow a very high degree of flexibility as the type of models would only be working in the boundaries they were defined for. While these system designs are fully valid, a risk and scenario analysis was seen as a good way of testing the models and indeed of scoping the limitations of the system designed. It is then more a question of knowing what the system is good for and how the system is enabled to operate the best way and indeed understand the limitations. In addition, the people managing the system should then be enabled to manage in an efficient way. Hence if there is a need to make a
decision to execute tasks against the systems recommendations, for example because of special events not being supported by the system, there needs to be processes in place to enable people to make decisions and to run the assets in an efficient way for that specific case.
3.2 Standardised interfaces It was seen that every organisation starts to build up a service ecosystem [10, 11] which contains various organisations involved in the management of their assets, most of which have their own AMS. There is therefore a need for a “standardised” interface for asset management systems to ensure value generation for the stakeholders. It is important for organisations thinking about a new design or a strategic redesign of their asset management system, to think about external interfaces. There are often multiple stakeholders supplying parts to one asset management task within a system. Optimizing the communication between the partners within an ecosystem and bettering the value alignment between the partners will better the outcome of the service delivery ecosystem [10, 11]. There is the need to consider two aspects; one the managerial and two the IT systems side of communication. On the managerial side it is seen as important that processes are implemented and discussed in the community which streamline the communication between partners of an ecosystem. At present there could be little or no literature and guidance found. Indeed there is scope for in-depth studies in these areas to define best practices. On the IT systems side, communication between partners to align the delivery of services should be considered. If these systems are in existence however they are either build on ad hoc basis or are highly customised IT solutions. Hence there is the need for further investigation into the interfaces and exchange of information between two and more entities in an asset management system. The authors are in agreement that there is a potential for standardisation for both the above and hence a reduction of costs to enable seamless communication between stakeholders through interfacing their IT Systems and bettering the communication processes.
3.3 Definition of performance measures and KPIs There is a need to define KPIs / Performance measures for the service asset management system in two focus areas. First the organisation has to see as much as possible the long term potential and take out the short term overall view when it comes to asset management. There were for example KPIs defined which had to do with cost cutting in some organisations, which have been found to hinder effective asset management in other organisations in the ecosystem. Decisions like cost cuts usually support a short term view, which may be very much needed at the time. However, maximisation of the value of the asset and an idealised focus on when to purchase a new asset at the right time is crucial in some situations. Hence making a purchasing decision on the basis of capital cost may seem driving down expenses in the short term, however in the longer term these may be driving the baseline costs high and lower customer satisfaction. Linked with the above area of risk management, these situations may focus on a long term planning for financially difficult times rather than a short term reduction of costs. KPIs need to be aligned to ensure an effective asset management across an entire ecosystem. There have been multiple cases in interviews were for example site operators on building sites were not releasing machinery to other building sites within the company to ensure the availability of spare machinery in case of need. The argument for the behaviour was that the site manager was incentivised to keep his site running, but not incentivised to share his assets and resources with other sites when needed. The protectionist behaviour on one site had led to higher costs on other sites and hence to overall higher costs for the company as a whole. There is hence the need to incentivise the correct management of assets throughout the organisation and incentivise sharing where needed.
3.4 End-Value of Value Chain End-value is the value that the user of the asset obtains from the use of the asset [12, 13]. For instance, an earth-moving equipment for a mining company may be maintained by a subcontractor under contract to the OEM, but the end-value from the equipment is delivered to the mining company. Throughout the interviews in only one case there was a high clarity and transparency of end-value through the value chain. There is the need to communicate the end value throughout the organisation. This is to ensure that multiple companies involved in a service delivery work together to focus on providing value to the customer. There is the need for a certain flexibility left within the power of the local managers on the ground on the partnering companies. This will be allowing collaboration on the basis of lower level management. This flexibility within processes will leave the ability to problem solve to deliver maximum value and outcome to the end
customer. Indeed this should be flexibility to deliver within the KPIs and within budget so that there is no over delivery.
3.5 Alignment and Value distribution of Performance measures There was no indication that KPIs throughout all organisations were end value focused [13]. It is well known that services operations should always focus on the end value generated [12]. The cases indicate that specifically personal performance KPIs as well as department and wider KPIs do not incentivise the end value generated. The interviews show for example one building site having a shortage of equipment because of equipment failure and another site was not prepared to optimize the use of their equipment for the greater good of the company’s customer. Moreover the other building side was even encouraged to keep a high spare capacity on a may need to have basis because of the penalisation of the management staff if production would be reduced. If the company value perspective would be within the KPIs of the site managers and hence exchange of equipment would be incentivised the exchange of equipment would be easier between sites and risks between sites reduced.
3.6 Changing customers and needs Finally an effective AMS should have change management capability to adapt to changing customers and requirements. The case studies have shown that usually there was not a provision for a redesign of an asset management system encountered on the basis of customer needs. Generally the asset management was on a project basis and would hence be started with the project start date. Hence there was the ability visible to see an asset over a project lifetime, however no company could see the asset for its own lifetime view. Specifically an asset lifetime view is getting important when thinking about multiple customers and the sharing of assets between different customers. The interviews conducted show that organisations are mostly not able to optimize assets over multiple customers even when they know that this would be possible and a viable option to reduce costs and increase asset use. The cases showed that customer needs would be flexible and alternate in e.g. intensity of use of equipment. Hence a large digger would be needed once a month, while a small digger would be needed the rest of the month. The large digger was used on site for the customer all the time, however the customer paid for the use of a smaller equipment.
4
Conclusions
The case studies showed that organisations often do not have a structured methodology to design an Asset Management System from scratch - they strive to improve an existing system. Risk and scenario analysis (akin to FMEA) is essential during the solution design stage for a resilient asset management system. A service ecosystem will contain various organisations each running their own asset management systems. There is a need for a “standardised interface” for asset management systems to ensure value generation for the different stakeholders. A standardised interface will help minimise complexity and help in sharing data and information between stakeholders. When designing a service solution, it is essential to define KPIs and performance measures for the asset management system in addition to service-level KPIs and there is a need to align KPIs with the value generated to the end customer. It is essential to improve transparency of end-value through the value chain in order to cultivate and improve integrated working practices. An effective asset management system should also have an efficient change management capability to adapt to changing customer requirements.
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