Enterprise Asset Management. Enterprise Asset Management 1

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1 Enterprise Asset Management 1

2 Introduction Managing assets effectively is critical to the success of organisations that depend on complex physical assets to deliver services. Increasingly, operators and suppliers are under rising pressure to drive value from their existing asset base, and maximise value from the deployment of future assets. Organisations are therefore keen to understand how Enterprise Asset Management (EAM) can be applied to their activities, and this paper provides an introduction to the subject, the benefits of undertaking a pro-active approach which include lower operational cost and reduced asset downtime, and the challenges that typically surface when transformations are undertaken. Litmus has worked with a variety of public organisations and capital intensive businesses to develop a Best Practice EAM model which aligns with international recognised standards. This paper documents this model, and how it can be used to drive better EAM outcomes for organisations. Whether an operating business or a greenfield project, EAM delivers benefits that translate to the bottom line and balance sheet. 2

3 The Challenge Asset intensive industries spend over half their cash-flow on asset management yet often fail to optimise their operating models or focus management attention on leading practice asset management. Historically, there has been a fragmented approach by many organisations to manage what is an integrated system of assets comprising of physical, human, financial, information and intangible resources. However, those who adopt a proactive framework can benefit from reduced operational risk and costs, optimal decision-making and planned work practices. ISO (pending), the leading EAM international standard, has been developed in recognition of the need to provide a common approach and codification of best practice. The standard provides a clear connection between an organisation s strategic plans and the on-going operations and maintenance of assets. An integrated asset management system, as addressed by ISO 55000, optimises and aligns the organisation s diverse and complex assets to its objectives, priorities and risk profile. An organisation s first step towards effective asset management is to design best practice processes that are understood and effectively implemented organisation wide. Locally in Australia, The Asset Management Council has released a technical publication titled Framework for Asset Management Body of Knowledge to provide a common asset management language for better communication within organisations and across industries. The publication discusses key asset management elements including demand management, systems engineering, configuration management, acquisition, operations and maintenance, continuous improvement, business management, culture and leadership. Litmus recognises the need of our clients to take these best practices and codify them in a way that can be used to drive EAM system implementations. Accordingly, Litmus has built a detailed EAM model in ARIS (a process repository tool) which incorporates a best practice approach together with our experience and asset management thought leadership. The model captures the standard processes relating to all asset types, with consideration to the uniqueness of each. Litmus has applied this model to assist organisations to implement asset management processes, optimise their operating model and unlock benefits including improved operational performance, safety and reduced costs. 3

4 Understanding asset management Enterprise asset management is the systematic and coordinated activities and practices through which an organisation optimally and sustainably manages its assets and asset systems, their associated performance, risks and expenditures over their life cycles for the purpose of achieving its organisational strategic plan. As the definition highlights, ISO encompasses not just ongoing maintenance but the associated operational processes, technologies, people and governance required to achieve the organisation s goals. Organisations can derive significant advantages from the adoption and compliance with ISO 55000, particularly in an asset intensive organisation, where management of assets is central to the effective delivery of a product or service and/or where public accountability exists over the effective and safe use of assets. Key areas in which organisations can leverage ISO include: Assess the maturity of an organisation through recognition of the gaps and opportunities in reference to best practice standards; Utilise methodologies to develop an objective, prioritised and coordinated implementation plan, aligned with the organisation s goals and which is widely understood; Align technology, people and processes across the organisation. ISO informs the establishment of the asset management system which considers the identification and management of individual equipment items through to complex functional systems or diverse portfolios. Each of the organisation s asset types possess widely varied investment opportunities, risks and performance. An effective system optimises each asset, throughout its lifecycle from planning to disposal, in alignment with the organisation s objectives, priorities and risk profile. Portfolio view of assets, not a local view Need high value business practices and KPIs Brings together commercial, maintenance, operations, IT and procurement Focus is on the assets and optimisation, not just on maintenance + + Need to optimise equipment life-cycle decisions and costs Activities geared to supporting asset readiness and availability Balance of performance risk and cost of ownership to achieve operational excellence Looking at maintenance to a business context to drive company profits Optimise assets reliability, availability, maintainability and serviceability 4

5 Strategic Organisational goals Manage asset portfolio (capital investment optimisation & sustainability planning) Asset management system Manage asset systems (sustained performance, cost & risk optimisation) Manage asset lifecycle Operational Concept Specify Acquire Use & Maintain Evolve Dispose Best Practice Assest Management System One feature of the asset management system is it allows an organisation to identify its assets and manage them in logical groupings to drive efficiencies and improvement opportunities. Asset management covers five broad categories of assets: physical, information, human, financial and intangible assets. Within each asset class there can then be a number of sub-classifications meaningful to the organisation. For example, physical assets can be classed in a number of different ways as per the following diagram: Fixed assets assets which have a fixed physical location e.g. plant and buildings; Linear assets an asset whose connectivity in a stream or line length plays a critical role in maintenance e.g. road, railway track, power lines, pipeline; Non-linear assets occupy a specific space and can be tracked by their location assets which are not linear e.g. plant, individual rolling stock; Functional location defines the connectivity and environment of the asset e.g. maintenance depot area; Class assets which are physically similar e.g. all pumps. Mobile assets assets which do not have a fixed physical location e.g. car or train; Fixed Mobile Linear Non-linear Functional locations Class... Typical Physical Assest Types 5

6 Typical benefits Common challenges Effective processes covering the asset lifecycle are integral to aligning the decisions and activities of operational areas, such as procurement, infrastructure technology, maintenance, operations and HR, to the strategic goals of the organisation. Common business drivers and outcomes can result in benefits such as improved operational performance, safety and reduced cost. Typical benefits that organisations realise from optimising the management of the asset life cycle include: Consistent and effective decision making and long term planning; Improved corporate reputation from higher asset reliability and minimisation of downtime; Lower total cost of asset ownership and greater return on investment; Lower proportion of unplanned maintenance resulting in more effective workforce planning; Improved risk management evidence of decisions and actions taken through; Improved health, safety and environmental performance. In practice, organisations face a number of common challenges in respect of asset management. Litmus has encountered and overcome the following challenges present in various organisations: Understanding of asset management concepts and financial literacy across the whole organisation is generally low and sufficient training limited; Ineffective asset management processes in place; Multiple processes address different asset types and the unique challenges they present; Processes not documented or aligned to evolving technology solutions; Decisions made based on hierarchy and influence; Expenditure and maintenance forecasting is difficult as system data is absent or inaccurately estimated e.g. costs and revaluations of assets are updated on an ad hoc basis; Lack of organisational alignment to asset management processes; Decentralised decision making around asset management strategies across individual sites resulting in assets being either under or over maintained; Existing technology solution is perceived as being ineffective; and Compliance with health and safety regulations not documented. 6

7 Our experience & intellectual property Litmus core business is large scale business transformations and change management for asset intensive businesses such as transport, energy and utilities and mining. We have leveraged our experience together with best practice frameworks to develop unique intellectual property which allows us to cover the full spectrum of asset management building blocks including Strategy Development, Target Operating Models, Maturity Models and an Enterprise Asset Management Process Model developed in ARIS. Litmus works collaboratively with our clients to build their knowledge and maturity of enterprise asset management practice. We apply a standard, best practice approach to the asset lifecycle processes with consideration to our client s unique asset types and requirements to create a common language across the organisation. When coupling EAM programs with the implementation of supporting software, our independence is a powerful asset. We have considerable experience across a wide range of software products and our focus is on ensuring that the optimal solution is designed and the best fit product is selected to enable attainment of your strategic EAM vision. We have delivered tangible benefits to our clients including aligned decision making, greater asset visibility and reliability, reduced maintenance costs and improved health and safety. 7

8 Litmus Enterprise Asset Management model Litmus EAM model covers all the standard processes across the asset management lifecycle. It expands on the six key stages and comprises over 50 process maps and over 400 activities. 1. Concept develop an asset strategy through the assessment of new opportunities and development of preliminary system requirements. Typical outputs are stakeholder requirements, concepts of operation, feasibility assessment, preliminary system requirements and outline of design solutions. Key processes include: developing business asset plans, operating concepts and maintenance concepts. 2. Specify detail the functional requirements and develop an outline of a feasible solution that can be achieved with manageable risks. Key processes include: develop functional or production specifications, technical specifications and statements of work. 3. Acquire incorporates processes from Request for Tender to new assets commissioned or accepted for use to minimise the interface between maintenance systems and suppliers. Key processes include: tendering activities, purchasing, risk management and project management of construction or implementation. 4. Use & Maintain the most enduring stage and centrepiece of the asset lifecycle. Focus on use of assets to provide a defined service, maintenance and support to ensure a continuing capability to meet the requirements in respect of service provision, safety and reliability. Key processes include: maintenance scheduling, dispatch maintenance jobs and record maintenance details. 5. Evolve identify opportunities to enhance the Acquire and Use & Maintain stages through feedback loops - improve and replace, and organisational learning and feedback. Key processes include: undertaking performance root cause analysis, optimising maintenance repair and operation inventory and incorporating continuous improvement to optimise asset value contribution to the business. 6. Dispose plan and execute the decommissioning of an asset. In relation to major asset disposals, consider safety and environmental considerations, heritage or other considerations, responsibility for disposal process, timetable, funding and budget arrangements. Key processes include: planning and executing asset disposal. 8

9 The Litmus EAM model was developed based on best practice frameworks, including Asset Management Book of Knowledge (AMBOK) by Asset Management Council and ISO 55000, together with Litmus Intellectual Property. The diagrams below shows the detailed functions within the Use & Maintain stage of Litmus EAM model (top) and the activities and roles required to perform the process (bottom). 4.0 Use & Maintain 4.1 Defect Management (corrective) 4.5 Maintenance Scheduling Initiate Reactive Maintenance Manage Defect Maintenance Manage Warranties Maintenance Scheduling Run Risk Assessment Manage Work With 3rd Party Arrange Permits Run Risk Assessment Arrange Permits Manage Work With 3rd Party 4.2 Maintenance Planning (preventive) 4.6 Manage Asset Monitoring Develop Maintenance Master Plan Define Scheduled Maintenance Schedule Condition Monitoring and Inspection Develop Asset Condition reports Replace as Set Manage Work With 3rd Party Issue Materials Arrange Permits 4.3 Maintenance Delivery 4.7 Configure Management Dispatch Maintenance Job Record Maintenance Details Perform Condition Monitoring & Inspection Manage Maintenance Configurations Issue Materials Execute Maintenance Work 4.4 Integrated Support Management Prepare Asset Documentation Provide Asset Tactics Incorporate RCM Maintenance Planning Assess Asset Performance Manage Facilities and Inventory Manage Inventory Legend: Grey: Level 1, Orange: Level 2, Blue: Level 3, Light Blue: Sub-process. Extract from the Litmus EAM model. Ad hoc Inspection order created. From Permit Officer Asset Owner Condition Monitoring and Inspection Scheduler Condition monitoring inspection required Master Plan updated from Review and update inspection order priorities Determine if local or remote condition monitoring Review qualifications of maintenance service provider Labour Materials Asset Check the availability with the asset owner Retrieve remote condition monitoring information Determine availability of labour resources Enough labour resources? Determine bill of materials availability Enough resources? NO Determine asset availability Retrieve data from master plan Create a purchase order Review alarms and exceptions YES YES NO Assign people resources Assign bill of materials Create reminder to execute work order when material is available Determine detailed requirements for inspection YES NO NO Determine whether permit is required to perform work Defer work order Schedule a time for inspection Site visit not required? YES Permits required? NO Asset available? YES Arrange permits Determine 3rd party involvement in inspections 3rd party involved? YES Manage work with 3rd party Purchase order created. To Estimate time to complete work Inspection work recording required. To Issue materials Condition Monitoring and Inspection is scheduled. To

10 Conclusion Critical to the success of organisations that depend on complex physical assets to deliver services is effective management of the assets and deriving maximum value from the deployment of future assets. The Litmus Group has worked with a wide variety of organisations and capital intensive businesses to develop a Best Practice Enterprise Asset Management model which aligns with internationally recognised standards to assist organisations lower operational costs, reduce asset downtime and deliver benefits that translate to the bottom line. 10

11 About Litmus Group Litmus Group (Litmus) is a management consultancy firm specialising in the creation of tangible value through the realisation of strategy. We partner with clients and their teams to translate their strategic intent into the outcomes they had envisaged. We are an employee-owned firm with a committed and talented team that is driven by the strategic value we can add to our clients businesses. We have offices across Australia and in Singapore. Litmus Group is part of The Clovis Capital Company, a portfolio of companies including TrueNorth Advantage, Clovis Investments and Clovis Products. Litmus has access to international expertise through its global membership of Cordence Worldwide, an international partnership of locally focused consulting companies with common values. Through this partnership, we offer our clients the global knowledge and cross-industry experience from more than 2600 consultants in 50 offices around the world. In 1998, Litmus was born with a clear mandate: to partner with clients to realise their strategic goals. We were then, and we remain today, a new breed of management consulting firm that is driven by value. Litmus Group ABN Tel info@litmusgroup.com Melbourne Office Level 10, 350 Collins St, Melbourne VIC 3000 Sydney Office Level 9, 70 Pitt St, Sydney NSW 2000 Brisbane Office Level 20, 444 Queen St Brisbane QLD 4000 Perth Office Level 14, Governor Stirling Tower 197 St Georges Terrace Perth WA 6000 Hobart Office Level 14, 39 Murray St, Hobart TAS 7000 Singapore 20 Cecil St Equity Plaza #13-01 Singapore Tel Fax: Disclaimer The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we make every effort to provide accurate and timely information, there can be no guarantee that such information is accurate and complete as of the date it is received or that it will continue to be accurate in the future. No individual or entity should act on such information without appropriate professional advice and after a thorough examination of the particular situation. 11

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