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Life-cycle approach key to extracting maximum value from assets

Clive Ross, Global Head of Asset Management at Aurecon

Clive Ross

26 November 2015 - Many organisations experience challenges when they transition from asset creation to using, optimising and maintaining assets. 

Specialist technical, management and engineering company Aurecon recently hosted an asset management breakfast at the Radisson Blu Gautrain Hotel in Sandton to discuss how organisations can better optimise their asset performance. Speakers included Hester Hermus – Director: Technical Support Services – Asset Management from the National Treasury and Clive Ross, Global Head of Asset Management at Aurecon.

“Whether the organisation is running a mining operation, producing clean water, processing wastewater or manufacturing products, increasing economic pressures are forcing companies to find new ways to optimise value from their asset portfolios. As engineers, we need to adopt a full life-cycle approach instead of a phased approach to demonstrate greater value creation rather than cost reduction to clients,” said Ross.

Historically, asset owners have tried to extract this value from an asset’s operations phase by ‘sweating’ the asset. Ross said that the industry is now seeing a shift, where companies are focusing more on using the asset creation phase to generate value.

“Savvy asset owners are now focusing more on design and construction activities because this is how they can ensure that they extract greater value from an asset during its operational life,” he explained. The lifecycle of every asset may be defined by the following phases:

  • Demand planning
  • Acquisition
  • Commissioning 
  • Operation and Maintenance
  • Renewals
  • Disposal

“While only 20% of the life-cycle costs are expended during the Demand planning, Acquisition and Commissioning phases, 80% of the asset’s inherent Reliability is locked by the time an asset is commissioned. This means that during the ongoing Operation and Maintenance phase, an asset owner can only influence 20% of the reliability,” said Ross.

“People are driven by different objectives (organisational, contractual and personal) at each phase of the asset life cycle. To add optimum value, asset owners need to adopt a far more strategic approach to designing reliability and maintainability into an asset during the creation phase. This is achieved when all stakeholders are aligned to a common suite of objectives focused on the entire asset lifecycle. Involving the Operation and Maintenance staff in the asset creation phase helps to influence the design of the asset and will have a large impact on the long-term asset performance by improving the maintainability, reliability and operability of assets,” he added.

True value may be derived by considering key aspects, from an asset management perspective rather than purely a design or engineering perspective, such as:

  • asset layout to improve access for maintenance
  • proximity and configuration of workshops and overhaul areas
  • material or component specifications to extend the asset’s life expectancy possible automation opportunities to reduce manual interventions
  • reducing unnecessary complexity

“The best time to make design changes is during the beginning of the project, because that’s when you can make the greatest impact at the lowest cost,” Ross asserted.

Another area where asset owners are losing value is during the commissioning phase. According to Ross, engineers need to implement a better structured and formalised operational readiness programme as part of the construction and commissioning activities. This facilitates a more vertical start up where assets are commissioned sooner and reach full capacity earlier. In addition, they need to ensure that physical and financial asset registers are accurate and that asset management strategies and maintenance plans are ready at commissioning. This provides greater control of maintenance activities and optimises maintenance expenditure from day one.

Hermus commented that a life-cycle approach and focusing on value creation, not only cost reduction, is particularly relevant for the public sector.

“The role of assets in the public sector is to deliver an acceptable level of service, sustainably. As service delivery is the core function, economic benefit isn’t always the overriding consideration for municipalities and government entities. All too often, it becomes difficult for the public sector to find the budget to maintain their assets so, instead of optimising maintenance expenditure on existing infrastructure, we focus on putting new assets on the ground. The result is an increase in the number of assets to maintain without the subsequent budgets necessarily split appropriately between capital and maintenance,” said Hermus.

When a life-cycle approach is taken, organisations will be able to plan ahead and, through experience, start closing the gap between estimated costs and actual costs of asset management.

“For example, in the public sector, disposal costs for assets can also be significant where they involve hazardous materials or sites. The costs relating to restoring the environment to its original safe state following the decommissioning of assets need to known and planned for before the ‘investment decision’ is made. A life-cycle approach will ensure that asset owners have made provisions for everything from maintenance and operation to disposal or renewal,” concluded Hermus.

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