IAM Annual Conference June 2012

Copyright 2012 Asset Management Consulting Ltd. All Rights Reserved IAM Annual Conference June 2012 Version 5 (Short) For use in conjunction with A1/A2 Fundamentals of Asset Management: Line of Sight (or not driving blind!) Ruth Wallsgrove, June 18 2012 Copyright 2012 Asset Management Consulting Ltd. All Rights Reserved

Line of Sight how to see where you are going What is Line of Sight? Asset Management Policy a simple approach Asset Strategy/ies the issue is optimisation Case study working from corporate targets How AM Strategies relate to Asset Planning Note: some of the material here comes from AMCL s IAM Endorse Module B2 & is copyright AMCL

BSI PAS 55 BSI PAS 55 published by the IAM in 2004 and revised in 2008 Provides high level requirements for an Asset Management system Contains guidance on the development of Asset Management Policy & Strategy Also contains requirements for linkage of Asset Management policy, strategy and objectives Line of Sight possibly the single most important concept in PAS 55 Copyright 2012 Asset Management Consulting Ltd. All Rights Reserved

If Line of Sight is the solution, what s the problem? How do you know the work you carry out on the assets is the best use of your limited resources? You can t jump from corporate strategy to maintenance tasks (or vice versa) in one leap In some organisations what needs doing is deceptive - we need to start asking what we don t need to do This is a challenge to both strategy and standards to move them from rule-based to optimal where they need to be smarter

Line of Sight example A risk-based approach to maintenance will be adopted Risk-based maintenance will be applied to our top 5 asset types Risk-based maintenance will deliver an improvement in the failure rate of switchgear of 10% for no increase in cost by September 2015 Risk-based maintenance will be introduced at UtilCorp s grid substations in September 2015 with the following work volumes Copyright 2012 Asset Management Consulting Ltd. All Rights Reserved

Asset Management Policy Typical Format 1 3 pages at front of highest level Asset Management Strategy, as well as published on intranet Clear relationship with corporate strategy and objectives spell out

Asset Management Strategy an example Contents Introduction Strategic Context and Business Drivers Asset Management Framework Asset Management Objectives & Priorities Overall Approach to Asset Management Overview of Asset Portfolio & Criticality Analysis Asset Management Timeline and Strategic Plan Roles & Responsibilities Balanced Scorecard and Performance Monitoring Copyright 2012 Asset Management Consulting Ltd. All Rights Reserved

Asset Management Plan Typical Content Contents Review of previous AMP Changes to the Asset Portfolio Work volumes enhancement, renewal and maintenance Costs enhancement, renewal and maintenance Expected performance outputs Expected condition Risk schedules Improvement projects Resource plan Demonstrates the Line of Sight from the Asset Management Policy & Strategy Copyright 2012 Asset Management Consulting Ltd. All Rights Reserved

What this requires in practice AM Policy should be easy if you understand your corporate strategy and how Asset Management helps you deliver it Eg NYCT AM Policy in an hour AM Objectives should relate explicitly to corporate targets and show precisely how the AM strategies will deliver them not easy, but the task is clear AM Plans are the whole point of Asset Management they take plenty of work and AM strategies exist simply to support the planning process (not vice versa) by setting rules, guidelines, templates for planning AM Strategies are the messy bit in the middle, and I believe pose more challenges than any other part of our line of sight

Asset Management Policy basic approach AM Policy should be a direct response to current corporate strategy and targets and drive the means to achieve it (probably not business as usual) Typical corporate objectives are: Grow Cut costs Improve services or product quality Diversify or consolidate? There are obvious appropriate Asset Management responses to each For example, what are good practice AM techniques to cut opex while maintaining or improving service/ product quality? What are the AM issues in growth? Let s do it!

Relating AM Policy to AM Strategy Basic approach: if x is your policy, what is an appropriate strategy/ies to implement x? Obvious place to start is begin with applying policy to most critical assets For example, if you need to cut opex, you might look at applying x to highest opex assets Simple enough but what kind of strategies do you have in place at the moment? (everybody already has lots ) Useful to distinguish between old standards and strategies (keep in place until you get around to rethinking) and strategies that are actually directly driven by new AM Policy

Role of AM Strategy Bridges the gap between short & sweet high level AM Policy and low level & excruciatingly detailed Asset Management Plans In practice, this is unlikely to be just one document, but have a Line of Sight structure of its own

Live example 1: Scottish Water s Asset Strategy Framework Source: Scottish Water Asset Management Strategy 2010

Short term strategy: a proposed pragmatic approach Existing strategies, like standards, are very unlikely to be optimal To optimise them all at once would be far too much work for most organisations, and criticality tells us some are good enough as they are We can make use of corporate targets and PAS 55 idea of AM objectives to drive strategies To kick start a more optimal approach, apply a rigorous Asset Management approach to existing corporate targets related to assets... and see what difference that makes

Example simple UK Water case Regulated utilities have nicely well-defined asset performance targets (service levels) AM strategy needs to show how we utilise our resources best to meet these targets using good old Root cause analysis Options evaluation Cost-risk trade-off

Maintain at the current number the properties on the at-risk register for internal sewer flooding Root cause analysis of why any property is on the register at the moment eg sewer chokes due to excess fat in sewers What do we know are effective solutions to this particular risk? Are any of them actually not actions on our own assets (eg fat traps)? Given what we know, how far do we believe can we reduce the risk of this root cause to meet target? (100, 50, 10% of target?) To how many properties on the register does this root cause apply? Do we have any data on risk of this applying to other properties? Cost-risk trade-off for each option, of course Short term strategy should then propose the best combination to meet the target at optimal cost If we don t know then do the analysis quick! ( We need to do more analysis rarely makes senior management happy as a strategy on its own)

How would this differ to asset strategising at the moment? Depends on whether anyone ever applied rigorous root cause analysis, options generation and cost-risk trade-off to the particular asset & issue to strategy before Key concept (I suggest) is contribution quantifying the contribution a given strategy has towards meeting a corporate target this strategy will deliver 10% of the opex savings and cost 1% Let s do it!

Effectiveness of AM Strategy SMART targets plus Lead indicators: Alignment to the priorities of the business Integration of policy and strategy principles in Asset Management decisionmaking Communication of policy and strategy Awareness of key staff of policy and strategy content SMART objectives Lag indicator: Achievement of SMART objectives Periodic review and update of policy and strategy Copyright 2012 Asset Management Consulting Ltd. All Rights Reserved

RELATING AM STRATEGY/IES TO ASSET PLANNING Two-way relationship: your Asset Planners will know what actually happens on site - problems, costs, options It is often easier to see cost-risk trade-off at work in a plan than in a strategy because plans have to deal with actual costs (and risks) On the other hand, criticality principle tells us generic approaches are fine for most assets important role of Asset Master Plan or cost templates High level AM Policy should be visible in every strategy that you optimise How to ensure strategies don t actually conflict? Does it matter?

Asset Management Plan Case Studies & Guidance International Infrastructure Management Manual 2011 Compendium of Case Studies from range of sectors internationally Developed by NAMS in Australia and New Zealand Aligns with proposed ISO asset v management standard Copyright 2012 Asset Management Consulting Ltd. All Rights Reserved

ruth.wallsgrove@tkjpartners.com www.amcl.com