manoeuvring physical assets into the future - planning for predictable and preparing for unpredictable change in Asset Life cycle management
Physical assets fulfil indispensable roles in our society. Machinery, factories and infrastructure need to perform in safe, cost-effective and reliable ways to support our daily lives. These assets represent a significant financial value for their owners and typically have lifetimes of several decades. Therefore, effective management of these assets is essential. This need is amplified by two recent developments. Firstly, 44% of the assets in Western Europe are expected to reach the end of their functional lives within the next 10 years (Haarman and Delahay, 2015). Secondly, asset managers increasingly face change in both the goals of their assets and the context in which the assets operate (e.g. Al-Turki, 2011). The first development increases the importance of managing (ageing) assets in an effective way, while the latter complicates efforts to do so.
Asset Management is concerned with “the balancing of costs, opportunities and risks against the desired performance of [physical] assets, to achieve the organizational objectives” (ISO, 2014, p. 2). According to Pudney (2010), Asset Management has five important characteristics: 1. it is a multidisciplinary practice; 2. the whole life cycle of a physical asset should be taken into account; 3. the goal is to achieve certain specified objectives; 4. within acceptable limits of risk and relevant regimes; and 5. it should determine the allocation of resources. Asset Management that fulfils these five requirements will be called Asset Life Cycle Management (ALCM).
However, the literature clearly shows that most approaches to Asset Management have a singular focus on technical or financial aspects, rather than being multidisciplinary (e.g. Haffejee and Brent, 2008). Also, often the attention is limited to certain parts of the lifetime of the assets (e.g. Schuman and Brent, 2005), or solely on the estimation of the remaining useful life (RUL) of the assets (e.g. Si et al., 2011). Asset Management objectives are not always fully aligned with the corporate strategy (Komonen et al., 2012). Potential changes in the relevant regimes (e.g. regulation) are not taken into account, as fixed objectives and an unchanging context are assumed implicitly. Finally, both the literature and the recent ISO 55000 standard (ISO, 2014) on Asset Management do not offer guidance as to how to do Asset Management in a way that fulfils these five characteristics. Therefore, in order to address these deficiencies, this research project aimed:
to develop methods and tools for strategic Asset Life Cycle Management in a changeable context.
The research project was structured according to the logic of the Design Science methodology (Hevner et al., 2004; Holmström et al., 2009). First the problem was explored in practice, using both a survey study on ALCM and a case study at Liander, a Dutch network operator and the sponsor of this research project. Then, based on our understanding of the problem, a case study at the Netherlands Railways and the literature, a number of tools and accompanying processes were developed. These were then tested and evaluated by an application at Liander. Also, the development process itself was studied as an action research project on the development of ALCM capabilities at Liander. Additionally, as a counterpart to the focus on predictable change in this first part of the research, a multiple case study was carried out to understand how Asset Management organizations deal with unpredictable change.
In the problem exploration, it was found that the limited availability of data, the distribution of information throughout the organization and the limited time available for long-term, strategic issues results in a limited understanding of the remaining lifetime of assets. Additionally, these three factors limit the ability of asset managers to identify and anticipate future changes in a proactive manner. Therefore, a method was developed to assist asset managers in identifying future threats and opportunities, which were labelled lifetime impacts: “trends or events that may have a positive or negative effect on the value created by using the asset”. The lifetime impacts are identified by bringing experts from different backgrounds together in a structured discussion on five different perspectives on the asset: technical, economic, compliancy, commercial and organizational (TECCO). To prioritize the identified lifetime impacts, a prioritization tool was developed, based on the likelihood and potential effect of the lifetime impact as well as the effort required to manage the impact in an effective way. Additionally, a logic tree was designed to propose the most suitable solution strategy for each lifetime impact. These different tools combined were labelled Lifetime Impact Centred Asset Management (LICAM), which also encompasses a process to develop Asset Life Cycle Plans. This method can be regarded as a strategic counterpart to Reliability Centred Maintenance (RCM), as it assists asset managers to manage and plan for lifetime impacts in a changeable context, whereas RCM helps maintenance managers in managing failure modes in a stable context.
However, during the development of these methods and tools, it was found that not all lifetime impacts can be identified in time to prepare suitable preventive measures. Therefore, the concept of agility was studied in the context of ALCM, to investigate how Asset Management organizations cope with unexpected changes. This resulted in a framework comprising of seven agility enablers. Four agility enablers relate to the organization (agile people, linkages, processes & information and strategy), and three agility enablers originate from the physical assets (asset resilience, asset adaptability and agile deployment). The asset agility enablers are an elaboration of the agility theory, while the organizational agility enablers show asset managers that not all change has to be accommodated by the physical assets themselves.
Finally, the research also created insight in the change process from Asset Management to ALCM. This change process requires new skills of the asset managers, improved alignment and new collaborations within the organization and a deliberate step away from the firefighting mentality that is found in many Asset Management organizations.
Relevance and implications
This research has added several insights to the Asset Management literature. First, it introduces the focus on future threats and opportunities (i.e. lifetime impacts), challenging the implicit assumption in most Asset Management tools that the future is stable. Second, it stresses the importance of a multidisciplinary approach to ALCM and introduces the five TECCO (i.e. technical, economic, compliancy, commercial and organizational) perspectives to facilitate such an approach. Thirdly, it presents Lifetime Impact Centred Asset Management, which comprises of a number of tools to identify, prioritize and manage lifetime impacts. Finally, it shows how agility is a means to deal with unpredictable change, and presents a framework for agility in Asset Management.
For practitioners, this research offers tools for strategic ALCM in a changeable context and describes a change process towards such a management approach. In this way, it assists asset managers to develop Asset Life Cycle Plans (or: Asset Management Plans) as required by ISO 55000, in order to timely prepare for future threats and opportunities to create maximum value for the organization from the exploitation of their assets.