Strategic Asset Management

The Strategic Asset Management Awakening and Its Growing Umbrella

UMS Group has covered the full gamut of Strategic Asset Management since the early 1990s. Our work with global utilities highlights the distinction between markets – Australia and Europe are largely ahead of others in terms of sophistication and the movement toward risk metrics, but we do see the US market has been awakening to the value of Strategic Asset Management and need for effective and comprehensive SAM. Traditional views have focused on physical assets, but this is maturing. IT, data assets, and other assets that are not directly employed in producing or delivering electricity or gas are now following under AM requirements.

Our position as an as an industry leader is evidenced by our designation as an endorsed assessor and trainer by the Institute of Asset Management, the professional body of those involved in the acquisition, operation, and care of physical assets – particularly critical infrastructure. Our approach is based on ISO 55000 (and its predecessor PAS 55) and the more practical IAM Standard, which provide a framework for assessing the extent to which organizations’ policies and practices are aligned with the basic tenets of asset management. In so doing, we address a myriad of areas designed to assist our clients in fully leveraging their in-house subject matter expertise, and with the assistance of data-driven methodologies, efficiently manage physical and data/other assets, optimizing the trade-offs between:

• Cost (i.e., reduce long-term cost and maximize the return on investment),
• Performance (i.e., provide safe and reliable service to our customers), and
• Risk (i.e., implementing mitigation strategies to operate within the risk tolerance thresholds established by key stakeholders).

Achieving Strategic, Data-Driven, Mission-Aligned Decisions

In assisting our clients in fully integrating asset management principles across their business, we provide our clients with the analytical frameworks and decision support tools to manage their  assets in a manner that is sustainable and economical, ensuring that they are equipped with the data, analytics and information required to perform mission-critical assignments. Our support activities move our clients to the point where their decisions are strategic, data-driven, and aligned with their mission and vision as well as any applicable laws, rules, and regulations.
Focus Areas
Asset Management Baseline Assessments
Determining current state of a utility’s Asset Management System (Operating Model, Processes, Information and Technology and Culture / Competencies) against pre-established industry standards (e.g., ISO 55000 and/or IAM) allows for measuring overall Asset Management maturity and identifying key actions to close gaps considered relevant by each utility.
Asset Lifecycle Planning
Includes system resiliency / revitalization planning at the macro level, and optimization of the life-cycle cost of individual assets, at the micro level. (e.g., long-term replacement strategy, repair vs. replace decisions, and maintenance strategies). Our methodologies and supporting analytical tools effectively bridge the gap between these two perspectives.
Maintenance Program Optimization
Synonymous with applying the correct balance of Financial Performance, Operational Performance and Risk to the overall maintenance regimen. In so doing, our clients increase the likelihood that cost-effective, prudent, and defensible outcomes will be realized within pre-defined funding constraints.
Investment and Program Portfolio Management

Centralized management of a group of projects / programs from initial selection (via an Investment Portfolio Optimization process) through to close-out, focused on supporting our clients’ accomplishment of their strategic objectives. This process and supporting software applications provide strategic oversight to the execution of projects / programs, assuring that the combined effect of the delivered portfolio optimizes the trade-offs between value and avoided risk on one hand, and spending on the other. This area is particularly relevant due to (1) the anticipated dramatic increase in investment and program funding over the next ten years, (2) the realities of ever-increasing customer expectations with respect to reliability and response, (3) the emerging need to modernize electric systems viz a viz the Utility of the Future, and (4) a preponderance of regulatory and environmental mandates.

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Asset Management Transformation

Our role in supporting implementation is dependent on the interaction protocols established with our clients. We strive to achieve the proper balance between unilaterally producing deliverables in final form (seemingly most efficient) and resourcing our clients with input (frameworks, criteria and approaches) from which they can then produce the products themselves, thus promoting “ownership” (most sustainable). For those practices and processes that are repeatable (particularly across all asset classes), we will typically work “hand-in-hand” with our clients’ key players for a defined period of time; and then transition to more of an on-call role as their organization takes the lead in its development. With that as a backdrop, our efforts take the following form:

“Quick Wins” and/or “No Regrets” Actions: In collaboration with our clients’ organizations, we will establish initial actions to (1) capture the value of Asset Management (even during the initial formulation stage and perhaps in advance of stating its long-term aspirations regarding certification), (2) transform the theory behind asset management into practical application, and (3) start the change management process.

Long-Term Actions: The “Quick Wins” and/or “No Regrets” Actions will provide many of the building blocks to implement an effective Asset Management System. However, there are a host of items necessary to establish context and assure consistency during the day-to-day operation of the overall process (and are “mandatory” if ISO 55000 standards certification is the desired end-state), many of which are included in the following description of our offerings.

On-going Asset Management Support

Even our most mature clients maintain a drive for continuous improvement in operating their Asset Management System. We are poised to support them in this endeavor including:

• Improvement in the collection, retrieval and accuracy of asset performance and condition data,
• More effective application / development of decision support tools to inform asset-related decisions,
• Expanded staff competencies across all domains of asset management, and
• Revised processes and practices to align with most recent developments in Asset Management.

Our Services

ASSET MANAGEMENT BASELINE ASSESSMENT

Depending on the orientation of our client, UMS Group will adopt one of three standards in performing a gap analysis (ISO 55000 standards, IAM or less formal Industry Best Practices). Independent of the standard, we organize our observations, implications, recommendations around four domains (Operating Model, Processes, Information and Technology and Culture / Competencies).
Q

Depending on the orientation of our client, UMS Group will adopt one of three standards in performing a gap analysis (ISO 55000 standards, IAM or less formal Industry Best Practices). Independent of the standard, we organize our observations, implications, recommendations around four domains (Operating Model, Processes, Information and Technology and Culture / Competencies).

We then categorize the specific gap-closing actions, based on their projected impact to an effective Asset Management System, estimated cost to implement, and ease of implementation. The final deliverable of the Baseline Assessment is an Asset Management Implementation Roadmap, a high-level time-phased and prioritized view of the initiatives to meet a utility’s aspirations regarding Asset Management.

INVESTMENT AND PROGRAM PORTFOLIO OPTIMIZATION

UMS Group’s industry best practice Spend Optimization Suite (SOS) solution has a proven track record across multiple jurisdictions within the electric, gas and water utility industries. In linking investment decisions to corporate strategy, actions can be defined (and later evaluated based on measurable outcomes) to improve overall business performance.
Q

UMS Group’s industry best practice Spend Optimization Suite (SOS) solution has a proven track record across multiple jurisdictions within the electric, gas and water utility industries. In linking investment decisions to corporate strategy, actions can be defined (and later evaluated based on measurable outcomes) to improve overall business performance. Focused strictly on establishing optimum capital investment and O&M spending program portfolios, the SOS provides a structured approach to ensure a comprehensive, consistent and transparent process aligned with the basic of tenets of effective Asset Management.

Questions addressed through the process and supporting application include:

  • What are the major risks impacting the business?  What is the current risk exposure?
  • How does one best optimize investments to achieve desired business outcomes?
  • Will the investment and spending plans improve overall risk exposure? Is the business currently under-spending and potentially running full speed into a risk wall?
  • What impact will investments have on the business’ strategic objectives? What is the best way to scenario test developing investment decisions?
  • How does one defend investment decisions - to the Asset Owner, the Regulator, and employees? How can one be sure that they are defensible?
  • How can one “guarantee” consistency in outcomes (i.e.; selected investments) independent of individual biases; thus ensuring the decisions reflect the organizations business and operating strategy? Do I guarantee that my investment decisions when made by different people in the business, consistently reflect our business and operating strategy?

Simply stated, SOS is both a process and a practical set of tools designed to provide users with the information needed to make tough but defensible investment and spending decisions; but more than that, it drives strategic thinking into an organization. All levels of a utility organization will start to understand the strategic implications of available investment or spending choices and align their decisions accordingly. Not only will the strategy of a business become more evident, there will also be increased accountability for the results that specific investments and programs are supposed to provide.

In application the design reflects a collaboration of several disciplines, including the latest thinking in Asset Management, Operations Research, Organizational Behavior, and Industrial Psychology. Its function is not just to provide a mathematical model to determine an optimal portfolio, but also to improve a utility’s decision-making ability.

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ECONOMIC LIFECYCLE MODELING

Underlying our approach is the tenet that risk-based economics rather than only technical judgment should drive the decisions around how best to invest in assets. In so doing, we assist our clients in minimizing total life-cycle costs (e.g, capital, maintenance and implicit costs related to failures).
Q

Underlying our approach is the tenet that risk-based economics rather than only technical judgment should drive the decisions around how best to invest in assets. In so doing, we assist our clients in minimizing total life-cycle costs (e.g, capital, maintenance and implicit costs related to failures). Key inputs driving our approach include:

  • Health Indexing: Required to assess the condition of the assets relative to end-of-life. We work with our clients’ SMEs to determine the relative importance of specific inspection and testing parameters; with the goal of standardizing these assessments so that future trending activities produce meaningful insights and perspectives. We have developed standardized formulations for most of the major asset classes, and work with our clients to ensure any required / appropriate customization occurs.
  • Failure Probability: In order to quantify risk for the economic life calculation, we work with our clients to estimate the probability of failure for an asset, considering age (i.e., the “bathtub curve”), condition (as defined by the health index), and other relevant drivers.
  • Consequence of Failure: This is analogous to the criticality of an asset: a measure of its impact to system performance in the event of an unplanned failure. We generally express it through the development of multiple failure scenarios, quantifying them in terms of the direct costs to repair or replace the asset, the impact of the failure on customers, and possible safety or environmental effects. We offer our experience in deploying readily available data, expertise based on work in the industry, and elicitation methods to help quantify these consequences. We consider outage costs from the perspective of customers and other stakeholders, and express customer service level effects in dollars (a major factor in properly assessing risk and the economic benefits of basic repair, replace, or “run-to-failure” decisions).

We will work with you to build these inputs into a fully tested and operational Asset Risk Decision Model, customized to support your current and future vision regarding the management of your critical assets, with outputs that can support key decisions regarding specific interventions to apply to each asset. The outputs of this effort include risk-based asset replacement profiles and input into capital investment and program spending portfolio planning.

SYSTEM RESILIENCY / REVITALIZATION PLANNING

Our approach to asset lifecycle planning also acknowledges the complexity of addressing aging and deteriorating assets amidst several seemingly conflicting objectives competing for funding.
Q

Our approach to asset lifecycle planning also acknowledges the complexity of addressing aging and deteriorating assets amidst several seemingly conflicting objectives competing for funding, including the:

  • Demand for continued improvement in overall system reliability,
  • Need to establish a long-term system strategy that positions the utility for a “new normal” in servicing its customers,
  • Imperative to improve the customer experience while keeping rates low,
  • Demand side management initiatives, and
  • Mandates to automate the system and address environmental concerns.

There is much attention paid to and excitement generated around the use of new technologies and automation platforms. However, we must also address a number of technical and financial legacy issues; all while dealing with the realities of financial constraints, social factors and differing perspectives / priorities of external stakeholders. Timing of course is critical, implying the need to leverage existing frameworks and analytical constructs to develop a plan that:

  • Provides a comprehensive view, disaggregating the driving forces and constraints, thus tailoring its presentation to a broad and varied constituency.
  • Allows for the seamless integration of a broader-view aged infrastructure replacement / modernization strategy with current operational planning processes.
  • Captures and translates all technical benefits in terms easily understood by all interested parties.
  • Provides total transparency to facilitate continued refinement and support its implementation.
  • Delivers an operational model that accommodates adjustments amidst a dynamically changing business and operating environment.

We offer these frameworks and an established methodology to meet the challenge (refer to figure on next page), working with your staff to formulate initiatives (some oriented towards addressing technical and financial legacies, and others more futuristic in terms of improved communication and automation). We will provide assistance in estimating the costs and benefits associated with each initiative and aggregate them to form the bases of a fully operationalized, yet flexible plan.

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ASSET LIFECYCLE PLANS

UMS Group assists its clients in developing asset class-specific Lifecycle Plans, specifying the key strategies for managing assets (e.g., establishment of performance measures and related targets, indicators of condition to be monitored along with pre-determined thresholds that define limits of acceptable performance/ condition, specific maintenance strategies, criteria for determining end-of-life, life cycle cost estimates, and long-term investment plans with associated reactive and proactive replacement profiles).
Q
UMS Group assists its clients in developing asset class-specific Lifecycle Plans, specifying the key strategies for managing assets (e.g., establishment of performance measures and related targets, indicators of condition to be monitored along with pre-determined thresholds that define limits of acceptable performance/ condition, specific maintenance strategies, criteria for determining end-of-life, life cycle cost estimates, and long-term investment plans with associated reactive and proactive replacement profiles), from initial acquisition and installation, during full-scale operation, through to repair, refurbishment and replacement.

MAINTENANCE PROGRAM OPTIMIZATION

In applying the various categories of maintenance to form an optimum maintenance program, our approach recognizes that the answer does not lie in the extremes:
• Exclusive application of Interval or Time-Based Maintenance is neither economically feasible or practical as it implies that all assets are equally critical (in the event of failure) and assumes staffing levels that can keep pace with extremely ambitious inspection and testing schedules.
• Predictive or Risk and Criticality-Based Maintenance, taken to an extreme, would require the performance of Asset Condition Assessments on all assets, regardless of criticality and without consideration for the costs.
Q

In applying the various categories of maintenance to form an optimum maintenance program, our approach recognizes that the answer does not lie in the extremes:

  • Exclusive application of Interval or Time-Based Maintenance is neither economically feasible or practical as it implies that all assets are equally critical (in the event of failure) and assumes staffing levels that can keep pace with extremely ambitious inspection and testing schedules.
  • Predictive or Risk and Criticality-Based Maintenance, taken to an extreme, would require the performance of Asset Condition Assessments on all assets, regardless of criticality and without consideration for the costs.

Rather, a well-orchestrated blend of the insights gleaned from Asset Health Indexing (for those asset classes deemed critical), practical realities related to warranties and legal / regulatory requirements, and engineering-driven technical requirements will reveal an optimal mix.

An anticipated outcome of an optimum Maintenance Program will include:

 

  • Adherence to test and inspection requirements for those assets deemed critical to the safe and reliable operation of the system,
  • Compliance with maintenance requirements tied to legal / regulatory mandates and system / equipment warranties, and
  • Establishment of a “Run-to-Failure” strategy for specific assets as an outcome of a comprehensive assessment of risk against Executive Management established risk tolerance threshold.
  • Manageable backlogs of Corrective Maintenance in compliance with pre-specified priority timeframes.

Embark on Solutions That Transform

 

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