Maintenance is not Asset Management – Or is it? (Part III)

Created on February 26, 2016
Last updated on December 14th, 2021 at 8:26 am by Asia Gelker


The last blog (Part II) finished with the need to understand the relationship between maintenance and asset management.  To achieve a clear understanding, it would be necessary to the various phases of an asset’s life cycle.  The following diagram illustrates a common 8 part life cycle.

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If we would begin by looking at the reason an asset is created/ procured, it would begin with:

  1. Investment Planning (Needs and Feasibility Assessments for Assets) This phase of an asset’s lifecycle begins with the discovery that there is

(1) a new product or service that can be produced and sold,

(2) a greater demand for an existing product or service, or

(3) another facility location required to meet customer needs.

The demand for new assets may also relate to meeting increased regulatory requirements for existing assets.

The investment planning will likely involve the following studies:

  1. Strategic Planning
  • The company direction is to diversify, expanding into new markets.
  • The company direction is to expand their share of an existing market.
  1. Customer Needs
  • The customer demands modifications or enhancements to existing products or services that requires new assets.
  1. Regulatory Requirements
  • There may be new regulatory requirements that require extensive modifications (new assets) to existing buildings, facilities, processes, equipment, etc.
  1. Project Definition (Design of Assets)

In this phase of an asset’s lifecycle, the scope of the asset(s) is defined. For the asset to meet the market/ customer demand (identified in Phase 1), it will need to meet certain requirements. There are reliability requirements (how long the equipment operates in between maintenance periods), maintainability requirements (how long it takes to restore the equipment to service), projected life and total cost of ownership (TCO) requirements that the assets will need to meet to support the business requirements identified in Phase 1.

It must be kept in mind that the asset at this phase of its lifecycle is still only a document, a drawing, or a blueprint. There have been no major costs (other than studies) done to this point. In fact, the majority of the textbooks written on lifecycle design and costing show that up to 90% of the lifecycle costs are specified (knowingly and unknowingly) by the design engineer. However, the same 90% of asset lifecycle costs are not incurred until the asset is in its operational and maintenance phases of the lifecycle.  In fact, the projected maintenance requirements (manpower, materials, etc.) are established at this time.  Eventually, these projections are to be turned over to the maintenance department for requesting additional manpower and adjusting spare parts levels when the new assets are commissioned.   Most companies (who do not listen to the design engineer) commonly overlook this fact and fail to achieve the profitability projections in the Phase 1 business study.  This is due to the increased maintenance requirements being neglected, which (once the asset is commissioned) results in a shift toward reactive maintenance and increasing the overall maintenance costs (labor and materials).

There are three calculations a design engineer will focus on during the design of an asset. They are:

  1. Reliability – A design specification that determines the period of time an asset will perform its intended function without failure. This is typically measured by the Mean Time Between Failure (MTBF) calculation.
  2. Maintainability – A design specification that determines the length of time it takes to restore an asset to its functional state once a failure has occurred. This is typically measured by Mean Time To Repair (MTTR) calculation.
  3. Cost-Benefit Analysis – A design study that shows the profits required from an asset versus the cost the asset will incur throughout its lifecycle. It may be measured by ROIC or ROA calculations.

How do the assets move from the drawing board to the plant floor? How do these calculations impact the asset during the rest of its life? How does a company maximize their return on investment in the asset?  This will be discussed in the final blog in this series.

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