The case for a lifecycle approach to managing physical assets

  • July 30, 2014
  • Feature

By Warren Wilson, Ovum

Enterprises in asset-intensive industries such as utilities and oil & gas spend many billions of dollars on facilities and equipment: power stations and energy transmission/distribution networks; drilling ships, fracking equipment, refineries, and gas processing plants; and much more. Many of these assets are aging. They have been in place for decades and need increasing attention and investment to continue to function properly. Even so, few companies have deployed software that can accurately manage all physical assets across the organization. In a recent survey conducted as part of a consulting engagement with EMC Corp., Ovum found that about 60% of companies in the utilities, exploration & production, and oil refining/natural gas processing industries have installed software to manage asset and/or project information or performance. But few of these applications are comprehensive, company-wide systems. In fact, most respondents said they have three, four, or even five separate asset management applications, each covering a portion of the business. And few of these systems can capture and manage all relevant data across the asset’s lifecycle. This leaves many companies unable to quickly answer basic questions such as the locations and condition of all of their assets. They cannot begin to rigorously analyze whether they are using their assets to maximum advantage; whether they are spending too much or not enough on repairs; whether they are holding too much or too little in inventory. Such analysis can be performed manually, but that is slow and expensive and cannot easily be performed “on demand” to answer new queries as they arise. Such rapid analysis is becoming more important, for a variety of reasons. First, power grids and drilling operations must operate continuously. When a power outage occurs, it can be dangerous as well as costly. When a drilling rig is down, leasing fees keep accruing at the rate of tens of thousands of dollars per day – much more if the rig is offshore. Adding to the need for better asset management tools are factors including globalization, increasing competition, longer and more complex supply chains, and volatile markets. Asset lifecycle information management (ALIM) is an emerging application category that offers a solution. To merit this label, such applications must have two broad capabilities. First, they must cover all significant assets – anything that could positively or negatively affect the company’s operational efficiency, financial results, and risks. Second, they must be able to capture data across the assets’ lifecycle, from design through eventual decommissioning. This capability must span both structured, numerical data about costs and performance and unstructured data such as design and as-built drawings, specifications, standard operating procedures, operating conditions, service history, and all relevant paperwork – contracts, correspondence, work orders, change orders, and the like. Applications this comprehensive are neither simple nor inexpensive. They must be carefully planned, with discrete stages, clear milestones, and appropriate metrics to ensure minimal disruption, on-time completion, and rapid time-to-benefit. Typically, enterprises will start from an immature position in which most asset information is unmanaged. Much of it may be paper-based or, if it is digitized, isolated in silos. Few companies will have identified specific goals in asset lifecycle information management. That should be the first step – identifying an objective such as eliminating silos, or enabling mobile and/or plant-wide access to data. The objective should have clear boundaries – focusing on an individual plant, department, or geographic area – to simplify defining an adoption methodology and testing it at a small scale before deploying it more widely. As that process evolves, enterprises will move toward greater standardization and integration of asset data. They can define increasingly sophisticated success metrics and begin to train managers and other users of the system.  Over time, their asset information will become more complete and powerful – for example, by incorporating real-time data and predictive analytics – and available to a larger share of the workforce. Properly carried out, this process will bring measurable benefits all along the way and a substantial payoff. Properly designed, an application lifecycle information management system will provide not just an accurate and trustworthy foundation for asset management itself, but one that also will enable optimal maintenance, repair, and overhaul procedures; feed directly into operations and financial management systems; and facilitate supply chain management by providing better visibility into performance, time to failure, asset condition, delivery times, and the like. In our survey, only 11% of respondents have fully deployed such a system; another 7% are trialing one. But this group reports highly encouraging results. Some 78% of respondents are completely or mostly satisfied with the benefits they have achieved in improving overall asset value. Some 77% are completely or mostly satisfied in terms of reducing overall asset costs, improving information value, and reducing service and repair times, among other business benefits. About two-thirds of the adopters said they were completely or mostly satisfied with their investment in terms of technology-related factors such as ease of deployment and ease of integration with enterprise applications and analytics tools. Today’s business conditions make the asset lifecycle information model a sensible, even necessary, one. Companies that do not pursue a lifecycle strategy face a number of serious consequences. These include impaired operational visibility; greater regulatory risk, which can lead to penalties and expulsion from markets; and higher costs, project delays, and reduced process stability, all of which erode the company’s competitive position. We believe that companies in asset-intensive industries should give the ALIM model careful consideration over the next several years. Companies that embrace it will reap the benefits, while those that do not risk being left behind.

Managing Assets for Maximum Performance and Value

Good asset management is crucial in industries such as utilities and oil & gas. This infographic tells the story of what was learned from an Ovum survey that explored the importance of managing physical assets throughout its lifecycle, from design through end of life. View the Infographic below to learn more.

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