Challenges for Asset Management - Dr Penny Burns

Challenges for AssetManagement An exploration of possibilitiesDr Penny BurnsAMQ InternationalVirtual Asset Management Communitywww.amqi.com

The World of Asset Managementhas changed Yesterday– The world was different. How different? Today– Where are we now?– Where are we going?– How will we get there?

Yesterday Emphasis on individual assets and shorttermToday Emphasis on asset systems and long termThis has made asset management more holistic inapproach

Yesterday Our focus was project based (eg building abridge)Today Our focus is program based (decisionscenter on the whole lifecycle of assetcollections eg a transport corridor)

Yesterday We considered design and constructionoptionsToday We consider design & construction ANDoperations and maintenance, renewal andreplacement, and eventual disposal asparameters

Yesterday Work was mostly in-houseToday There are more options; e.g. buying servicesrather than assets, contracting out,integrated facility delivery

Yesterday Finance was by government borrowing ortax revenuesToday We have PPP/PFI of incredible variety (andcomplexity)

Yesterday Our approach was piecemeal and ad hocToday We are moving towards a process which isholistic and systematicIn today’s world, input and feedback are essential

So, today we are SYSTEMIC and SYSTEMATICWhat does this mean for assetmanagement challenges?

Strategic Challenges Alternative arrangements for facility(Delivery; Operations & maintenance; Systemsoperation & maintenance)Presents new challenges How do we determine system objectives? How do we evaluate the options? How do we measure and monitor theoutcomes?

Integration Challenges Integrating functional and conditiondriven requirements– Functional lives are usually far shorter than physicallives- and less predictable Integrating asset classes and sectors– Services are not provided by one asset class orsector alone – eg rail services with public track,private rolling stock Linking appropriate management anddecision support systems – the problem of reintegratingseparate business units

Measurement Challenges Identifying appropriate indicators– The things that REALLY matter for servicedelivery (not the things that are easiest tomeasure)– Skills at interpreting indicators in relatedgroups rather than as isolated measures Establishing comparative baselines– Where the context and objectives arecomparable

Analytic Challenges Improving data collection and management– Collecting less, updating more Constructing and evaluating alternativelifecycle scenarios– The maintenance/life trade-offs– The maintenance/operation cost trade-offs– The maintenance/service quality trade-offs Incorporate flexibility– Life is changing, models need to change with it

Institutional Challenges Effecting coordination between orreconfiguration of silos– E.g. cross functional groups or assetmanagement co-ordinators working from acorporate perspective Defining roles of public and privatesectors– What is core? (Strategy, research, datamanagement?)

Conceptual Challenges Clarifying objectives– Defining, measuring and monitoringservice levels Clearly linking activities to outcomes

Accounting Challenges Activity based costing– Few can say how much any activity, any service, iscosting. Without this it is not possible to make soundservice decisions – and hence sound assetmanagement decisions(Strategic Asset Management # 111, April 4 2003) Commitment budgeting– Short term financial planning requires more thansimply knowing what expenses have been accrued, itmeans knowing what have not yet been accrued, buthave been committed

Costing Challenges Valuation– Despite much attention, some basic issues still needresolution – e.g. not merely the cost but also the valueof community obligations, the extent to whichreplacement costs builds in inefficiencies, etc– Estimation of value from broad 1-5 condition scales isstill a hit and miss business Depreciation– We need depreciation measures that recognise the fasterdegradation that occurs when maintenance isinadequate

What else?And where to next?Time to Vote! What issues are very important AND youwould like to be involved in their solution? Which issues are pretty important and youwould be pleased if someone else tackledthem? Which are less important, solved, or well ontheir way to solution?

Collaborative Practical Research The web presents the opportunity for goodpractical ideas to be developed by groups ofpeople who may be quite distant from eachother geographically– But close in interest and commitment Idea exchange by email or internet is timeeffective – even more so if the exchange isformally facilitated

I shall return! Virtually, that is. Think about the challenges you are facing. I shall write shortly to find the challenges that youwould like to commit to finding a solution to And, where there are viable groups sizes, I willfacilitate research exchange through privatediscussion forums Start thinking! Penny Burnspenny@amqi.com