Tam, Allen S B; Price, John W H --- "Asset value" [2006] MonashBusRw 46; (2006) 2(3) Monash Business Review 46

Asset value

Allen S B Tam, John W H Price

Asset managers need a framework to assist them to optimise the lifecycle value of their organisations assets, write Allen S.B. Tam and John W.H. Price.

Understanding the cost of maintenance is critical, especially when operating complex assets such as aircrafts and chemical plants. However, the return on maintenance investment is not easily quantifiable in a monetary sense and thus is often not valued as a return on investment. If invested in and performed properly, maintenance can effectively reduce operational risks and potential losses (costs) through unwanted breakdowns.

What is needed is an asset management framework for optimising maintenance investment decisions to align them with enterprise business objectives. Capital intensive complex assets often consist of various systems and components manufactured by different Original Equipments Manufacturers (OEMs) and vendors. Since it is undesirable to stop operation for maintenance, asset operators plan maintenance to minimise disruption to normal operation and at the same time seek not to jeopardise the overall asset’s safety, reliability and operational risk.

How frequently maintenance is carried out is normally governed by the maintenance intervals which are determined by the OEMs during the design stage. Since the physical operating conditions and design specifications of each piece of equipment are diverse, deterioration due to usage and operating incidents will be different. As a result, the maintenance specification as well as maintenance intervals of each system may not be the same. For industries that have strict regulations on safety, the respective maintenance requirements are even tighter. Adding on to the complexity, the maintenance function requires support of other resources such as facilities, equipment, human resources and spare parts.

This research proposes an integrated and generalised framework (Figure 1) which aims to optimise the maintenance program at any period within the asset’s life-cycle. The proposed framework can assist in formulating models for optimising the operation and maintenance of the asset.

The three decision dimensions for asset management considered here are defined as follows:

1. Operation dimension is achieving organisation output objectives for the asset.

2. Assurance dimension is achieving compliance with regulations, safety and company quality requirements.

3. Economic dimension is achieving most return without exceeding enterprise monetary allocation.

Since the decision dimensions have direct or indirect relationships to one another, the tradeoffs between these dimensions are to be analysed such that the enterprise return on investment is optimised. This research takes the view that each decision dimensions consists of a family of parameters which can eventually be quantified to monetary values. Through quantifying these decision dimensions, models can be formulated and optimisation can be carried out simultaneously using a consistent unit which we term the ‘value per unit time’ approach.

Table 1a Asset database

* Key: The IT systems have been given generic names – MRP (Materials and Resource Planning); CMMS (Computerised Maintenance); OEM (Original Equipments Manufacturers).

The asset database provides the basic reference of physical properties and asset functions so that strategic decisions can be made at senior managerial level. In this table, the data is categorised into decision dimension relevance, then the uses and importance of each data source are discussed; in the final column a priority ranking is given. Detailed planning of outages is not regarded as an enterprise significant factor, but total cost of an outage is enterprise significant. This table was developed with information sourced from interviews, workshops and internal reports from a wide range of industries including defence, aviation, power, manufacturing and research.

Table 1b Asset database (cont)

* Key: The IT systems have been given generic names – MRP (Materials and Resource Planning); CMMS (Computerised Maintenance); OEM (Original Equipments Manufacturers).

The asset database provides the basic reference of physical properties and asset functions so that strategic decisions can be made at senior managerial level. In this table, the data is categorised into decision dimension relevance, then the uses and importance of each data source are discussed; in the final column a priority ranking is given. Detailed planning of outages is not regarded as an enterprise significant factor, but total cost of an outage is enterprise significant. This table was developed with information sourced from interviews, workshops and internal reports from a wide range of industries including defence, aviation, power, manufacturing and research.

Figure 1 Optimisation framework

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Cite this article as

Tam, Allen S B; Price, John W H. 'Asset value'. Monash Business Review. 2006.; Monash University ePress: Victoria, Australia. http://www.epress.monash.edu.au/. : 46–47. DOI:10.2104/mbr06046

About the authors

Allen S B Tam

Allen S.B. Tam is a PhD candidate in the Department of Mechanical Engineering, Monash University. He received his BE in Aerospace Engineering with 1st class honours from the University of NSW.

John W H Price

Professor John W.H. Price is in the Department of Mechanical Engineering, Monash University. Before joining the university, he was a senior engineer in the electricity industry.