Asset Management Life Cycle: Guide To Follow in 2023

The Life Cycle of Asset management is everything that happens with the asset, from the idea with which it is created or incorporated into a project until its final disposal. This life cycle is associated with the "Life Cycle Cost," which is the sum of all the costs assignable to the asset (direct and indirect, variable and fixed).

The component stages of the life cycle of an asset include:

Business plan

• The initial idea and preliminary studies.

• Evaluation of the full context of the project, including studies of technical feasibility, economic feasibility, and environmental impact.

• Planning of all the stages that the project will cover.

• Draft, including all the necessary basic engineering.

• To have a detailed project and process design.

• Execution of the project according to the planned stages.

Buys

• Purchase of the necessary elements and eventual manufacture of the same and installation of all the elements according to the project.

Operation and Maintenance

• Commissioning, testing of all installations and their acceptance.

• Operation and Maintenance of facilities, use, or consumption of goods or services.

Provision

• Evaluation of use alternatives, including possible recycling or the possible elimination of the installation elements.

• Discard, recycle, or sell the installation.

On the other hand, Asset Management is the activities through which the organization manages its physical assets throughout its entire life cycle, their interaction with the other company assets, and in the context of their operation. It starts with defining the business objectives and going through the strategies of the assets to optimize all the resources to maximize the results.

Over time, documents and regulations were developed that guide the implementation of a Physical Asset Management System, which establishes an approach that starts from the strategy that takes into account said management throughout the life cycle of the assets. The main document used as a reference worldwide is the ISO 55,000 Standard – Asset Management, and the following image summarizes its approach.

Asset Management and Life Cycle

All Companies carry out actions to work with their physical assets and obtain benefits from their reliability. Unfortunately, experience indicates that these actions and procedures, in general, are isolated and disorderly in such a way that the Companies do not manage to obtain a maximum return on their assets.

One of the most difficult questions for Companies is whether asset management should be cost-oriented or results-oriented. Many companies view asset management as a cost, considering only management in the Operation/Maintenance stage of the asset.

On the contrary, focusing on results implies having a long-term vision, where all stages of the asset's life cycle are considered, making sustainable management possible.

In this way, instead of thinking about the need to "reduce the maintenance costs of an asset," a medium and long-term vision forces us to think about the "maximization of the Life Cycle Benefit of an Asset (BCV)," which will arise from the difference between the Life Cycle Income (ICV) and the Life Cycle Cost (CCV).

Life Cycle Cost Calculation

The Life Cycle Cost is calculated by adding all the costs that are incurred throughout the life of the asset:

CI: Investment cost (machines, buildings, streets, facilities, tool parts, maintenance equipment, documents, and training, among others)

CO: Cost of Operation (staff, energy, materials and supplies, transportation, staff training, and quality)

CM: Maintenance Cost (maintenance personnel and materials and spare parts, both for proactive, corrective and redesign, in addition to the training costs of this personnel)

CP: Shutdown Cost (loss cost due to asset malfunction).

Because this cost occurs over time (several years), to calculate the total cost, the time value of money must be considered through a factor N= (1 + r)n – 1 rx (1 + r)n, where r: interest rate and n: number of years.

CCV = CI + N (CO+CM+CP)

Reliability by Design

When do you start thinking about Maintenance as we develop the Life Cycle? And on the other hand, when should we start thinking about Maintenance?

Normally, companies think about maintenance management when the equipment and facilities are already in operation. In other words, operations and maintenance personnel are rarely involved in a structured way in the early stages of the asset life cycle (Business Plan and Asset Purchase). This lack of use of the know-how of maintenance and operations personnel causes them to miss opportunities to improve the maintainability of assets and, consequently, to optimize costs throughout the asset's life cycle.

It is in the early stages of a project where decisions are made that determine most of the life cycle of the facilities (for example, when deciding on the use of a maintenance-free battery over one where the addition of electrolyte is required to some frequency).

To make decisions in such a way as to maximize the result (income minus cost) of the asset throughout its life cycle, the participation of those people who have the most knowledge about the operation and Maintenance of the equipment is essential.

A sustainable asset design must be developed through the structured and systematic application of a method that ensures the evaluation of all life cycle costs by all those who know the asset.

Operational Reliability

In the context of asset management, it is necessary to be clear about how Maintenance plays a role in the organization's economy.

On the one hand, we have the Direct Costs, such as labor, subcontracts, spare parts, materials, training, and administration expenses. All these are those that appear in the maintenance budget. However, they are not the only maintenance costs.

On the other hand, we also have Indirect Costs, which are those that are generated by the lack of operational reliability; among them, we find those derived from production losses, poor quality of products or services, delays in deliveries, capital costs for having excess stocks, energy losses, security problems, among others. In general, indirect or hidden costs are five to ten times larger than direct or visible costs.

In the Life Cycle Stage corresponding to "Asset Maintenance," it is important to make decisions considering the following concepts:

• Consequences of not carrying out Maintenance (safety, environment, operational, non-operational).

• Available alternatives of maintenance strategies (predictive, preventive, fault finding, redesign, no scheduled maintenance).

• Technical feasibility of the maintenance task (is it technically feasible to carry out?).

• Risk assessment (will the maintenance strategy reduce the risk below the maximum allowable level?).

For an adequate definition of maintenance strategies, different structured methodologies are available to evaluate all these concepts, ensuring that the appropriate maintenance strategies are defined at the appropriate time (RCM2 - Reliability Centered Maintenance, MTA - Analysis of Maintenance Tasks, among others).

This is done by evaluating each possible cause of asset failure, the maintenance strategies that can be defined, and compared with the evaluation of the consequences if none are carried out. Depending on the consequence, in some cases, this evaluation is financial (operational or non-operational consequences). In others, the risk has to be statistically evaluated = probability x consequence (consequences for security or the environment).

Life Cycle – Final stage of the asset

The life cycle of an asset does not end with its use and Maintenance, but rather its disposal stage (withdrawal from use and final decision on sale or disposal as waste) must also be considered.

Although it is the last stage, it is not of minor importance since it entails the evaluation and decision regarding when to dispose of the asset and in what way. This decision involves the costs of use and Maintenance of the asset and the income from sale or disposal cost.

Just as in the Use and Maintenance stage of the asset, the funds associated with carrying out or not carrying out maintenance tasks are evaluated, and an evaluation of the costs associated with the asset throughout the entire life cycle must be carried out to assess the moment in which it is economically convenient to dispose of it (optimum useful life). In other words, calculate the point from which it costs more to operate and maintain the asset than to dispose of it and buy a new one.