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A New Perspective for Asset Lifecycle Management & Interoperability

A New Perspective for Asset Lifecycle Management & Interoperability

Sid SnitkinVice-President

ARC Advisory [email protected]

Fabricators

ConstructionContractors

Maint Service Providers

Shareholders

Repair Shops

OEMs

Engr & EPCs

Consumables

Financial Regulators

EH&S Regulators

Product Supply Chain

Design Maintain

Operate

Improve

OEMs & Parts Distributors

2© ARC Advisory Group

Established in 198680 EmployeesGlobal: US, UK, Germany, Japan, China, IndiaFocused on Manufacturing and Supply Chain

Sample of Manufacturing Company Members

About ARC Advisory GroupAbout ARC Advisory Group

3© ARC Advisory Group

Why are Improvements in ALM & Interoperability Important?

Why does the Traditional perspective on these topics limit improvement?

What would be a better model for ALM?

What is Interoperability and ALM Interoperability?

What do we need to do to achieve it?

Agenda Agenda

4© ARC Advisory Group

The Challenge/Opportunity Poor ALM & Interoperability are Costly! The Challenge/Opportunity Poor ALM & Interoperability are Costly!

A 2004 NIST study estimated the annual losses due to the lack of information interoperability within the North American Capital Projects Industry to be $15.8B (4.2% of installed asset cost). Almost $10B of this is owner/operator losses in the Operate and Maintain Lifecycle Stages (2.7% of installed asset cost = 2.7% ROA penalty).

A less formal survey I conducted sets annual losses due to poor information Interoperability between O/O Engineering and O/M groups to be 3% of Plant Revenues.

Maintenance studies consistently find “wrench time” to be 25-30%, due to poor access to information, waiting for parts, poor coordination with operations, etc. activities.

EH&S Compliance today demands:• Complete, Accurate information for all assets • Proper Operating and Safety procedures• Complete histories of how assets have been operated • Much more than money is at Risk!

5© ARC Advisory Group

Why are we in this situation? The Traditional Model for Asset Lifecycle Management Why are we in this situation? The Traditional Model for Asset Lifecycle Management

Operate/Maintain

Capital Costs (CAPEX) Net Income

ROA

÷

OPEXRevenues

EPC O/O

6© ARC Advisory Group

Why are we in this situation? What’s Wrong with the Traditional ALM Model Why are we in this situation? What’s Wrong with the Traditional ALM Model

Operate/Maintain

1. One-shot , Linear steps vs. cyclic, repeating activities2. Ignores Interdependencies that create a lot of the

problems3. Encourages isolated, one-off decisions vs. coordinated,

global investments. 4. More focus on Project (3-5 years) than O&M (30-50

years) 5. Business process, not Lifecycle Management Analysis

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Timely, Right Information

Maximum Availability

Optimal Utilization

X

X

Design

MaintainOperate

A New Perspective Performance Recognizing Dependencies A New Perspective Performance Recognizing Dependencies

X

Optimal Execution

Build

ALM Performance

• Product Range• Throughput• Quality• Product Unit Cost• EH&S Capability

• Product Mix• Prod Planning• Prime %• Material Cost• Labor Cost• EH&S

• Maint Strategy Mgmt• Maint Planning• Maint Efficiency• MRO Material Mgmt• Labor Cost• EH&S

• Financial • Profit, Ratios (ROA)

• Functional• Process EH&S• Personal EH&S• Customer Satisfaction• Cost, Quality, Delivery

• Financial • Cost• Cash Flow

• Functional• Personal EH&S• Work Quality• Schedule

• Design Accuracy• Release Mgmt• C/N Mgmt• Equip Selection• Material Specs

• Const Planning• Material Mgmt• Site Mgmt• Labor Efficiency• EH&S

Timely, Right Information

The Right Capability

Project Performance

Asset Performance

Optimizing Project and/or Asset Performance Requires Collaboration & Teamwork !

8© ARC Advisory Group

A New Perspective Information Flow Recognizing Cyclic Behavior A New Perspective Information Flow Recognizing Cyclic Behavior

Timely, Right Information

Maintain

Operate

Build How was it Bought & Built?

What should it be & why? What is it?

How should it be operated & why? How has it been

operated?

How should it be maintained & why?

How has it been maintained

Design

Calcs Models

Drawings Equip BOMs Vendor Info

etc.

ALM Information

Design IT Investments Impact Project & Asset Performance Design, Operate & Maintain Are Key to AIM!

Asset Info

Project Info

9© ARC Advisory Group

A New ALM Model Understanding the Asset Lifecycle A New ALM Model Understanding the Asset Lifecycle

What is a Lifecycle?• Lifecycle is not in the Dictionary• Life Cycle means the stages that an entity goes through in

one generation of its species continuing cycle of life

Humans Assets

Conception Concept

Fetus Project

Birth Commissioning

Child Pilot Operation

Adolescent Ramp Up

Young Adult Full Production

Middle Age Peak Performance

Senior Citizen Decline/Replace

Death Retirement

10© ARC Advisory Group

A New ALM Model Understanding the Asset Lifecycle A New ALM Model Understanding the Asset Lifecycle

Time

The stages in the life of one generation of

an asset

Cycl

es

du

rin

g t

he L

ifeti

me o

f an

Ass

et

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A New ALM Model Understanding Asset Lifecycle Management A New ALM Model Understanding Asset Lifecycle Management

What is Lifecycle Management?• Multiple Definitions - extend life, cycle phasing, etc.• Product Life Cycle – Match strategy to Stage Objectives &

Needs

ALM Stage Strategic Objectives

Concept Rapid, Reliable Evaluation/Comparison of Scenarios

Project Efficient, Timely Execution of Design, Source, Build Activities

Commissioning Coordinated, Comprehensive Validation of Design Compliance

Pilot Operation Mentored Training of O&M Personnel, Limited Production

Ramp Up O&M Skill Enhancement, Planned Increase in Output

Full Production Maximize Output/Revenue, Maintain Equipment

Peak Performance Optimize Asset Performance via Continuous Improvement

Decline/Replace Retain Performance, Manage Replace/Upgrade Activities

Retirement Maximize Salvage Value, Manage Removal/Disposal

12© ARC Advisory Group

A New ALM Model Elements of a Management Strategy A New ALM Model Elements of a Management Strategy

13© ARC Advisory Group

A New ALM Model Understanding the Asset Lifecycle A New ALM Model Understanding the Asset Lifecycle

Time

The stages in the life of one generation of

an asset

Cycl

es

du

rin

g t

he L

ifeti

me o

f an

Ass

et

KPIs

People & Processes

Technology

InformationKPIs

People & Processes

Technology

Information

KPIs

People & Processes

Technology

Information

KPIs

People & Processes

Technology

Information

KPIs

People & Processes

Technology

Information

KPIs

People & Processes

Technology

Information

KPIs

People & Processes

Technology

Information

KPIs

People & Processes

Technology

Information

KPIs

People & Processes

Technology

Information

KPIs

People & Processes

Technology

Information

KPIs

People & Processes

Technology

Information

KPIs

People & Processes

Technology

Information

KPIs

People & Processes

Technology

Information

KPIs

People & Processes

Technology

Information

KPIs

People & Processes

Technology

Information

KPIs

People & Processes

Technology

Information

KPIs

People & Processes

Technology

Information

KPIs

People & Processes

Technology

Information

14© ARC Advisory Group

A New ALM Model Elements of an ALM Strategy A New ALM Model Elements of an ALM Strategy

15© ARC Advisory Group

A New ALM Model Elements of a Plant ALM Strategy A New ALM Model Elements of a Plant ALM Strategy

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A New ALM Model An ALM View of the Traditional DBOM Processes A New ALM Model An ALM View of the Traditional DBOM Processes

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A New ALM Model Recognizing Some Key O&M Processes A New ALM Model Recognizing Some Key O&M Processes

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A New ALM Model An ALM View of All Asset Lifecycle Processes A New ALM Model An ALM View of All Asset Lifecycle Processes

Time

DesignDesign MaintainMaintain

OperateOperate

ImproveImprove

Bui

ldBui

ld

Report

Report

19© ARC Advisory Group

Info Exchange

StdsCommon

Data Models

Plug & Play

Software Std. Business Processes

Teamwork

FEED

Operate to Maint

EPC Handover

to O/O

Engr Handover

to O/M

O/M to

Engr

What is ALM Interoperability? It Depends Upon Your Perspective ... What is ALM Interoperability? It Depends Upon Your Perspective ...

20© ARC Advisory Group

Interoperability is More than IntegrationInteroperability is More than Integration

Integration

Interoperability

21© ARC Advisory Group

Making ALM Processes Interoperable Making ALM Processes Interoperable

Complementary Data Models

Compatible Tools

Consistent Processes

Shared Goals

Proc 1 ......... Proc N

Optimum ALM Performance requires Teamwork …ALM Interoperability Makes Teamwork “Work”!

22© ARC Advisory Group

Who is on the ALM Interoperability Team?Who is on the ALM Interoperability Team?

ALM Interoperability Team Charter

1. Anyone who meets one or more of the following criteria, should be on the ALM Team:• Create Information that may be used in ALM • Use Information that may be created by ALM

2. Whoever suffers the most “must” be the Team Leader … Owner/Operator must be the key Leader for ALM.

3. The Team Leader is responsible for establishing the ALM Interoperability environment and the rules as to how the game is played.

4. All Team Members are responsible for supporting the Team Leader by:

• using the environment

• playing according to the rules.

23© ARC Advisory Group

The O/O’s Internal ALM TeamThe O/O’s Internal ALM Team

DesignDesign MaintainMaintain

OperateOperate

RestoreRestore

Bui

ldBui

ld

Report

Report

Materials Mgmt

Project Mgmt

Financial

Mgm

t

MRO Purchasing

Pro

ject

Pur

chas

ing R

isk &

Compliance

Cons

tM

gmt

Operations Mgmt/Engr

Maint Mgmt/Engr

Reliability Engr

Process Engr

Des

ign

Engr

Star

tup

Engr

Operators

Maint

Techs

Internal ALM Team Members Need “Role-based” Access to All Relevant ALM Information!

24© ARC Advisory Group

The O/O’s External ALM TeamThe O/O’s External ALM Team

Fabricators

Construction Contractors

Maint Service Providers

Shareholders

Repair Shops

OEMs

Engr & EPCs

Consumables

Financial Regulators

EH&S Regulators

Product Supply Chain

DesignDesign MaintainMaintain

OperateOperate

ImproveImprove

Bui

ldBui

ld

Report

Report

OEMs & Parts Distributors

25© ARC Advisory Group

An O/O Model for ALM InteroperabilityAn O/O Model for ALM Interoperability

Fabricators

Construction Contractors

Maint Service Providers

Shareholders

Repair Shops

OEMs

Engr & EPCs

Consumables

Financial Regulators

EH&S Regulators

Product Supply Chain

DesignDesign MaintainMaintain

OperateOperate

ImproveImprove

Bui

ldBui

ld

Report

Report

OEMs & Parts Distributors

External ALM Interoperability

Platform

26© ARC Advisory Group

For a free copy of a full ARC report on this topic please contact the author at [email protected]

For information about ARC’s upcoming Asset Lifecycle Management Forum in Houston, please visit our web site

at www.arcweb.com and look under “Events”.

Thank You.Thank You.