lce risk-based asset management report

8/8/2019 LCE Risk-Based Asset Management Report

1/11

2009 Life Cycle Engineering, Inc. | www.LCE.com

Accounting for Risk in Your AssetManagement Strategy

Asset management has evolved significantly as machine technology has changed.Until about 50 years ago, corporate assets were run to failure. Then efforts to reducebreakdowns led to the birth of preventive maintenance. With the inception of the jetengine and the complexities of equipment that came with it, probability tables muchlike those used in the insurance industry were used to develop this maintenancestrategy. The relationship between age and risk in asset management was born.Following time-based maintenance, the airline industry once again drove forimprovement and formed the Maintenance Steering Group. Fault tree logic and theapplication of analysis yielded the dawn of reliability-centered maintenance.

Today, with a global market, shrinking availability of natural resources, rising fuel costand a weakening economy, increasing asset utilization and decreasing total cost ofownership are standard corporate objectives. Any organization planning to sustain a

viable value stream must optimize asset performance to survive these tough businessconditions. The focus on continuous improvement and Lean events to increase overaequipment effectiveness while lowering life cycle costs is now commonplace but thiapproach doesnt go far enough. Faced with the lack of technically qualified people, aaging work force, and shrinking margins, all industries must consider risk whenapplying resources to the management of assets.

A risk-based asset management strategy couples risk management, standard work,and condition-based maintenance to properly apply resources based on processcriticality. This ensures that proper controls are put in place and reliability analysis is

used to ensure continuous improvement. An effective risk-based management systemincludes an enterprise asset management or resource solution that properly catalogsasset attribute data, a functional hierarchy, criticality analysis, risk and failure analysiscontrol plans, reliability analysis and continuous improvement. This paper outlines thedevelopment and application of risk-based management to include life cyclestrategies.

Rx Whitepaper

CONTENTS

PAGE 1:

Executive Summary

Background

Introduction

PAGE 2:

Front End Loading Approach to

Asset Management

PAGE 3:

The Asset Management Plan

PAGE 4-10:

The Six Steps to Risk-Based

Asset Management

Background

Introduction to Risk-based Asset Management

> Only known

International Standard onAsset Management is theBritish Standards Institute

PAS55: 2008

Executive SummaryIf your asset management strategy is not risk-based, you may be spending money on symptoms of problems instead of theroot cause of your losses. For example, one company without a complete asset management strategy in place experienced limiting factor that impacted production capacity by 25% (to the tune of $30 million), yet had no control plan in place to addre

the cause, nor the key performance indicators and analytics to even know the problem existed. A risk-based assetmanagement system will help you appropriately prioritize how you spend time, money and materials fixing the most criticalproblems, provide the infrastructure for continuous improvement and help you meet your corporate business objectives,including regulatory compliance. This paper offers an overview of the three key elements of an asset management strategyand presents the six steps to building a robust, risk-based asset management program.


2/11


Risk-based Asset Management Process

As in capital improvements and project management, front end loading is a powerful methodology that helps you facilitatechange early in the life cycle without having a large impact on life cycle cost. Though it often adds a small amount of timeand cost to the early portion of a project, these costs are minor compared to the alternative impact on total cost ofownership. You can use front end loading to develop your asset management plan as a part of your corporate objectives.There are typically four stages in front end loading, with a gate between each that will not be passed through untilmilestones are all met. To craft an asset management plan, the stages would be Conceptual Idea, Feasibility Study,Design and Implementation, as illustrated below.

Front End Loadin A roach to Asset Mana ement


3/11


An asset management plan is created to meet your corporate objective pertaining to asset management policies andstrategies relating to the process flows, business processes, and infrastructure to support asset sustainment, utilization,performance measures and continual improvement. Conceptual Idea:Determine the background and objectives, such as interaction with other goals, and procedures and

plans. Feasibility Study: This study should outline the planning period, stakeholder interest, accountability and

responsibilities for asset management, and details of asset management systems and processes. Design: The design stage includes a description of asset configuration, identification of assets by category, justificatio

for assets, proposed levels of service, customer-oriented performance targets, other asset performance targets, andjustification for target levels of service.

Implementation: The implementation stage puts the project plan in motion, including resources, milestones andbudgetary constraints, asset age and condition. Additionally, there should be a focus on detailed infrastructureperformance measures.

The Components of an Asset Management Plan

Asset Operation Plan: The operation plan defines the boundary conditions, startup and shutdown cycles,

permissible operating ranges and methods, operating campaigns, and specific procedures for normal and

abnormal operating modes Asset Risk Plan: The risk plan defines the risk identification process, risk analysis, risk mitigation,

communication plan, and the use of the risk management table

Asset Maintenance Plan: The maintenance plan defines the process of mapping failure modes to failure

detection methods, contains rebuild / refurbishment criteria, assigning crafts and trades, determining frequency,

establishing durations, and level loading tasks created from the control plan.

The Asset Mana ement Plan


4/11


1. Build the Enterprise Asset Management database (a four phase approach):

Design (Functional Requirements Specification)

o Business Process Review Review your existing business processes and work flows against best

practice

o

Functional Requirements Create a cross-functional team to determine the objectives of each functionadepartment and define those specifications that are required to support the value stream. This table

provides an example of the different functional areas and the team members that need to help define

requirements.

The Six Ste s to Risk-based Asset Mana ement


5/11


o Specifications for RFP The next step is to convert the engineered specifications defined in the

functional requirements document into contractual language to be used to provide software vendors the

request for proposal.

Selection

o Demonstrations Select the top two or three proposals and ask the vendors to demonstrate how their

solution adheres to the engineered specifications and functional requirements.

o Grading Create a table that will help you evaluate and compare the solutions based on cost,

performance, reputation, etc.

Implementation Due to the duration of the implementation, the integration of workflows, business processes,

resource requirements, module mapping, etc., use both a Gantt chart and project management plan to ensure all

milestones are adequately captured and all resources are clearly accounted for.

o Database Development This is probably one of the most overlooked components of a successful risk-

based asset management system. For your system to meet corporate objectives, data for each asset

must be clearly captured based on its type and required attribute data.

Collection Data can be collected manually, with the aid of electronic media, and even digital imagery.


6/11


Cataloging Its critically important to create a functional hierarchy. The hierarchy will provide the level to which

work orders are assigned, bills of material are written, and failure analysis is conducted. It also allows for roll ups

to cost centers, providing total cost of ownership and budgetary analysis. Heres an example:

> Taxonomy derivedfrom ISO 14224:2006


7/11


Criticality Analysis The next step is to create an analysis of your equipment and the significance of failure to

work flows, business processes, value stream, etc. As the example below illustrates, this analysis includes such

considerations as environmental impact, safety, production, or reputation issues associated with the organization

o System Test & Validation Once you have collected the data, created the functional hierarchies and

entered all data into your system, test the system to make sure it meets the functional requirements you

identified in your RFP.

Customization

o Reports / Queries Evaluate whether the canned reports support your KPIs. Then develop any

customized queries or reports you need to manage your assets.

o Standard Operation Procedure This document is not the vendor-supplied Users Manual. Develop a

customized procedure that clearly outlines the integration of work flows and business processes to the

applicable modules.

o Training Develop training, both formal introductory training and interactive repetitive training. Both are

necessary to reinforce the methodology and application.

o Change Management Implementing a new system successfully requires a process of changing the

culture to accept and execute, such as the ADKAR model outlined below:


8/11


2. Risk and Failure Analysis

Risk analysis Identifying risk is the first step in risk management. Your analysis needs to include potential

sources of risk, the severity if uncontrolled, and the likelihood of occurrence. An example of a simple risk table is

presented below. Those items in the A category have the greatest risk and therefore receive the most attention

Failure analysis The next step is to conduct some formal failure analysis to determine the predominant failure

modes that will be addressed based on risk ranking. The complexity of the analysis will depend on the criticality

analysis. An example would be a Reliability Centered Maintenance approach to those most critical. This method

usually requires a cross-functional team and is fairly intrusive.

Then, a simplified failure mode and effect analysis can be created for the next logical grouping such as the one

presented below.

> FMEA Standards

such as:

MIL-STD-1629

SAE J1739SAE ARP5580AIAG FMEA-3

VDA V4IEC 60812

> Standards

such as

SAE JA1012provides

a guide to RCM


9/11


RCM vs. SFMEA

3. Risk Ranking

The risk ranking is a product of the risk priority number from the failure analysis and the criticality analysis. This ranking

enables you to deploy corporate resources to the assets and predominant failure modes that have the greatest risk of

impacting corporate objectives and the process value stream.

This process, along with the failure and risk analysis, allows for a risk-based inspection methodology such as that

depicted below:

> Risk-based inspectionmethods are outlined in

ASME PLC-3-2007


10/11

2009 Life Cycle Engineering, Inc. | www.LCE.com 1

Affiliation of Risk Ranking

o Reliability Centered Maintenance Most intrusive to define asset care task only a small percentage of asset

o Simplified Failure Modes and Effect Analysis Still risk based but not as intrusive most assets meet this

o

OEM recommended tasks not failure based but meet regulatory and warranty requirement if risk doesntjustify failure analysis

o Run to Fail no planned asset care task criticality and risk justify

4. Control Plans

Control plans consist of tasks that will be accomplished to mitigate or eliminate the risk of failure by targeting how

equipment is maintained and operated. Examples of control plans relating to maintaining include a preventative

maintenance task such as lubrication, deployment of a predictive technology such as ultrasonic testing, installing a

component using a precision installation procedure, or replacing a component using a bill of material. Examples of contro

plans relating to operating include procedures detailing start-up, shut-down, lay-up, and change-over. As in the Lean

principle of standard work, these must be defined and must be performed repeatedly in the same manner. Variations in

these plans will create risk.

5. Reliability Analysis

Measures must be established that define the key performance indicators supporting the

value stream and corporate objectives. Once the control plans are defined, planned,

scheduled, resourced, and then executed, historical data can then be coupled with work

order history, failure codes, material usage, etc. and then utilize probability modeling,

such as Weibull distribution, to gain an understanding of where the limiting factors reside

> Probability and statistics

for reliability are outlined

in the American Societyfor Qualitys Body of

Knowledge for Certified

Reliability Engineers

(ASQ.ORG)


11/11

2009 Life Cycle Engineering, Inc. | www.LCE.com 1

6. Continuous Improvement

Utilize tools such as root cause analysis to ensure triggers are clearly and formally defined, and define a process to

implement corrective actions. An example of an effective root cause analysis would involve the following:

A knowledgeable reliability engineer with good facilitation and coaching skills

A cross-functional team with specific insight into the problem

Time to address the problem (typically 2 to 12 days)

Agreement from all stakeholders to determine and correct the problem

Discipline to follow and complete the process

The correct tools and processes for each problem

DMAIC is another method familiar to Lean practitioners to ensure a formal process is in place to continually identifylimiting factors and then place effective controls in place to mitigate or eliminate the risk.

A risk-based asset management strategy provides the infrastructure for continuous improvement and insures that thetime, money and material used to address your limiting factors are spent targeting the overall risk to meeting corporateobjectives. This strategy has the added benefit of insuring regulatory compliance.

For more information about creating a risk-based asset management program, contact Mike Poland, Director of Asset

Management Services at Life Cycle Engineering. You can reach Mike [email protected] or 843-744-7110 ext.4208.

Conclusion

lce risk-based asset management report

Documents