Condition, Risk, and Cost: The Future of Asset Management
In an industry that is in charge of billions of dollars of assets, it’s crazy think that the current approaches to asset management are so far behind the curve.
For utilities, which manage facilities, pipes, lines, valves, meters, and many other physical assets, the need to adopt technology to prepare for the financial future couldn’t be greater.
Currently, asset management strategies are largely based on two approaches:
- Inventory your assets- understand what they are, where they are, how old they are, and any other basic data. Put that into a software system (GIS, CityWorks, Lucity) so they can be visualized and managed.
- Manage your assets (repair, replace, etc) based on their age– look at a typical or assumed end of useful life curve to figure out what to repair or replace. In other words, assume that an underground pipe is 50 years old and should be replaced in 10 years, because they last about 60 years total.
What’s the problem with this approach? It facilitates throwing massive amounts of money out the window! If an asset is replaced before it’s end of useful life, or isn’t replaced before a major failure, it will cost your organization money that could be prevented with strategic asset management approaches.
So what is the winning strategy? Managing your assets based on their condition, risk, and cost. What does that entail?
Condition– In other words, understanding the true condition of an asset before deciding how to repair or replace. Forget just relying on age- understand the condition (good or bad) of it before making a decision. Do this by looking at the age, the composition, the conditions surrounding it, and any other factors that could extend or shorten it’s like. Great example is an old car- do you need to replace an old car in great condition, just because it’s old?
Risk- Assets fail, so make sure to manage the highest risk assets. Which assets are critical to a system? Which assets would cause great financial impact to an organization if there was a failure? Prioritizing asset management based on the highest risk assets will ensure major risk reductions and optimization of repairing and replacing the right assets.
Cost– What are the costs to replace, reduce risk, and to optimize decisions? Organizations need to be able to quantify this for planning and day to day purposes. Speak the language that all of world speaks- money!
Using these principles for asset management will help organizations make smarter decisions, reduce risk, and save money.