Asset Performance (and Risk) Management

Even a small improvement to the reliability, maintenance and operational efficiency can have a significant financial impact on organisations. This fact is especially true for asset-intensive companies operating in the manufacturing, energy and maritime industry.

Many service providers have explored the opportunity to support companies in finding efficiencies. Lloyd's Register, for example, has performed maintenance strategy and optimisation studies for Floating Production Storage and Offloading (FPSO) operators around the world?(LR, 2020)?(LR, 2020). To advance the industry’s understanding of how maintenance activities are impacting companies, LR has aggregated data from multiple studies, and the insight sends a powerful message to operators.

From these studies, LR has estimated that, on average, an FPSO has 50,000 equipment items. With this initial information, it is possible to assess the number of work orders over the platform life, which will be around 750,000 maintenance activities. It is possible to extrapolate this metric to calculate the maintenance hours, which would be, on average, 9,000,000 hours. This information leads to the estimation of the total maintenance expenditure, which is around ￡2 billion over the asset life. If companies target a marginal saving of 1%, this strategy will represent cost savings of ￡2m over the asset life or ￡80k every year. And, for this specific type of oil and gas platform alone, a potential marginal saving of 1% could yield the oil and gas industry over ￡450m in financial gain for operators.

This evidence clearly shows the ambition companies have around exploring savings is warranted, and it can yield significant financial value for them. Beyond the financial incentive to pursue opportunities to increase efficiencies, many other gains are important by-products. For instance, there will be a direct increase in safety levels caused by the reduction of maintenance activities, reducing the exposure of maintainers to risks. So, the return on investment is huge, way beyond finances.

Another insight extracted from LR's analysis shows that the net optimisation of planned maintenance activities is, on average, 30%. The data suggest that, for specific systems, companies are performing more maintenance activities than required to meet availability and reliability targets. Besides performing unnecessary maintenance, research (NASA, 2000) suggests that, in many cases, over-maintaining an asset can increase the overall failure rate by introducing a change into an otherwise stable system. More importantly, the same research points out that between 77% and 92% of failures occurred on a random basis. So, apart from potentially introducing more faults through excessive maintenance, the existing maintenance strategy, based mostly on preventative maintenance, wouldn’t prevent a large proportion of failures from happening.?

Existing software solutions such as enterprise asset management solutions are generally not equipped with the right methodologies to support an informed decision-making process. They lack the asset and risk framework that will empower operators to prioritise maintenance and improve operational efficiencies. Hence, a new market requirement has appeared to support the ambition companies have to improve their operational and maintenance expenditure – Asset Performance Management.

Asset Performance Management defined by Gartner (Gartner, 2020) is:

Asset performance management (APM) encompasses the capabilities of data capture, integration, visualisation and analytics tied together for the explicit purpose of improving the reliability and availability of physical assets. APM includes the concepts of condition monitoring, predictive forecasting and reliability-centered maintenance (RCM).

Industrial players have been introducing solutions with different flavours around this framework. Some companies have been focusing on extending best-in-class risk management methods and offering a more integrated approach. Other vendors are focusing on developing new solutions which take brand-new ways of calculating and managing risks. The latest technology, like big data, artificial intelligence and cloud computing, is powering the latter solutions.

This article is the first one in a series where I explore the existing landscape of Asset Performance Management. The next article starts by investigating why asset performance management is important.