We introduce the strategic, tactical, and operational decision-making with the 3 fundamental asset lifecycle management models.
How do you visualize new concepts and ideas? How does your thought process flow when you are trying to understand new knowledge? In many disciplines, models are the main tool. By breaking down ideas into individual components and showing the relationships between them, models make complex concepts easier to grasp.
Similarly, the three fundamental models in asset management represent the dynamics of processes within the discipline, the organization of the asset management system’s components, and the use of asset qualities to create added value for the business.
In this article, we provide a comprehensive overview of the Concept Model, the Asset Management System Model, and the Capability Delivery Model, examining each component in detail. But first, let’s explore the purpose of models and their importance in asset management.
Asset management as a discipline encompasses elements of art, innovation, strategic thinking, and planning. It also involves constant interaction with technical elements and the collection of asset data. Models are crucial tools for making decisions based on this collected information, ensuring that decisions align with stakeholder objectives.
A model is a human construct designed to help us better understand abstract concepts and present them as real-world systems. Models are developed for convenience, allowing us to more easily comprehend the abstract visions we aim to convey. Each model includes an information input, an information processor, and an output of expected results.
“All models are wrong, but some are useful.” ~ George E.P. Box
The Asset Management Council, a membership-based, non-profit organization, has created three models to explain the ‘Why?’, the ‘What?’, and the ‘How?’ of asset management. These models represent the three levels of asset management:
Specifically, the Concept Model introduces strategic decision-making, the System Model focuses on tactical decision-making, and the Capability Delivery Model addresses operational decision-making.
Asset management models form a complete system for managing the lifecycle of organizational assets, using various criteria to maximize:
The three models developed by the Asset Management Council combine to form a comprehensive framework, serving as a benchmark for professionals and organizations.
The Concept Model represents mainstream thinking in the industry. It serves as a mental framework for handling the complexity of asset management and as a structure through which the main parts of the discipline can be:
Before diving into the Plan-Do-Check-Act cycle, we must examine the influence of stakeholders. Stakeholders play a role in all models of the Asset Management Council, occupying the upper levels.
The Concept Model exists within the ‘Stakeholder Circle,’ which regulates all decisions and actions performed by the organization. Stakeholders encompass and influence all asset management activities, and organizational decisions or activities may affect these individuals and their actions.
In asset management, stakeholders can be internal or external, including:
The Circle sets requirements to guide the pursuit of organizational goals. This information can be documented in a ‘Statement of Stakeholder Needs,’ addressing all mandatory requirements and the needs of different stakeholder groups. Expectations may include, but are not limited to:
The diagram of the Asset Management Concept Model represents the learning and improvement cycle developed by Dr. Walter Shewhart. This cycle, foundational to continuous improvement, includes four processes: Plan, Do, Check, Act. Each process is connected to principles such as Output Focus, Capabilities, and Level of Assurance.
The cycle begins with recognizing the need for change and asking, “What data indicates a change is required?” This involves analyzing available information from various sources, including key asset parameters, internal and external stakeholders, the supply chain, and other critical points.
In the ‘Do’ stage, the planned change begins to take place. Teams involved in the process must track and record every action, as specific actions may be crucial for the success or failure of the new process.
During this phase, it is essential to explain how the change was made and managed. This includes detailing the step-by-step plan followed, major decisions made, problems faced, and risk factors mitigated.
The ‘Check’ stage focuses on monitoring progress towards the change. Organizations should track the effectiveness of the plan and compare data from different stages of implementation to determine if key objectives are being met. It is crucial to compare achievements with the plan and note any expected or unexpected changes.
The purpose of this stage is to systematize lessons learned and document best practices. Key questions to address include:
By the final stage of the Plan-Do-Check-Act (PDCA) cycle, your organization should have planned the change, executed the plan, analyzed the progress, and documented the key outcomes. The last stage, ‘Act,’ focuses on how to respond to insights gathered from the previous three stages.
You have several options: adopt new practices, abandon ineffective techniques, or even run the PDCA cycle again to gather more knowledge before deciding on your next steps. If you find no significant change, investigate the root cause. It might be that you weren’t collecting the right type of data.
Core activities in the ‘Act’ stage include:
The Shewhart system emphasizes continuous improvement until all variations in results are minimized. Successful asset management involves thorough planning, checking, and acting on deviations. In contrast, organizations that fail often neglect the planning part, focusing too much on the first two stages and ignoring the Check and Act phases.
The four principles of asset management synthesize the objectives stakeholders set for themselves:
ISO defines the fundamentals of asset management in the ISO 5500X standards: Value, Alignment, Leadership, and Assurance. Assets have potential or actual value to the organization, existing to provide this value to the business and its stakeholders. Management practices aim to transform organizational goals into technical and financial solutions, plans, and activities by utilizing assets’ capabilities, creating alignment, and ensuring assets fulfill their intended purpose. Leadership and workplace culture are critical to realizing value. The absence of any of these elements reduces the value assets carry.
Every organization and its assets must aim to achieve specific results. The first principle of the Concept Model addresses the question: “What is the asset used for?” The focus is on delivering target output consistent with the organization’s objectives, usually set out in external agreements.
Output can be defined in various ways but always affects another principle: capabilities. Methods of measuring results must be coordinated to ensure clarity on whether the production or service has been delivered.
The essence of asset management lies not in the physical asset itself but in its capabilities. According to ISO 55000, “Assets exist to provide value to the organization and its stakeholders.” Capabilities are the means through which the business accesses this value.
An asset’s perceived ability depends on its assigned purpose. For example, chairs are made for seating, but stakeholders might use them as ladders to replace lightbulbs, changing their purpose and capabilities.
Asset capabilities have three aspects: the capabilities themselves, people’s competencies and skills, and the devices, equipment, and processes owned by the organization.
The third principle, Level of Assurance, estimates the likelihood that an asset will fail to meet organizational goals under certain conditions while balancing risk, finance, value, and quality.
Level of assurance is associated with risk—the probability that when X happens, Y will follow. Risk is a key concept in asset management, potentially arising from various causes, such as financial markets, unsuccessful projects, regulatory failures, accidents, natural disasters, and human error. Risk directly relates to the value an asset produces. Asset management strives to optimize the relationship between cost, risk, and outcome against desired performance to achieve organizational objectives.
The fourth principle, Learning Organization, is heavily influenced by workplace culture and management style. It evolves from business attitudes and aspirations, transforming assets from mere equipment and processes into valuable property of the people.
This principle is challenging to instill in an organization’s mindset. Members of a learning organization continuously seek ways to:
People in such organizations consciously claim ownership of assets and actively participate in decision-making.
When we combine the Stakeholders Circle and the four principles of asset management through the Plan-Do-Check-Act process, we get the Asset Management Concept Model. The model’s mechanism consists of four main steps:
The mechanism operates through the Plan-Do-Check-Act process. Within asset management models, the Concept Model involves reviewing and improving the plan. The next step to mastering Asset Management is the System Model.
While the Concept Model describes how things happen when managing assets, the System Model illustrates what happens when people operate assets. ISO 55001 defines the requirements for the asset management system, and the System Model serves as a guide to assembling the parts of this system and establishing connections between them.
Imagine the system within an organizational hierarchy: senior managers guide divisional managers in asset management, who in turn supervise team members performing the technical, operational, and maintenance tasks required to keep assets operational.
The System Model also depicts the relationship between stakeholders’ needs, organizational goals, and asset management goals. To fully understand the model’s mechanism, we will also examine the Organizational Systems Model, which illustrates the interrelationship between different organizational management systems.
The asset management system is a collection of interconnected elements within an organization. Asset management interacts with many organizational functions, and assets can perform multiple functions. The system coordinates the contributions and interactions between these functional units.
An asset management plan links the management system with various technical requirements set out in ISO standards and other levels of standardization. The system’s function is to determine:
The system’s elements are tools combined to ensure that activities lead to desired outcomes.
The system impacts the entire organization, its stakeholders, and third parties involved in the value chain. It integrates many organizational activities and functions that would otherwise operate in isolation. The System Model includes requirements described in ISO 55001:
Recall the importance and role of stakeholders introduced in the Concept Model. Stakeholders in the asset management system are individuals or groups directly influenced by the system’s operation and who may influence its future development. They define the business’s needs and constraints and are key to all models, processes, plans, and decisions.
Senior management is responsible for:
Once stakeholders determine the value they want from their assets, leadership must implement these decisions. Leadership links the leadership committee’s desires with the organization to create a harmonious whole.
Organizational objectives are overarching goals or ideas defining the context and direction of organizational activities, derived from stakeholder needs. They can be broad (e.g., “We want to be the lead distributor in our target market for five years”) or specific (e.g., “We want to reduce the COGS by 3.6% by next quarter”).
The System Model shows how leadership transforms stakeholder requirements into organizational goals and then into asset management goals.
Derived from organizational goals, asset management objectives are part of strategic asset management development. These objectives are documented in the Strategic Asset Management Plan (SAMP). ISO 55000 states: “Documented information that specifies how organizational objectives are to be converted into asset management objectives, the approach for developing asset management plans, and the role of the asset management system in supporting achievement of the asset management objectives.” They must be consistent with other management systems and aligned with overall business goals.
Performance monitoring and improvement are integral to any asset management system. They track the accomplishment of goals, Key Performance Indicators (KPIs), and Key Result Areas (KRAs). Monitoring and improvement involve:
Organizations must periodically assess and report on the effectiveness of risk management and improvement processes. Documentation should be prepared with information from monitoring, measurement, analysis, and evaluation, serving as a register of activities.
Through monitoring and measurement, organizations can assess whether they meet stakeholder requirements and expectations. Data related to asset management objectives can prompt changes in management policy, processes, plans, and possibly the objectives themselves to ensure they are met.
ISO 55001 states that an organization must determine:
The management system and its goals may change due to new conditions, staff members, organizational hierarchy changes, or new equipment. The management system must be monitored to ensure it meets organizational objectives and that decision-making processes are adequate.
Key elements of the management system must be audited every two years. The audit process includes:
The key to monitoring and evaluating the system is to collect data and turn it into practical information. A methodology and techniques must be established to verify and evaluate the data, accompanied by data quality requirements.
Misalignment may occur between the management system and the objectives it was designed to achieve due to changes in company conditions, new personnel, or new equipment. Continuous monitoring of the asset management system ensures it meets organizational objectives and that decision-making processes are adequate.
Each decision is characterized by:
In asset management, decisions should align with the objectives of the asset management plan. There are five types of decisions:
Decision-making responsibility may lie with individuals or groups, depending on the situation and organization. Decentralized decision-making implies a higher level of agreement on decision-making criteria, derived from objectives. The consequences of decisions must be evaluated in light of their impact on organizational goals and asset management.
A Key Result Area (KRA) is the required level of performance for an organization to be profitable and grow. Measurement is done using Key Performance Indicators (KPIs) necessary to implement the KRA.
Consider the three main areas asset management seeks to improve—cost, risk, and efficiency—for the three KRAs of an asset management system. Our imaginary organization has KPIs related to each area and evaluates decisions based on their impact on these KPIs.
Asset management involves managing the organization’s processes, competencies, and commitment due to their influence on decision-making.
Process management defines the processes an organization must execute to achieve defined objectives. Processes, whether financial or technical, depend on the people who maintain them and their competencies. People must be empowered to perform these functions.
Each staff member has a predetermined level of responsibility for the risk associated with the process. If an employee is absent, responsibility for mitigating the risk shifts upward, not downward. Questions to address include:
To make decisions, staff must be competent and engaged. Competence is the ability to apply knowledge and skills to achieve desired results. However, no matter how competent staff are, they will not function optimally unless they are engaged. A committed team goes the extra mile for the common goal, as everyone understands the benefits of their decisions.
Risk management is integral to asset management and derives from process management, competence, commitment, and organizational roles. Through asset management, we aim to use and maintain assets to preserve their value for stakeholders and the business. This requires understanding stakeholder needs, the nature of associated risks, and finding approaches to mitigate these risks. Risk management provides the processes and tools to support decision-making for future asset performance.
The Asset Management System Model exists within a larger system—the Organizational Systems Model. This model shows the relationship between various organizational objectives and the systems they generate.
For example:
In the Organizational Systems Model, individual goals and their systems must align with all organizational goals. Combined, they form a holistic picture of the organization.
In summary, the Asset Management System Model develops through these dynamics:
Now that we understand how and why assets are managed from a system perspective, we can explore guidelines for using the asset management system, developing asset management system capabilities, and developing capability solutions.
In the Asset Management Concept Model, we looked at the Plan-Do-Check-Act (PDCA) process at its core. The Capability Delivery Model embodies this process. The success of an organization’s asset management lies in the capabilities of its assets, which realize the added value of the assets. We determine if an asset has realized business value by whether it has fulfilled the organization’s set goals.
The Capability Delivery Model depicts processes and discipline areas that a business can use, in part or in whole, to achieve organizational goals through the strategic use of physical assets. The model answers the question “How?” by providing a process view of delivering assets that meet organizational goals and illustrating relationships between:
The function of the Capability Delivery Model is to provide guidance for asset management system deployment, capability development, and capability delivery solution development.
One objective of the Capability Delivery Model (or the Asset Management Process Model) is to implement the asset management principles identified in the Asset Management Concept Model while applying the continuous improvement approach of the PDCA cycle. The model identifies and implements data-driven, risk-based analytical processes to define the asset management objectives necessary to achieve organizational goals.
Demand Management seeks to balance market demand, stakeholder needs, and organizational capabilities. This process is part of Strategic Planning.
The Asset Management Capability Delivery Model creates sustainable relationships between external and internal stakeholders while proactively identifying future business needs.
The Demand Management cycle begins with determining market demand for products and/or services. Demand for the leading product and/or service should be mitigated or scaled. The organization must anticipate the necessary resources to achieve target demand levels and business objectives. Capabilities should be planned, i.e., the assets needed now and in the future to satisfy market demand and achieve organizational goals. The cycle ends with demand forecasting.
Systems Engineering develops an engineering management process to develop and verify an integrated, lifecycle-balanced set of system solutions that satisfy stakeholder needs. This is known as the Systems Engineering ‘V’ process.
It starts with understanding user requirements, developing functional specifications, and deriving design specifications, which evolve into plans and drawings for realization. This is the “Decomposition and Definition” part of the ‘V’ process.
Next, the executed plan is inspected to assess conformity to the original idea and diagrams. System solutions are assembled and verified, and the engineering management system is demonstrated and validated. This is the “Integration and Verification” part of the process.
The systems engineering process achieves balance by using the lowest lifecycle cost, balancing acquisition costs with future costs (operations and maintenance), known as CAPEX and OPEX.
Configuration Management focuses on the functional and physical attributes (data) of an asset system and its associated assets, ensuring complete and up-to-date visibility of this data. Data types include functional, physical, and derived data.
Elements of Configuration Management include:
Capability Acquisition determines how best to acquire the required business capability for the needed period, usually to accomplish a specific goal. It takes a long-term perspective, focusing on reducing the asset’s lifecycle costs associated with acquisition while delivering required services/outputs and financial returns (if applicable).
Operations and Maintenance implement the activities defined by the Capability Acquisition discipline according to business needs.
Operations require the development and execution of approved operational tasks.
The Maintenance Management model, like any other model, starts from business needs. These needs inform the engineering design, which determines the maintenance requirements. These two elements form the Design Authority.
Next, we move on to Preventive Maintenance. From the maintenance requirements, we prepare the Maintenance Plan, which defines:
The Equipment Register is prepared first. Responsible parties extract task information from the schedules. These artifacts and tasks from the Maintenance Plan contribute to the Corrective Maintenance – Planning and Control unit. This unit provides Performance Feedback to the Engineering Design while generating Work Orders for Maintenance Activities.
The Corrective Maintenance cycle begins with Systems Failure, which feeds Defect Advice to Planning and Control. Planning and Control (P&C) interacts with the Resources unit, communicating the organization’s resource requirements. The Resources unit ensures:
The cycle closes with the Maintenance Activity providing Performance Feedback to Planning and Control.
To determine the tactics and activities for asset maintenance, you first need maintenance goals divided into three groups:
Preventive Maintenance tactics and activities include Condition Monitoring, Hard Time Activity, and Functional Testing. Their main task is detecting defects to be referred to Planned Repair.
Corrective Maintenance deals with Repair (Standards), including Unplanned and Planned Repair. Another activity in Corrective Maintenance is Renewal (Cost), which also refers to Planned Repair.
Statutory/Regulatory Maintenance has only one activity – Planned Repair.
The final component of the Capability Delivery Model is Continuous Improvement, a feedback loop that measures and assesses operations and maintenance arrangements. This process, known as the Continuous Improvement Cycle, redefines and improves along the way.
The first part of this process is business analysis, presented as a pyramid structure. At the top are business objectives, followed by the hierarchy of assets and asset management objectives, and finally, Failure Mode, Effects, and Criticality Analysis (FMECA).
The second part is the Determination of Maintenance Activities, including Level of Repair Assessment (LORA) and Reliability-Centered Maintenance (RCM). Condition Monitoring tasks originate from LORA, and predictive and preventive maintenance tasks from RCM.
These tasks are combined in Task Analysis & Packaging, the results of which go into the third phase of the Asset Management Continuous Improvement Process – Spares and Rotable Analysis, including Rotable Pools and Spares Needs.
The fourth component is Maintenance and Operations Planning, which also includes In-House and Contractor Tasks generated by Task Analysis & Packaging. Continuous Improvement impacts each of the six parts of the process described.
Instead of a detailed summary of the key elements of the Asset Management Capability Delivery Model, we will mention the documents derived from it. These documents describe the process, activities, roles, responsibilities, and plans in the model design:
The Capability Delivery Model is more extensive than the previous two models. It provides mechanisms for asset management to identify and achieve the desired balance of cost, risk, and performance.
In this article, we introduced the three main models of asset management – the Concept Model, the System Model, and the Capability Delivery Model.
The Asset Management Concept Model presents the main idea of the discipline, introduces the regulations that oversee it, and sets the principles and fundamentals guiding related activities.
Main elements of the Concept Model:
The Asset Management System Model structures the management system, reflecting the influence of the human factor on each structural element. In macro terms, this model falls under the Organizational Systems Model.
Main elements of the System Model:
The Capability Delivery Model is the third major model in asset management, guiding organizations on how to use assets to achieve organizational goals. It includes the following processes:
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