Why an asset investment plan is important to business
Article by Infor managing director for ANZ Jarrod Kinchington.
Asset investment planning (AIP) enables asset-intensive organisations to determine which asset investments will allow them to best meet service level objectives with the right level of expenditure while minimising the risk of asset failure.
AIP can also help determine the best time to invest in order to smooth capital expenditures over time.
Modern AIP solutions simplify the process of developing asset investment plans by allowing organisations to leverage the data that is already in asset registries in the enterprise asset management (EAM).
Teams can use that data to quantify four key inputs: asset condition, asset criticality, business risk, and level of service.
Asset condition allows organisations to visualise deterioration over the asset’s lifetime and establish where intervention is necessary. Asset criticality determines the impact the failure of an individual asset will have on an organisation’s ability to realise its business objectives.
Business risk determines the consequences of asset failure. The level of service required enables an organisation to operationalise its policies, strategies and objectives, tie those to KPIs and then link that to the level of service requirements.
Once the inputs define and quantify these inputs in the AIP solution, the outputs are reports that will provide visibility into the consequences of taking one action or another so teams can develop a list of projects.
For example, consider a transit agency with buses and trains that it uses to deliver service 24x7x365. The asset investment plan will tell the company how much it will need to invest to achieve its service (LOS) goal.
Organisations can also create scenarios that show how they will need to invest to meet LOS goals over time. For example, the organisation may need to spend $1 million next year, $20 million in three years, and $100 million in five years. Having this information enables the organisation to adjust its expenditure patterns to smooth out annual budgets to make them more consistent.
Data can also be taken from the EAM, pushed into a central repository, and then teams can perform optimisation (“what if”) analyses to compare different scenarios and outcomes to determine the best outcome in the face of various constraints.
For example, say you’re a water utility company, and your analysis determines that you’re going to have to replace all your water pipes in a particular region at a cost of $1 billion over the next ten years. You explain that this capital expenditure is necessary to your CFO, and she says she can only give you $500 million.
Now you have to prioritise your expenditures. AIP planning will help you do that by looking at what will happen in 5, 10, 15 years if you don’t spend money on X part of the project, and then compare that to what happens if you invest in Y or Z.
Optimisation will allow organisations to balance various investments against their impact on service levels to determine what spending should be prioritised.
The first step to building an AIP strategy is by storing all the necessary data, tracking the key metrics, as well as creating advanced reporting that holistically determines which assets to invest in, and how much to invest over the short and long term to reduce risks and meet service level objectives.