Asset Life Cycle Management - Asset Management Council

1 Asset life Cycle ManagementCase Studies onAsset life Cycle Cost ModellingContents The Basics The Process Different Models Examples / Case StudiesAsset life Cycle Cost BasicsTotal CostTimeReplacementLife Span(Assessment Period) life Cycle ( Asset Estimated life )Financial YearRefurbishmentStep 1:Define the Scope of the AnalysisStep 2:Develop or adjust the LCC Model Step 3:Define Team. Collect InformationStep 4:Populate the ModelStep 5:Review and Optimise the ModelStep 7:Maintain the ModelStep 6:Decision and Implement the SolutionLife Cycle Cost Modelling Process Stakeholder involvement Project plan review Scope of analysis Data requirements analysis Model selection Depreciation policies and rates Governing accounting practices Categorisation of cost contributors Validation of the model by Accounting Data verification Audit trail for data entries Consensus discussion Base results demonstration Team identification Responsibility allocation Data collection and configuration Reality checks Sensitivity analysis Variations Presentation to Stakeholders Consensus Budget alignment and Project Team appointment Implementation project definition and activation Populate actual data Adjust and reviewDifferent Models Optimum Replacement Age Repair / Replacement Alternative Decision Making Maintenance Strategy Selection Other UsesOptimum Replacement Age ModelsOptimal Asset life ?

2 Replace every YearLife Cycle CostLCC 1 LCC 2 LCC 3 LCC 4 LCC XReplace Every 2 YearsReplace Every 3 YearsReplace Every 4 Summations across life Span (Example)Replacement IntervalY0Y1Y2Y3Y4Y5Y6Y7Y8Y9Y10 LCCE very $ 2 $ 3 $ 2 $ 6 $ 7 $ 8 $ 9 $ 4 $ 5 $ 10 $ [$M]TimeY10Y9Y8Y7Y6Y5Y4Y3Y2Y1Y0123456789 Excel based Model RepresentationAsset life DeterminationAsset life DeterminationRepair or Replace?Old Truck?New Truck?Repair / Replacement ModelsMaintain orReplace?Replace After 1 YearLife Cycle CostLCC 1 LCC 2 LCC 3 LCC 4 LCC XReplace After2 YearsReplace After3 YearsReplace After4 Summations across life Span (Example)Replacement YearY0Y1Y2Y3Y4Y5Y6Y7Y8Y9Y10 LCCR eplace $ $ $ $ $ $ $ $ $ $ $ [$M]TimeY10Y9Y8Y7Y6Y5Y4Y3Y2Y1Y0123456789 0102030 40[$M]Replacement CapitalMaintenance CostsLost ProductivityDisposalProcess CostsExcel based Model RepresentationRepair/Replace Y0 (2006)Replace Y1 (2007)Replace Y2 (2008)Replace Y3 (2009)Replace Y4 (2010)Replace Y5 (2011)Re place Y6 (2012)Replace Y7 (2013)Replace Y8 (2014)Replace Y9 (2015)Replace Y10 (2016)Replace Y11 (2017)Replace Y12 (2018)Replace Y13 (2019)Replace Y14 (2020)Replace Y15 (2021)Replace Y16 (2022)Replace Y17 (2023)Replace Y18 (2024)Replace Y19 (2025)Replace Y20 (2026)Replace Y21 (2027)Replace Y22 (2028)Replace Y23 (2029)Replace Y24 (2030)Replace Y25 (2031)

3 Repl acement YearNet Present Values [Millions]Current Machine DepreciationDi sposalShutdown Lost ProductivityLost ProductivityLump Sum CapitalLump Sum OPEXR outine ProcessRoutine MaintenanceReplacementCapitalCoal Terminal AssetsStacker Repair / Replace ModelReclaimer Repair / Replace ModelRepair/Replacement Model Example 1 Alrode L9 Pasteuriser IQMS Results0102030405060708090100 Apr-00 May-00 Jun-00 Jul-00 Aug-00 Sep-00 Oct-00 Nov-00 Dec-00 Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 MonthIQMS Results [%]Pasteuriser Performance ImprovementAlternative Decision MakingCyclic fatigue crackingMaintenance Strategy SelectionReinforcingReinforcingReinforci ng websMaintenance Strategy SelectionRisk Based Maintenance Task LCC Comparison010000002000000300000040000005 000000600000070000008000000 RBM: Condition BasedMai ntenanceRBM: Usage BasedMai ntenanceRBM: Run to fai lureMaintenanceRBM: DesignImprovementMaintenanceNon-RBM Mai ntenanceMaintenance Types of WorkTLCC NPV [AUD]Alternative Risk Based Maintenance Solutions(Mitigated Risk)Current RiskLife Span ImpactLife Cycle Cost ModellingOther UsesLife Cycle Cost ManagementTime$ life Cycle CostsReplacement Year Scenarios10121416182022242630 Replacement Scenario CostsRolling Years X?

4 Assets048121620242832361234567 Fleet Total LCC$$$$$$$$$$Fleet Plan22 life Cycle CostMachine BenchmarkingCumulative CostsUsageTarget (Model)Machine 1 Machine 2 Dubai Festival City / Dubai Palm JumeirahModelling Software Tools Excel APT Lifespan (Woodhouse Partnership) AssetLife (Hansen Corporation) Meridium Reliability Solution life Cycle Cost ModuleReferencesStandards: Australian Federal Income Tax Legislation AS 15288: 2003 Systems Engineering System life Cycle Processes AS/NZS 4356: life Cycle costing An application guide Australian Accounting Standard AAS 4 Depreciation Australian Accounting Standard AAS 116 Property, Plant and Equipment International Financial Reporting Standards (lFRS) IAS 16 and IAS 36 Standards Australian Government Depreciation Guidelines Australian Master Tax Guide TR 2009/4: Taxation Ruling Income tax: effective life of depreciating assets GAAP (Generally Acceptable Accounting Practices) life Cycle costing Better Practice Guide Australian National Audit OfficeBooks: Maintenance, Replacement and Reliability, Jardine life Cycle Cost and Economic Analysis, Prentice Hall, Englewood Cliffs, NJ life Cycle Cost, Reliability, Maintainability, and Supportability Guidebook, Warrendale, PA life Cycle Costing: Techniques, Models and Applications, B.

5 S. Dhillon life Cycle Cost and Economic Analysis, Benjamin S. Blanchard, Fabrycky, Wolter JWebsites: APT Lifespan: LCC Ware 3: Barringer & Associates, Inc.