Do you remember when you bought your first car? You scraped together enough for a deposit, got a loan at the ridiculous interest rate, found the ‘dream’ car and thought you were a gun at negotiating with the car dealer. You probably immediately went out and put a new stereo in it, or bought better mag wheels.
Was it a good investment decision? It doesn’t really matter – it was your first car. Mine was a cappuccino coloured Mazda, and yes, it had a great stereo.
So, what does buying your first car have to do with Asset Management? As it turns out; quite a bit.
Many military people quickly understand the basics of asset management – having a capability (an asset), that meets your mission profile (performance), delivered at the lowest cost (value for money) and is fit for purpose (risk). Pretty simple stuff. And, since you’re reading this article you probably have some interest in asset management.
However, how to ‘do’ asset management remains a mystery to most.
Now, I am quite biased on this topic – I work as an asset manager for a rail company. I have been involved in gaining ‘PAS 55’ and ISO 55000 certification. We were some of the first in Australia to do so.
And what’s more, I learnt the basics of asset management when I worked for Defence.
A BIG PICTURE VIEW
Now back to that first car of yours:
- How long did you own the car for?
- How much did you spend on running the car in the first year– think about the fuel, servicing, unplanned servicing, insurance (just 3rd party please) and the new stereo costs?
- Was it safe?
- Would you do it again?
Of course, your mission parameters were different back then, but you get where I am going. Nowadays you’d determine the best value for money car by trading off a multitude of ‘requirements’. You would, of course, get full insurance, consider the fuel efficiency and want to know servicing frequencies. You’d consider the ongoing costs as well as the purchase price. Just like an asset manager.
Asset management really is all about considering the whole cost of the asset.
HOW IS ASSET MANAGEMENT DIFFERENT FROM WHAT DEFENCE ALREADY DOES?
In practice, not much. Except best practice asset management suggests the need for the ‘line of sight’ – a clear linkage from the strategic need, through to the maintenance instructions for front-line staff. It’s easier said than done.
PROS AND CONS OF INTRODUCING IT INTO DEFENCE
One of the main aims of using asset management is to deliver the capability for the lowest overall cost. In practice, there are three phases of an asset:
- Concept and planning
- Procurement and construction
- Operations and maintenance (O&M)
The first two phases are fast paced, new, exciting and get all attention. The O&M side is repetitive, business as usual (BAU), not as glamorous, and always faces the question of, ‘can we defer that for another year’?
Implementing good asset management practices takes time. You need to consider annual budget cycles, competing priorities, and ensuring that assets aren’t being gold plated, nor neglected. It takes a skill set that is not readily available in the market. We are all aware of the construction boom that has been occurring in Australia, but very few even get training in how to manage assets over their life.
CAN ASSET MANAGEMENT SAVE DEFENCE MONEY?
I was once told that 85% of the costs of running a hospital was not in the construction phase – the hospital is there to see sick patients. Like all assets, they are built to deliver a benefit and services.
All asset owners face a similar challenge – delivering the Level of Service (LOS) for the lowest possible cost. In defence terms, it’s about delivering the level of capability at the right time. This doesn’t just mean cutting your yearly budget.
Asset managers need to balance performance, risks, and costs. As the assets get older, they need more maintenance, and performance can start to deteriorate. The art of asset management is to know when to invest to deliver performance, before major unexpected costs are faced.
HOW TO START ‘DOING’ ASSET MANAGEMENT
I’m always jealous of those who get to manage new greenfield assets. I work with assets that in some cases are over 100 years old. Other assets are cutting edge technologies.
I am an advocate of simplicity. We started the asset management journey by creating an asset management framework that reflected the practices that were occurring in the real world. We then started to develop better plans and better planning. After that, we documented what we know about the assets. This lead to having a good knowledge base and understanding of the assets and has allowed us to predict the condition of the assets over a 15-year future horizon.
WHAT CAN DEFENCE LEARN FROM OTHER INDUSTRIES?
Play the long game.
Asset management should be supported from the top. Without top level support and genuine buy-in, implementing good asset management is a challenge. We have an asset management policy signed by the CEO.
WHAT EXPERIENCES SHOULD CURRENT/ASPIRING DEFENCE ASSET MANAGERS SEEK OUT?
I know it’s a bit boring, but knowing about Reliability, Availability, Maintainability and Safety (RAMS) seems to be a lost skill that is core to asset management. I first learnt about it when I went on an Integrated Logistic Support (ILS) course back in 2000.
Having experience in defining and writing requirements, delivering capital projects and maintaining assets gives you the on-the-ground experience to put in place practical, simple and deliverable asset plans.
Read the international standard, ISO 55000. Australia and New Zealand were some of the pioneers in thinking about asset management, and another great source of knowledge is the International Infrastructure Maintenance Manual (IIMM). It’s easy to read and covers everything you need to know.
By Nick Pelham
Nick Pelham is the Strategic Asset Manager for Metro Trains Melbourne. He first learnt about lifecycle asset management while working on the Collins Class submarine project in 1999. Nick continues to work closely with the Defence Department, certifying and assessing project managers and project directors in Victoria through the Australian Institute of Project Management (AIPM).