Integrated asset management a roadmap

March 1, 2017

MechChem Africa’s Peter Middleton talks to Karl Nepgen, a partner consultant for Pragma, about optimising plant ownership and operations by following the Pragma way, a multi-level approach to implementing physical asset management solutions.

Born in South Africa in 1990, Pragma started out as a four-man business operating out of Stellenbosch in the Western Cape Province. The initial value proposition arose from their experience in developing implementable best-practice reliability systems for defence engineering, from which a very structured way of ensuring the reliability of key strategic assets emerged. “These principles used were then further ‘pragmatised’ into an asset management solution deliverable to the manufacturing and general industry,” Nepgen tells MechChem Africa.

A prominent organisation in modern asset management is the Global Forum for Maintenance and Asset Management (GFMAM), which has identified 39 ‘subjects’ to fully describe the asset management framework. “GFMAM’s set of 39 subjects is a highly practical framework that specifies structured processes to help organisations to implement asset management -¬ and it also touches on delivery and execution aspects ” he notes.

The other significant International Standard is ISO 55000, which is more management-system oriented. “Preceding these relatively new initiatives, we at Pragma have developed our own structured set of processes that align well to both of these key standards. Called AMIP – Asset Management Improvement Planning – our ‘roadmap’ delivery is based on a comprehensive framework; a structured set of processes, policies and best practices,” he adds.

The detail of AMIP is very comprehensive, consisting of 17 key performance areas (KPAs) and 150 best practices. Key performance indicators (KPIs), linked to the maturity of the organisations programme, are also used to measure how well each best practice is being implemented and performed by the organisation.

As an example, Nepgen describes one of the KPAs called Information Management. “Typical best practices for this KPA include the information strategy, which defines the asset-related information a plant should be collecting, recording and reporting in support of its activities.

“One of the KPIs for this best practice is maintenance information velocity, which measures how long it takes for data from a maintenance action – a predictive or repair requirement, for example – to generate an action or decision. We measure the action time and the time it takes to report the results for later analysis.

“A system working well might be able to deliver actionable information within an hour, while it can be up to a week if the asset management system is less mature,” he says.

Pragma’s starting point for implementing AMIP is to determine the maturity of an organisation’s asset management framework and the gaps with reference to benchmarked industry best practises. “We measure five levels of maturity, based on ISO 55000 compliance. At Level 1, plants are in fire-fighting mode, simply fixing things as and when they break down. Level 2 is when plants are stabilising their asset performance and have acknowledged the need and value of improvement. Basic routines and systems are in place, typically based on simple spreadsheets.

“Level 3 involves more preventative approaches and involves better decision making with a view to improving the overall performance and reliability of equipment. Level 4 is called ‘optimising’ where performance is being improved via feedback from more complex analyses, such as comparing maintenance costs/unit across the organisation or looking at specific costs: per ton mined; per kWh generated; or per kℓ pumped, for example, and looking for continuous operational cost improvement opportunities,” he explains.

The highest maturity level, Level 5, “is about excellence and it is not always economically viable. It is the ideal, super-efficient operation with low breakdown risk and high uptime – a typical requirement of a nuclear power station, for example”.

Nepgen suggests that the sensible aspirational level for South African plants is between Level 3 and Level 4, with sound preventative approaches being used along with some key optimisation initiatives.

Compared to maintenance management, the concept of asset management takes a much broader view of operational assets. “While maintenance is confined to keeping equipment operating, asset management looks at the whole lifecycle of a plant or operation, from the identification of need for new equipment; through the conception, design, construction and procurement processes; through the operate and maintain phase; and all the way to winding down, decommissioning and disposal.

“Renewable energy plants in South Africa, for example, are designed to last for 20 years, in line with envisaged power purchase agreements (PPAs). Accordingly, the investment business cases are calculated based on that premise, and plant asset portfolio designs follow suit. After a two-year upfront EPC phase, the plant must be operated and maintained for 20 years, so this stage makes up 90 to 95% of its total life.

“Practically speaking, formal asset management doesn’t really make sense for a small workshop where one or two experienced people know all the machines. But as soon as an organisation starts to need a dedicated maintenance facility and risks become appreciable, then aspects of the formal asset management approach can be productively applied.

To help companies implement the system, Pragma has developed its Asset Care Centre concept, which is a contracted outsourcing service, with its computerised asset management software system called On Key as base. “Maintainability and reliability can improve significantly, and risks contained, the value of which will almost always exceed the costs of adopting a structured approach to asset management,” he suggests.

“It almost always makes sense for large asset intensive operations such as power plants or refineries, process plants and manufacturing companies,” he adds.

As part of maturity assessment of an organisation’s asset management practices, the difference between the actual maturity and the target maturity preferred by the client are measured. Called gap analysis, this is used as the starting point for developing an Asset Management Improvement Plan.

A typical improvement plan is implemented over a period of between one and three years. “Following the identification and implementation of some ‘quick wins’, most of the initial work involves a phase that we call ‘stabilisation’, starting with the compilation of an Asset (equipment) Register as the backbone. Using On Key, we can usually clone asset types across different locations to reduce the burden,” Nepgen says.

Describing the structuring of an asset register, he says: “For a power station, for example, we follow the production process from the incoming resource, through steam and electricity generation and out via the switchgear. Or for water treatment, we look at the equipment and processes involved in moving and processing the raw water intake, the filtration, purification processes, pumping and dispatching.”

The second stabilisation step is to get a sense of the work actually being done to manage assets: Are machines being repaired when they break down? Is any preventive, predictive or proactive maintenance being done? “We use the collective term ‘asset care plans’ as ideal deliverable output from this aspect of the programme.”

“The task is to get to grips with the assets the organisation has, how they look after the equipment and how each one complies with health, safety, security and environmental regulations,” he adds.

Citing asset management in the renewable space as an example, Nepgen says:
“The cost of renewable energy generation has come down drastically. Compared to Round 1 of the REIPPPP, tender prices are 60 to 70% lower. As a consequence, margins are lower, so very reliable assets and optimised O&M costs are imperative.

“So asset management, which has been seen as luxury, now has an integral role to play in keeping renewable plants economically viable. And economies of scale also play a role. By developing some standard solutions, it is easier to implement asset management solutions to renewable energy operations regardless of the technology being applied – wind, solar or hydro – or of the installed OEM equipment. Since our solutions are all based on the ISO 55000 and GFMAM, AMIP is easily rolled out to marginal operations across the sector,” he tells MechChem.

“The other effective tool embedded in these solutions is risk management. All plants rely on financing and funding, so investment risks are always of concern. Investors need to know that the assets will be effectively operational for the full 20 years of the power purchase agreement (PPA) and asset management is an essential tool in mitigating against the long term risks associated with poor plant performance and reliability,” he points out.

“Any investor will want to see what plans have been put in place to ensure efficient operation for 20 years and practical asset management is the obvious way to ensure plant and financial sustainability matches those envisioned,” he continues.

He suggests that many development aid investments on the African continent, while initially beneficial, “fall apart very quickly” due to poor asset management. “So long term, the donor’s vision is not translated into long-term upliftment,” Nepgen points out.

The final destination of the Pragma roadmap highlights the ultimate sustainability objective. “The principle is universally applicable, wherever there are physical assets where the sustainability benefit has to be realised, formalised asset management plays a vital role.

In summary, he says that asset management strives to optimise the balance between three pillars: cost, risk and performance. “By neglecting the assets, the failure risk rises and the performance drops, which will eventually drive up the costs. But if you over minimise the risk, then the care cost could go sky high. It is important to find the sweet spot, where the total costs and risk are minimised and the performance maximised.

“In practice, though, asset management is all about discipline,” he continues. “The higher an organisation progresses on the management maturity ladder, the more discipline plays a role. That is why the outsourced Asset Care Centre (ACC) service we offer is so successful, because it enables discipline to be contracted into a service level agreement from the start,” he concludes.

Bio: Karl Nepgen

Karl Nepgen graduated from Stellenbosch University with an electrical engineering degree in 1978. He started out as an electronic development engineer and then went into system engineering, which were natural stepping-stones to his asset management expertise.

Nepgen has been an asset management consultant and partner with Pragma for over 25 years. His current role is largely focused on the energy business, and more specifically, the renewable energy sector.

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