Asset Life Cycle Management
Asset managers have many concerns about the cost of maintaining assets in relation to their longevity. How long will the assets last? Is it profitable to replace sooner rather than later, and which risks increase or decrease? If we are going to replace certain assets, what choices do we make and how will these choices affect the generations to come? Insight based on Long Term Asset Planning and Life Cycle Costing can help.
Two methods with different functions
Long Term Asset Planning (LTAP) and Life Cycle Costing (LCC) have different functions despite often being mentioned in the same breath. LTAP provides insight into maintenance and replacement times. An LCC analysis helps with weighing up what is most cost-effective: asset maintenance or replacement. Pragma can help you with both LTAP and LCC.
Long Term Asset Plan
What is a Long Term Asset Plan?
The purpose of a Long Term Asset Plan (LTAP) is to get an overview of the costs of maintaining assets over a longer period of time. An LTAP advises when (major) maintenance and replacements are planned. An LTAP ensures that decisions can be made around assets, when these decisions need to be made, and what they will cost. An LTAP provides a multiannual budget for the assets from which the annual budget can be derived. An LTAP also indicates which assets are approaching the end of their lifespan.
Why have a Long Term Asset Plan?
An LTAP gives asset managers insight into the maintenance costs of existing assets. It gives a clear picture of the future based on the knowledge of today’s assets, and timeously identifies decisions to be taken about performance, risks and costs. This allows organisations to make the right decisions about their assets over the life of those assets, such as life-extending maintenance, renovation and asset replacement. Pragma can support you in drawing up an LTAP.
Life Cycle Costing when purchasing assets
What is Life Cycle Costing?
In the case of major maintenance, modifications, and the design and purchase of new or replacement assets, the costs play an important role. A calculation model for LCC allows you to answer the question of which variant or scenario has the lowest cost, measured over the total life of the asset. The concept of cost is broad and includes investments, maintenance costs, energy costs and production costs, as well as after-use costs such as divestment or recycling of the asset. LCC, therefore, helps to substantiate the decisions to be made in the maintenance process or replacement of assets. Pragma also looks at performance and risks over an asset’s lifespan. These LCC analyses equip an organisation to make cost-effective choices.
Why Life Cycle Costing?
In the design phase of an asset, the most important decisions are made about the asset’s availability and maintenance costs. Asset managers face many questions: Do we need to install additional valves? Which maintenance strategy should we choose? Decisions can be quantitatively substantiated by looking at costs throughout the asset’s life cycle. Pragma supports this substantiation by creating LCC analyses. Similarly, LCC analyses can be applied to choices about modifications, major maintenance or replacements.
Get started with your LTAP and LCC
Our team has assisted numerous clients with the development of life cycle costing models, resulting in substantial savings. Why don’t you give us a call if you need advice or help with your life cycle costing models?
