Nancy J. JohnsonPresident & CEO, Facility Matters LLC

How to Improve ROI through Asset ManagementThere are no Secrets, Only Imperfect Memories

• Asset Management History

• Case Studies

– Government Organization (USA)

– Private Organization (UK)

– Private Organization (Global)

• Start Small, Finish Big

• Key Takeaways

How to Improve ROI through Asset Management

• How did it start?

– Crises

– Economic pressures

– Operational vulnerabilities

– Physical Deficiencies

The Asset Management Movement

• Global Response

– Manage risk

– Lower costs

– Increase productivity

– Improve reliability and condition

– Lifecycle planning

The Asset Management Movement (continued)

• Recognize Asset Management as a “generator” of value

– 360 degree visibility

• Align

– Strategy & Planning

– Decision-Making

– Life-Cycle Delivery

– Asset Information

– Organization & People

– Risk & Review

Current Wisdom - ISO 55000 Series

There are no Secrets, Only Imperfect Memories

Asset Management

isUndervalued

Inadequate resources

Outdated technology

Outdated staff skills

Performanceis finance oriented

Low C-suite support & awareness

How to Improve ROI through Asset Management

Case Studies:

Pennsylvania DOT

Gatwick Airport

Euroports

• Maintains >41,000 miles of roadway, 25,000 bridges, 60 railroads and 5,100 miles of track

• Ranked 7th and 10th in in the USA in tons and carloads of freight that originate and terminate within the state.

• Handles ~7.5% of goods and materials produced, used, or exported in the USA

• Establish action-oriented enterprise-wide goals to improve business results

– Based on customer, stakeholder, and partner input

– Incorporating best and world class practices

• Align business plans with the strategic agenda

• Manage business plans with performance measures that

– “make a difference” to customers and stakeholders

– drive behavior among staff throughout Penn DOT, and

– are used in evaluation and decision-making

Penn DOT’s Multi-Year Strategic Agenda

• Utilize lifecycle criteria for asset management to reduce outstanding maintenance

• Manage performance through a hierarchy of score cards that

– Align corporate goals and objectives with individual employee roles and responsibilities and

– Are appropriate for the staff who will use them

• Continuous improvement, to include

– Leadership capabilities, work environments, and effective relationships

Penn DOT Strategic Commitments

Penn DOT’s Earliest Plan

June 17, 2002

Attachment 2 – PennDOT Vision, Mission, Values, Strategic Focus Areas, High Level Goals, and Strategic Objectives

PENNSYLVANIA DEPARTMENT OF TRANSPORTATION

VISION

A transportation system and services exceeding customer expectations.

MISSION

Through the active involvement of customers, employees and partners, PennDOT provides a transportation system and services that exceed the expectations of those who use them.

VALUES

Service – We are committed to providing the best possible service to every customer.

Integrity – We conduct ourselves responsibly and honestly to earn the public’s trust every day.

People – We value and respect each other. We promote continual learning and individual growth.

Performance – We work each day to improve our individual and collective performance.

Strategic Focus Area

High Level Goal Strategic Objective

A "maintenance first" policy is reflected through the prioritization of funding and resources for all systems and services.

Maintenance First Smoother roads

Improve ride quality by incorporating smooth road strategies into a comprehensive pavement program.

Cost effective highway maintenance investment

Refine winter services practices to achieve more timely and efficient responses.

Use life cycle criteria as a tool for asset management and investment to reduce outstanding maintenance needs.

Transportation, social and environmental concerns need to be balanced, improving the quality of life in Pennsylvania.

Quality of Life Balance social, economic, and environmental concerns

Improve customer’s experiences of our facilities by enhancing beautification efforts and reducing roadside debris

Develop timely transportation plans, programs and projects that balance social, economic, and environmental concerns.

Demonstrate sound environmental practices

Implement a strategic environmental management program that adopts best practices as our way of doing business.

The innovative

Mobility and Access Delivery of transportation products and services

Meet project schedules and complete work within budgeted cost.

Penn DOT’s Earliest Plan (continued)

International Roughness Index

21

Ride Quality (International Roughness Index - IRI)

The International Roughness Index (IRI) is used to measure pavement ride quality. IRI is calculated by measuring the longitudinal profile of the pavement in each wheelpath and applying that profile to a computer algorithm to simulate the response of the suspension of a typical sedan traveling at 50 mph. The resulting accumulated vertical bounce of the vehicle is the IRI, reported as inches per mile. The higher the number, the rougher the ride quality. IRI values may be categorized as follows: IRI Scale (in/mi) Description < 60 Very Smooth 61 – 120 Smooth 121 – 170 Fair 171 – 220 Rough > 220 Very Rough The Department follows AASHTO Protocols for the collection of IRI data. Specific technical details are as follows:

Quarter Car Model is used (IRI is calculated for each wheel path and the resulting IRI values are averaged).

High Pass filter of 300 feet and Low Pass filter of 6 inches are used.

Wheelpath laser spacing is 72 inches.

Longitudinal Profile is sampled at 1 inch intervals and averaged each 4 inches.

IRI value is summarized and reported for each 0.10 mile.

The Department‟s Roadway Inventory System (RIS) calculates and reports the weighted average IRI for each rating segment.

IRI on bridges and railroad crossings are left in the data set, but are marked so the user can remove these features from the data if needed.

Data corrupted by slow collection speed or construction events affecting the pavement surface are replaced with „0.‟

Year

IRI

Penn DOT’s Earliest Plan (continued)

June 17, 2002

Attachment 4 – PennDOT Balanced Scorecard

Strategic Focus Areas High-Level Goals How Success

Customer

Support

Measurement

Tool Target

(SFAs) (HLGs) Measured external internal 2002 2005

A "maintenance first" policy is

reflected through the

prioritization of funding and

resources for all systems and

services.

Maintenance First smoother roads

better ride conditions on

major National Highway

System (NHS) highways

X Internal Roughness

Index (IRI)

104 for NHS

roads

99 for NHS

roads

cost-effective highway

maintenance investment

reduction in outstanding

maintenance needs X

condition

assessment for

highways and

bridges

complete

asset

management

system

meet target

established in

2002

Transportation, social and

environmental concerns need to

be balanced, improving the

quality of life in Pennsylvania.

Quality of Life balance social, economic

and environmental

concerns

timely decisions based on

public and technical input

on project impacts

X

highway project

environmental

approvals meeting

target dates

75% meeting

target dates

90% meeting

target dates

demonstrate sound

environmental practices

attaining world-class

environmental status X

ISO 14001

environmental

criteria

implement a

pilot program

meet ISO

standards

The innovative management of

our transportation system &

services improves access &

mobility, ensuring that people &

goods can move efficiently.

Mobility and Access

delivery of

transportation products

and services

honoring commitments on

scheduled transportation

projects

X

dollar value of 12 -

year program

construction

contracts initiated

1.3 billion per

year

1.4 billion per

year

Actual Year 2000 Median IRI for Interstate Highways (NHS) = 108

Penn DOT Results

Draft Final: Pennsylvania Comprehensive Freight Movement Plan

Chapter 4: Freight Facilities and Commodity Flows

Figure 6: Pennsylvania Statewide Median IRI values, by Business Plan Network, 2008-13

Source: PennDOT Highway Administration

The role of locally-owned roadways (78,000 miles) should not be understated, as these roadways

accommodate over 47 million vehicle miles of travel on a daily basis, or 18 percent of the overall state

total. These roadways are also often commonly part of the “first and last mile” for shippers and

carriers, and thus an important component in facilitating the movement of freight. The importance of

local roadways has been identified by FHWA as an area for improved awareness, and PennDOT has

completed much work in recent years with its partners in obtaining more information regarding the

extent of this network. This importance was recognized and validated by an increased investment in

the local system as part of Act 89.

Truck Bottlenecks Pennsylvania’s top truck bottlenecks were identified using statewide truck performance measures

derived from ATRI’s truck GPS 2013 database for the Interstate and National Highway System (NHS).

The analysis incorporated average speeds along with an indicator of volume to generate a congestion

index for over 6,000 Pennsylvania highway segments, which are a mile or less in length. Based on a

comparison of truck speeds on each segment over the course of a year, the top 100 truck bottlenecks

were identified. Figure 7 illustrates the top 100 truck bottleneck segments/locations on Pennsylvania’s

interstates and NHS. Major interstates in Philadelphia, Pittsburgh, Harrisburg, and Allentown

accounted for the majority of the identified truck bottlenecks and many of these locations have

expansion or operational needs that require additional general purpose lanes, truck climbing lanes, or

ITS infrastructure to improve freight movement.

0

20

40

60

80

100

120

140

160

180

2008 2009 2010 2011 2012 2013

Med

ian

IR

I V

alu

e

Year

Non NHS

All Routes

Entire NHSB

ett

er

PENNSYLVANIA’S LONG RANGE TRANSPORTATION & COMPREHENSIVE FREIGHT MOVEMENT PLAN

32

NHS Median IRI

Year 2000 = IRI of 108Year 2002 = IRI of 89Year 2008+ = 90 ___________________

ROI since Year 2000 = 17% improvement in NHS smoothness

NHS = Interstate Highways

PennDOT and ISO 55000

AlignStrategy & Planning

Decision-Making

Life-Cycle Delivery

Asset Information

Organization & People

Risk & Review

✔

✔✔

✔✔

✔

• 38 million passengers passing through in 2014 (ranked 36th in passenger traffic in the world)

• 30 miles from Central London

• 19 acres

• 2 airline terminals

• 2 runways (only 1 in use)

Gatwick Airport (GAL)

• Strategy

“compete to grow and become London’s airport of choice”

• Corporate Objectives

• Optimize airport assets

• Maximize shareholder returns

• Provide a safe and profitable operating environment for business partners

• Deliver stress free journeys and exemplary service to airport customers

GAL’s Corporate Strategy & Objectives

• Deliver the best passenger experience

• Help our airlines grow

• Increase value and efficiency

• Protect and enhance our reputation

• Build a strong employee health and safety culture

• Develop the best people, processes and technology

GAL’s Six Strategic Priorities

Achieving Line of Sight at GAL

The Hoshin Kanri Method of Policy Deployment is used to connect personal employee objectives to the six strategic priorities.

GAL Alignment of Strategies, Plans, Objectives

Asset management staff received

• Computer-based training on

– GAL’s commitment to asset management

– ISO 55001, and

– The ISO 55001 relationship to GAL’s business

• Asset management pocket guides (print and on smartphones)

• One-on-one mentoring and guidance

GAL Employee Focused Rollout

• One-page resource documents containing asset-specific plans

• All employees have individual and team objectives with line of sight to

– GAL’s strategic priorities and

– Strategic Asset Management Objectives.

• Formal performance reviews every six months

GAL Employee-Focused Rollout (continued)

• Shuttle Train availability improved from 85% to over 99%, resulting in additional revenue by achieving service level targets.

• 31% savings in operating expenses for loading bridges was realized from a change management program for monitoring and maintenance

GAL Results

GAL and ISO 55000

AlignStrategy & Planning

Decision-Making

Life-Cycle Delivery

Asset Information

Organization & People

Risk & Review✔

✔

✔✔✔

• One of the largest port operators in Europe

• Owned by a consortium of financial institutions

• Handles ~ 46 million tons annually

• Owns 26 port terminal operations in Europe and China

– Also operates terminals for customers at 10 other sites

• 2,550 FTE staff

Euroports

• Strategy

– Position asset management as a new business philosophy to improve performance across the organization (26 ports and 11 countries)

– Give staff the knowledge, methods, and tools they need to improve performance and accountability.

– Improve cultural cohesion between ports

– Increase the accuracy of capital spending forecasts

– Reduce medium-term requirements for capital spending

Euroports - Phase I

• Introduced Asset Management Planning

at 11 ports (Belgium, Italy, Spain, &

Finland)

Euroports – Phase I (continued)

• Results (ROI)

– Euroports leadership and shareholders gained a comprehensive view of the asset portfolio – across ports – that was not previously available

– Procurement staff were able to leverage the combined purchasing and leasing power across business units

Euroports – Phase I (continued)

• Expand Asset Management Planning to all 26 ports and include delivery of a risk-based structure for the evaluation and prioritization of assets

• Develop

– A single comprehensive database of assets using consistent criteria and

– A plan for increasing ROI on assets, extending asset life, and reducing capital demands

Euroports – Phase II

• Results (ROI)

– Opportunities for adding value were identified at both the capital and operating level

– Capital Expenditures were ~37% lower, focused on outcomes (performance and net operating expense), and without increased risk to the business.

– 360 degree line of sight was established for

• management to understand technical and operating realities and

• technical and operations staff to understand the impact of their activities on the business

Euroports – Phase II (continued)

Euroports and ISO 55000

AlignStrategy & Planning

Decision-Making

Life-Cycle Delivery

Asset Information

Organization & People

Risk & Review✔

✔

✔

✔✔

✔

How to Improve ROI through Asset Management

1. Align Asset Management within the Organization2. Get People Involved3. Focus Limited Resources for Maximum Results

Start Small, Finish Big

1. Align Asset Management within the Organization

AlignStrategy & Planning

Decision-Making

Life-Cycle Delivery

Asset Information

Organization & People

Risk & Review

✔✔✔✔✔

✔

• Selecting a value proposition for expressing ROI

• Establishing KPIs that support the strategic business plan

• Plan-Do-Check-Act

Focus Energies for Alignment on These Things

Tangible

• Lower cost

• Longer life

•Higher output

•Greater reliability

• Improved safety

Intangible

•Public confidence

•Customer loyalty

•Brand recognition

Regulatory Requirements

• Business specific

• Asset specific

Grant Funding

•Value

• Sources

Asset Condition

•Performance

•Risk

Select a Value Propositions for Expressing ROI

Establish KPIs that Support the Strategic Business Plan

Input

• # FTE

• $ Cost

Output

• # things produced

• # inspections completed

Activity

• # customers served

• # freight containers moved

Outcome

• Change in condition or satisfaction

• Time between failures

• Condition indeces

• Industry comparisons

KPIs Aligned with Strategic Business Plan (example)

Highways England

Information courtesy of CH2M

Strategies KPIs

Plan-Do-Check-Act

Define the PlanExecute the Plan

Measure &Analyze

Improve &Control

• Inside the asset management team

• Outside the asset management team

• Within the C-suite

2. Get People Involved

• Communicate meaningful information so that people throughout the organization understand

• Get used to talking about until people understand so well

– Who does what

– What will happen if

– Where others can help

– How to make things better

– Why things matter

• Produce meaningful reports that are targeted at your audience

Get People Involved

Meaningful KPIs & Reports - PCI

Meaningful KPIs & Reports - PCI

0

10

20

30

40

50

60

70

80

90

100

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

PA

VE

ME

NT

CO

ND

ITIO

N I

ND

EX

Age - Years

GOOD

POOR

FAIR$1 for Rehabilitation PCI=70

$1.36 for Rehabilitation PCI=55

$2.32 for Rehabilitation PCI=40

$5-$6 for Reconstruction PCI<30

Large Decreasein PCI

Small % of Pavement Life

Meaningful KPIs & Reports - FCI

Meaningful KPIs and Reports – FCI with Funding Options

25 Year Impact of Various Funding Levels on Asset

Condition

Legend

X = yearY = backlog $

Colored bars = FCI

Lines represent annual funding level options

Meaningful KPIs and Reports – Comparative Risk

US Navy Ship-building Practices

• Persistent cost growth & schedule delays

• Uncertain outcomes

• Technology is an enabler

3. Focus Limited Resources for Maximum Results

Why BIM?

BIM – delivers an organized and accurate model

BIM – Immediate Benefits for Construction

• Savings of up to 10% of contract value through clash detections

• Up to 7% reduction in project time

• LEED buildings have competitive advantage for sales and leasing, with price premiums and higher occupancy rates

For Every 16 Months of Construction Take 1 Month off the Schedule

BIM Produces Net Annual O&M Savings

BIM in O&M Use Case (Samples) Total Time

SavingsCost

SavingsAnnual Events

Cost Avoidance

Major plumbing leak 2 $175 24 $4,200

Shutdown Request 41 $4,067 96 $390,400

Structural and Fire Safety Analysis

3 $250 12 $3,000

Integrated Finish Schedule 83 $8,333 12 $100,000

Engineering Staff Training 178 $17,800 12 $213,600

ICRA/PCRA Review 78 $7,783 100 $778,333

Asset Information Entry and Update

1,616 $161,575 1 $161,575

$1,651,108 Total Annual Cost Avoidance (5+%)

Based on Total Annual

O&M Expense of

$26.5M

Key Takeaways

• ISO 55000

– Provides a framework for managing assets in a way that assures performance is both consistent and sustainable

– Allows you to use preferred methods for implementation

– Works for any industry or asset

Key Takeaways

• Fixed assets

– Have inherent organizational value, impact organizational performance, and influence organizational risk

– They are therefore generators of ROI

• To Improve ROI through Asset Management

– Provide 360 degree line of sight

– Foster an environment of open communication and results-oriented performance

– Seek consistency and reliability through PDCA AND commit to continuous (“relentless”) improvement

– Accurately account for assets across their entire lifecycle

– Use metrics as a tool, not the answer.

Key Takeaways

• Start Small, Finish Big

– Align Asset Management within the Organization

– Get People Involved

– Focus Limited Resources for Maximum Results

Key Takeaways

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Thank you!