Asset Life Cycle Management
Case Studies onAsset Life Cycle Cost Modelling
Contents
• The Basics
• The Process
• Different Models
• Examples / Case Studies
Asset Life Cycle Cost Basics
Tota
l Cos
t
Time
Replacement
Life Span (Assessment Period)
Life Cycle (Asset Estimated Life)
Financial Year
Refurbishment
Step 1:Define the Scope of the Analysis
Step 2:Develop or adjust the LCC Model
Step 3:Define Team. Collect Information
Step 4:Populate the Model
Step 5:Review and Optimise the Model
Step 7:Maintain the Model
Step 6:Decision and Implement the Solution
Life 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 review
Different Models
• Optimum Replacement Age
• Repair / Replacement
• Alternative Decision Making
• Maintenance Strategy Selection
• Other Uses
Optimum Replacement Age Models
Optimal Asset Life?
Replace every Year
Life Cycle Cost
LCC 1
LCC 2
LCC 3
LCC 4
LCC X
Replace Every 2 Years
Replace Every 3 Years
Replace Every 4 Years
Etc.
Cost Summations across Life Span (Example)Replacement Interval Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 LCC
Every Year 9.00 8.40 7.80 7.45 7.05 6.80 6.65 6.35 6.25 6.20 6.00 $77.95M
Every 2 Years 3.20 8.40 1.00 7.45 1.35 6.80 3.65 6.35 1.60 6.20 1.95 $47.95M
Every 3 Years 3.30 3.70 7.80 0.85 1.05 6.80 1.40 3.50 6.25 1.30 1.55 $37.5M
Every 2 Years 3.70 4.20 4.05 7.45 0.85 1.00 1.05 6.35 3.30 1.25 1.25 $34.45M
Every 6 Years 3.90 4.50 3.65 3.50 3.45 3.30 6.65 0.65 0.80 0.85 1.25 $32.5M
Every 7 Years 3.90 4.50 3.65 3.50 3.60 3.75 3.90 6.35 0.50 0.70 0.85 $35.2M
Every 8 Years 3.90 4.50 3.65 3.50 3.60 3.65 4.40 4.25 6.25 0.45 0.75 $38.9M
Every 9 Years 3.90 4.50 3.65 3.50 3.60 3.75 4.65 3.75 3.80 6.20 0.40 $41.7M
Every 4 Years 3.85 4.50 3.60 3.55 7.05 0.80 0.90 0.95 1.15 6.20 1.10 $33.65M
Every 5 Years 3.90 4.50 3.65 3.45 3.50 6.80 0.70 0.85 0.95 1.20 3.05 $32.55M
Every 10 Years 3.90 4.50 3.65 3.50 3.60 3.75 4.75 3.55 3.75 4.10 6.00 $45.05M
Cos
ts [$
M]
Time
Y10Y9Y8Y7Y6Y5Y4Y3Y2Y1Y0
1
2
3
4
5
6
7
8
9
Excel based Model Representation
Asset Life Determination
Asset Life Determination
Repair or Replace?
Old Truck?
New Truck?
Repair / Replacement Models
Maintain orReplace?
Replace After 1 Year
Life Cycle Cost
LCC 1
LCC 2
LCC 3
LCC 4
LCC X
Replace After2 Years
Replace After3 Years
Replace After4 Years
Etc.
Cost Summations across Life Span (Example)Replacement Year Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 LCC
Replace Y0 9.00 1.00 1.25 1.45 1.75 3.75 1.40 1.60 1.80 2.00 2.30 $27.30MReplace Y1 3.20 8.40 1.00 1.20 1.35 1.65 3.65 1.30 1.60 1.75 1.95 $27.05MReplace Y2 3.30 3.70 7.80 0.85 1.05 1.15 1.40 3.50 1.20 1.30 1.55 $26.80MReplace Y3 3.70 4.20 4.05 7.45 0.85 1.00 1.05 1.35 3.30 1.25 1.25 $29.45M
Replace Y6 3.90 4.50 3.65 3.50 3.45 3.30 6.65 0.65 0.80 0.85 1.25 $32.50MReplace Y7 3.90 4.50 3.65 3.50 3.60 3.75 3.90 6.35 0.50 0.70 0.85 $35.20MReplace Y8 3.90 4.50 3.65 3.50 3.60 3.65 4.40 4.25 6.25 0.45 0.75 $38.90MReplace Y9 3.90 4.50 3.65 3.50 3.60 3.75 4.65 3.75 3.80 6.20 0.40 $41.70M
Replace Y4 3.85 4.50 3.60 3.55 7.05 0.80 0.90 0.95 1.15 3.20 1.10 $30.65MReplace Y5 3.90 4.50 3.65 3.45 3.50 6.80 0.70 0.85 0.95 1.20 3.05 $32.45M
Replace Y10 3.90 4.50 3.65 3.50 3.60 3.75 4.75 3.55 3.75 4.10 6.00 $45.05M
Cos
ts [$
M]
Time
Y10Y9Y8Y7Y6Y5Y4Y3Y2Y1Y0
1
2
3
4
5
6
7
8
9
0 10 20 30 40 [$M]
Replacement Capital
Maintenance Costs
Lost Productivity
Disposal
Process Costs
Excel based Model Representation
Repair/Replace Model
-4.00
-2.00
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
Replac
e Y0 (
2006
)
Replac
e Y1 (
2007
)
Replac
e Y2 (
2008
)
Replac
e Y3 (
2009
)
Replac
e Y4 (
2010
)
Replac
e Y5 (
2011
)
Replac
e Y6 (
2012
)
Replac
e Y7 (
2013
)
Replac
e Y8 (
2014
)
Replac
e Y9 (
2015
)
Replac
e Y10
(201
6)
Replac
e Y11
(201
7)
Replac
e Y12
(201
8)
Replac
e Y13
(201
9)
Replac
e Y14
(202
0)
Replac
e Y15
(202
1)
Replac
e Y16
(202
2)
Replac
e Y17
(202
3)
Replac
e Y18
(202
4)
Replac
e Y19
(202
5)
Replac
e Y20
(202
6)
Replac
e Y21
(202
7)
Replac
e Y22
(202
8)
Replac
e Y23
(202
9)
Replac
e Y24
(203
0)
Replac
e Y25
(203
1)
Replacement Year
Net
Pre
sent
Val
ues
[Mill
ions
]
Current Machine DepreciationDisposalShutdown Lost ProductivityLost ProductivityLump Sum CapitalLump Sum OPEXRoutine ProcessRoutine MaintenanceReplacement Capital
Coal Terminal Assets
Stacker Repair / Replace Model
Reclaimer Repair / Replace Model
Repair/Replacement Model Example 1
Alrode L9 Pasteuriser IQMS Results
0
10
20
30
40
50
60
70
80
90
100
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
Month
IQM
S R
esul
ts [%
]
Pasteuriser Performance Improvement
Alternative Decision Making
Cyclic fatigue cracking
Maintenance Strategy Selection
ReinforcingReinforcingReinforcing webs
Maintenance Strategy Selection
Risk Based Maintenance Task LCC Comparison
0
1000000
2000000
3000000
4000000
5000000
6000000
7000000
8000000
RBM: Condition BasedMaintenance
RBM: Usage BasedMaintenance
RBM: Run to failureMaintenance
RBM: DesignImprovementMaintenance
Non-RBM Maintenance
Maintenance Types of Work
TLC
C N
PV [A
UD
]
Alternative Risk Based Maintenance Solutions
(Mitigated Risk)
Current Risk
Life Span Impact
Life Cycle Cost Modelling
Other Uses
Life Cycle Cost Management
Time
$
Life Cycle Costs
Replacement Year Scenarios
10 12 14 16 18 20 22 24 26 30
Replacement Scenario Costs
Rolling Years X?)Assets
0 4 8 12 16 20 24 28 32 361234567
Fleet Total LCC $ $ $ $ $ $ $ $ $ $
Fleet Plan
22
Life Cycle Cost
Machine Benchmarking
Cum
ulat
ive
Cos
ts
Usage
Target (Model)Machine 1Machine 2
Dubai Festival City / Dubai Palm Jumeirah
Modelling Software Tools
• Excel
• APT Lifespan (Woodhouse Partnership)
• AssetLife (Hansen Corporation)
• Meridium Reliability Solution Life Cycle Cost Module
ReferencesStandards:• 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 Office
Books:• Maintenance, Replacement and Reliability, A.K.S. 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. S. Dhillon• Life‐Cycle Cost and Economic Analysis, Benjamin S. Blanchard, Fabrycky, Wolter J
Websites:• APT Lifespan: www.reliability.com.au• LCC Ware 3: www.aptools.co.uk• Barringer & Associates, Inc: http://www.barringer1.com/