Privileged and Confidential Strategic Approach to Asset Management Presented to October 2004 2004...

Privileged and Confidential

Strategic Approach to Asset Management

Strategic Approach to Asset Management

Presented to

October 2004

2004Urban Water Council

Regional Seminar


Infrastructure Needs / PerceptionsInfrastructure Needs / Perceptions

Need to be cost competitive

Aging Infrastructure

EPA Reports

Accounting Changes


Common Asset Management MythsCommon Asset Management Myths

Regulatory Issue

Information Technology Issue

Preventive Maintenance Issue

Who is Responsible

One-time Event

If You Ignore it – It Will go Away


Myth 1 – Regulatory IssueMyth 1 – Regulatory Issue

GASB 34 is the answer - If you comply with the regulations you are practicing good asset management.


Myth 2 – Information TechnologyMyth 2 – Information Technology

IT is the answer

Software – it is just a matter of having the right software


Myth 3 – Preventive MaintenanceMyth 3 – Preventive Maintenance

A preventive maintenance program will take care of your asset management needs


Myth 4 –ResponsibilityMyth 4 –Responsibility

Asset management is the responsibility of:

Engineers

Accountants

IT

Management


Myth 5 – One-time EventMyth 5 – One-time Event

An asset management report is the solution!


Myth 6 – Ignore itMyth 6 – Ignore it

Asset management is just another fad – it too will pass


Defining Asset ManagementDefining Asset Management

“an on-going process which enables managers to optimize the investment in their assets resulting in reduced operating and capital costs and improved business sustainability”

AM is the alignment of a utility’s business processes to provide for a more efficient and effective operation.

An effective program will turn the reams of data that today’s utilities generate with their customer information systems, GIS, preventive maintenance, financial and related systems into meaningful information, with which managers can make informed decisions, resulting in cost savings for operations and capital expenditures.


Asset ManagementGoals and ObjectivesAsset ManagementGoals and Objectives

Identify, develop or enhance business processes that cut across all business units

Identify the critical business areas that will create value and illustrate the probability of success.

Production Distribution

BusinessFunctions

InventoryProcurement

PreventativeMaintenance

GIS

FleetMaintenance

MeterReading

Billing

NewConnections


Va

lue

Ch

ain

Su

pp

ly C

ha

in

CustomerService

ValueValueCreationCreation

A & G Support Functions

Management

Asset Management Program


BusinessFunctions

InventoryProcurement

PreventativeMaintenance

GIS

FleetMaintenance

MeterReading

Billing

NewConnections


Va

lue

Ch

ain

Su

pp

ly C

ha

in

CustomerService

ValueValueCreationCreation

A & G Support Functions

Management

Asset Management Program

Only Issues with an impact of more than X million dollars to the 10 Year NPV are integrated.

Organics Legislation

Water Supply Prices

Weather Impacts

Operator retirements

Main Distribution Pipeline upgrades

Customer Growth

Dam Inspections

0 20 40 8060-80 -60 -40 -20

NPV, ($ millions)

Only Issues with an impact of more than X million dollars to the 10 Year NPV are integrated.

Organics Legislation

Water Supply Prices

Weather Impacts

Operator retirements

Main Distribution Pipeline upgrades

Customer Growth

Dam Inspections

0 20 40 8060-80 -60 -40 -20

NPV, ($ millions)


Asset ManagementGoals and Objectives

Provide effective monitoring capabilities which allow decision makers to manage identified opportunities

Prevent value destruction by stabilizing and positioning the organization for integration and implementation

StatusQuo

Step 1 Situation Analysis

Step 2 Feasibility

Review

Step 4 Implementing and Anchoring

Step 3 Planning and

Design

Resource Commitment

Resource Commitment

Resource Commitment

Resource Commitment

Situation Executive Review

Feasibility Executive Review

Planning Executive Review

Closure Executive Review

StatusQuo


Step 2 Feasibility

Review


Step 3 Planning and

Design

Resource Commitment

Resource Commitment

Resource Commitment

Resource Commitment






Major ElementsMajor Elements Strategy - Develop a robust program within strategic framework.

Business Review - Implement with respect to critical business needs and without impact to scheduled operations.

Technology Review - Implement technology that can support processes at the business unit level but that can also be supported at the enterprise level.

Implementation Planning - Identify an implementation schedule based on the program and corresponding costs.

Pilot Implementation - Implement in a critical business area for near term benefit and optimize implementation aspects.

Monitoring - Provide enterprise level tools and processes to supervise and examine the on-going success of the program

Change and Knowledge Management - Establish Change and Knowledge Management processes to build executive sponsorship, support management decisions, and empower staff.


AM Typical Work PlanAM Typical Work Plan

Three Stages

Strategize

Develop

Implement

ImplementationPlan

Enterprise AM Plan Development

Current Technology Review

Current Monitoring Capabilities

Current Business ReviewDevelop StrategicDirection

GapAnalysis

ImplementationServices

ImplementationPlan





GapAnalysis



Typical Strategizing ActivitiesTypical Strategizing Activities

Conduct Management Interviews and Planning Sessions

Develop Organizational Assessment Objectives

Develop IT Systems Assessment Objectives

Develop AM Targets

Develop AM Plan Gap / Needs Analysis Objectives

ImplementationPlan




Current Business Review

Develop StrategicDirection

GapAnalysis


ImplementationPlan




Current Business Review

Develop StrategicDirection

GapAnalysis



Typical Business ReviewsTypical Business Reviews

Customer Service

Financial Planning and Forecasting

Organizational Alignment

Failure Analysis / Risk Management

Financial

Budgeting


Typical Technology ReviewsTypical Technology Reviews

Financial Systems Supply Chain/Asset Procurement Maintenance Management Condition Assessment AM Training GIS HR CIS


Typical Monitoring CapabilitiesTypical Monitoring Capabilities

Performance Measures

Asset Inventory / Registers

Life Cycle Management

Optimized Decision Making

Data Collection and Reporting

Asset Valuation and Depreciation

Capital Budgeting

Life Cycle Costing


Gap AnalysisGap Analysis

Planning

Operations

Information Systems

Accounting


Typical Implementation ActivitiesTypical Implementation Activities

Strategy

Functional Requirements

Operational / Tactical Requirements

Supporting Technology

Monitoring Requirements

Business Case Analysis - Value Creation





GapAnalysis


ImplementationPlan





GapAnalysis


ImplementationPlan


Development of meaningful internal and external strategic and financial plans.

Incorporation of the financial measures, determined in the Evaluation and Integration steps, into a cohesive strategy for the client’s business strategies. The integrated strategy links each of the business areas into a cohesive, consistent, meaningful strategy.

The key to building an effective strategy is to reduce downside exposures in order to operate closer to an expected value.

Development of a comprehensive “move forward” plan optimizes the trade off of key NPV drivers and the limited resources that are available.

The final stage of develop is a meaningful communications plan that incorporates the measures identified and the corporate-debit-shareholder impacts.

Value CreationValue Creation


Identifying a risk profile is critical to maximize value.Identifying a risk profile is critical to maximize value.

The utility that understands the major impacts on an asset, and executes a meaningful corporate strategy, will achieve maximum value for their asset.

$10 $15 $20 $25 $30

NPV, millions

Pro

ba

bil

ity

Reduction inExposure

Reduction in benefit

Expected Value

Initial Distribution

Risk Managed Distribution


Performance MonitoringPerformance Monitoring

Management Challenges

How to see the ‘big picture’?

How to link day to day actions to strategy?

How to easily communicate performance to the Board?

Could you expand on “Oops, looks like

something bad happened”


Balance ScorecardBalance Scorecard

‘Balanced’ Scorecard – Measures the entire organization and provides feedback to help in implementing strategies and objectives.


Performance ManagementPerformance Management

Immediate and Comprehensive way to manage and maximize consistent improvement within the organization,

Linking day-to-day actions with the overall vision, mission, and strategy of the Utility


Change ManagementChange Management

Change Management Process Organizational Assessment

Face-to-Face Communication Strategy

Develop Transition Plan

Launch Change Management Teams

Define New Roles And Responsibilities

Establish New Learning Channels

Align Leadership Teams

Build Partnerships StatusQuo


Step 2 Feasibility

Review


Step 3 Planning and

Design

Resource Commitment

Resource Commitment

Resource Commitment

Resource Commitment





StatusQuo


Step 2 Feasibility

Review


Step 3 Planning and

Design

Resource Commitment

Resource Commitment

Resource Commitment

Resource Commitment






Change Management Change Management

Change Management Outcomes

No-decline in productivity, profitability and operational excellence

Readiness for next step

Key Management processes in place


Knowledge ManagementKnowledge Management

Preservation

Communication

Documentation

Knowledge

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