Physical Asset Management : With an Introduction to the ISO 55000 Series of Standards

This book presents a systematic approach to the management of physical assets from concept to disposal, building upon the previous editions and brought up-to-date with the new international standards ISO55002 and ISO/TS50010. It introduces the general principles of physical asset management and covers all stages of the asset management process, including initial business appraisal, identification of physical asset needs, capability gap analysis, financial evaluation, logistic support analysis, life cycle costing, strategic asset management planning, maintenance strategy, outsourcing, cost-benefit analysis, disposal and renewal. Features include: providing a textbook for asset management courses to university level; relating closely to the ISO55000 international asset management standard series; providing a basis for the establishment of physical asset management as a professional discipline; and presenting case studies, analytical techniques and numerical examples with solutions. Written for practitioners and students in asset management, this book provides an essential foundation to the topic. It is suitable for an advanced undergraduate or postgraduate course in asset management and also offers an ideal reference text for engineers and managers specializing in asset management, reliability, maintenance, logistics or systems engineering. Acknowledgements About This Book Note Regarding the Third Edition Contents About the Author 1 Introduction to Asset Management 1.1 Purpose of This Book 1.2 Evolution of Asset Management 1.2.1 Why Do We Need Asset Management? 1.3 ISO 55000 Series Asset Management Standards 1.3.1 Background to This Book and ISO 55000 Standards 1.4 What is an Asset? 1.4.1 Who Needs Asset Management? 1.5 Asset Management Role 1.6 An Accountant’s View of Assets 1.6.1 Fixed Asset 1.6.2 Current Asset 1.6.3 Expense 1.6.4 Liabilities 1.6.5 Equity 1.7 What is Asset Management? 1.7.1 ISO 55000 Definition 1.7.2 Extended Definition of Asset Management 1.8 Aim of Asset Management 1.8.1 Asset Management System 1.8.2 The Asset Life Cycle, 1.8.3 Asset Strategic Planning 1.8.4 Asset Management Basic Questions 1.8.5 Regulation 1.9 Dangers of Poor Asset Management 1.10 Benefits of Good Asset Management 1.11 The Asset Death Spiral 1.12 Exercises 1.12.1 Self-Assessment Quiz 1–1 1.12.2 Self-Assessment Quiz 1–2 1.12.3 Gas Processing Plant Exercise 1.13 Solutions to Exercises 1.13.1 Self-Assessment Quiz 1–1 1.13.2 Self-Assessment Quiz 1–2 1.13.3 Gas Processing Plant Exercise 1.14 A Top-Level Decision 2 Structure and Activities 2.1 Business Strategy and Asset Management 2.1.1 Asset Management Capability 2.2 Asset Management in the Organization 2.3 Chief Asset Management Officer Role 2.4 Asset Management in the Organisation (2) 2.5 Asset Planning Group 2.5.1 Asset Planning Sub-Groups 2.5.2 Asset Planning Sub-Groups Example 2.5.3 Asset Management and Maintenance 2.5.4 Engineering 2.6 Integrated Project Teams 2.7 Asset Knowledge 2.8 Asset Management Activities 2.8.1 Asset Data Management 2.8.2 Life Cycle Asset Management Planning 2.8.3 Asset Operations Activities 2.8.4 Deployed Assets and Asset Fleets 2.8.5 Asset Planning and Finance-Related Activities 2.8.6 Maintenance and Logistic-Related Activities 2.8.7 In-Service Support 2.9 Asset Management Policy 2.10 Asset Management Plans 2.11 Strategic Asset Management Plan (SAMP) 2.12 Policy, Strategy or Plan? 2.13 Exercises 2.13.1 Self-Assessment Quiz 2–1 2.13.2 Self-Assessment Quiz 2–2 2.13.3 Holiday Resort Exercise 2.14 Solutions to Exercises 2.14.1 Self-Assessment Quiz 2–1 Solution 2.14.2 Self-Assessment Quiz 2–2 Solution 2.14.3 Holiday Resort Exercise Solution 3 Asset Management Personnel 3.1 Context of the Organization 3.2 Asset Management—A Matrix Activity 3.2.1 Understanding Needs and Expectations of Stakeholders 3.3 Leadership 3.4 Competence 3.5 Required Areas of Competence 3.5.1 Filling the Gaps 3.6 Key Activities Where Competence is Needed 3.7 Roles, Responsibilities and Authorities 3.8 Engineering and Maintenance Roles 3.8.1 Engineering Leaders 3.8.2 Technical Authorities 3.8.3 Maintenance Manager 3.8.4 Maintenance Superintendent 3.8.5 Maintenance Team Leader 3.8.6 Maintenance Planner 3.8.7 Maintenance Scheduler 3.8.8 Document Controller 3.9 Personnel Development System 3.10 Competency Assessment 3.11 Communication and Response 3.12 Exercises 3.12.1 Self-Assessment Quiz 3–1 3.12.2 Pacific Earth Moving Part 1 3.12.3 Self-Assessment Quiz 3–1 Solution 3.12.4 Pacific Earth Moving Part 1 3.13 Asset Management—Who Needs It? 4 From Concept to Project Approval 4.1 Business Development Planning 4.2 Project Initiation 4.3 Types of Acquisition or Development 4.3.1 Project Complexity 4.3.2 Opportunity Cost 4.3.3 Major Projects 4.3.4 Minor Projects 4.3.5 Developmental Flexibility 4.3.6 Delegation of Financial Authority 4.4 Capability 4.5 Asset Capability Delivery Model 4.6 Capability Requirements Planning 4.6.1 Development Planning Teams 4.6.2 Demand Analysis and Forecasting 4.6.3 Demand Management 4.6.4 Needs Analysis 4.6.5 Un-Augmented Capability Analysis 4.6.6 Capability Gap 4.6.7 Cumulative Production Gap 4.6.8 Capability Requirements Statement 4.7 Concept Proposal 4.8 Value Engineering 4.8.1 Value for Money 4.9 Creating the Development Plan 4.10 Pre-feasibility Analysis 4.11 Feasibility Analysis 4.12 Development Plan 4.13 Development Plan Detailed Topics 4.14 Considerations in Development Planning 4.14.1 Stakeholders 4.14.2 Stakeholder Example 4.14.3 Existing Processes and the Status Quo 4.14.4 Situations to Avoid 4.14.5 Lead Time 4.14.6 In-Service Date 4.14.7 Date of Decision 4.14.8 Operational Concept Document 4.14.9 Function and Performance Specifications 4.14.10 Level of Service 4.14.11 Scope of Work 4.14.12 Financial Analysis 4.14.13 Acquisition Strategy 4.15 Project Maturity 4.16 Implementation Portfolio 4.17 Exercises 4.17.1 Self-Assessment Quiz 4.1 4.17.2 Self-Assessment Quiz 4.2 4.17.3 Capacity Planning—Generators 4.17.4 Bottling Plant Exercise 4.17.5 Own Project Exercise 4.18 Exercise Solutions 4.18.1 Self-Assessment Quiz 4.1 Solutions 4.18.2 Self-Assessment Quiz 4.2 Solutions 4.19 Capacity Planning Exercise Generators—Solution 4.20 Bottling Plant Exercise Solution 4.21 A Business Imperative 5 Financial Methods 5.1 Introduction 5.2 Discounted Cash Flow 5.2.1 Interest Rate 5.2.2 Present Value (PV) 5.2.3 Discount Factor 5.2.4 Net Present Value (NPV) 5.2.5 Cash Flow Diagram 5.2.6 Excel Function NPV 5.2.7 Equivalent Annual Cost (EAC) 5.2.8 Relationship Between EAC and NPV 5.3 Other Financial Terms 5.3.1 Annuity Factor 5.3.2 Capital Recovery Factor 5.3.3 Equivalent Unit Cost (EUC) 5.3.4 Asset Investment Criteria 5.3.5 Planning Horizon 5.3.6 Net Present Value 5.3.7 Payback Period 5.3.8 Internal Rate of Return (IRR) 5.3.9 Minimum Acceptable Rate of Return (MARR) 5.3.10 Profitability Index 5.3.11 Return on Investment (ROI) 5.3.12 Comparison and Selection of Projects 5.4 Exercises 5.4.1 Discounted Cash Flow Revision Question 5.4.2 Materials Handling System—Net Present Value Exercise 5.4.3 Materials Handling System—Payback Period Exercise 5.4.4 Communications System Exercise 5.4.5 Financial Analysis of a Turbogenerator Project—Exercise 5.5 Exercise Solutions 5.5.1 Discounted Cash Flow Revision Questions 5.5.2 Materials Handling System Solution 5.5.3 Materials Handling System Payback Period—Solution 5.5.4 Communications System Solution 5.5.5 Financial Analysis of Turbogenerator Exercise Solution 6 Developing a Business Case 6.1 Business Case Introduction 6.1.1 Airing the Issues 6.2 Development Plan 6.2.1 Opportunity Cost 6.3 Business Case Outline 6.4 Smaller Project Business Case Outline 6.5 Executive Summary Guidelines 6.6 Justifying Expenditure—The Hard-Hearted Accountant 6.6.1 Reasons for a Project 6.7 Cost–Volume–Profit Analysis 6.7.1 Fixed Costs 6.7.2 Variable Costs 6.7.3 Profit Margin 6.7.4 Contribution Margin 6.7.5 Sensitivity Analysis 6.7.6 Presenting a Case 6.7.7 Other Benefits 6.7.8 Value for Money 6.8 Impact of Downtime 6.8.1 Physical or Service Losses 6.8.2 Cost Considerations 6.8.3 Cost of Failure 6.8.4 Indicate Savings and Returns on Investment 6.9 The Final Decision to Proceed 6.10 Approved Development Plan 6.11 Wine Selection Example 6.12 Exercises 6.12.1 Organizational Structure and Procedures 6.12.2 Own Project 6.12.3 Pacific Earth Moving Part 2 6.13 Experience Required 6.14 Exercise Solution 6.14.1 Pacific Earth Moving Part 2 Solution 7 Implementing Development Plans 7.1 Asset Development Portfolios 7.1.1 Concept Portfolio 7.1.2 Planning Portfolio 7.1.3 Implementation Portfolio 7.1.4 In-Service Asset Portfolio 7.1.5 Disposal Portfolio 7.2 Project Team and Activities 7.2.1 Team Roles 7.2.2 Project Management 7.2.3 Activities 7.3 Project Milestones 7.4 Reliability-Centered Procurement 7.4.1 Equipment Commonality 7.4.2 Performance Standards 7.4.3 Test and Evaluation Criteria 7.4.4 Preferred Suppliers 7.5 Evaluation of Suppliers 7.6 Equipment Selection and Trials and Acceptance 7.7 Through Life Support 7.8 Financial and Contract Process 7.9 Project Maturity Status 7.10 Assigning Responsibilities 7.10.1 RACI or ARIC? 7.11 Project Management Reports 7.11.1 Topics 7.11.2 Financial Overview Report 7.12 Project Progress Monitoring 7.12.1 Delays and Overruns 7.12.2 Scope Creep 7.12.3 Project Progress Report Examples 7.13 Project Portfolio Management 7.13.1 Project Register 7.14 Commissioning and Introduction into Service 7.14.1 Operational Readiness 7.14.2 Training 7.14.3 Introduction into Service 7.15 Change Management 7.15.1 Change Review and Danger Points 7.15.2 Change Analysis 7.15.3 Change Management Plan 7.15.4 Approval of Changes 7.16 Exercises 7.16.1 Self-Assessment Quiz 7.1 7.16.2 Pacific Earth Moving Part 3 7.17 Exercise Solutions 7.17.1 Self-Assessment Quiz 7.1 Solutions 7.18 Pacific Earth Moving Part 3 Solution 7.19 An Acquisition Decision 8 Life Cycle Planning and Costing 8.1 Life Cycle Asset Management Plan 8.1.1 Why Do We Need a Life Cycle Asset Management Plan? 8.2 Life Cycle Costing 8.2.1 Why Do We Need Life Cycle Costing? 8.2.2 Planning Horizon 8.2.3 Acquisition Decisions 8.2.4 Economic Life 8.3 Creating Life Cycle Plans and Costings 8.3.1 Sources of Information 8.3.2 Life Cycle Planning and Costing Elements 8.3.3 Functionality 8.3.4 Acquisition 8.3.5 Operations 8.3.6 Maintenance 8.3.7 Support Services 8.3.8 Disposal 8.3.9 Buildings—Design and Construction 8.3.10 Buildings—Operation, Maintenance and Disposal 8.4 Life Cycle Planning and Costing Process 8.5 Life Cycle Planning and Costing Example 8.6 Input to Plans and Budgets 8.6.1 Acquisition 8.6.2 Support Facilities and Logistics Planning 8.6.3 Strategic Asset Management Planning and Budgeting 8.7 Summary of Applications of Life Cycle Plans and Costings 8.8 Asset Management Plan—ISO 55000 8.9 Exercises 8.9.1 Self-Assessment Quiz 8.9.2 Standby Generator Exercise 8.9.3 Solution to Self-Assessment Quiz 8.9.4 Standby Generator Exercise Solution 9 Know Your Assets 9.1 Awareness of Key Assets 9.1.1 Summary of Physical Assets 9.1.2 Asset Knowledge 9.1.3 Organizational Asset Portfolio 9.1.4 Register of Asset Developments 9.1.5 Examples of Organizational Assets 9.1.6 Examples of Groups of Mining Assets 9.1.7 Railway Example 9.1.8 Asset Awareness 9.2 Acquisition of Asset Knowledge 9.3 Block Diagrams 9.3.1 Information Required Per Block 9.3.2 Drawings 9.4 Criticality 9.4.1 Example—Chemical Plant 9.4.2 Example—Mining Site 9.5 Expert Teams 9.6 Bottlenecks 9.7 Backlogs and Surplus Capacity 9.8 Managing Asset Resources 9.9 Asset Condition 9.10 Plant Criticality Exercise 9.11 Plant Criticality Exercise Solution 9.12 Look Back in Embarrassment 10 Asset Continuity Planning 10.1 Asset Continuity 10.1.1 Factors in Continuity Planning 10.2 Asset Data 10.3 Planning Terminology 10.4 Planning Schedules 10.5 Planning Schedules Example 10.5.1 Expiry Schedule 10.5.2 Acquisition and Cost Schedule 10.5.3 Application of the Acquisition and Cost Schedule 10.6 Planning Example with Varying Needs 10.6.1 Pre-plan Gap Analysis 10.6.2 Creating the Purchase Plan 10.7 Capability Continuity Planning 10.8 Columnar Format 10.9 Exercises 10.9.1 Continuity Planning 10.9.2 Vehicle Fleet Capacity Exercise 10.10 Exercise Solutions 10.10.1 Continuity Planning Solution 10.10.2 Vehicle Fleet Capacity Exercise 11 Strategic Asset Management Planning 11.1 Strategic Asset Management Planning and Why We Need It 11.1.1 Business Plan 11.1.2 Strategic Asset Management Planning 11.2 Strategic Asset Management Planning Elements 11.2.1 Asset Portfolios 11.2.2 The Plan for the Asset Portfolio 11.2.3 The Plan for Asset Support 11.2.4 Asset Information Systems and Procedures 11.2.5 Updating 11.2.6 Asset Budget CAPEX and OPEX 11.2.7 Strategic Asset Management Plan (SAMP) Document 11.2.8 Reasons for Having Strategic Asset Plans 11.2.9 Planning Teams 11.3 Development Steps 11.3.1 Plan Summary 11.3.2 Follow-Up Action 11.4 Planning Considerations 11.4.1 Top Down and Bottom Up 11.4.2 Further Issues in Strategic Asset Planning 11.5 The Plan for Asset Support—Considerations 11.5.1 Organization for Asset Support 11.5.2 Support Activities 11.6 Asset Information Systems and Procedures—Considerations 11.6.1 Systems Activities 11.7 Strategic Asset Management Plan 11.7.1 Why is a Strategic Asset Management Plan Needed? 11.7.2 Outline Contents of a Strategic Asset Management Plan 11.8 Organizational Structure 11.9 Exercises 11.9.1 Self-Assessment Quiz 11.1 11.10 Exercise Solutions 11.10.1 Self-Assessment Quiz 11.1 Solution 12 Capital Planning and Budget 12.1 Capital Planning Considerations 12.1.1 Cyclic Aspect 12.2 What Is a Budget? 12.3 Types of Budget 12.3.1 Cash Flow 12.3.2 Zero-Based Budgeting 12.3.3 Activity-Based Budgeting 12.3.4 Budgeting Methods—Discussion 12.4 Budget Structure 12.5 Devolution of Authority 12.6 Organizational Planning Process 12.7 Asset Planning Process 12.7.1 Planning Periods 12.7.2 Source and Application of Funds 12.8 Capital Requirement Plans for Asset Types 12.9 Capital Budgeting Cycle 12.10 Project Prioritization 12.10.1 Financial Return 12.10.2 Business Continuity 12.10.3 Capital Rationing or Smoothing 12.10.4 Condition and Criticality Rating 12.10.5 Condition/Criticality Plot 12.10.6 Risk and Regulation 12.10.7 Reliability 12.10.8 Urgency 12.10.9 Timing 12.11 The Capital Budget 12.12 Managing the Capital Project Portfolio 12.12.1 Capital Budget for Current Year 12.12.2 Contingency Allowances 12.12.3 Out-of-Plan Expenditure 12.12.4 Quarterly Review 12.13 Exercises 12.13.1 Self-Assessment Exercise 12.1 12.13.2 Long River Ferry Company Exercise 12.14 Are Your Assets Liabilities? 12.15 Exercise Solutions 12.15.1 Self-Assessment Exercise 12.1 Solution 12.15.2 Long River Ferry Company Exercise Solution 13 Asset Management Information Systems 13.1 Information System Role and Applications 13.2 Asset Register 13.2.1 Doomsday Book 13.2.2 Maintenance-Based and Finance-Based Systems 13.3 Base Data and the Need for Identification Coding 13.3.1 Componentization 13.3.2 Fixed Plant and Functional Locations 13.3.3 Location Code Structure 13.3.4 Mobile Plant Coding 13.3.5 Activity and Trade Codes 13.4 Resourcing and Managing the System 13.4.1 Data Administration 13.4.2 Information Technology Support 13.4.3 Users 13.4.4 Possible Difficulties in Information Systems 13.5 Reports and Their Uses 13.6 Documented Information 13.7 Document Control 13.8 Implementing Changes 13.9 Configuration Management 13.9.1 Configuration Management Example 13.9.2 Configuration Description 13.9.3 Configuration Management Process 13.9.4 Configuration Change Control 13.10 Exercises 13.10.1 Asset Data Setup Exercise 13.10.2 Pacific Earth Moving Part 4 Asset Mgmt Info System 13.10.3 Configuration Management Exercise 13.11 Exercise Solutions 13.11.1 Asset Data Setup Exercise 13.11.2 Pacific Earth Moving Part 4 AM Info System Solution 13.11.3 Configuration Management Solutions 13.12 Roll Over 14 Cost–Benefit Analysis 14.1 Cost–Benefit Analysis 14.1.1 Non-financial Benefits 14.2 Cost–Benefit Analysis Outline 14.2.1 Basic Example 14.3 Needs and Wants 14.4 User Pays Principle 14.5 Activity-Based Cost–Benefit Analysis 14.6 Lost Opportunity Cost 14.7 Measures of Benefit 14.8 Cost–Benefit Analysis Steps 14.8.1 Activity-Based Cost–Benefit Summary Sheet 14.9 Regional Health Clinics Exercise 14.10 Regional Health Clinics Exercise Solution 14.11 Cost–Benefit Spider Diagram 15 Risk Analysis and Risk Management 15.1 References 15.2 Risk Terms and Definitions 15.3 Introduction to Risk 15.4 Legislative Approach 15.4.1 Duty of Care 15.4.2 Maintenance and Equipment Condition 15.4.3 Electric Cable Example 15.4.4 Residual Risk 15.4.5 What Is Reasonably Practicable? 15.4.6 Legal Defense 15.4.7 Precautionary Analysis 15.4.8 Likelihood and Consequence 15.4.9 Grape Slip Example 15.4.10 Additional Concepts 15.5 Management of Risk 15.5.1 Mitigating Risk 15.5.2 Risk Management Outline 15.5.3 Roles and Responsibilities 15.5.4 Risk Assessment Teams 15.5.5 Risk Management Documents 15.6 Establishing the Context 15.7 Water Supply Example 15.8 Initial Risk Register and Controls 15.8.1 Risk Identification 15.8.2 Hazard Analysis 15.8.3 Initial Controls 15.9 Risk Analysis and Treatment Worksheet 15.9.1 Example—Risk 1 Erosion of River Bank 15.9.2 Example—Risk 7 Control Board 15.9.3 Treatment Options 15.9.4 Risk Treatment Plan for Control Board 15.10 Risk Management Plan 15.11 Risk Analysis Factors 15.11.1 Consequences 15.11.2 Consequence Reduction Activities 15.11.3 Maximum Foreseeable Loss 15.11.4 Likelihood Reduction 15.12 Risk Treatment 15.12.1 Risk Treatment Plan 15.13 Contingency Planning 15.13.1 Contingency Allowance 15.13.2 Contingency Plan 15.13.3 Retirement of Risk 15.13.4 Monitoring and Audit 15.14 Types of Risk 15.14.1 Operational Risks 15.14.2 Sovereign Risk 15.14.3 Risks in Projects 15.14.4 Technical Development Risk 15.14.5 Performance Risk 15.14.6 Commercial or Financial Risk 15.14.7 Administrative Risk 15.14.8 Safety and Environmental Risks 15.14.9 Supplier Risk 15.14.10 Resources 15.14.11 Multiple Risks 15.15 Quantitative Risk Analysis 15.15.1 Probability 15.15.2 Data Analysis Areas 15.16 Risk-Cost 15.16.1 Risk-Cost and Treatment Cost 15.17 Risk Rating 15.17.1 Direct Judgment 15.17.2 Likelihood and Consequence Rating 15.18 Other Methods 15.19 Acquisition Project Risk Examples 15.20 Risks in Risk Management 15.21 High-Risk Plant 15.22 Exercises 15.22.1 Self-Assessment Exercise 15.1 15.22.2 Risk Register and Risk Treatment Plan Exercise 15.22.3 Suction Roll Exercise 15.22.4 Self-Assessment Exercise 15.1 Solution 15.22.5 Suction Roll Solution 15.22.6 Risk Register and Control Plan Solution 16 Outsourcing 16.1 Introduction 16.2 What to Outsource 16.2.1 Non-Core Activities 16.2.2 Minor Player 16.2.3 Peak Load Resources 16.2.4 Complex Team Jobs 16.3 The Owner/Operator Model 16.4 What NOT to Outsource 16.4.1 Core Activities 16.4.2 High Customer Impact 16.4.3 Problem Areas 16.4.4 Examples 16.5 Benefits of Outsourcing 16.5.1 Concentration on Core Business 16.5.2 Redress Workforce Imbalances 16.5.3 Reduce Costs 16.5.4 Review Maintenance Practices and Resources 16.6 Costs of Outsourcing 16.6.1 Formalization 16.6.2 Intangible Effects 16.6.3 Other Potential Negatives 16.7 Types of Contract 16.8 Contract Features 16.9 Limiting Risks in Outsourcing 16.9.1 Audit 16.10 Outsourcing Result 16.10.1 Example 16.11 Contractor Viewpoint 16.12 Build Own Operate Transfer (BOOT) 16.13 Public–Private Partnerships (PPP) 16.14 Exercises 16.14.1 Self-Assessment Exercise 16.14.2 Self-Assessment Exercise Solution 17 Logistic Support 17.1 Introduction 17.1.1 Visible and Hidden Costs 17.2 Logistic Support Analysis (LSA) 17.2.1 Logistic Support Basic Data 17.2.2 Logistic Support Detailed Factors 17.3 Level of Repair Analysis (LORA) 17.3.1 Levels of Repair 17.4 Integrated Logistic Support (ILS), 17.5 Logistic Support Plan 17.6 Through Life Support 17.7 Configuration Management Plan 17.8 Through Life Support Contract 17.9 Logistic Support Example 17.10 Supplier or Contractor Viewpoint 17.11 Cunning at the Castle 17.12 Exercises 17.12.1 Self-Assessment Questions 17.12.2 Logistic Support Analysis—Tooth Brush 17.12.3 Racing Cycle Team 17.12.4 Level of Repair Analysis Exercise 17.13 Exercise Solutions 17.13.1 Self-Assessment Questions Solutions 17.13.2 Logistic Support Analysis—Tooth Brush Solution 17.13.3 Cycle Team Logistic Support Exercise Solution 17.13.4 Level of Repair Analysis Exercise 18 Asset Basic Care 18.1 Introduction 18.2 Total Productive Maintenance or Asset Basic Care 18.2.1 Workplace Tidiness and Organization 18.2.2 Maintain Standards 18.2.3 Training 18.2.4 Machine Knowledge 18.2.5 Basic Observation and Action 18.2.6 Japanese Guide Words 18.3 Basic Maintenance 18.3.1 Assign Housekeeping and Basic Maintenance Tasks 18.3.2 Routine Maintenance by Technicians 18.3.3 Accredit Workers 18.4 Performance Recording 18.5 Performance Management 18.5.1 Test Analyze and Fix (TAAF) 18.5.2 Continuous Conformance and Corrective Action 18.5.3 Continuous Improvement 18.5.4 Deming Wheel 18.5.5 Fishbone Diagram (Ishikawa) 18.6 Improvement Coordinator 18.7 Asset Basic Care/TPM—Management Support 18.7.1 Asset Basic Care/TPM Summary 18.7.2 Asset Basic Care/TPM Benefits 18.8 A Shock from Japan 18.9 Self-Assessment Exercise 18.10 Self-Assessment Exercise Solutions 19 Maintenance Organization and Budget 19.1 Maintenance Aim 19.2 Maintenance Organization 19.2.1 Maintenance Layout 19.3 Types of Maintenance Activity 19.3.1 Additional Related Tasks 19.4 Maintenance Work Management 19.4.1 Inspection and Scoping 19.4.2 Planning and Costing 19.4.3 Scheduling 19.4.4 Maintenance Control 19.4.5 Personnel Roles 19.4.6 Planning and Control Process 19.4.7 Planners Checklist 19.4.8 Job Priorities Scheme 19.4.9 Weekly Scheduling Process 19.5 Maintenance Budgeting 19.5.1 The Business Plan 19.5.2 Zero-Based Budgeting 19.5.3 Activity Based Budget Development 19.5.4 Creating the Budget 19.5.5 Using the History 19.5.6 Walking Around 19.5.7 Backlog 19.5.8 Sources of Maintenance Work 19.5.9 Changes in Demand 19.5.10 Direct Labor Estimates—Routine 19.5.11 Non-Routine and Breakdown Labor Estimate 19.5.12 Specific Items 19.5.13 Indirect Labor 19.5.14 Overheads 19.5.15 The Maintenance Iceberg 19.5.16 Arrive at the Resource Requirement 19.5.17 Correct the Imbalances 19.6 Costing 19.7 Survey and Quote 19.8 Budget Cost Control 19.9 Budget Reports 19.9.1 Quarterly Review 19.10 Activity Based Costing 19.10.1 Examples 19.11 Exercises 19.11.1 Self-Assessment Exercise 19.11.2 Maintenance Budgeting Exercise 19.11.3 Pacific Earth Moving Part 5, Maintenance 19.12 Exercise Solutions 19.12.1 Self-Assessment Exercise Solution 19.12.2 Maintenance Budgeting Exercise Solution 19.12.3 Pacific Earth Moving Part 5, Maintenance Solution 20 Stock Control 20.1 Introduction 20.2 Aims of Inventory Management 20.3 Initial Spares Purchase 20.4 Cataloging 20.5 Inventory Management Basics 20.5.1 Stock Keeping Units or SKUs 20.5.2 Spare Parts Catalog 20.6 Procedure When Item is Needed 20.7 Stock Status and Control Terminology 20.7.1 Multiple Locations and Status Settings 20.8 Dependent Demand 20.8.1 Kanban System 20.8.2 Materials Requirement Planning (MRP) 20.9 Independent Demand Items 20.9.1 Fast Moving Items 20.9.2 Reorder Level Concept 20.9.3 Lead Time 20.9.4 Reorder Level Setting 20.9.5 Reorder Quantity 20.9.6 MIN and MAX 20.10 Target Level 20.11 Forecasting 20.12 Reorder Risks 20.13 Inventory Faults 20.14 Safety Stock 20.15 Item Criticality 20.16 Summary of Reorder Rules Fast Moving Items 20.16.1 Stock Control Example 20.17 Current Action 20.18 Complications 20.18.1 Consignment 20.18.2 Cannibalization 20.18.3 Returned Stores 20.18.4 Specialized Tools or Equipment 20.18.5 Storekeeper Personnel 20.18.6 Overstocking 20.19 Repair Pools and Rotables 20.19.1 Repair Parts 20.20 Slow Moving Items 20.20.1 Zero, One, Two Policies 20.20.2 Example 20.21 Insurance Spares 20.22 Summary of Policy Types 20.23 Performance Indicators 20.23.1 Service Level 20.23.2 Days Supply 20.23.3 Dead Stock 20.23.4 Stock Turns Per Year 20.23.5 Value Turns 20.23.6 ABC Analysis 20.23.7 Inventory Improvement Actions 20.24 Accounting for Inventory 20.24.1 Inventory in the Balance Sheet 20.24.2 Inventory in the Profit and Loss Account 20.24.3 Overstocking and Write Downs 20.25 So How Did We Win? 20.26 But Problems Remain 20.27 Exercises 20.27.1 Self-Assessment Exercise 20.1 20.27.2 Self-Assessment Exercise 20.2 20.27.3 Reorder Level Exercise 20.27.4 Reorder Quantity Exercise 20.27.5 Actual Order Decisions Exercises 20.27.6 Self-Assessment Exercise 20.1 Solution 20.27.7 Self-Assessment Exercise 20.2 Solution 21 Reliability, Availability and Maintainability 21.1 Introduction 21.2 Reliability 21.3 Specification and Testing 21.3.1 Mean Time Between Failures 21.3.2 Failure Rate 21.3.3 Failure 21.4 Design for Reliability 21.5 Managing the Reliability of In-Service Assets 21.5.1 Operator Records and Incident Reports 21.5.2 Toolbox Meetings 21.6 Failure Patterns and Causes 21.7 Failure Pattern Discussion 21.7.1 Useful Life 21.7.2 Burn-In Failures 21.7.3 Random Failure Examples 21.7.4 Wearout 21.7.5 Failure Mode Relative Importance 21.7.6 Failure Interdependency 21.7.7 Bad Actor 21.8 Failure Reporting and Corrective Action System (FRACAS), 21.9 Pareto Analysis 21.10 Failure Mode and Effects Analysis (FMEA), 21.10.1 Common Failure Modes and Mechanisms 21.11 Root Cause Analysis (RCA) 21.11.1 Five Whys 21.11.2 Action and Condition Causes 21.11.3 Example—Pump Failure 21.11.4 Brainstorming a Solution 21.11.5 Example—Pump Failure Continued 21.11.6 Actions to Remedy 21.12 Condition Monitoring 21.12.1 Delay Time or P-F Interval 21.12.2 Condition Monitoring Applicability 21.12.3 Limitations 21.12.4 Condition Monitoring Effectiveness 21.12.5 Applications of Condition Monitoring 21.13 Reliability-Centered Maintenance,, 21.13.1 Information Sources 21.13.2 Guidelines 21.13.3 Function and Functional Failure 21.13.4 Functional Failure 21.13.5 Failure Mode 21.13.6 Effects 21.13.7 Hidden Failures 21.13.8 Tasks 21.13.9 Reliability-Centered Maintenance Conclusion 21.14 Maintenance Policy Review 21.14.1 Example 21.14.2 Aging Equipment 21.15 Availability 21.15.1 System Availability 21.15.2 Cost of Downtime 21.15.3 Availability When Needed 21.16 Availability Related to Total Time 21.17 Maintenance Effectiveness 21.18 Maintenance Load 21.19 Maintenance Regime 21.20 Maintainability, 21.20.1 Design for Maintainability 21.21 Maintainability Measure 21.22 Desert Song 21.23 Exercises 21.23.1 Self-Assessment Exercise 21.23.2 Pacific Earth Moving Pt 6—Reliability and Availability 21.23.3 Cost of Downtime 21.23.4 Availability Related to Total Time 21.23.5 Hydraulic Faults 21.24 Exercise Solutions 21.24.1 Self-Assessment Exercise Solution 21.24.2 Pacific Earth Moving Part 6. Solution 21.24.3 Cost of Downtime 21.24.4 Availability Related to Total Time 21.24.5 Hydraulic Faults Solution 22 Safety 22.1 Safety Requirements and Competence 22.1.1 Safety Practices 22.1.2 Take 5 22.1.3 Training and Information 22.1.4 Permits 22.1.5 Tags 22.1.6 Danger Indications 22.2 Safety Critical Equipment (SCE) and Systems (SCS) 22.2.1 Safety Critical Examples 22.2.2 Risk-Based Inspection 22.2.3 Example—Distillation System 22.2.4 Asset Integrity Management Plan (AIMP) 22.2.5 Maintenance Specific to Safety Critical Equipment 22.2.6 Internal Corrosion Management 22.2.7 Protective Devices 22.2.8 Record Keeping 22.3 Layer of Protection Analysis (LOPA),, 22.4 Safety Integrity Level (SIL) 22.4.1 Design for Safe Operation 22.4.2 Facility Siting and Layout 22.4.3 Fitness for Service Assessment 22.5 Repairs Requiring Engineering 22.6 Terminology Summary 22.7 Exercises 22.7.1 Self-Assessment Quiz 22.7.2 Self-Assessment Quiz Solutions 23 Profit, Depreciation and Tax 23.1 Introduction 23.2 Capital Transactions 23.2.1 Acquisition Cost 23.3 Depreciation 23.3.1 Book Value (or Written Down Value, WDV) 23.3.2 Effective Life 23.3.3 Straight-Line Depreciation 23.3.4 Residual Value 23.3.5 Declining Balance Depreciation 23.4 Profit and Loss Account 23.5 Profit Calculations 23.5.1 Depreciation Tax Credit 23.5.2 Maintenance Tax Credits 23.5.3 Tax Credit Summary 23.5.4 Tax on Resale 23.6 Cash Flow Statement 23.7 Pre-Tax and After-Tax Cash Flow Diagrams 23.7.1 Pre-Tax Cash Flow Diagram 23.7.2 After-Tax Cash Flow Diagram 23.8 Conclusion 23.9 Exercises 23.9.1 Self-Assessment Exercise 23 23.9.2 Profit Calculation Exercise 23.10 Self-Assessment Exercise 23 Solution 23.10.1 Profit Calculation Exercise—Solution 24 Asset Decision Examples 24.1 Repair/Replace Decision for Ore Loading Vehicles 24.1.1 Situation 24.1.2 Required Decision 24.1.3 Factors Involved in the Replace or Overhaul Decision 24.2 Replace Option 24.2.1 New Ore Loader Costs 24.3 New Loader Life Cycle NPV and EAC 24.4 Overhaul Option 24.4.1 Old Ore Loader Costs 24.5 Cost Summary 24.6 Ore Loader Cost Analysis with Tax 24.6.1 “Replace” Option with Tax 24.6.2 “Overhaul” Option with Tax 24.6.3 Loader Initial Policy Decision 24.7 Availability and Reliability 24.7.1 Replace/Overhaul Ore Loader Conclusion 24.8 An Asset-Based Investment Case Study 24.8.1 Data 24.8.2 Cash Flow Analysis 24.8.3 Investment Analysis for the Power System Project 24.9 Exercises 24.9.1 Solar or Diesel Power Exercise 24.10 Exercise Solutions 24.10.1 Solar or Diesel Power Exercise Solution 25 Economic Life 25.1 Economic Life Concept 25.2 Economic Life Example 25.2.1 Hand Calculation 25.2.2 Spreadsheet Calculation 25.2.3 Economic Life with Discounting 25.2.4 Economic Life with Discounting and Tax 25.3 Exercises 25.3.1 Self-Assessment Exercise 25.3.2 Self-Assessment Exercise Solution 26 Equipment Replacement Decisions 26.1 Replacement Planning 26.2 Reasons for Equipment Replacement 26.2.1 Fleet Uniformity 26.3 Condition Assessment 26.4 Disposal 26.5 Data Analysis 26.6 Cost Analysis for Replacement 26.6.1 Like-with-Like Replacement 26.6.2 Equivalent Annual Cost of the Challenger 26.6.3 Steadily Increasing Cost Case 26.6.4 Savings 26.6.5 Unevenly Changing Cost Case 26.7 Spend-Limits 26.7.1 Spend-Limit Example 26.8 Risk with Aging Equipment 26.8.1 Risk-Cost 26.9 Linear Assets, 26.9.1 Cost Structure 26.9.2 High Consequence Assets 26.9.3 Low Consequence, Long Life Asset Replacement 26.10 What Length of Asset Should Be Replaced? 26.10.1 Cost Structure of Replacement 26.10.2 Contiguous Replacement 26.10.3 Linear Assets Conclusion 26.11 Component Replacement 26.11.1 Condition-Based Replacement 26.11.2 Failure Replacement and Run to Failure 26.11.3 Age-Based or Service-Based Replacement 26.12 Exercises 26.12.1 Vehicle Replacement Exercise 26.12.2 Transformer Replacement Exercise 26.12.3 Spend-Limit Exercise 26.13 Solutions to Exercises 26.13.1 Vehicle Replacement Exercise Solution 26.13.2 Transformer Replacement Exercise 26.13.3 Spend-Limit Exercise 27 Further Financial Topics 27.1 Debt and Equity Financing 27.2 Loan Repayment 27.2.1 Weighted Average Cost of Capital (WACC) 27.3 Comparison and Selection of Projects 27.3.1 Project Comparability 27.3.2 Planning Horizon 27.3.3 With and Without Analysis 27.4 Inflation 27.4.1 Adjusting Historical Costs 27.4.2 Real Rate of Interest 27.4.3 Adjusting Future Costs 27.5 Asset Valuation 27.5.1 Book Value 27.5.2 Fair Value 27.5.3 Impairment 27.5.4 Valuation Situation 27.6 Current Replacement Cost 27.6.1 Depreciated Curren