How small utility companies can adopt asset management

25 August 2020 Consultancy.com.au

Asset management might seem complicated, but according to UMS Group expert Phil Caffyn, even small utility companies can realise big savings by adopting an asset management system. While bigger firms might deploy expensive software to undertake asset management, Caffyn believes that all players really need to start their journey with clearly defined objectives and an aligned approach.

Asset management is the practice of managing physical assets to minimise the total cost of owning and operating these assets, while delivering the desired service levels. According to the global benchmark ISO55000, asset management is defined as “the coordinated activity of an organisation to realise value from its assets”.

By improving their asset management, utilities can improve their business processes, enabling better decision making to reach a company’s long-term goals, enhance regulatory compliance, provide higher levels of reliability, and realise significant cost savings. 

Despite this, according to Phil Caffyn, a Senior Consultant at UMS Group, one of the most common things he still hears at clients is “implementing asset management best practices, that's only for the really large corporations, not for us.”

How small utility companies can adopt asset management

Taking his native market of Oceania as an example, he explained, “In New Zealand, electric line companies are typically small, some with only 5,000 customers. Most in the country have 25,000 - 45,000, with the largest has 560,000 customers. It’s skewed to the smaller end – so one current client of UMS Group in the US has an income which is about three times New Zealand’s entire electric bill. Even small organisations need to be willing to improve their asset management though.”

With more than 35 years in the electric power industry – including more than two decades as an advisor to some of the world’s leading utilities firms – Caffyn has seen how asset management can benefit clients of all shapes and sizes. Since stepping into consulting in 1998, he has advised over 50 electric companies across five continents, from Sweden to South Africa. Speaking on UMS Group’s ‘The Strategic Asset Management Podcast,’ he outlined the process needed for small utilities companies to build their strategies around asset management.

Addressing potential cultural pushback first, Caffyn explained, “Fundamentally, without a willingness to improve, it simply won’t happen… There has to be an asset management champion, who can see the benefits, and get the right blend of setting asset management apart from urgent daily stuff, and doing closed-door thinking, while also encourage and persuade people on a daily basis. Change management, behaviours, habits, modes of thinking will be critical – and that all starts with the company culture.” 

In other words, the focus should not be on software, but instead on soft skills required to implement asset management. 

Clear objectives

After ensuring there is a strong ‘burning platform’ and change management in place, utility companies usually start by setting up their Asset Management Policy and their Strategic Asset Management Plan. It is crucial for clients to define what each of their assets needs to do in terms of performance, risks and costs at the start of their asset management process. That then helps define the individual plans given to categories assets. This will lead to a more intricate process consisting of several key milestones. 

First, a firm needs to define asset categories, “for example, ‘poles,’” before then defining subcategories, “such as hard wood, softwood, concrete, railroad track.” Then these need to be given defined objectives – “which might require some lateral thinking”, for example, the objective of a pole “is that live components are kept a minimum distance from everything else,” but this distance may well depend on local regulations, so these have to be accounted for per category.

“Next,” Caffyn went on, “it is key to define the most common failure modes for each category – understanding that each may be quite different between subcategories. Then you will need to attach a condition to each asset – what condition does the asset need to be in to meet its objective? Next you need to attach a criticality to each asset – a combination of public safety, supply reliability and other features. Put this into an asset health and criticality matrix for each category. This can then be used to help determine maintenance schedules, things with high criticality for example need to be replaced before they break.” 

While this might sound like a complex process, however, Caffyn stressed that asset management should not be seen as merely the preserve of companies who can afford to put cutting-edge solutions toward it. He explained that many utilities firms, big or small, most likely already have all the tools they need to at least get started.

Caffyn contended, “It’s controversial, but I think that good asset at a small company can be done with an Excel spread sheet! At its most basic, asset management is about applying a bunch of rules to list of assets to create a work list. Where most people come unstuck is that their bunch of rules is ‘fluffy’ and loose because their objectives are not well defined. Obviously, sophisticated software can lift asset management, but only if the underlying thinking is there. Software without solid thinking is just going to be a solution.”


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