Asset Management: Practical Path to Success

The term asset management has taken center stage for most utility transmission
and distribution, primarily because of cost pressures resulting from limited
capital and O&M funds, and customer/regulatory pressure to improve network reliability.
While definitions may vary, asset management is commonly characterized as maintaining
the “health” and “wealth” of the assets. Health is typically described as the
traditional maintenance management, performance monitoring, replacement and
investment planning based on asset operating performance and related operating
and maintenance costs. Wealth takes into consideration the revenue associated
with the asset along with the cost of maintaining its health and is used in
making enterprise investment decisions. Asset “health and wealth,” taken together,
must be managed through the entire network asset life cycle. This life cycle
starts with planning, designing, building, commissions, operation of the network,
monitoring the network, maintenance, and refurbishing all parts of the network
(from equipment to software to infrastructure).

So what makes it so difficult for the utility to implement an effective asset
management program that measures and makes informed decisions on asset health
and wealth? There are instances where the utility has been successful in implementing
asset management for a particular class of assets, or a specific phase of the
life cycle, such as maintenance. With the emphasis placed on implementing information
technology solutions over the past 10 years to support the utility transmission
and distribution business, this would lead one to believe that the right tools
are in place to effectively, if not efficiently, manage assets. Clearly, many
of these technologies have been labeled “asset management” solutions but have
fallen far short of providing the capability to manage assets. So has technology
failed us in our endeavor to manage assets? A few utility technology-related
observations are worth looking at.

Utility Technology-Related Observations

It’s no secret that when utilities are forced into cost-cutting measures (which
has happened significantly over the last five years), the first strategy considered
is personnel reduction. During this same period, however, utilities have procured
and deployed more commercial applications (replacing legacy and in-house developed),
allowing for automation, productivity improvements and extended vendor support
to help justify the reduction in personnel. Figure 1 shows the impact that the
degree of commercial application implementation/ integration has on the line
of business (LOB) and IT personnel.

This indicates a greater percentage reduction in IT staff than in LOB staff,
primarily for two reasons. First, software vendors, through more comprehensive
annual service agreements, are providing increased levels of application and
maintenance support. Second, in-house developed legacy systems often require
more IT personnel for administration and maintenance. Also, internally developed
software is generally susceptible to near-continuous customization requests
by the LOB.

Overall, at first, this seems to present a supportive picture in a utility’s
efforts to cut costs. However, as the degree of commercial application implementation
and integration continues, another phenomenon is taking place. This is best
illustrated through example. A typical distribution utility has 10 to 12 applications
for operations and engineering, each with a minimum of two to three interfaces,
provided by six to eight unique vendors. As these applications become more tightly
integrated, with most vendors providing annual upgrade releases, Figure 2 examines
the scenario that can occur.

Assume that a typical application upgrade is $500,000, and each interface upgrade
is $25,000. Those are probably conservative estimates. For a utility early on
in its commercial application implementation and integration efforts (e.g.,
three applications), it can be looking at nearly $2 million in upgrade costs.
For the completely integrated utility, these costs approach $12 million, more
than the internal IT staff can support and likely more than has been budgeted.
The question is whether the utility can afford to continue on this path, and
more importantly, what is the expected benefit in doing so? The primary benefit
received in application integration is improved business process efficiency,
but it results in minimal positive impact in managing assets. Furthermore, this
improvement in business process efficiency is only temporary if the utility
doesn’t have the financial or technical resources to maintain the technology
integration. It’s a snapshot in time, becoming out of date once the first vendor
provides an upgrade to its application and the utility makes a decision to implement
it. Clearly, fewer vendors providing an integrated solution can help alleviate
the substantial cost and resource requirements needed to keep the solution current.

Another alternative may be to outsource the technology or contract to make
a single vendor responsible for keeping the technology current. Because many
applications (e.g., outage management, engineering design, planned maintenance)
are built around one or two primary business functions, the business units using
these applications can directly benefit from the upgrades. As a whole, the individual
business units may see a benefit from the upgrade (e.g., improved maintenance
optimization, better crew utilization in outage restoration); however, the business
process as a whole most likely suffers if the integrated solution isn’t maintained.

Why does asset management suffer under this scenario? Asset management is not
simply a sum of the parts in an asset’s life cycle. For example, the engineering
department can optimally design an extension to the utility’s physical network,
appropriately sizing the necessary transformers and other assets. However, if
the network is configured such that these transformers are typically operating
with excessive loads, or the manufacturer’s recommended maintenance isn’t performed
(or at least considered) or similar transformer failure history isn’t considered
in the maintenance plan, etc., the results are higher costs and lower reliability.
That is decreased asset heath and wealth. The synergy of asset management is
that the whole of the asset life cycle is much greater than the sum of the individual
phases, even if, individually, the phases have been optimized. So, what should
a utility consider in implementing asset management?

Picking the Right Asset

Undertaking asset management across the entire utility can be a daunting task,
and even those who believed they had the right resources and finances have been
overwhelmed. A practical approach needs to be taken in the successful implementation
of asset management. First and foremost, the utility needs to recognize that
the expertise and much of the data, 80 percent or more, resides within the utility.
Second, although it’s important to implement an overall asset management strategy,
don’t become so engrossed in it that it keeps you from ever implementing. Some
utilities have become paralyzed by the intensive efforts they’ve taken to ensure
that their asset management strategy is just right. Third, start small by implementing
asset management for a specific type of asset, over the entire asset life cycle.

Although utilities have expended considerable resources on technology implementation
and integration to the benefit of the efficiency and effectiveness of business
processes, all is not lost in benefiting asset management. Through application
functional enhancements that technologically enable the associated business
processes, the collection, retention and availability of pertinent asset data
has been dramatically improved. The key is to be able to easily and readily
extract, transform and load the appropriate data from a number of disparate
application data sources so meaningful information can be presented and used
to answer questions and provide decision support for asset management.

This technology, combining a transmission and distribution business intelligence
model with data warehousing, is available and affordable today. Unlike the many
problems associated with keeping complex interfaces between integrated applications
current, this technology depends on the data model that seldom changes even
though the application may undergo frequent upgrades. Also, this technology
easily lends itself to utilityspecific customizations, through the separation
of data tables, and readily supports new software releases and upgrades. Some
solution vendors have developed a robust utility transmission and distribution
data model with accompanying dashboards, key performance indicators, metrics
and reports that reduce this effort to one of a data-mapping exercise to the
utility’s data sources.

With the technology and much of the data available to support asset management,
the holistic view of the asset life cycle must be considered. As noted earlier,
much of the recent efforts to implement technology solutions have focused on
specific business functions, with the integration of these applications primarily
supporting the enhancement of the overall business processes. An approach to
embedding the asset life cycle in asset management is to implement a structured
process that looks at each phase of the asset life cycle by identifying the
questions that need to be answered, determining what data is needed to answer
the questions, and where that data resides. An abbreviated example of this approach
is shown in Figure 3.

As the detail of this structured approach is flushed out, it becomes apparent
that the majority of the questions asked are asset-type or class-independent.
Also, any gaps that may exist in the needed data become apparent.

By selecting a specific asset type or class to apply this approach, the utility
can refrain from being paralyzed by spending too much time on developing just
the right asset management strategy. More importantly, it can learn a lot about
what its overall strategy needs to be in managing assets. Also, another common
fate of those who initially strive for the “perfect” strategy is that they are
overwhelmed with data and can no longer derive meaningful information from it,
eroding the ability to make informed decisions. It is an expensive solution,
not only in terms of dollars, but also the lost opportunity for effective asset

An Asset Management Road Map

This approach to asset management:

  • Benefits from and leverages the investments the utility has made in technology,
    enabling utility transmission and distribution business functions;
  • Builds upon the functional enhancements and availability of data that has
    resulted as transmission and distribution applications have matured;
  • Supports the recent application integration efforts to improve overall business
    process efficiency;
  • Recognizes that proven and affordable technology exists today to technologically
    enable asset management;
  • Embeds the asset life cycle in making asset management decisions;
  • Provides the utility with an early success in asset management;
  • Provides the utility with specific asset management results that can be
    used to shape its overall strategy.

This practical approach to implementing asset management will provide the utility
with a road map that achieves measurable successes early on and places them
on a manageable path to an enterprise asset management solution.