by Shane Day and Daniel Lambert, Arup

When Melbourne Water overhauled its old business model and took on a new customer-centric strategic direction, it was a good opportunity to also change its approach to asset management.

This was a fundamental shift in the way the utility operated, from an asset-centric organisation to one that put the customer at the centre of its business objectives.

Arup came on board to develop an asset management strategy that would support Melbourne Water’s service delivery whilst at the same time helping to improve the performance of the assets and of the organisation as a whole.

Asset management is all about ensuring that physical assets can deliver on the business requirements for which they were built – essentially to do what they are meant to do. It involves aligning the assets with the business strategy to get them to work in the same direction as the organisation.

In the recent report The Future of Urban Water, Arup identified a range of challenges faced by Australian water utilities, including a changing climate, managing diverse sources of supply, ensuring the health of waterways and ecological systems, maintaining the affordability of water services, and population growth.

Urban water utilities need to maximise opportunities to provide services of value, while mitigating future risks and uncertainties, and a strong asset management strategy can help with this.

At Melbourne Water, the process started with identifying the organisation’s goals, taking into account the business, social, economic and environmental factors, as well as the key challenges and issues in each area.

It might be surprising, but in many utility businesses maintenance of assets exists in a silo, where the focus is on the asset itself. This is not asset management; asset management focuses on the way the assets can align and deliver the overall business needs to the end customer.

As the delivery model changed to a customer centric one, Melbourne Water had to make sure that it could deliver consistently and align its asset strategy to its business needs and the customer, which has a service focus not an asset focus.

Along with helping to provide better services to their customers, an aligned asset management strategy is helping Melbourne Water save on operational costs and capital costs.

By aligning asset management to the business objectives, the asset management team can start identifying assets that aren’t actually helping them achieve those objectives, opening the way for the asset to be phased out.

This approach also raises the issue of whether or not an organisation actually needs to own all of the assets it uses. For instance, a business objective might be to maintain a service continuity for a pump station to a particular standard. This may require a redundant power supply which traditionally may have been serviced by a standby generator set. But that supply could be outsourced through a power supply utility generator or second supply. The water utility starts to ask whether it really needs to own the equipment, or whether it could be delivered by other providers or solutions.

In some cases, state-owned utilities own some assets, but they’re not being utilised very much, or they have spares, and their disposal could free up operational capital for other uses.

It’s all about balancing cost, risk and performance. It’s easy to say this, but harder to do it. The processes involved in strategic asset management can help an organisation understand the actual risk and balance it against the storage and maintenance costs, allowing for rationalisation of a lot of plant and equipment.

An asset management strategy can also help defer capital works programs until they’re really needed.

Once an organisation maps its assets to the business’s needs and it has gained a good understanding of their performance, and therefore their cost, the organisation will get an understanding of their condition at the same time. At that point, it can assess whether it can push back some capital works programs, freeing up capital for more urgent projects.

Our colleagues in the UK recently helped Yorkshire Water develop a water asset management cycle that provides for capital replacement decisions to be founded on business risk assessments. They used impact scales linked to a series of measures, together with probability scales, to rank business risks and provide justification ahead of investment approvals.

Red and amber findings were resolved using an action tracker to drive through improvements whilst areas of best practice were shared with all partners, leading to collective improvement.

Our colleagues also undertook a pilot study trialling a quantitative risk assessment of ten earth embankment dams. The project is to provide a better appreciation of the condition of these assets and their current level of risk exposure. This will enable Yorkshire Water to tailor their operating practices and prioritise investment to most efficiently reduce this risk. Following on from the pilot study Arup undertook the assessment and categorisation of risk across nearly a hundred dams owned by the utility.

Asset management is all about balancing performance, cost and risk. Once an organisation has reached a certain maturity of asset management, they’ve got a really good understanding of the key performance indicators of their assets and how much they cost to maintain and run. They can trace that up to the business requirements because each asset is matched to a business requirement. If the business requirements change, the organisation knows how much that is going to cost and what it has to do to adapt to that challenge more effectively because it has got all the business requirements matched to its assets.

It’s about being able to react to the changing business environment more effectively and in a way that balances cost, risk and performance to provide a solution aligned through the business to the customer.

“Urban water utilities need to maximise opportunities to provide services of value, while mitigating future risks and uncertainties, and a strong asset management strategy can help with this.”

Shane Day works in Arup’s Sydney-based asset management practice. He has two decades’ experience, and has developed a wide range of operational and maintenance solutions in the design and support phases of several rolling stock projects. Shane is a Certified Asset Management Assessor.

Daniel Lambert leads Arup’s water business in Australasia. He has played a key role in delivering asset management projects for clients, including Melbourne Water’s Transformational Asset Management Strategy and Indah Water Konsortium’s Asset Management Roadmap in Malaysia.

Laura Harvey is a fifteen-year veteran of trade publishing in the energy and infrastructure sectors. Currently she’s the Editor of Utility’s sister publication, Energy. During her time in the publishing sector, Laura has seen significant changes to the way the sector operates. What has remained constant throughout her career, whether she’s working on a magazine, a blog post, a video or an event, is her focus on connecting audiences with quality, engaging and thought-provoking content.

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