http://fiatech.org/images/stories/events/techconference/2008/Snitkin-Tuesday-Interoperability

A New Perspective for Asset Lifecycle Management & Interoperability Construction Contractors

Product Supply Chain

Shareholders

Financial Regulators

Operate

Fabricators

EH&S Regulators

OEMs

Engr & EPCs

Design

Maintain

Improve Consumables

Repair Shops OEMs & Parts Distributors

Sid Snitkin

Maint Service Providers

Vice-President ARC Advisory Group srsnitkin@arcweb.com

About ARC Advisory Group Established in 1986 80 Employees Global: US, UK, Germany, Japan,

China, India

Focused on Manufacturing and Supply

Chain

Sample of Manufacturing Company Members 2

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Agenda Why are Improvements in ALM & Interoperability

Important?

Why does the Traditional perspective on these topics

limit improvement?

What would be a better model for ALM? What is Interoperability and ALM Interoperability?

What do we need to do to achieve it?

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The Challenge/Opportunity

Poor ALM & Interoperability are Costly!

A 2004 NIST study estimated the annual losses due to the

lack of information interoperability within the North American Capital Projects Industry to be $15.8B (4.2% of installed asset cost). Almost $10B of this is owner/operator losses in the Operate and Maintain Lifecycle Stages (2.7% of installed asset cost = 2.7% ROA penalty).

A less formal survey I conducted sets annual losses due to

poor information Interoperability between O/O Engineering and O/M groups to be 3% of Plant Revenues.

Maintenance studies consistently find “wrench time” to be 25-

30%, due to poor access to information, waiting for parts, poor coordination with operations, etc. activities.

EH&S Compliance today demands:

• • • •

Complete, Accurate information for all assets Proper Operating and Safety procedures Complete histories of how assets have been operated Much more than money is at Risk!

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Why are we in this situation?

The Traditional Model for Asset Lifecycle Management O/O

EPC

Operate/Maintain

Revenues

OPEX

÷ Net Income

Capital Costs (CAPEX)

ROA 5

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Why are we in this situation?

What’s Wrong with the Traditional ALM Model Operate/Maintain

1. One-shot , Linear steps vs. cyclic, repeating activities 2. Ignores Interdependencies that create a lot of the problems 3. Encourages isolated, one-off decisions vs. coordinated, global investments.

4. More focus on Project (3-5 years) than O&M (30-50 years) 5. Business process, not Lifecycle Management Analysis 6

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A New Perspective

Performance Recognizing Dependencies • • • • •

Design Accuracy Release Mgmt C/N Mgmt Equip Selection Material Specs

• • • • •

Design Timely, Right Information

The Right Capability • • • • •

Product Range Throughput Quality Product Unit Cost EH&S Capability

• Financial • Cost • Cash Flow • Functional • Personal EH&S • Work Quality • Schedule

Const Planning Material Mgmt Site Mgmt Labor Efficiency EH&S

Build Optimal Execution

X

X • • • • • •

Project Performance

Operate

Maintain

Optimal Utilization

Maximum Availability

Product Mix Prod Planning Prime % Material Cost Labor Cost EH&S

X • • • • • •

Maint Strategy Mgmt Maint Planning Maint Efficiency MRO Material Mgmt Labor Cost EH&S

ALM Performance Asset Performance • Financial • Profit, Ratios (ROA) • Functional • Process EH&S • Personal EH&S • Customer Satisfaction • Cost, Quality, Delivery

Optimizing Project and/or Asset Performance Requires Collaboration & Teamwork !

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A New Perspective

Information Flow Recognizing Cyclic Behavior ALM Information Timely, Right Information

Build

Project Info

Design Calcs Models Drawings Equip BOMs Vendor Info etc.

How was it Bought & Built?

What should it be & why? What is it?

Operate

Maintain

Asset Info

How should it be operated & why?

How has it been operated?

How should it be maintained & why?

How has it been maintained

Design IT Investments Impact Project & Asset Performance Design, Operate & Maintain Are Key to AIM! 8

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A New ALM Model

Understanding the Asset Lifecycle What is a Lifecycle?

• Lifecycle is not in the Dictionary • Life Cycle means the stages that an entity goes through in one generation of its species continuing cycle of life Humans

Assets

Conception

Concept

Fetus

Project

Birth

Commissioning

Child

Pilot Operation

Adolescent

Ramp Up

Young Adult

Full Production

Middle Age

Peak Performance

Senior Citizen

Decline/Replace

Death

Retirement 9

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A New ALM Model

Understanding the Asset Lifecycle

The stages in the life of one generation of an asset

Cycles during the Lifetime of an Asset

Time

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A New ALM Model

Understanding Asset Lifecycle Management What is Lifecycle Management?

• Multiple Definitions - extend life, cycle phasing, etc.

• Product Life Cycle – Match strategy to Stage Objectives & Needs ALM Stage

Strategic Objectives

Concept

Rapid, Reliable Evaluation/Comparison of Scenarios

Project

Efficient, Timely Execution of Design, Source, Build Activities

Commissioning

Coordinated, Comprehensive Validation of Design Compliance

Pilot Operation

Mentored Training of O&M Personnel, Limited Production

Ramp Up

O&M Skill Enhancement, Planned Increase in Output

Full Production

Maximize Output/Revenue, Maintain Equipment

Peak Performance

Optimize Asset Performance via Continuous Improvement

Decline/Replace

Retain Performance, Manage Replace/Upgrade Activities

Retirement

Maximize Salvage Value, Manage Removal/Disposal 11

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A New ALM Model

Elements of a Management Strategy

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A New ALM Model

Understanding the Asset Lifecycle

Technology Information

KPIs

KPIs

People & Processes

KPIs People & Processes Technology Information

KPIs People & Processes

People & Processes

Technology

Technology

Information

Information

The stages in the life of one generation of an asset

KPIs People & Processes Technology Information

KPIs People & Processes

Technology

Technology

Information

Information KPIs

People & Processes

KPIs

People & Processes

KPIs People & Processes KPIs

People & Processes

Technology

KPIs Technology

Technology

Information

Technology KPIs

Technology KPIs

People & Information Processes

People & Information Processes

KPIs

KPIs

People & Processes

People & Processes

Technology

Technology

Information

Information

People & Processes

Information

Information

Technology

KPIs

Information

People & Processes Technology Information

KPIs

Technology

People & Processes

Information

Technology Information

Cycles during the Lifetime of an Asset

Time

KPIs People & Processes

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A New ALM Model

Elements of an ALM Strategy

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A New ALM Model

Elements of a Plant ALM Strategy

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A New ALM Model

An ALM View of the Traditional DBOM Processes

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A New ALM Model

Recognizing Some Key O&M Processes

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A New ALM Model

An ALM View of All Asset Lifecycle Processes Time

Operate Bu il d

rt po Re

Design

Maintain

Improve

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What is ALM Interoperability?

It Depends Upon Your Perspective ...

Engr Handover Teamwork to O/M

O/M Info Exchange to Stds Engr

Plug & Play FEED Software Common Operate to Data Maint

Std. EPC Business Handover Processes to O/O

Models

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Interoperability is More than Integration

Interoperability

Integration

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Making ALM Processes Interoperable

Shared Goals

Consistent Processes

Compatible Tools

Complementary Data Models

Proc 1

.........

Proc N

Optimum ALM Performance requires Teamwork …

ALM Interoperability Makes Teamwork “Work”!

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Who is on the ALM Interoperability Team?

ALM Interoperability Team Charter 1. Anyone who meets one or more of the following criteria, should be on the ALM Team: • Create Information that may be used in ALM • Use Information that may be created by ALM 2. Whoever suffers the most “must” be the Team Leader … Owner/Operator must be the key Leader for ALM. 3. The Team Leader is responsible for establishing the ALM Interoperability environment and the rules as to how the game is played.

4. All Team Members are responsible for supporting the Team Leader by: • using the environment • playing according to the rules.

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The O/O’s Internal ALM Team

Operations Mgmt/Engr

Bu il d

s

& ce

Pu Pro rc jec ha t De si ng si Co En gn n M gr gm st St t ar En tup gr

r to ra pe

s k an Ri t rpli m pCoo aint s M ch Te Re

O

Process Design Engr

Project Mgmt

l ia nc t na m Fi Mg

Operate

Maint Reliability Mgmt/Engr Engr

Maintain

Materials Restore Mgmt

MRO Purchasing

Internal ALM Team Members Need “Role-based” Access to All Relevant ALM Information!

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The O/O’s External ALM Team Construction Contractors

Financial Regulators

Bu il d

rt po Re

Engr & EPCs

Shareholders

Operate

Fabricators

OEMs

Product Supply Chain

Design

Maintain

Improve

EH&S Regulators

Maint Service Providers

Consumables

Repair Shops OEMs & Parts Distributors

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An O/O Model for ALM Interoperability Construction Contractors

Financial Regulators

Bu il d

rt po Re

Engr & EPCs

Shareholders

Operate

Fabricators

OEMs

Product Supply Chain

Design

Maintain

Improve Consumables

Repair Shops OEMs & Parts Distributors

EH&S Regulators

Maint Service Providers

External ALM Interoperability Platform 25

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Thank You. For a free copy of a full ARC report on this topic please contact the author at srsnitkin@arcweb.com For information about ARC’s upcoming Asset Lifecycle Management Forum in Houston, please visit our web site at www.arcweb.com and look under “Events”.

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