Asset Life Cycle Management

Case Studies onAsset Life Cycle Cost Modelling

Contents

• The Basics

• The Process

• Different Models

• Examples / Case Studies

Asset Life Cycle Cost Basics

Tota

l Cos

t

Time

Replacement

Life Span (Assessment Period)

Life Cycle (Asset Estimated Life)

Financial Year

Refurbishment

Step 1:Define the Scope of the Analysis

Step 2:Develop or adjust the LCC Model

Step 3:Define Team. Collect Information

Step 4:Populate the Model

Step 5:Review and Optimise the Model

Step 7:Maintain the Model

Step 6:Decision and Implement the Solution

Life Cycle Cost Modelling Process• Stakeholder involvement• Project plan review• Scope of analysis• Data requirements analysis

• Model selection• Depreciation policies and rates• Governing accounting practices• Categorisation of cost contributors• Validation of the model by Accounting

• Data verification• Audit trail for data entries• Consensus discussion• Base results demonstration

• Team identification• Responsibility allocation• Data collection and configuration

• Reality checks• Sensitivity analysis• Variations

• Presentation to Stakeholders• Consensus• Budget alignment and Project Team appointment• Implementation project definition and activation

• Populate actual data• Adjust and review

Different Models

• Optimum Replacement Age

• Repair / Replacement

• Alternative Decision Making

• Maintenance Strategy Selection

• Other Uses

Optimum Replacement Age Models

Optimal Asset Life?

Replace every Year

Life Cycle Cost

LCC 1

LCC 2

LCC 3

LCC 4

LCC X

Replace Every 2 Years

Replace Every 3 Years

Replace Every 4 Years

Etc.

Cost Summations across Life Span (Example)Replacement Interval Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 LCC

Every Year 9.00 8.40 7.80 7.45 7.05 6.80 6.65 6.35 6.25 6.20 6.00 $77.95M

Every 2 Years 3.20 8.40 1.00 7.45 1.35 6.80 3.65 6.35 1.60 6.20 1.95 $47.95M

Every 3 Years 3.30 3.70 7.80 0.85 1.05 6.80 1.40 3.50 6.25 1.30 1.55 $37.5M

Every 2 Years 3.70 4.20 4.05 7.45 0.85 1.00 1.05 6.35 3.30 1.25 1.25 $34.45M

Every 6 Years 3.90 4.50 3.65 3.50 3.45 3.30 6.65 0.65 0.80 0.85 1.25 $32.5M

Every 7 Years 3.90 4.50 3.65 3.50 3.60 3.75 3.90 6.35 0.50 0.70 0.85 $35.2M

Every 8 Years 3.90 4.50 3.65 3.50 3.60 3.65 4.40 4.25 6.25 0.45 0.75 $38.9M

Every 9 Years 3.90 4.50 3.65 3.50 3.60 3.75 4.65 3.75 3.80 6.20 0.40 $41.7M

Every 4 Years 3.85 4.50 3.60 3.55 7.05 0.80 0.90 0.95 1.15 6.20 1.10 $33.65M

Every 5 Years 3.90 4.50 3.65 3.45 3.50 6.80 0.70 0.85 0.95 1.20 3.05 $32.55M

Every 10 Years 3.90 4.50 3.65 3.50 3.60 3.75 4.75 3.55 3.75 4.10 6.00 $45.05M

Cos

ts [$

M]

Time

Y10Y9Y8Y7Y6Y5Y4Y3Y2Y1Y0

1

2

3

4

5

6

7

8

9

Excel based Model Representation

Asset Life Determination

Asset Life Determination

Repair or Replace?

Old Truck?

New Truck?

Repair / Replacement Models

Maintain orReplace?

Replace After 1 Year

Life Cycle Cost

LCC 1

LCC 2

LCC 3

LCC 4

LCC X

Replace After2 Years

Replace After3 Years

Replace After4 Years

Etc.

Cost Summations across Life Span (Example)Replacement Year Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 LCC

Replace Y0 9.00 1.00 1.25 1.45 1.75 3.75 1.40 1.60 1.80 2.00 2.30 $27.30MReplace Y1 3.20 8.40 1.00 1.20 1.35 1.65 3.65 1.30 1.60 1.75 1.95 $27.05MReplace Y2 3.30 3.70 7.80 0.85 1.05 1.15 1.40 3.50 1.20 1.30 1.55 $26.80MReplace Y3 3.70 4.20 4.05 7.45 0.85 1.00 1.05 1.35 3.30 1.25 1.25 $29.45M

Replace Y6 3.90 4.50 3.65 3.50 3.45 3.30 6.65 0.65 0.80 0.85 1.25 $32.50MReplace Y7 3.90 4.50 3.65 3.50 3.60 3.75 3.90 6.35 0.50 0.70 0.85 $35.20MReplace Y8 3.90 4.50 3.65 3.50 3.60 3.65 4.40 4.25 6.25 0.45 0.75 $38.90MReplace Y9 3.90 4.50 3.65 3.50 3.60 3.75 4.65 3.75 3.80 6.20 0.40 $41.70M

Replace Y4 3.85 4.50 3.60 3.55 7.05 0.80 0.90 0.95 1.15 3.20 1.10 $30.65MReplace Y5 3.90 4.50 3.65 3.45 3.50 6.80 0.70 0.85 0.95 1.20 3.05 $32.45M

Replace Y10 3.90 4.50 3.65 3.50 3.60 3.75 4.75 3.55 3.75 4.10 6.00 $45.05M

Cos

ts [$

M]

Time

Y10Y9Y8Y7Y6Y5Y4Y3Y2Y1Y0

1

2

3

4

5

6

7

8

9

0 10 20 30 40 [$M]

Replacement Capital

Maintenance Costs

Lost Productivity

Disposal

Process Costs

Excel based Model Representation

Repair/Replace Model

-4.00

-2.00

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

Replac

e Y0 (

2006

)

Replac

e Y1 (

2007

)

Replac

e Y2 (

2008

)

Replac

e Y3 (

2009

)

Replac

e Y4 (

2010

)

Replac

e Y5 (

2011

)

Replac

e Y6 (

2012

)

Replac

e Y7 (

2013

)

Replac

e Y8 (

2014

)

Replac

e Y9 (

2015

)

Replac

e Y10

(201

6)

Replac

e Y11

(201

7)

Replac

e Y12

(201

8)

Replac

e Y13

(201

9)

Replac

e Y14

(202

0)

Replac

e Y15

(202

1)

Replac

e Y16

(202

2)

Replac

e Y17

(202

3)

Replac

e Y18

(202

4)

Replac

e Y19

(202

5)

Replac

e Y20

(202

6)

Replac

e Y21

(202

7)

Replac

e Y22

(202

8)

Replac

e Y23

(202

9)

Replac

e Y24

(203

0)

Replac

e Y25

(203

1)

Replacement Year

Net

Pre

sent

Val

ues

[Mill

ions

]

Current Machine DepreciationDisposalShutdown Lost ProductivityLost ProductivityLump Sum CapitalLump Sum OPEXRoutine ProcessRoutine MaintenanceReplacement Capital

Coal Terminal Assets

Stacker Repair / Replace Model

Reclaimer Repair / Replace Model

Repair/Replacement Model Example 1

Alrode L9 Pasteuriser IQMS Results

0

10

20

30

40

50

60

70

80

90

100

Apr-00

May-00

Jun-00

Jul-00

Aug-00

Sep-00

Oct-00

Nov-00

Dec-00

Jan-01

Feb-01

Mar-01

Apr-01

May-01

Jun-01

Month

IQM

S R

esul

ts [%

]

Pasteuriser Performance Improvement

Alternative Decision Making

Cyclic fatigue cracking

Maintenance Strategy Selection

ReinforcingReinforcingReinforcing webs

Maintenance Strategy Selection

Risk Based Maintenance Task LCC Comparison

0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

8000000

RBM: Condition BasedMaintenance

RBM: Usage BasedMaintenance

RBM: Run to failureMaintenance

RBM: DesignImprovementMaintenance

Non-RBM Maintenance

Maintenance Types of Work

TLC

C N

PV [A

UD

]

Alternative Risk Based Maintenance Solutions

(Mitigated Risk)

Current Risk

Life Span Impact

Life Cycle Cost Modelling

Other Uses

Life Cycle Cost Management

Time

$

Life Cycle Costs

Replacement Year Scenarios

10 12 14 16 18 20 22 24 26 30

Replacement Scenario Costs

Rolling Years X?)Assets

0 4 8 12 16 20 24 28 32 361234567

Fleet Total LCC $ $ $ $ $ $ $ $ $ $

Fleet Plan

22

Life Cycle Cost

Machine Benchmarking

Cum

ulat

ive

Cos

ts

Usage

Target (Model)Machine 1Machine 2

Dubai Festival City / Dubai Palm Jumeirah

Modelling Software Tools

• Excel

• APT Lifespan (Woodhouse Partnership)

• AssetLife (Hansen Corporation)

• Meridium Reliability Solution Life Cycle Cost Module

ReferencesStandards:• Australian Federal Income Tax Legislation• AS 15288: 2003  Systems Engineering – System Life Cycle Processes• AS/NZS 4356: Life cycle costing ‐ An application guide• Australian Accounting Standard AAS 4 Depreciation• Australian Accounting Standard AAS 116 Property, Plant and Equipment• International Financial Reporting Standards (lFRS) IAS 16 and IAS 36 Standards • Australian Government Depreciation Guidelines• Australian Master Tax Guide• TR 2009/4: Taxation Ruling ‐ Income tax: effective life of depreciating assets• GAAP (Generally Acceptable Accounting Practices)• Life cycle costing Better Practice Guide – Australian National Audit Office

Books:• Maintenance, Replacement and Reliability, A.K.S. Jardine• Life‐Cycle Cost and Economic Analysis, Prentice‐Hall, Englewood Cliffs, NJ• Life Cycle Cost, Reliability, Maintainability, and Supportability Guidebook, Warrendale, PA• Life Cycle Costing: Techniques, Models and Applications, B. S. Dhillon• Life‐Cycle Cost and Economic Analysis, Benjamin S. Blanchard, Fabrycky, Wolter J

Websites:• APT Lifespan: www.reliability.com.au• LCC Ware 3: www.aptools.co.uk• Barringer & Associates, Inc: http://www.barringer1.com/