High-Performance Asset Management


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High-Performance Asset Management

  1. 1. High-Performance Asset Management
  2. 2. 1 | High-Performance Asset Management Transmission and Distribution utilities are operating in an increasingly complex environment. Cost pressures and customer expectations are rising, mergers/acquisitions are developing, and customers are increasingly concerned about quality of service. At the same time, utilities have to manage the risks of their aging asset bases and workforces. De-regulation and A superior asset management Investment Management capability is crucial for utilities that Decision Support Processes and Tools market liberalization must manage these complexities Technical Management are renewing focus on effectively. For some utilities, it Capital Program Delivery costs and performance requires a radical change in mindset to move from resource-driven to Information Management asset-driven decision making. For Integrated Asset and Work Manage- other companies, the information- ment Systems intensive nature of asset management is placing increasing strain on modestly integrated systems that were designed for a different set of needs. Accenture has developed an extensive range of asset management services and solutions that address these issues and gaps. High performance asset management is dependent on the development of a number of core capabilities. This document provides a summary of Accenture's views gained through experience with over 100 asset management organizations and addresses asset management capabilities including:
  3. 3. 2 | High-Performance Asset Management The 2003 US/Canada blackout cost the US economy more than $10 billion Transmission and Distribution Utilities—Drivers for Figure 1 Asset Management Balancing Drivers Transimission and Distribution (T&D) utilities are delivering services to consumers in an increasingly complex world. • Deregulation, unbundling, and market liberalization are progressing globally • There is growing focus on cost and quality of service Regulators Shareholders Assets • Many first-generation T&D networks are nearing the end and Consumers of their technical lives, resulting in significant levels of asset replacement and focus on asset performance • Some utilities are experiencing significant increases in energy demand • Recent blackouts in the US and Europe have raised the Asset management comprises a set of activities that attention of regulators, the public, and politicians on support businesses in driving sustainable economic security of energy supply performance while meeting service targets expected from infrastructure assets. It is about understanding and These factors have increased the need to manage T&D managing the delicate balance between cost, risk, and assets more effectively. Compared to other asset-intensive performance. (See figure 1) industries, asset management is a relatively new business discipline within utilities. However, the interconnected and What Is Different About Asset Management? distributed nature of T&D assets means that a simple All T&D utilities already manage their assets to varying application of leading practices from other industries is not degrees. So what is so different about Asset Management? possible. The truth is that asset management thinking already exists
  4. 4. 3 | High-Performance Asset Management in many utilities. Frequently, however, it is fragmented, Differentiating Capabilities for Asset Management inconsistently applied, and inadequately supported by tools Accenture has developed models for the processes, and information. Asset management practice may also be organization structures, skills, and systems required to constrained by existing processes or skills. High deliver high performance asset management. Accenture Performance Asset Management is a pervasive guiding terms these 'differentiating Asset Management capabilities' business discipline that defines how the business will that allow some T&D utilities to transcend what are often manage its assets. There are some key indicators regarding highly challenging markets and outperform their whether a company has these capabilities: peers. These capability models have been developed through over 100 projects with utilities worldwide and • Asset managers can clearly articulate the implications of through Accenture's own research into high performance. investment budget changes to senior management • Asset investment planning includes processes to optimize Accenture's Solutions for Asset Management in costs, performance, resourcing, and outages • Predictive tools are in place for network asset Transmission and Distribution performance Accenture offers an extensive range of services and • Fact-based, asset decision making is employed across all solutions for T&D utilities in Asset Management and Work asset classes Management. Clients engage Accenture in a variety of • Key Performance Indicators are in place for decision projects ranging from 1 week diagnostics to multi-year making quality • Compliance with operating, maintenance, regulatory, and transformation programs and system implementations. In other policies and procedures approaches 100% addition, Accenture has alliances with a number of • Robust information strategies are in place, underpinned application vendors and with specialist service providers by a thorough understanding of the information and that complement its portfolio of services and solutions. decision support requirements for the asset management function For a number of asset management capabilities, like Investment Management, Technical Management Why Is Asset Management Difficult? (Engineering), Risk Management, Contract Management and Information Management, Accenture offers the Many factors make high performance asset management in following services: T&D utilities a difficult undertaking: Business Diagnostics • Balancing financial, technical, risk, and operational Operating Strategies drivers is complex and requires a step change in management and operational processes Process Design and Reengineering • The interconnected, distributed nature of network assets Planning Tools necessitates complex analysis and interpretation Implementation of Information Systems • Diverse asset classes, heterogeneous design approaches, Design and Implementation of Decision Support Tools and numerous material specifications complicate Learning and Development Solutions Including Content analysis Sourcing and Supply-Chain Strategies and Solutions • The relatively long life of many assets means that effects of poor decisions must be managed for an extended Business Change Management period Knowledge Management Tools and Processes • Regulatory considerations and the potential for regulatory clawback constrain decision making flexibility • Poor information from multiple legacy systems with limited integration and inadequate user tools restrict potential for investment analysis and monitoring • Multiple small projects, particularly for distribution, make analysis of all investments impractical • Organization issues, such as workforce practices and organization structure, can severely constrain flexibility
  5. 5. 4 | High-Performance Asset Management Investment Management: improving the planning, allocation, control, and review of capital and operating spend Accenture's Point of View on Investment Figure 2 Management Prior to financial year Within year After year Investment management processes are fundamental to the Control Planning Budgeting Control Review effective development, tracking, and reporting of capital Re-allocation and operating spend. Investment management covers the Allocation processes, tools, skills, and organization structures required to develop robust investment plans that are needed to deliver necessary network outputs in an efficient manner. Investment management does not end, however, with the performance, risk, and cost. Core to this area are robust development of the asset investment plan. Investment processes, organization, and governance structure, but management processes also include the mechanisms to these have to be supported by suitable information and monitor the plan, allocate and re-allocate funds, and review tools to enable more effective decision making. the effectiveness of decisions after investment is completed. Accenture believes in 'total investment management,' considering the total spend including operating costs in Accenture believes that investment management is a core the investment management processes. It is only by fully capability for utilities that need to deliver more from their integrating at the planning stage that the capital and capital and operating investment programs. (See figure 2) operating expenditure linkages can be understood and managed effectively. Keys to high-performance asset management in utilities are the investment management processes of planning, budgeting, allocation, and authorization of funds, and the monitoring and control of spend. Accenture has worked with a number of utilities to make this a differentiating capability that effectively manages the tradeoffs between
  6. 6. 5 | High-Performance Asset Management Solutions for Investment Management Typical Benefits Accenture has developed a comprehensive blueprint for The investment management capability targets providing a investment management capability in T&D utilities. This new level of rigor to the development of plans, allocation blueprint has been refined by working with a number of of resources, and monitoring of progress. Potential benefits gas, electric, water, and wastewater utilities. Components of to be gained can be significant across a range of areas: the solutions include: • Improved decision making leading to higher returns • Comprehensive diagnostics for investment management through capital efficiencies or additional outputs for • Process architecture for core investment management dollars spent processes • Superior audit trail for decision making which can • Organizational design blueprints for different types of reduce risks of non inclusion of capital in the regulatory businesses including roles, responsibilities, and interfaces asset base with other parts of the business • Enhanced integration of capital expenditure, O&M • Approaches for allocation across multiple units expenditure, revenue, outage, and resource planning, leading to better investment optimization and lower costs of rework • Better capture of best practices and issues in projects
  7. 7. 6 | High-Performance Asset Management Decision Support Tools: improving the quality of decision making for T&D utilities Accenture's Perspective on Decision Support Tools Figure 3 Decision support tools cover a wide variety of Information Typical Issues with Decision Making Capabilities Technology (IT)-supported tools that enable a business to Poor support improve the quality, speed, and consistency of decision Strategic Consensus culture Rough & ready analysis making. Unlike integrated asset and work management Little risk consideation Support Policy systems that are discussed in a later section, decision Value Limited commercial exposure support tools are commonly smaller, rapid-build tools that Tactical Change in decision criteria Limited commercial skills provide focused and quicker benefits. Departmental silos Operational Resistance to change Decision making in T&D utilities is becoming increasingly complex as businesses try to balance conflicting objectives. Traditionally, decision making has been accomplished using relatively little support and has relied heavily on the levels of investment across different asset classes and judgment of experienced engineers. This approach tends to different drivers of spend. This is particularly important result in (see figure 3): where safety or other risks are being managed. Decision support tools provide a mechanism to significantly improve • Systematic errors based on individual biases decision making through (see figure 4 on next page): • Variation in decision quality across different business units • Taking the implicit knowledge of the business and • Poor audit trails for decision making making it explicit (business rules) • Using a set of consistent tools across the business The issues are particularly large for strategic and policy • Allowing a breadth of analysis that is not possible areas where complex, longer-term issues make unsupported without analytic support decision making especially questionable. Increasingly, utilities need to provide robust justification for
  8. 8. 7 | High-Performance Asset Management A key initial part of decision support tool development is Typical Benefits making implicit knowledge explicit. Typically, a utility has The development of decision support tools enables a huge knowledge bases that have been developed through robust, structured, and fact-based approach to business experiences and skills of their engineers. The tool decision making. Potential benefits this can provide to the development process utilizes this knowledge and converts it business are: to a set of robust business rules that can be used to drive investment decisions. • Improved decision making leading to higher returns through capital efficiencies or additional outputs for dollars spent Solutions for Decision Support • Supports knowledge management by providing a Accenture has developed a broad range of decision support structure to capture and structure the implicit tools for T&D utilities. Specific tools are typically developed knowledge of the business through rapid-build projects using a variety of software • Supports regulatory negotiations through development options to meet the needs of the particular business of a rationale for required levels of spend • Provides a mechanism to address capital expenditure, problem. Accenture has also developed a series of decision O&M expenditure, revenue, outage, and resource issues support modules that can be leveraged for more in a single tool standardized analysis, such as asset depreciation, failure rates, and aging. This considerably speeds up development. Figure 4 Accenture has developed decision support tools across a range of areas, such as: • Economic models for T&D businesses • Replacement volume forecasting • Safety and technical risk assessments • Prioritization of competing projects with and across asset classes/investment drivers • Optimization of outages and resources Typically, these tools are developed using a rapid Figure 5 development approach. This comprises an iterative build in close cooperation with utility business experts. Accenture has developed a design guide that provides a robust, structured methodology aiding the development of decision support tools for T&D utilities. Depending on the complexity, these can be maintained as standalone tools or integrated later into existing corporate systems. Examples of the types of software used for decision support tool development are (see figure 5): • Crystal Ball and @Risk for Monte Carlo analysis • XLStat for multivariate statistical analysis, such as Principal Component Analysis • Powersim for systems dynamics tools • Criterium Decision Plus for SMART analysis • OLAP tools for rigorous data analysis • Excel
  9. 9. 8 | High-Performance Asset Management Technical Management: development and implementation of commercially sound technical policies Accenture's Experience in Technical Policy Figure: 6 Development and Implementation Example of a policy hiearchy Technical management covers the processes, skills, and tools required to develop, implement, monitor, and review commercially and operationally astute technical policies, Strategic Strategy procedures, and specifications. Policy Policy (direction, standards) Technical policies, procedures, and specifications provide Management Procedures (mgt. control, roles, responsibilities) the drivers for the majority of T&D capital and O&M Specifications expenditures. Typically between 60% and 80% of a (equipment and materials) transmission or distribution utility's spend is directly or Work Details indirectly impacted by these policies. However, policies, (detailed steps for executing work) procedures, and specifications tend to be treated dominantly as technical considerations and do not receive the degree of scrutiny their implications warrant. • Insufficient level of detail in policies to ensure compliance • Effectiveness of policy implementation is commonly Typical areas of weakness in this area are: poor • Commercial awareness of the technical management Accenture believes that a number of mindset changes are function • Poor information and decision support to aid the required to transform the technical policy area (see figure development of policies 6): • Inadequate risk management capabilities • Poor incorporation of operating constraints in • View the technical policy area as a core component of development of policies, leading to difficulties in asset management, not simply a engineering, safety, and implementation compliance group
  10. 10. 9 | High-Performance Asset Management • Treat technical policies as investment proposals, Typical Benefits complete with business cases Addressing the technical management area with an asset • Ensure that the skills, information, and tools are in place manager's mindset can yield significant benefits to utilities: to support better policy decision making and monitoring • Readdress the level of discretion in policies; what is often dismissed as a mandatory investment commonly • Development of commercially aware policies that are also has a degree of discretion operationally efficient can provide significant cost • Ensure that there is a consistent hierarchy of policies, reductions in capital and operating spend procedures, and specifications that link in a coherent • Improved compliance levels can reduce risk levels and manner all the way from the business strategy to work reduce costs in the field • Development of an integrated risk management • Use implementation training and compliance monitoring approach can help constrain costs and limit safety, to manage risks and garner best practices environmental, and network security risks • A structured business process for policy development can improve the utility's ability to capture working practices and issues from work management teams Solutions for Technical Policy Development and Implementation Accenture has worked with utilities to support them in Figure 7 developing their technical policy capabilities. We often work Governance on business aspects of the policy area, rather than the Ensure detailed technical analysis. However, we have alliance Trigger Develop Rollout Compliance partners with strong capabilities in more technical aspects Policy Review Policies Policies Monitor that we work with where appropriate. Effectiveness Feedback Process Areas where Accenture can support utilities include (see Development Staff Implementation Staff figure 7): Cross-functional team to support policy lifecycle • Technical policy capability diagnostics and best practice assessments • Information and tool requirements development • Decision support tool development to assist policy development • Implementation support through Accenture Learning Services Technical policy diagnostics Accenture has developed a range of diagnostics that enable utilities to get a detailed view of strengths and areas for improvement in their technical management capability. Unlike many comparative assessments, this diagnostic does not rely on comparing difficult-to-interpret benchmarks. Rather, it looks at the underlying organization structures, processes, skills, and tools to assess the capability.
  11. 11. 10 | High-Performance Asset Management Capital Program Delivery Accenture's Experience Aiding Capital Program • Ensuring that appropriate reports and tools are Delivery available to manage the overall program and to provide linkage to the investment management processes Capital program delivery covers capabilities required to ensure that capital projects are delivered effectively as Solutions for Capital Program Delivery part of an overall capital program plan. Accenture's focus Accenture has worked with utilities, oil companies, and is concerned with the asset management perspective, other asset-intensive businesses to help develop rather than the actual delivery of capital projects. This organization models, processes, and systems to deliver means that the emphasis is primarily at the program level. capital programs effectively. Areas that Accenture typically supports are: Many T&D companies are currently facing major increases in their capital programs coupled with continuing cost • Development and implementation of sourcing strategies pressures. This places greater pressure on cost effective • Supply chain optimization and timely delivery of the plan, particularly where there • Development of appropriate alliance models for are issues of network accessibility. The capital program construction delivery capability is targeted at improving effectiveness • Definition and development of reporting and tool through): requirements • Development of collaborative project management and • Managing the linkages between the capital plan and workflow solutions to support delivery of major capital other plans (e.g., outage planning and maintenance projects planning) • Ensuring that the overall capital program is being managed efficiently • Developing the strategy for sourcing materials and services for capital projects
  12. 12. 11 | High-Performance Asset Management Typical Benefits The capital delivery program capability is focused on ensuring that benefits identified in planning are captured through efficient management of the overall capital plan. Typical benefits that utilities can deliver through this capability are: • Lower overall capital and operating costs by improved optimization of the plan • Material and service cost reductions through improved sourcing strategies and supply chain effectiveness • Improved capture and management of capital plan risks
  13. 13. 12 | High-Performance Asset Management Asset Information Management Accenture's Perspective on Asset Information Figure 8 Management Processing and Toolsets and Analysis Data Storage Information management is the capability to define and manage the data, report, and decision support Data DSTs Data requirements for asset management. This capability does Capture Entry Standard Key Reports Decisions not include the development of decision support tools or Operational Analytical/ systems, but it does form a vital input into the Systems and Warehouses Querying Toolsets prioritization and coordination of these activities. One of the key elements of a strong asset management User Requirements organization is the ability to make sound decisions based Definition on a balance of technical, financial, and risk factors. Most utilities have a large number of information sources and models that support decisions, having fundamental impacts • Inaccurate tools, often developed without the on risks and the opportunity for value creation or knowledge of the wider business destruction. Given this, the ability to define business • Inadequate understanding of the business value of requirements accurately and manage their quality is a key different types of data, resulting in poor prioritization of component. systems development and quality improvement initiatives Typical issues that T&D utilities face are (see figure 8): • Poor control of data quality at capture, input, aggregation, analysis, and reporting • Different tools and data sources used across the business • Absence of a consistent strategy for asset data and tool • Silo behavior of business units resulting in inadequate requirements sharing of information and multiple instances of redundant data capture
  14. 14. 13 | High-Performance Asset Management These issues have harmful effects in two areas. The first is Solutions for Information Management degradation in the ability to make effective decisions. The Accenture has worked with asset management functions in second is the substantial additional cost from duplication utilities, helping them improve their management of of systems, data capture, and data entry, resulting from business information. As a result of this work, we have poor data, information, and tool control. developed a comprehensive diagnostic toolset that allows utilities to rapidly: Accenture defines four areas of asset information management capability: • Understand their current level of capability • Identify areas for future development that will provide Governance is the process that ensures data requirements the greatest value of the business are captured, assessed, prioritized, and implemented effectively. The governance structure includes: Accenture also has experience helping utilities develop individual components of their asset information • Processes, roles, and responsibilities of all resources who management capability: capture, input, or use data • Reporting and monitoring requirements for information • Governance strategy, processes, roles, and responsibilities management for the information management group • The governance approach for making decisions on data • Structured capture of business requirements for the issues asset management function • Development of decision support tool registers and plans Management information is the coordination of for their development/ retirement requirements capture for business reporting. Management • Development of high-level data models for asset information includes the aggregation, filtering, and slicing information of operational data to provide support for decision making. Tools and analysis covers tools required to manipulate Typical Benefits data, providing meaningful information to support decision making. Information management covers: Asset information management is a significant enabler of benefits to the business. Typical benefits that can be • Defining the governance structure for development and achieved include: maintenance of business tools (typically not major systems) • Improved decision making driven through tool • Developing and maintaining the register of tools used in standardization the business • Lower levels of time spent maintaining multiple models • Providing a key interface between asset management and databases through the identification of tools for and the IT organization rationalization • Effective and efficient development of systems by Data quality consists of the processes, tools, and maintaining a robust set of business requirements for procedures for understanding the quality of data and data and tools implementing improvements. Data quality includes • Improved data quality, reducing the levels of rework consideration of quality at capture, input errors, and required by identifying and driving improvement granularity or synchronicity issues. The information initiatives in the business management capability is focused on driving business • Potential reduction in risk from poor data quality improvements in this area. Typical components include: • Primary source analysis, to understand where, when, and by whom, primary data should be collected • Development of initiatives with the business to improve data quality
  15. 15. 14 | High-Performance Asset Management Integrated Asset and Work Management Systems: driving a step change in capability Description Development of integrated systems for asset and work management can provide the tools to allow the business Asset management and work management systems allow to move to a new level of sophistication. Accenture calls integration of work, asset, outage, and resourcing data, this Enterprise Asset Optimization. Enterprise Asset providing the utility enhanced, integrated information and Optimization is driven through a strong focus on reports, tools to support improved decision making. models, and information required to support the key Accenture's Point of View on Integrated Asset and business decisions of the asset management function. Work Management Systems An integrated asset and work management capability can Typically, utilities use a large number of systems and end- provide major benefits to the business including: user solutions to manage assets. These are generally the result of: • Direct improvements in both long- and medium-term capital program planning processes • Development of systems on a point basis with poor • Increased confidence in medium- and short-term asset linkage to an overall IT strategy replacement planning and maintenance • A set of legacy systems that were originally specified to • Development of integrated risk management through support a company with different asset management analysis of technical, safety, asset performance, and requirements commercial data • Facilitation of improved field data capture In addition, T&D utilities commonly have issues with the • A fundamental change in the way asset data is quality of data capture and input. This results in additional captured, stored, accessed, and used to drive better- post-processing that requires considerable time and effort. informed maintenance and asset replacement decision Data exploitation capabilities for poorly integrated systems making are often inadequate and reporting, decision support, and • Reductions in systems-related costs planning tools generally do not meet the growing - Improved data capture and entry requirements and sophistication of today's utility asset - Single database allowing retirement of duplicate managers. systems
  16. 16. 15 | High-Performance Asset Management - Reduced data cleansing and manual integration Typical Benefits - Retirement of many end user tools The development of business process-integrated work and asset management systems provides the business impetus Solutions for Integrated Asset and Work for a significant step change in the efficiency and effectiveness of the asset management function. Typical Management Systems benefit areas that can be addressed include: Accenture has experience in developing integrated utility systems that allow users to seamlessly navigate between • Planning efficiency from the provision of improved tools technical and financial data, from planned assets to and access to information existing assets, and across risk, performance, and other • Development of integrated plans that provide improved views of the business. As well as implementing major levels of integration across expenditure types, resource systems, Accenture also aids T&D utilities by helping plans, and outage plans. This can enable improved bundling of work to reduce costs and typically results in increase the value obtained from existing tools through the lower levels of plan rework addition of new components, such as decision support tools • The system enables enhanced risk management or reports. Our experience working with asset management techniques to be used by integrating diverse information businesses allows us to focus on the improved decisions the types such as technical, performance, financial, business could make, thereby improving focus on high value consumer, and plan information. This can result in lower components of relevant systems. costs to manage risks and/or lower levels of non compliance
  17. 17. 16 | High-Performance Asset Management Key Capabilities Beyond Asset Management Improving asset management capabilities is only one Accenture's Utilities Industry Practice element of driving performance in T&D utilities. Accenture's North American Utilities Group works with Transformation of the field organization is a key element in electric, gas, water, and wastewater utilities building bridges delivering benefits from improved asset management to meet rapid marketplace change. Our extensive utility capabilities. The ability to effectively manage the transfer knowledge-combined with an integrated suite of methods, of work to the field organization and the capture and people, and assets-provides executives and their teams with delivery of vital asset and project data back to the asset the necessary strategies and tools to position their management function are particularly important. organizations for success in the new market realities. In an industry where change and reinvention have become the norm, experience is a critical asset. • Over 30 years experience in the industry • Our more than 7,000 utility industry personnel work with approximately 305 clients in 43 countries to meet the unprecedented changes facing today's utility companies. • Accenture serves 72 percent of the Fortune 500 Utility companies in North America and 83 percent of the Global Fortune 500 utilities worldwide
  18. 18. Contacts For more information or to discuss high- performance asset management for T&D utilities, please contact: Paul Yarka 720-560-9036 paul.j.yarka@accenture.com David Rouls 313-887-2011 david.m.rouls@accenture.com Copyright © 2005 Accenture All rights reserved. Accenture, its logo, and Accenture High Performance Delivered are trademarks of Accenture. About Accenture Accenture is a global management consulting, technology services and outsourcing company. Committed to delivering innovation, Accenture collaborates with its clients to help them become high-performance businesses and governments. With deep industry and business process expertise, broad global resources and a proven track record, Accenture can mobilize the right people, skills and technologies to help clients improve their performance. With more than 100,000 people in 48 countries, the company generated net revenues of US$13.67 billion for the fiscal year ended Aug. 31, 2004. Its home page is www.accenture.com.