Episode 3: Asset Management The System Model

The Asset Management (AM) Concept Model teaches us how things happen when managing assets.

The Asset Management System Model is used to illustrate what is happening in the asset management realm. ISO 55001 defines only the requirements for the asset management system. The System Model is the guide to ‘assembling’ the parts of an asset management system and establishing a connection between those elements. 

Besides, the model depicts the relationship between stakeholders’ needs and organizational goals to the asset management goals. 

The Organizational Systems Model illustrates the interrelationship between different organizational management systems.

The essence of the Asset Management System

An asset management system is a collection of elements of an organization. They are connected to and interact with each other. 

The function of the system is to determine: 

  • Asset management policy 
  • Asset management goals 
  • The processes required to achieve these goals 

The elements of an asset management system are a set of tools that are combined to ensure the performance of asset management activities. 

Asset management interacts with many functions of the organization. We also know that assets can perform more than one function. The Asset Management System provides a means of coordinating the contribution and interaction between these functional units within the organization. 

An asset management plan can enable an organization to create a link between its management system and various technical requirements. These requirements are set out in ISO standards as well as in international, regional and national levels of standardization. 

The relationship between the asset management system activities

An Asset Management System directs, coordinates, and controls asset management activities. It can provide better risk control and assure consistent achievement of organizational goals. 

IMPORTANT: Not all asset management activities can be formalized through an asset management system. For example, aspects such as leadership, culture, motivation, behavior, which can have a significant impact on the achievement of asset management goals, can be managed by the organization using arrangements outside the asset management system.

The Elements of AM System Model

The Asset Management System affects the entire organization, its stakeholders and external service providers. It can use and integrate many of the activities and functions of the organization that would otherwise be managed in isolation. 

The requirements for the asset management system model described in ISO 55001 are grouped in a manner consistent with the fundamentals of asset management: 

  1. Context of the Organization 
  2. Leadership 
  3. Planning 
  4. Support 
  5. Operation 
  6. Performance Evaluation 
  7. Improvement 

Stakeholders

In Episode 2: The Concept Model, we met the stakeholders in detail. Let’s remember who they were:

The stakeholder in the system is an individual/group directly affected by the operation of the system and may have an influence in creating its future. It creates an organization and defines the needs and constraints of the business. Key to all models, processes, plans, and decisions, stakeholders are portrayed as a leading influence for the asset management system and organizational systems. 

Leadership and Organizational Objectives

Senior management is responsible for: 

  • the development of an asset management policy 
  • the vision and values that guide the policy 
  • actively practicing and promoting these values inside and outside the organization 
  • asset management goals 
  • their alignment with organizational goals 
  • the granting of power to support the asset management system 
  • responsibilities, accountability, and strategies for asset management 
  • providing adequate resources to support the asset management system 
  • resolving conflicts between the internal culture of the organization and the operation of its asset management system 

Once stakeholders determine the value they want to extract from the asset, their decisions must be implemented. This is where leadership is involved. It is the link between the wants of the stakeholders and the organization to create a harmonious whole. 

Organizational objective refers to an overarching goal or idea that defines both the context and direction of organizational activities. Organizational goals are derived from stakeholder needs. They can be: 

  1. Broad – We want to be the lead distributor in our target market for 5 years 
  2. Specific – We want to reduce the COGS by 3.6% by next quarter 

The system model illustrates how leadership transforms stakeholder requirements into organizational goals and then into asset management goals. 

Asset Management Objectives

Asset management goals are derived from organizational goals as part of the development of strategic asset management. 

The objectives must be consistent with all other management systems and aligned with the organizational systems model. When all management objectives are combined (financial, safety, manufacturing, operations, etc.), they enable business goals to be achieved. 

We can summarize asset management goals by answering these questions: 

  1. What assets does the business want? 
  2. What should they do? 
  3. How do they work together to deliver the desired results? 

When setting goals, an organization should consider: 

  • organizational context 
  • stakeholder requirements 
  • interaction with other management systems

Performance Monitoring and Improvement

Monitoring and performance improvement are part of any management system. Their role is to track the accomplishment of different goals, KPIs (Key Performance Indicators) and KRAs (Key Result Area). Monitoring and improving work consist of two parts:  

  1. Monitoring the performance and improving the assets themselves against the set goals 
  2. Monitoring the results and improving the management system 

Monitoring and refinement can be directed to an asset to the extent that it is consistent with its objectives and management system. 

The assessment and refinement of asset management objectives include continuous improvement and strategic review. The strategic review is required when organizational goals are not achieved. 

The review may include changes to: 

  • Politics 
  • Processes 
  • Plans 
  • Goals 

A strategic review can be driven by the asset towards the end of its life cycle, by a change in the regulatory system or by an interruption. 

ISO 55001 states that an organization must determine: 

  • What should be monitored and measured 
  • Methods of monitoring, measurement, analysis, and evaluation 
  • When monitoring and measuring 
  • When the results of monitoring and measurement are analyzed and evaluated
Monitoring Compliance with the AM System

The management system and the goals it has set may differ due to changed conditions, new staff, or new equipment. The management system must be monitored to ensure that it meets the organizational objectives and that the decision-making processes are adequate.

Auditing the Management System

The key elements of the management system must be audited every two years. The processes consist of: 

  • Interviews with people in the system 
  • An overview of the results the system produces 
  • An overview of the artifacts produced by the system 

The key to monitoring and evaluating the system is to collect data and turn it into information. People will set up a methodology and techniques to verify and evaluate the data.

Data and information requirements

Effective management of asset data and its’ transformation into insights is key to monitoring and measuring asset performance. The process includes the following steps: 

  1. Methods and techniques for assessing and validating the information collected and recorded 
  2. Quality control of the data used and the information reported 
  3. Responsibilities for data collection, analysis, storage, and protection 
  4. Transformation of data into relevant and reliable interpretation for the employees

Decision making

Every organization needs to make decisions affecting several areas, including asset management. These four things have the biggest influence on decision making: 

  1. The context of the decision 
  2. Decision criteria/objectives 
  3. Alternatives 
  4. Potential risks аnd opportunities 

There are 5 types of solutions: 

  1. A complex solution – it requires a large amount of information to be researched and involves the judgment of many people. 
  2. Yes/No decision – includes only two alternatives: to take or reject a course of action; do things differently or continue as before. 
  3. Deciding whether a proposed course of action is reliable enough to be implemented. 
  4. The decision whereby the original alternative must be developed by the decision-maker or the asset manager. 
  5. Routine decisions, such as hiring, purchasing equipment or services, developing personnel policies, and other day-to-day solutions. 

Decision making can be: 

  1. left in the hands of certain people 
  2. made by groups 

It is necessary to determine the objectives and criteria according to which the options will be evaluated. 

In asset management, the decision criteria are derived from the AM objectives. Each decision must provide value determined by its rate of contribution to asset management and organizational goals. 

The criteria on which decisions are made determine policies. 

The solution may be a compromise between “urgency” and “desire”. The option chosen may have some drawbacks that need to be evaluated. The consequences of decisions should be weighed against the degree of their impact on organizational and managerial goals. 

The management system must ensure that decisions are made by authorized and competent people. The person must have the necessary powers to make a decision.

Using KPIs to monitor decisions

Key Result Area (KRA) is the result required for the success of the organization. It is measured against the KPIs required for its implementation. 

Example: 

So, if KRA is “make lunch for the kids,” then KPI is “grocery shopping until 9 am” 

If cost, risk, and performance are the three KRAs for an asset management system – and one organization has KPIs related to each of these areas – then any decision can be evaluated by the impact it has on KPIs.

Process Management, Competence, Engagement, and Organizational Roles

Asset Management includes group management of the organization’s processes, competencies, and commitment. These three things fit into the decision-making process. 

Process management defines the processes that an organization must execute to achieve its goals. Processes are related to repeatability. It can be a financial process or a technical process. 

A process is meaningless without a competent and authorized person to understand, plan, and install it. To be empowered to make decisions you must be: 

  1. Competent 
  2. Engaged 

Competence is the ability to apply knowledge and skills to achieve the intended results (pretty much like the definition of sappience 😊 ). No matter how competent the staff is, they will not function at their best unless they are engaged. Staff should be able to see the benefits of the decisions they make. 

The Organizational Systems Model

The Asset Management Systems model ‘lives’ in a larger system – the Organizational Systems Model. It shows the relationship between the various objectives of the organization and the systems they generate. 

For example: 

  1. The Safety Objectives of the organization have their own system 
  2. The Asset Management Objectives have their own system as well 

The same thing applies to other types of goals – environmental, risk, quality, financial, etc. 

In the organizational systems model, the individual goals and their systems have to cope with all the organizational goals, when combined, must form a picture of the organization.

Let’s Review

The Asset Management System Model begins to function from the top (Stakeholders) to the bottom (Monitoring & Improvement). 

Let’s summarize: 

  1. The stakeholders determine the value they want to extract from the asset(s). 
  2. Their decisions must be implemented. This is where leadership kicks in. It is the link between the wishes of the stakeholders and the organization. 
  3. The organizational objective is a goal or idea that defines both the context and direction of organizational activities. The leadership translates stakeholders’ goals to organizational objectives and then to asset management objectives. 
  4. The AM objectives define what will the assets do, how, and why. 
  5. Monitoring and improving performance are here to track the accomplishment of different goals, KPIs and KRAs. 
  6. The decisions are the medium between the plan and taking action. 
  7. Process management defines the processes that an organization must follow to achieve its goals. Competence is the ability to apply knowledge and skills to achieve the intended results. No matter how competent the staff is, they will not function at their peak unless they are engaged. The organizational roles determine who will make the decisions. 
  8. The Organizational Systems Model integrates all the goals of the organization together with their systems into one functioning whole. 

Now you know how and why assets are managed from a system perspective. It’s time to find out who sets the rules of the game. See you next time with the topics related to ISO 55000 & PAS 55.


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