SAP Thought Leadership Paper Enterprise Asset Management

Enable Good Asset Management with Integrated Enterprise Information Software Using Technology to Support PAS 55 Specifications

Enable Good Asset Management with Integrated Enterprise Information Software

Table of Contents

5 The Mission-Critical Role of Asset Management PAS 55: The Guideline for Good Asset Management Practices The Scope and Key Principles of PAS 55 Implications of PAS 55 for Asset Management Software

10 SAP Software: Supporting an Integrated Approach to Meeting PAS 55 Guidelines Enterprise Asset Management Software Complementary, Integrated SAP Solutions Corporations spend billions to design, buy, operate, and decommission production equipment and other physical assets. Managing assets and optimally using and running these investments can be mission critical. As a result, the assets are under the constant and watchful eyes of top management, shareholders, and regulators. But how can you be confident that your asset management practices are maximizing return on assets? It’s All About Return on Assets, Competitiveness, and Business Sustainability

The Mission-Critical Role of Asset Management

Uncertain markets are forcing companies PAS 55: The Guideline for Good PAS 55 can help your company gain to maximize return on assets. Meanwhile, Asset Management Practices competitive advantage by helping ensure globalized competition is challenging that you are effectively managing your businesses to drive competitiveness by PAS 55 as an asset management frame- assets. In fact, many companies are achieving operational and maintenance work describes and defines essential key seeking to get PAS 55 certified through excellence. But most of all, increased attributes and good practices for the specialized consulting organizations with awareness of sustainability issues is management of physical assets. It was deep asset management practice exper- requiring companies to manage environ- developed by the Institute of Asset Man- tise. This certification is becoming a ment, health, and safety performance and agement in the United Kingdom, in col- benchmark of publicly recognized good asset-related risks with more precision laboration with the British Standards asset management practices. And com- than ever before. Institution and along with the assistance pliance is even required in certain indus- As a result, traditional asset manage- and valuable input of many other organi- try sectors and countries (such as the ment activities, such as creating asset zations and individuals. United Kingdom) in order to do business. registries and orchestrating maintenance PAS 55 reflects a growing understand- At the same time, meeting the guide- operations, are evolving into a compre- ing of the importance of asset manage- lines can result in new cost savings and hensive, standards-driven management ment as a driver of profitability. It also service improvements, as well as facili- approach that impacts all facets of an reveals an understanding of operational tate compliance with industry and other organization. Guidelines such as Publicly risks and safety issues when asset man- regulatory standards; in fact, PAS 55 Available Specification (PAS) 55 are agement is not handled in a holistic man- coexists with other related management helping companies put structured, good- ner. The guidelines were first published in standards, such as ISO 9001 and ISO practice-based discipline around their 2004 and then updated in September 14000. All of these requirements are asset management capabilities so they 2008. They consist of two parts: inextricably linked because effective can optimize asset uptime, reliability, and •• Part 1: Specification for the optimized asset management demands an inte- overall performance. This discipline is management of physical assets grated, cross-enterprise approach. being embedded into organizational strat- •• Part 2: Guidelines for the application Addressing only parts of PAS 55 in isola- egies, corporate governance, and day-to- of PAS 55-1 tion – even if these parts are handled day activities, helping companies not only optimally – means that companies miss get more value from their assets but also out on the primary benefits of meeting increase the sustainability of their PAS 55 guidelines. To further elevate the enterprise. importance of good asset management practices, PAS 55 guidelines are now considered the basis for the upcoming ISO 55000 series of standards for asset management.

PAS 55 reflects a growing understanding of the importance of asset management as a driver of profitability.

SAP Thought Leadership Paper – Enable Good Asset Management with Integrated Enterprise Information Software 5 According to Peter Kohler, chair of the tion optimally and sustainably manages technical development team of the Asset its assets and asset systems and their Management Council: “Asset manage- associated performance, risks, and ment is an emerging discipline, and expenditures over their lifecycles for the while the foundation elements have been purpose of achieving its organizational around for some time, modern business strategic plan.” As illustrated in Figure 1, needs now demand an integrated busi- this means properly managing the three ness-focused approach to how assets levels of assets. These start at individual are managed. The intent of the ISO equipment and eventually include com- 55000 series of standards is to deliver plex portfolios of asset systems (such as a good practice asset management power grids) in an integrated way across: framework so that all societies can gain •• Asset lifecycle activities – Create or the full benefit from their investment in acquire the asset, use and maintain it, the management of their assets.” and then renew or dispose of it. •• Asset systems – Focus on sustained The Scope and Key Principles performance, cost, and risk optimiza- of PAS 55 tion of asset systems (that is, groups of assets that make up a system, such PAS 55 looks at asset management as a transmission network). from an interdisciplinary and cross- •• The asset portfolio – Manage many departmental point of view. In the docu- systems as a portfolio of assets. The ments, asset management is defined as focus is on capital investment optimi- “systematic and coordinated activities zation and sustainability planning. and practices through which an organiza-

Figure 1: Integrating Asset Management into the Organization

Corporate and organization management

PAS 55 asset Manage asset portfolio management system

Manage asset systems

Manage assets Create Utilize Maintain Renew or acquire or dispose

Asset lifecycle

Permission to reproduce extracts from British Standards is granted by BSI. No other use of this material is permitted. At the highest level, PAS 55 guidelines activities and practices being used to encourage companies to embrace the manage physical assets. following principles to manage their Logically, this kind of cross-departmental asset systems: integration requires IT enablers. While •• Take an integrated approach that PAS 55 isn’t a certification of software embeds asset management into other applications, it does identify the need to enterprise processes include cross-departmental and inte- •• Centralize and systematize asset grated approaches to information man- management agement, decision making, performance monitoring, risk management, and com- Take an Integrated Approach munications. Specifically: PAS 55 guidelines are based on the idea •• PAS 55 principles encourage compa- that companies must take an integrated nies to evaluate, improve, and poten- approach to asset management, as this tially restructure their current business integration enables ever-higher levels processes so they can realize the ben- of asset optimization. While PAS 55 efits experienced by today’s PAS 55– focuses on physical assets, the recom- certified organizations. mendations must be embedded within •• PAS 55 highlights the need for process the overall business context of running a integration for everything from day-to- corporation. As shown in Figure 2, other day maintenance activities for single asset categories, such as financial assets, equipment all the way up to managing human assets, information assets, and complex asset networks from an inte- intangible assets are essential parts of an grated point of view. enterprise and need to integrate with the

Figure 2: PAS 55 Scope and Enterprise Business Context

Human assets Total business

Financial assets Physical Information assets assets

Scope of PAS 55

Intangibles assets

Based on information from BSI. Permission to reproduce extracts from British Standards is granted by BSI. No other use of this material is permitted.

SAP Thought Leadership Paper – Enable Good Asset Management with Integrated Enterprise Information Software 7 Whatever approach you take to enable “changes in standards, procedures, tech- this cross-departmental integration, PAS nical skills, business processes, IT sys- 55 guidelines specify that the approach tems, and organizational structures”2 for encompass systematic and coordinated asset management. In 2007 CLP Power activities and practices for sustainably became the first Asian electric utility managing assets and asset systems. company to receive the PAS 55 compli- Equally important, the approach must ance certificate, per an audit by The share the key principles and attributes Woodhouse Partnership Ltd.3 summarized in Figure 3. The value of this IT-enabled integration Centralize and Systematize is illustrated by Power Systems Business Asset Management Group (PSBG) of CLP Power Hong Kong. PAS 55 does not mandate that you deploy The company used PAS 55 as the basis certain software products. But it does set for developing its asset management goals for IT governance and control that practices that – over the past 10 years – are best achieved by deploying an enter- have enabled PSBG to achieve more than prise application that centralizes informa- a 90% reduction in customer minutes tion and systematizes and automates lost, or CMLs. The company simultane- processes supporting the entire asset life- ously responded to a 20% load growth, cycle. An enterprise application can do an increase in the number of assets and this by providing an integrated information overall network size, and pressures to system to support planning, building, and stay competitive.1 What helped PSBG commissioning of assets; asset visibility realize these impressive results were and performance; optimized asset opera- greater alignment and collaboration tions and maintenance; and operational across the whole organization, as well as risk management.

Figure 3: Key Principles and Attributes of Asset Management

Holistic

Sustainable Systematic

Integrated

Optimal Systemic

Risk based

Permission to reproduce extracts from British Standards is granted by BSI. No other use of this material is permitted. Implications of PAS 55 for Asset can include the most recent asset man- Management Software agement strategies, latest figures for key performance indicators, unit costs, and Given the integrated, holistic approach to historical maintenance or performance asset management demanded by PAS information. Consider how PSBG realized 55, companies will succeed best by tak- the benefits of a technology-driven ing a systematic, IT-enabled approach to approach to applying PAS 55 guidelines: asset management. Businesses can cer- “PSBG utilizes an integrated informa- tainly choose to run an asset manage- tion system, the Enterprise Work Manage- ment organization using paper-based ment System (EWMS) based on SAP records, spreadsheets, and disparate [software], to support its construction, systems and still be in compliance with operation, and maintenance activities. PAS 55. But in practice, they can realize EWMS serves as our master asset regis- greater efficiency and effectiveness if ter. It also captures and holds our cost and they use a single, centralized asset regis- maintenance data, and provides various try and automated system that updates management reports for performance and disseminates information in real monitoring. EWMS has evolved to become time and enables departments to work a rich source of O&M [operations and from a single source of truth. These maintenance] cost and activity data. It departments may include finance, inven- was [recognized] in the PAS 55 assess- tory management, production, procure- ments as having been particularly well ment, customer service management, implemented and exploited. Utilizing its and risk management. historical cost data, we have built a set Having up-to-date data at employee of O&M unit cost reports, which allow fingertips (rather than in a file drawer at the users to review cost information from another site) results in significant financial various perspectives and at different savings, among other benefits. This data granularities.”4

Businesses can realize greater efficiency and effectiveness if they use a single, centralized asset registry and automated system that updates and disseminates information in real time and enables departments to work from a single source of truth.

SAP Thought Leadership Paper – Enable Good Asset Management with Integrated Enterprise Information Software 9 Enabling a Systematic, IT-Enabled Approach to Asset Management

SAP® Software: Supporting an Integrated Approach to Meeting PAS 55 Guidelines

The goal of the PAS 55 guidelines is to •• Maximize investment by controlling create, sustain, and improve an inte- specifications procurement grated management system to optimally •• Improve financial reporting and analy- manage physical assets within stated sis by capturing all maintenance- policies and constraints. Integrated SAP® related expenditures solutions act as the information technol- •• Increase production through improved ogy platform on which an organization procurement practices and better can implement an asset management maintenance management system. They support the integrated enterprise process requirements essen- The solution provides software features tial to having a systematic, IT-enabled and functions to support key enterprise approach to asset management. asset management processes that help you: Enterprise Asset Management •• Reduce the risk of failure, delays, Software and overruns – Set the right priorities, effectively plan and monitor projects, The SAP Enterprise Asset Management collaborate with contractors more (SAP EAM) solution can provide the core closely, and react to issues earlier of any PAS 55 initiative. It supports pre- •• Optimize project portfolio perfor- ventive and predictive maintenance, mance – Manage projects more effec- maintenance cost budgeting, mainte- tively and enforce project governance nance execution, and work-clearance enterprise-wide management. This lets you: •• Lower overall project costs – Make •• Manage physical assets from purchase better use of critical resources and to end of life monitor budgets versus actuals •• Experience real-time visibility of asset throughout project execution performance and maintenance •• Lay the foundation for successful •• Improve efficiency with integrated proj- operations – Collect and maintain the ect management and centralized infor- best possible information for opera- mation management tions, maintenance, and purchasing

“Our endeavors toward implementing and realizing the value of the recognized good practices of PAS 55 would not have been possible without the visibility and trans- parency to our business information that the SAP Enterprise Asset Management solution has given us.”

Kim McArthur, Manager, Asset Stewardship, Hydro One Networks Inc. Integrated SAP solutions support the integrated enterprise process requirements essential to having a systematic, IT-enabled approach to asset management.

SAP Thought Leadership Paper – Enable Good Asset Management with Integrated Enterprise Information Software 11 Once the solution is deployed, your com- Complementary, Integrated Learn More pany can: SAP Solutions •• Maximize return on physical assets by Implementing good asset management prac- tices is a journey and enables a management supporting integrated asset manage- PAS 55 is asking for more than a stand- process that can lead to exceptional results ment processes to collaborate across alone asset management application with real business benefits, such as those all related activities, such as finance, since the scope of the standard is realized by Power Systems Business Group HR, risk, and compliance enterprise-wide and touches many (PSBG) of CLP Power Hong Kong. According •• Improve overall equipment effective- other processes within any corporation. to The Woodhouse Partnership Ltd., “PSBG is a shining example of outstandingly good ness by providing asset intelligence Other asset categories, such as financial asset management practices and processes and a holistic view of performance, assets, human assets, information – we are always impressed with the way risks, and expenditures throughout an assets, and intangible assets, must be they set themselves tough challenges and asset’s lifecycle – helping ensure effi- integrated with the activities and prac- consistently achieve their goals.”* cient utilization of assets tices being used to manage physical To learn more about how SAP can help your • • Manage asset-related risks by deliver- assets. organization meet PAS 55 specifications, ing continuous and proactive opera- The broader set of SAP solutions sup- call your SAP representative today or visit tional risk management to support ports these other business areas in an us online at www.sap.com/eam. instant decisions and minimize integrated manner. And the solutions disruption integrate with SAP EAM to enable an asset management software system that

meets requirements 4.1 through 4.7 of * Chris Cheung and Chi-Pui Ng, A Decade of Fruitful the PAS 55-1:2008 specification. The Network Asset Management in CLP Power, CLP Power Hong Kong, published by The Woodhouse Partnership table summarizes how SAP software Ltd., 2010, p. 7. relates to the various specifications.

“In recent years, Ausgrid has implemented new pro- cesses to improve the way in which we manage our assets and produce a better outcome. Ausgrid realized the importance of understanding the condition of its aging assets and the need to use this information to FOOTNOTES 1. Chris Cheung and Chi-Pui Ng, A Decade make future investment decisions. The implementation of Fruitful Network Asset Management in CLP Power, CLP Power Hong Kong, published by of the SAP Enterprise Asset Management solution The Woodhouse Partnership Ltd., 2010. was a cornerstone of our success. It became critical 2. Ibid, p. 4. 3. The Woodhouse Partnership Ltd. is an for Ausgrid to make a change within the organization international authority on the management of industrial risk, asset performance, and lifecycle to become a leader in asset management to solve costs. www.twpl.com. 4. Chris Cheung and Chi-Pui Ng, A Decade many of the associated issues.” of Fruitful Network Asset Management in CLP Power, CLP Power Hong Kong, published by John Hardwick, Executive Manager, Maintenance and Replacement Planning, Ausgrid The Woodhouse Partnership Ltd., 2010., p. 5. Asset Management System Requirements (PAS 55 Chapter 4)

Applicability of SAP® 4.1 4.2 4.3 4.4. 4.5 4.6 4.7 solutions to PAS 55 General Asset Asset Asset Implementa- Performance Management requirements (may requirements management management management tion of asset assessment review vary based on the policy strategy, enablers management and PAS 55 maturity level objectives, and controls plans improvement of an organization and plans and priority of asset management imple- mentation topics)

Business processes and scenarios

Enterprise asset X X X X X X X management solution – Planning, building, and commissioning assets

– Asset visibility and performance

– Optimized asset operations and maintenance

– Operational risk management

Customer relationship X X X X management

Financial management X X X X X

Human capital X X X X management

Supplier relationship X X X X management

Supply chain X X X X management

Collaboration X X X X X X X

Business analytics

Business intelligence X X X

Data warehousing X X

Enterprise information X X X X X X X management

Enterprise performance X X X X X X management

Governance, risk, X X X X X X and compliance

Sustainability X X X X X X

Technology

Application foundation X X X X X X X and integration

In-memory computing X X X

Mobility platform X X X X X X

SAP Thought Leadership Paper – Enable Good Asset Management with Integrated Enterprise Information Software 13

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