Water Journal : Water Journal November 2014
WATER NOVEMBER 2014 34 Feature Article - Strategy This is what in uences our decisions, drives our business and ensures we strive for our service goals for years to come. We are forward thinkers. We make smart decisions that allow us to deliver our goals and progress into the future both now and in the long-term. - Service levels These are the core of our business and are constantly evolving. They determine what we provide and to what level we provide it; we focus on the outcomes and how best to deliver them. - Line of Sight Yes! We know the impact to the customer if we change something in our services and service levels, and we take a 'linked up' approach to the asset management system and decision-making. DRIVING THE SHIFT TO SERVICE-FOCUSED BUSINESS Two examples of why we will shift to this service-based approach, where service levels drive decision making, can be highlighted by key nancial impacts in any asset intensive company -- Capital Funding and Depreciation Expenses. ASSET CONSUMPTION Depreciation Expenses If we depreciate our assets in line with the asset service life cycle (which is measured by physical assessment and based on Australian Accounting Standards), as opposed to xed straight-line depreciation, we can shift our average depreciation from 3.0 per cent to 2.5 per cent per annum across a $3B asset portfolio and save $1.5M pa in depreciation expenses. In Figure 1 we can see the difference in a single sewer main depreciation expense over a life cycle prior to a renewal point (before its end of life) using service potential-based depreciation and xed straight-line depreciation. The rate at which the asset is consumed here is not based on the actual behaviour of the asset, or how it relates to service levels and intervention points. Infrastructure does not degrade signi cantly in the initial years of its life and we renew it before it's totally consumed -- so why do we depreciate it that way nancially? And would we wait for asset failure to renew or reline earlier? The rate the asset is consumed in Figure 2 is based on the actual behaviour of the asset, the service levels and interventions points. In this instance we consume the asset based on our service expectations, and when we will intervene with a service improvement, which may be a partial renewal or reline, or new technology based on a gain and NPV decision. CAPITAL FUNDING If we optimise the way we plan renewals based on service level decision-making using analytics across the asset portfolio based on optimal intervention points from an NPV analysis, we can achieve a one per cent reduction in annual capital and still maintain services at the appropriate level, a saving of $1M pa based on a $100M capital budget. These two savings may seem high but the fact is they are realistic if we take a step back and look at how we consume and manage our assets based on the services they provide. These are measurable, repeatable, objective, tangible numbers that directly impact the bottom line. THE INTERNET OF ASSET MANAGEMENT To move into the world of smart decisions we need to move beyond the current day-to-day view that we have been working with for the past 10 years. If we look at how society has evolved over the past decade it's all about information. Why can we connect with a group of people on the other side of the world to auction a website design in the time it takes to read this article, yet we still can't connect with our peers in asset management across the world (Figure 3) to share and develop our proven science in asset management without attending a conference? This will change! Enter the Internet of Asset Management -- a connected system based on standard data frameworks, search engines, benchmarks and analytics puts asset management information from other industries and companies at our ngertips at the click of a button. Figure 1. Asset value based on a xed rate of consumption. Figure 2. Asset value based on service potential consumption. Figure 3. Unconnected asset management information in Australia.
Water Journal September 2014
Water Journal December 2014