When is end of life?

Within asset reliability and management estimating end of life points has become more and more important. With credit harder to access and more expensive; companies, and their creditors, need to have greater confidence in the  large flows of cash required, and it's timing.

This thinking has become sharper over the past twelve years, following from the developments since privatization of the UK utilities industries, and Public Private Partnership contracts, placing billions in spending and public welfare largely on a companies ability to forecast their asset management spending for the next period. (Nominally 5 years)

These plans, submissions and ongoing reports are reviewed intensely, against increasingly rigorous standards. 

And this one is a serious game. Companies have been fined over 100 million GBP, people have been charged with fraud (imagine that), and companies such as Metronet have failed leaving a hole worth billions to the British taxpayer.

All due in part to their ability to manage their physical asset base.

So you can believe they're plans are pretty robust by now. 

But thats not the problem...

The problem is, "when is end of life?" The underlying science of this, although often built on shoddy data foundations, is pretty much in place and there are a range of predictive methods in place to look at end of life.

With a few exceptions, most replacement decisions of multi-assembly assets are not made on one asset or component failure. They are usually tied to some form of replacement value thinking.

Once repair value exceeds (say) 80% of replacement value then remaining life trade offs indicate it is more cost effective to replace than repair. But when you have multi-assembly assets, each assembly alone rarely fulfills this criteria.

This is one of those classic asset management roadblocks that many of us have stumbled across as you get deeper and deeper into this. (Others include forecasting corrective maintenance spending and gleaning "information" through rivers of asset "data")

Do we just continue forever until the structure gives out, (or something like that), or is there really a point where the asset system can / should be replaced for economic effectiveness?

Answering this, in my view, requires a two pronged line of thinking. One that looks in detail at Asset Replacement Value, and works out what it is really worth. The other looks at end of life forecasts.


The key isn't when one item fails, it is when several fail in a similar period. This is the point where ARV gets compared with costs to repair and keep, with a view to determining optimal times for replacement. 


Obviously not as tidy and straight forward as that. And as you can imagine there are layers and layers of thinking here. From mobilization, lost production and efficient scheduling, through to where is the asset data coming from, and the right application of probabilistic techniques. (Better to be approximately right instead of...)

The good thing is that all of the work required to deliver this sort of thing is all positive, and will have impacts far beyond replacement points for multi assembly assets.