ASSET MANAGEMENT TECHNIQUES

TABLE OF CONTENTS

1. EXECUTIVE SUMMARY.................................................................................................................4
1.1. ASSET MANAGEMENT POLICY................................................................................................4
1.2. ASSET MANAGEMENT GOALS AND OBJECTIVES................................................................4
1.3. KEY CHALLENGES......................................................................................................................5
1.4. REALIZED BENFITS.....................................................................................................................5
2. CASE STUDY FOR CAPITAL ITEM................................................................................................6
2.1. COMPANY OVERVIEW...............................................................................................................6
2.2. UTILITY UNIT...............................................................................................................................7
2.3. BOILER FEED WATER PUMPS...................................................................................................7
2.4. KEY PERFORMANCE INDICATOR............................................................................................9
2.5. SYSTEM CHARACTERISITCS..................................................................................................12
2.5.1. PUMP SPECIFICATION..........................................................................................................12
2.5.2. TURBINE SPECIFICATION....................................................................................................15
2.6. SYSTEM MAINTENANCE OPTIMIZATION............................................................................17
2.6.1. PUMP MAINTENANCE OPTIMIZATION.............................................................................17
2.6.2. TUBINE MAINTENANCE CHARACTERISTICS..................................................................23
2.6.3. MOTOR MAINTENANCE OPTIMIZATION..........................................................................27
2.7. ASSET RENEWAL PLAN...........................................................................................................30
2.7.1. ASSET RENEWAL STRATEGY.............................................................................................30
2.7.2. ASSET RENEWAL TIMING/ FORECASTING......................................................................31
2.8. LIFE CYCLE COSTING...............................................................................................................33
2.8.1. ACQUISITION COST..............................................................................................................36
2.8.2. SUSTAINING COST................................................................................................................39
2.8.3. CASH FLOW............................................................................................................................43
2.9. ASSET CONTINUITY PLANNING............................................................................................45
2.10. CAPITAL PLANNING AND BUDGET...................................................................................46
2.11. CRITICAL SPARES.................................................................................................................47
2.12. BUDGET CUT PLANS.............................................................................................................48
2.12.1. EFFECTS OF BUDGET CUT...................................................................................................48
2.12.2. JUSTIFICATION FOR BUDGET.............................................................................................50
2.12.3. BACK UP PLAN.......................................................................................................................51
3. RECOMMENDATION.....................................................................................................................55
4. REFERENCES..................................................................................................................................56
1. CASE STUDY FOR CAPITAL ITEM

1.1. BOILER FEED WATER PUMPS

Boiler feedwater pumps are the main driving force of utility plant. There are two boilers which
are fed by two boiler feed water pumps with one in standby configuration. The two pumps are
driven by steam turbine while one is operated by motor. The criticality of these pumps can be
estimated by the fact that whole plant can abruptly shut down upon failure of these pumps. This
pumping system has been operating for long time and its performance degradation demands the
renewal of this system.

1.2. LIFE CYCLE COSTING

LCC is a technique in which every activity is costed based upon the resources involved. It
includes all costs of life cycle phases of new equipments. Although LCC results are not good
budgeting tools, they’re effective only as comparison/trade-off tools. Engineers must be
concerned with life cycle costs for making important economic decisions through engineering
actions. However, we would use LCC results to estimate the budget of new pumping systems
during all life cycle phases.

FIG: LCC cost factors

FIG: LCC phases
FIG: LCC individual cost factors
1.2.1. ACQUISITION COST

FIG: LCC Acquisition Cost elements

 ACQUSITION COST OF PUMP( INCLUDING PUMP, GEAR BOX AND COUPLINGS)
YEAR
COST ELEMENTS 0 1 2 3 4 5 6
ACQUSITION COST
PROGRAM MANAGEMENT 2000
ENGINEERING DESIGN 3000
ENGINEERING DATA 2000
SPARES AND LOGISTICS 3500
FACILITIES & CONSTRUCTION 4500
INITIAL TRAINING 2000
TECHNICAL DATA 1000
CAPITAL EQUIPMENT 100000
DOCUMENTATION COST 2000
TOTAL 120000

TABLE: Acquisition cost of pump

ACQUSITION COST OF PUMP( INCLUDING PUMP, GEAR BOX AND COUPLINGS)

YEAR
COST ELEMENTS 0 1 2 3 4 5 6 7
ACQUSITION COST
PROGRAM MANAGEMENT 2000
ENGINEERING DESIGN 3000
ENGINEERING DATA 2000
SPARES AND LOGISTICS 3500
FACILITIES & CONSTRUCTION 4500
INITIAL TRAINING 2000
TECHNICAL DATA 1000
CAPITAL EQUIPMENT 80000
DOCUMENTATION COST 2000
TOTAL 100000
TABLE: Acquisition cost of turbine
 ACQUSITION COST OF PUMP( INCLUDING PUMP, GEAR BOX AND COUPLINGS)
YEAR
COST ELEMENTS 0 1 2 3 4 5 6 7
ACQUSITION COST
PROGRAM MANAGEMENT 2000
ENGINEERING DESIGN 3000
ENGINEERING DATA 2000
SPARES AND LOGISTICS 3500
FACILITIES & CONSTRUCTION 4500
INITIAL TRAINING 2000
TECHNICAL DATA 1000
CAPITAL EQUIPMENT 80000
DOCUMENTATION COST 2000
TOTAL 100000
TABLE: Acquisition cost of motor

ACQUSITION COST OF PUMP( INCLUDING PUMP, GEAR BOX AND COUPLINGS

YEAR
COST ELEMENTS 0 1 2 3
ACQUSITION COST
PROGRAM MANAGEMENT 2000
ENGINEERING DESIGN 3000
ENGINEERING DATA 2000
TABLE: Acquisition cost of each pumping system train
1.2.2. SUSTAINING COST

FIG: Sustaining cost elements

 SUSTAINING COST OF PUMP( INCLUDING PUMP, GEAR BOX AND COUPLINGS)

FAILURE REPAIR
MTBF REPAIR
COST ELEMENTS RATER/ ACTIVITY
YEARS TIME
YEAR COST

SEAL 3 0.3333 8 100

BEARINGS 4 0.25 8 100
IMPELLERS 12 0.083333 56 100
SHAFT 18 0.055556 56 100
HOUSING 18 0.055556 56 100
GEAR BOX 20 0.05 8 100
COUPLING 8 0.125 8 100
MAINTENANCE VISIT 12 50
OPERATION VISIT 12 35
VIBRATION VISIT 12 50
TRAINING COST 0.5 250
TOTAL

TABLE: Acquisition cost of pumping system parts

 SUSTAINING COST OF PUMP( INCLUDING PUMP, GEAR BOX AND COUPLINGS)

REPA LOST
COST FOR
FAILURE REPAI IR LOGIST MAR ELECTRI
MTBF LAB, PART TOTAL
COST ELEMENTS RATER/ R ACTI ICS GIN CAL
YEARS EXP& COST COST/YEAR
YEAR TIME VITY COST COS POWER
MAT
COST T
SEAL 3 0.3333 8 100 266.64 3717 50 - 4033.64
BEARINGS 4 0.25 8 100 200 3717 50 - 3967
IMPELLERS 12 0.08333 56 100 466.6667 3584 100 - 4150.66667
SHAFT 18 0.05556 56 100 311.1111 3777 100 - 4188.11111
HOUSING 18 0.05556 56 100 311.1111 1667 200 - 2178.11111
GEAR BOX 20 0.05 8 100 40 750 50 - 840
COUPLING
MAINTENANCE 8 0.125 8 100 100 300 50 - 450
VISIT 12 50 600 - 600
OPERATION VISIT 12 35 420 - 420
VIBRATION VISIT 12 50 600 - 600
TRAINING COST 0.5 250 125 - 125

TABLE: Sustaining cost of pump

SUSTAINING COST OF PUMP( INCLUDING PUMP, GEAR BOX AND COUPLINGS)

COST FOR
FAILURE REPAIR
MTBF REPAIR LAB, PART LOGISTIC
COST ELEMENTS RATER/ ACTIVITY
YEARS TIME EXP& COST S COST
YEAR COST
MAT
SEAL 3 0.3333 8 100 266.64 3717 50
BEARINGS 4 0.25 8 100 200 3717 50
IMPELLERS 12 0.083333 56 100 466.6667 3584 100
SHAFT 18 0.055556 56 100 311.1111 3777 100
HOUSING 18 0.055556 56 100 311.1111 1667 200
GEAR BOX 20 0.05 8 100 40 750 50
COUPLING 8 0.125 8 100 100 300 50
MAINTENANCE VISIT 12 50 600
OPERATION VISIT 12 35 420
VIBRATION VISIT 12 50 600

TABLE: Sustaining cost of turbine

 SUSTAINING COST OF PUMP( INCLUDING PUMP, GEAR BOX AND COUPLINGS)

COST FOR
FAILURE REPAIR
MTBF REPAIR LAB, PART LOGISTIC
COST ELEMENTS RATER/ ACTIVITY
YEARS TIME EXP& COST S COST
YEAR COST
MAT
SEAL 3 0.3333 8 100 266.64 3717 50
BEARINGS 4 0.25 8 100 200 3717 50
IMPELLERS 12 0.083333 56 100 466.6667 3584 100
SHAFT 18 0.055556 56 100 311.1111 3777 100
HOUSING 18 0.055556 56 100 311.1111 1667 200
GEAR BOX 20 0.05 8 100 40 750 50
COUPLING 8 0.125 8 100 100 300 50
MAINTENANCE VISIT 12 50 600
TABLE: Sustaining cost of motor

SUSTAINING COST OF PUMP( INCLUDING PUMP, GEAR BOX AND COUPLIN

FAILURE REPAIR
MTBF REPAIR
COST ELEMENTS RATER/ ACTIVITY
YEARS TIME
YEAR COST

SEAL 3 0.3333 8 100

BEARINGS 4 0.25 8 100
TABLE: Sustaining cost of each pumping system
1.2.3. CASH FLOW

LCC FOR P
ACQUSITI
ON
COST ELEMENTS 0 1 2 3 4 5 6 7 8 9
PUMP COST -100000 -21552 -21552 -21552 -21552 -21552 -21552 -21552 -21552 -21552
TURBINE COST -50000 -49054 -49054 -49054 -49054 -49054 -49054 -49054 -49054 -49054
OPERATION COST -40000 -70606 -70606 -70606 -70606 -70606 -70606 -70606 -70606 -70606
DEPRECIATION -7500 -7500 -7500 -7500 -7500 -7500 -7500 -7500 -7500
PROFIT b/4 TAX -78106 -78106 -78106 -78106 -78106 -78106 -78106 -78106 -78106
TAX PROVISION 31242.4 31242.4 31242 31242 31242.4 31242 31242.4 31242 31242
NET INCOME -46864 -46864 -46864 -46864 -46864 -46864 -46864 -46864 -46864
ADD BACK DEPRECIATION 7500 7501 7502 7503 7504 7505 7506 7507 7508
CASH FLOW -190000 -39364 -39363 -39362 -39361 -39360 -39359 -39358 -39357 -39356
DISCOUNT RATE
ACTUAL COST 190000 44087 49376 55300 61935 69365 77687 87007 97445 109136

ACQUSITION
COST ELEMENTS 0 1 2
PUMP COST -100000 -21552 -21552 -21
TURBINE COST -50000 -49054 -49054 -49
OPERATION COST -40000 -70606 -70606 -70
DEPRECIATION -7500 -7500 -7
PROFIT b/4 TAX -78106 -78106 -78
TAX PROVISION 31242.4 31242.4 3124
NET INCOME -46863.6 -46863.6 -4686
ADD BACK DEPRECIATION 7500 7501 7
CASH FLOW -190000 -39363.6 -39362.6 -3936
DISCOUNT RATE
ACTUAL COST 190000 44087 49376 55

TABLE: LCC cost of P 402 A/B

 ACQUSITION
COST ELEMENTS 0 1 2
PUMP COST -100000 -21552 -21552 -2
TURBINE COST -50000 -49054 -49054 -4
OPERATION COST -40000 -70606 -70606 -7
DEPRECIATION -7500 -7500
PROFIT b/4 TAX -78106 -78106 -7
TAX PROVISION 31242.4 31242.4 31
NET INCOME -46863.6 -46863.6 -46
ADD BACK DEPRECIATION 7500 7501
CASH FLOW -190000 -39363.6 -39362.6 -39
DISCOUNT RATE
ACTUAL COST 190000 44087 49376 5

ACQUSITION
COST ELEMENTS 0 1 2
PUMP COST -100000 -21552 -21552 -2
TURBINE COST -50000 -49054 -49054 -4
OPERATION COST -40000 -70606 -70606 -7
DEPRECIATION -7500 -7500
PROFIT b/4 TAX -78106 -78106 -7
TAX PROVISION 31242.4 31242.4 31
NET INCOME -46863.6 -46863.6 -46
ADD BACK DEPRECIATION 7500 7501
CASH FLOW -190000 -39363.6 -39362.6 -39
DISCOUNT RATE
ACTUAL COST 190000 44087 49376 5
TABLE: LCC cost of P402 C

1.3. ASSET CONTINUITY PLANNING

This analysis has been carried out to synchronise the asset replacement decisions with production
plans in the context of equipment hiring duration and downtime for installation/ commissioning.

PRODUCTION AND REPLACEMENT PLANNING

1400

1200

1000

800

600

400

200

TIME HORZON

FIG: Production plans and asset replacement planning

1.4. CAPITAL PLANNING AND BUDGET

Based upon LCC and combination of asset replacement with production plans, following budget
forecast has been prepared. New pumping systems would be hired in 2015 and 2017.

BUDGET FORECAST
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$0
15 0 16 0 17 0 18 019 020 021 022 0 23 0 24 0 25 0 26 027 028 029 0 30 0 31 0 32 0 33 034 035 036 037
20 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2

TP 402 C TP 402 A TP 402B

FIG: Budget forecast of asset replacement and sustaining