Asset Management summaries
Table of Contents
Lecture week 1............................................................................................................ 2
Hicks & McGovern – Product life cycle management in ETO industries..................................2
Schuman & Brent – Asset life cycle management: towards improving physical asset performance in
the process industry................................................................................................... 3
Lecture week 2............................................................................................................ 9
Fabrycky & Alsem – Estimating cost and economic elements...............................................9
Chan – Investment appraisal techniques for advanced manufacturing technology (AMT): a literature
review................................................................................................................. 12
Kumar et al. – An investment decision process: the case of advanced manufacturing technologies in
Canadian manufacturing firms................................................................................... 15
Woodward – Life cycle costing: theory, information acquisition and application......................17
COT Case Conclusions............................................................................................ 20
Lecture week 3.......................................................................................................... 21
Archer & Ghasemzadeh – An integrated framework for project portfolio selection...................21
Ratnayake & Markeset – Asset integrity management for sustainable industrial operations:
measuring the performance....................................................................................... 24
Lecture week 4.......................................................................................................... 26
Muchiri & Pintelon – Performance measurement using OEE..............................................26
Muchiri et al. – Development of maintenance function performance measurement framework and
indicators............................................................................................................. 27
Waeyenbergh & Pintelon – A framework for maintenance concept development......................32
1
, Lecture week 1
Hicks & McGovern – Product life cycle management in ETO industries
The markets for ETO products are mature and cyclical with supply often exceeding demand.
Demand has shifted from specific items of plant towards turnkey contracts and through life
solutions. Some ETO companies start alliances to share risks and benefit from existing
complementary assets to meet customer requirements.
ETO companies are divided in four ideal types:
1. Vertically integrated
2. Design and assembly (with component manufacturing outsourced)
3. Design and contract (all physical processes outsourced)
4. Project management (with all physical processes and design outsourced)
There are three stages of interaction between ETO companies and their customers:
1. Relationship marketing that enables market trends, technical and non-technical
requirements and individual customer’s evaluation criteria to be identified
2. Tendering after an invitation to tender has been received
a. The cost of producing a tender may be very substantial
b. Typically 85-90% of cost is committed at the tendering stage
c. The tendering success rate was often less than 30%
d. Companies have a limited tendering capacity
e. Selecting which contract to tender for is an important strategic choice, which is
informed by the relationship marketing activity
3. Activities after the contract has been awarded: project planning, detailed design,
procurement, manufacturing, assembly, construction and commissioning. In some
cases, there are subsequent activities relating to operations, maintenance and
decommissioning activities.
The committed cost associated with a design rises steeply during the early stages of design,
although the incurred cost is low. Errors, ambiguities or misunderstandings in requirements
definition at the design stage can commit substantial costs, which are realized during
manufacturing and later stages of the product life cycle. The effective management of the
specification and design processes is crucial because 75-80% of avoidable total costs are
controllable at the requirements definition and design stages. Due to the competitive nature of
tendering, design configurations that result in excessive costs are unlikely to be successful.
Managing specifications is important for defining requirements in terms of technical attributes
and performance. A specification will typically contain sections relating to:
Technical, performance and quality requirements
Project management
Contract and commercial conditions
Specifications determine the power balance between customers and suppliers and are used by
customers to mitigate and manage risk. As specifications are developed early in the design
2
Table of Contents
Lecture week 1............................................................................................................ 2
Hicks & McGovern – Product life cycle management in ETO industries..................................2
Schuman & Brent – Asset life cycle management: towards improving physical asset performance in
the process industry................................................................................................... 3
Lecture week 2............................................................................................................ 9
Fabrycky & Alsem – Estimating cost and economic elements...............................................9
Chan – Investment appraisal techniques for advanced manufacturing technology (AMT): a literature
review................................................................................................................. 12
Kumar et al. – An investment decision process: the case of advanced manufacturing technologies in
Canadian manufacturing firms................................................................................... 15
Woodward – Life cycle costing: theory, information acquisition and application......................17
COT Case Conclusions............................................................................................ 20
Lecture week 3.......................................................................................................... 21
Archer & Ghasemzadeh – An integrated framework for project portfolio selection...................21
Ratnayake & Markeset – Asset integrity management for sustainable industrial operations:
measuring the performance....................................................................................... 24
Lecture week 4.......................................................................................................... 26
Muchiri & Pintelon – Performance measurement using OEE..............................................26
Muchiri et al. – Development of maintenance function performance measurement framework and
indicators............................................................................................................. 27
Waeyenbergh & Pintelon – A framework for maintenance concept development......................32
1
, Lecture week 1
Hicks & McGovern – Product life cycle management in ETO industries
The markets for ETO products are mature and cyclical with supply often exceeding demand.
Demand has shifted from specific items of plant towards turnkey contracts and through life
solutions. Some ETO companies start alliances to share risks and benefit from existing
complementary assets to meet customer requirements.
ETO companies are divided in four ideal types:
1. Vertically integrated
2. Design and assembly (with component manufacturing outsourced)
3. Design and contract (all physical processes outsourced)
4. Project management (with all physical processes and design outsourced)
There are three stages of interaction between ETO companies and their customers:
1. Relationship marketing that enables market trends, technical and non-technical
requirements and individual customer’s evaluation criteria to be identified
2. Tendering after an invitation to tender has been received
a. The cost of producing a tender may be very substantial
b. Typically 85-90% of cost is committed at the tendering stage
c. The tendering success rate was often less than 30%
d. Companies have a limited tendering capacity
e. Selecting which contract to tender for is an important strategic choice, which is
informed by the relationship marketing activity
3. Activities after the contract has been awarded: project planning, detailed design,
procurement, manufacturing, assembly, construction and commissioning. In some
cases, there are subsequent activities relating to operations, maintenance and
decommissioning activities.
The committed cost associated with a design rises steeply during the early stages of design,
although the incurred cost is low. Errors, ambiguities or misunderstandings in requirements
definition at the design stage can commit substantial costs, which are realized during
manufacturing and later stages of the product life cycle. The effective management of the
specification and design processes is crucial because 75-80% of avoidable total costs are
controllable at the requirements definition and design stages. Due to the competitive nature of
tendering, design configurations that result in excessive costs are unlikely to be successful.
Managing specifications is important for defining requirements in terms of technical attributes
and performance. A specification will typically contain sections relating to:
Technical, performance and quality requirements
Project management
Contract and commercial conditions
Specifications determine the power balance between customers and suppliers and are used by
customers to mitigate and manage risk. As specifications are developed early in the design
2
