Maintainability and Reliability of Capital Intensive Assets

This report analyzes the maintainability and reliability of capital intensive assets and discusses the needs and expectations of stakeholders. It explores the scope of maintenance organizations, the level of documented systems, commitment and support from leadership, the use of life cycle costing in maintenance decision making, and the measurement of maintainability in the organization.

TABLE OF CONTENT
Introduction...........................................................................................................................................2
Needs and expectation of stakeholders................................................................................................2
Scope of Maintenance Organisation to meet those expectations.....................................................3
Level of Documented System for Maintenance Department............................................................3
Commitment and support from leadership for risk based maintenance management.....................4
How Life Cycle Costing is used in maintenance decision making in your organisation..........................5
Conclusions with opportunities for improvement (along with reasons for your conclusions)..........7
Time Value of Money............................................................................................................................7
Measurement of Maintainability in the Organisation...........................................................................8
References:..........................................................................................................................................10

MREGC5001: ASSIGNMENT 1
Introduction
The present report deals with analysing the maintainability and reliability of a capital intensive asset.
Capital Intensive asset shall mean those assets which are part of business process or industry and
require a huge outlay in the form of cash or other asset. These assets form a significant portion of
balance sheet and needs to be properly maintained and managed. Examples of such asset encompasses
machinery or structure used for oil exploration, Machineries in Automobile Industries, Super
computers in Tesla, Hyperloop in Tesla etc. The cost of these assets may run upto billions with cost of
repair and maintenance ranging in billion dollars. These assets are reported in Property Plant and
Equipment section of the Balance sheet. These capital intensive assets have a long gestation period in
set up and have its own life cycle irrespective of life cycle of other assets of the company. Many
organisations have a dedicated team maintaining the assets from beta phase till the replacement of the
asset.
Some of the examples of such capital intensive asset encompasses the following:
(a) Bandwidth and Spectrum charges telecommunications;
(b) Machinery for oil exploration under Offshore drilling;
(c) Aviation Sector: Aeroplanes
In the present case, since details of asset management of a named organisation is not available. Data
from public domain has been used for the purpose of analysis and report preparation. Further, the data
pertains to the practise used in a common industry for maintenance and reliability of asset.
Needs and expectation of stakeholders
The stakeholder of a company generally comprises all the person influenced by the company whether
its shareholders, creditor, debtor, society at large and Government for taxes and compliances.
The general needs and expectation of stakeholders has been highlighted as under:
Sl. No. Stakeholder Expectation
1 Shareholders
Profit Maximisation through
higher margin, higher
production and lower cost
2 Government GDP Contribution, Taxes and
Compliances
3 Society at Large
Increase standard of living,
reduced cost and increased
employment.
4 Debtor Good quality at lower cost
5 Creditor Timely Payment
The specific stakeholder needs w.r.t assets:
(a) Better efficiency and effectiveness of Machinery;
(b) Up time and down time shall be reduced; (System Engineering and Research Center, 2018)
(c) Life of the asset shall be improved;
(d) Cost of Maintenance shall be optimised;
(e) Asset availability shall be improved;

Scope of Maintenance Organisation to meet those
expectations
The scope of the maintenance organisation to meet the expectation of the stakeholders shall
encompass the following:
(a) Primary Scope of Maintenance Organisation:;
 Inspection, cleansing and lubrication of machinery from time to time
 Alteration of existing plant, machinery and building to suit modifications and requirement;
 Maintenance of existing grounds and buildings, (Watt, 2019)
 Installation and maintenance of plant and machinery
.
(b) Secondary Functions of Maintenance Organisation:
 Reducing the level of Pollution and controlling it
 Protection of plant against fire, (System Engineering and Research Center, 2018)
 Taking Insurance of PPE i.e. Plant, Property and Equipment
 Maintenance and store keeping;
 Salvage value of Machinery
Level of Documented System for Maintenance Department
In an organisation, typically there exists various forms of documentation. The minimum level of
documentation process which is prevalent in the current organisation has been detailed here-in-below:
(a) Collection of data;
(b) Data Storage;
(c) Data Interrogation;
(d) Data Analysis;
(e) Data Processing and resulting information.
In addition, the maintenance of documentation for systemcan be manual or online. In the present
context, the maintenance of documentation is online.
Further, the current organisation has seven principal modules which perform different accounting
functions. Also, significant amount of efforts and labour are required for effective maintenance of
documentation function.
The details of seven modules are presented here-in-below:
Sl No Modules Function
1 1 Deals with Plant Inventory
2 2 Significant information for the plant base are maintained
3 3 Inspection and prevention schedule (Maintene
4 4 Inspection and prevention schedule
5 5 Planning Working System for Short term
6 6 Long term Planning System
7 7 Feedback Mechanism

Further, the graphic presentation of the seven module documentation process has been detailed here-
in-below:
(Berges-Muro, 2019)
Commitment and support from leadership for risk based
maintenance management
Risk based maintenance management comprise initially assessing the risk and then developing
maintenance planning based on such risk assessment.
Further, risk based maintenance system gives priority to those resources which carry significant risk
and have higher chances to fail. Also, resources with lower risk carry lower weight under the
management. The said action is carried out to maintain a balance and lower risk and cost for system
maintenance.
Also, the management from time to time allocates priority to different resources to effectively control
the risk. Under this, the leader commits to pay greater time for inspection and management of those
assets which have a greater chance of failure and assets which have a lower risk are subject to lower

maintenance. Thus, by implementing risk based maintenance management commits to deliver lower
failure under the most economical way.
How Life Cycle Costing is used in maintenance decision
making in your organisation
The life cycle of plant for present organisation consists of following steps:
(a) Equipment Designing;
(b) Technical Specifications Establishment;
(c) Asset Installation; (Blakely-Gray, 2018)
(d) Plant Commissioning;
(e) Plant operation and maintenance;
(f) Removal of plant or replacement. (Blakely-Gray, 2018)
The graphic presentation of the flow chart of Life Cycle Costing has been presented as under:
The cost that are incurred in the lifecycle of plant shall include the following:
(a) Cost of Operations;
(b) Cost of Maintenance;
(c) Cost of Development; (Elomatic, 2018)
(d) Purchase Design Cost;
(e) Cost of Construction and;
(f) Cost of disposal.

The above cost are incurred during the life cycle of plant and the management is determined to
optimise the cost of maintenance which encompass the following:
(a) Cost of repair;
(b) Cost of Insurance;
(c) Cost of Inspection; (Elomatic, 2018)
(d) Cost of Haulage;
Further, cost incurred in the organisation can be categorised under the following head:
(a) Preventive Maintenance cost;
(b) Corrective Maintenance cost;
(c) Predictive Maintenance cost.
The advantage of Life cycle costing is better analysis of cost, control of cost and reduction of cost
over time. Further active management helps in minimising the risk
In addition, a graphic presentation has been provided for life
(Komonen, 2016)

Any Gaps identified in current practice (appropriateness) when compared with good practices/
international standard
The international standard that governs management of asset encompasses the following:
(a) ISO 5500X Standard;
(b) ISO 55000-55002 Standard;
(c) EN 16646;
(d) ISO 15686-5:2017
The gaps identified under the current system has been identified as under:
(a) Inadequate training to staff;
(b) Lack of compliance with procedures;
(c) Inadequate technology;
(d) In appropriate staffing if department
Conclusions with opportunities for improvement (along with
reasons for your conclusions)
Based on above discussion, it can be understood that the current organisation has standard procedures
designed for maintaining the cash rich asset. Further, company takes appropriate actions to weed out
the issues under the maintenance system from time to time. It has also been given to understand that
the seven module system is working effectively for the organisation and has been able to control the
risk and maximise the availability of machinery on time. However, there exists certain gaps in the
system which needs to be managed and the risk to be weed out based on strong management
practices. Some of the best practices has been deliberated as under:
(a) Adequate staff training;
(b) Procedural compliance;
(c) Using Modern Technology;
(d) Departmental staffing with necessary skills;
(e) Investigation of key areas and proper reports and actionsThis are some of the actions that
organisation can take to weed out the gaps.
Time Value of Money
The term time value of money is a core concept of finance which states that money earned today is
not equal to money earned tomorrow on account of change in purchasing power of money due to
numerous factors. (Introduction: What is time value of money?, 2019) Further, the concept implies
that it is better to have money right now than in the future. The concept of time value of money is
based on rationality and basic instinct of a person.
The concept of future identical money lower than the present money is based on two rationale:

(a) Inflation;
(b) Earning capacity of money.
Inflation represents the growth in consumer index of a country on an year on year basis. This
represents the decrease in purchasing power of money or the change in the value of basket of goods
on an year on year basis.
For instance, the current value of basket of good is $ 10 and in future is $ 11. This implies a 10%
inflation in the economy.
Further, the earning capacity of money symbolise alternative areas where money can be invested to
earn a return like investing in equity, bonds etc.
For instance, the amount invested in equity today is $10 and in future is $ 12. This implies a 20%
earning capacity of currency.
In addition, the sample computation of time value of money has been presented as under:
FV= Future Value of Money;
PV= Present Value of Money;
I= Rate of Interest;
N = Number of compounding periods per year;
T = Number of Years
FV= PV x[ 1+ (i/n)]^(n*t)
On the basis of above formula let us take a sample sum
PV = $20000
T= 1year
I = 10%
FV =PV x[ 1+ (i/n)]^(n*t)
FV= $20,000 x (1 + (10% / 1) ^ (1 x 1) = $22,000
In addition, there are three concepts that have been widely used under time value of money:
(a) Annual Worth
(b) Future Worth
(c) Present Worth
All the computation are presented in Excel.
Answer 3:
Measurement of Maintainability in the Organisation
The term maintainability under asset management means taking appropriate measures to improve the
life of the asset, reduce failure and increase availability. The following are the methods that are
employed in the current organisation for maintenance of asset

(a) Mean time to failure;
(b) Constant rate to failure;
(c) Mean time to repair
These measures are very much essential for the organization who have equipment related operations.
Also, tracking the reliability of an assets is a very big challenge that the managers of the assets
generally faces on a daily basis. To use all the metrics very carefully one should know the proper
meaning of all the words and how to compute all those and what does that tell you about your assets.
MTTR is the minimum amount of time required to repair the full functionality of the system and
restore to its original condition. To compute the effectiveness it is computed through the following
formula: (TechTarget, 2019)
MTTR=Total maintenance time/Total number of repairs
MTBF is the second metric which means the estimated time that passes between one previous failures
of an electrical system to the next failure to a normal function.To compute the effectiveness it is
computed through the following formula:
MTBF=Total Operational Time/Total number of Failures
MTTF is a very basic measure used for the system which is non repairable. It shows the maximum
length of time the machine will lasts until it fails to operate. (Techopedia Inc, 2019)
MTTF=Total hours of operation/Total number of units.
Answer 4
Yes, the process is under control

References:
Berges-Muro, L. (2019). Functional model for maintenance documentation system. Retrieved March 29,
2019, from www.researchgate.net: https://www.researchgate.net/figure/Functional-model-for-
maintenance-documentation-system_fig1_260272734
Blakely-Gray, R. (2018). How to Use Life Cycle Costing. Retrieved March 27, 2019, from
www.patriotsoftware.com: https://www.patriotsoftware.com/accounting/training/blog/life-cycle-
costing-process/
Elomatic. (2018). Life Cycle Costing – predicting life cycle costs as part of maintenance management and
investment planning. Retrieved March 27, 2019, from blog.elomatic.com:
https://blog.elomatic.com/en/life-cycle-costing-predicting-life-cycle-costs-as-part-of-maintenance-
management-and-investment-planning
Introduction: What is time value of money? (2019). Retrieved March27 2019, from psu.instructure.com:
https://psu.instructure.com/courses/1806581/pages/introduction-what-is-time-value-of-money
Komonen, K. (2016). Maintenance within physical asset Management. Retrieved March 29, 2019, from
www.slideshare.net: https://www.slideshare.net/SFSedu/maintenance-within-physical-asset-
management
System Engineering and Research Center. (2018). Stakeholder Needs and Requirements. Retrieved March 27,
2019, from www.sebokwiki.org:
https://www.sebokwiki.org/wiki/Stakeholder_Needs_and_Requirements
Techopedia Inc. (2019). Mean Time to Failure (MTTF). Retrieved March 27, 2019, from
www.techopedia.com: https://www.techopedia.com/definition/8281/mean-time-to-failure-mttf
TechTarget. (2019). MTTR (mean time to repair). Retrieved March 27, 2019, from
searchstorage.techtarget.com: https://searchstorage.techtarget.com/definition/mean-time-to-
repair-MTTR
Watt, b. a. (2019). Stakeholder Management. Retrieved March 27, 2019, from opentextbc.ca:
https://opentextbc.ca/projectmanagement/chapter/chapter-5-project-stak

APPENDIX:
A.
Sl.
No.
Stakeholder Expectation
1 Shareholders Profit Maximisation through higher margin, higher production and lower
cost
2 Government GDP Contribution, Taxes and Compliances
3 Society at
Large
Increase standard of living, reduced cost and increased employment.
4 Debtor Good quality at lower cost
5 Creditor Timely Payment
SOURCE:OWN
B.
Sl No Modules Function
1 1 Deals with Plant Inventory
2 2 Significant information for the plant base are maintained
3 3 Inspection and prevention schedule (Maintene
4 4 Inspection and prevention schedule
5 5 Planning Working System for Short term
6 6 Long term Planning System
7 7 Feedback Mechanism
SOURCE:OWN

C.
SOURCE: Berges-Muro, L. (2019). Functional model for maintenance documentation system.
Retrieved March 29, 2019, from www.researchgate.net:
https://www.researchgate.net/figure/Functional-model-for-maintenance-documentation-
system_fig1_260272734

D.
SOURCE: Komonen, K. (2016). Maintenance within physical asset Management. Retrieved March 29, 2019,
from www.slideshare.net: https://www.slideshare.net/SFSedu/maintenance-within-physical-asset-
management