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Find all articles across all article series listed in reverse chronological order.

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Using Monte Carlo Simulations in Excel to Assess Uncertainty in Asset Replacement Decisions

Using Monte Carlo Simulations in Excel to Assess Uncertainty in Asset Replacement Decisions

Industrial operations that have operating horizons exceeding the lifespan of their assets face a crucial decision as they approach this timeline’s end (but not enough to operate the equipment until its full economically optimal life).

Specifically, they must decide whether to overhaul the asset, replace it with a new one, or rent the equipment until operations conclude. Given the numerous variables with inherent uncertainties in the financial models, how can they be confident in their decision?

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Building a RAM model? How granular do you need to go?

Building a RAM model? How granular do you need to go?

Reliability, Availability, and Maintainability (RAM) modeling overview

The fundamental purpose of Reliability, Availability, and Maintainability (RAM) modeling is to quantify system performance, typically in a future time interval. A system is a collection of items that operate together to produce an output, often a production value. These items can include subsystems, components, software, human operations, and more. For example, an automobile can be viewed as a system with subcomponents like the drive train, engine, gearbox, etc. In RAM models, it is crucial to consider the relationships between these items to determine the system’s final output. They have proven effective in various industries as tools for cost avoidance, decision-making, and validating assumptions made by internal stakeholders.

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How to Design an Effective Risk Management Framework

How to Design an Effective Risk Management Framework

Guest Post by Peter Holtmann (first posted on CERM ® RISK INSIGHTS – reposted here with permission)

This article is the fourth of fourteen parts to our risk management series. The series will be taking a look at the risk management guidelines under the ISO 31000 Standard to help you better understand them and how they relate to your own risk management activities. In doing so, we’ll be walking through the core aspects of the Standard and giving you practical guidance on how to implement it.

In previous articles (1st, 2nd, & 3rd) we’ve looked at the core elements of the risk management framework generally, as well as the role of leadership and commitment, and integration more specifically. In this article, we’ll be looking at how to effectively design your risk management framework.

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Duration of Job vs Labor Hours Required

Duration of Job vs Labor Hours Required

by Phil Swanton

When planning and scheduling, we need to have estimated hours to be able to schedule efficiently. Without estimated hours it makes it close to impossible to know your resource consumption. To take your scheduling efforts to the next level you need to understand the difference between Duration of job vs. labor hours required to perform the tasks.

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Should M&A Due Diligence Consider Safety?

Should M&A Due Diligence Consider Safety?

Mergers and Acquisitions (M&A) are a part of today’s corporate growth strategy. As a part of M&A due diligence various critical business issues are evaluated. But what about safety performance of the company you are looking to acquire or merge with?

You will say that most M&A in oil and gas/chemical processing industries are asset-driven. You look at what the pots and pans can do for you in the future and base your M&A decision.

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Make the Ships More Durable

Make the Ships More Durable

“His Majesty Will Have A Fleet Upon The Durability Of Which There May Be Some Dependence.”

Balancing Fleet Size with Workforce Size

In 1763, the Seven Years’ War ended and the Royal Navy demobilized. The Earl of Sandwich left the office of the First Lord of the Admiralty for the second time. At the end of the war, Britain had 149 ships of the line. Scrapping, retirement, and storage reduced the fleet size and  maintenance requirements. The navy was trying to manage a shrinking fleet with a shrinking budget. 

In 1763, the Admiralty requested a report of the total value of all ships and their stores, and an analysis of the “annual cost of replacing them in cycles between twelve and sixteen years,” according to historian N. A. M. Rodger. The Admiralty also asked for an estimate for annual repair and maintenance at task work rates if they expanded the number of shipwrights to 3000. (Shipwrights were the carpenters in dockyards who built and repaired ships.)

By 1765, only 47 of the 140 ships were in good condition. The Navy Board made a plan to increase the number of ships in good condition to from 47 to 63, but the plan required three years and an extra £2,000,000. Once restored to good condition, the plan assumed that the existing shipwright workforce could maintain a fleet of 90 ships. This approach would only work if the shipwrights were allowed to maximize overtime all summer, for every summer to come…the workforce and labor budget were at maximum capacity. To actually maintain 140 ships in good condition, the shipwright workforce would have to be expanded from 3,150 to 4,200. The government did not want to expand its civilian industrial labor base at a time when it expected a peace dividend.

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7 Benefits a RAM Model can Bring to an Organization

7 Benefits a RAM Model can Bring to an Organization

The fundamental purpose of Reliability, Availability, and Maintainability (RAM) modeling is quantifying system performance, typically in a future interval of time. A system is a collection of items whose coordinated operation leads to the output, generally a production value. The collection of items includes subsystems, components, software, human operations, etc. For example, an automobile can be considered as a system with sub-components being the drivetrain, engine, gearbox, etc. In RAM models, it is crucial to account for relationships between items to determine the final output of the system. In various industries, RAM models have proven to be effective as cost avoidance or decision-making tools, as well as their ability to confirm or counter stated assumptions by internal stakeholders. 

This paper highlights a non-exhaustive list of seven diverse solutions that a RAM model can bring to the organization in terms of decision-making advantages.

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Reliability Assessment and Acquisition Method

Reliability Assessment and Acquisition Method

Asset reliability assessment when buying running and used operating plant and equipment. Aging asset reliability assessment can be done quantitatively if all past component stresses are know, or it is down qualitatively when only operating and maintenance history is available.

I am a developing reliability professional and often read your articles. I was wondering if you could give me a bit of advice about the subject of aging asset reliability assessment for operating assets?

Can you please share your thoughts on reliability assessment for a thermal power plant, and its importance in acquisition of a running ageing plant. Is it a common practice to look at this aspect prior to acquisition and is it practical? And if so, how do we go about it?

Thank you for your advice.

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Integrating Your Risk Management Framework into Your Organization

Integrating Your Risk Management Framework into Your Organization

Guest Post by Peter Holtmann (first posted on CERM ® RISK INSIGHTS – reposted here with permission)

This article is the third of fourteen parts to our risk management series. The series will be taking a look at the risk management guidelines under the ISO 31000 Standard to help you better understand them and how they relate to your own risk management activities. In doing so we’ll be walking through the core aspects of the Standard and giving you practical guidance on how to implement it.

In our previous articles (1st, 2nd) we introduced you to the core elements of the risk management framework. This included integration, design, implementation, evaluation, improvement, and the role of leadership and commitment.

In this article, we’ll be looking at integrating and adapting the risk management framework to your organisation. In particular, we’ll be focusing on how you can best understand your organization’s structures and context, appreciate the role of governance and strategy, appreciate risk management accountability, and the importance of being iterative and dynamic with your approach to integration.

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Self Ownership Part 5

Self Ownership Part 5

This mindset I have and bring to my client’s struggling businesses did not get built overnight. It took years of conscious concentration to develop the discipline that says basically, if something goes wrong, it was probably my fault. Either I didn’t plan or predict a problem, or I didn’t solve the problem before it happened a second time; but now the burden is on me to solve it.

Luckily I have a few tips on how to develop a self-ownership mindset.

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Natural Gas Pipelines: Is There A Safer Alternative?

Natural Gas Pipelines: Is There A Safer Alternative?

Natural gas pipelines have caused incidents leading to fatalities, injuries, and property damages.

To be precise, there have been an average of 50 serious gas pipeline incidents every year in the U.S. between 1990-2009 (Source: http://primis.phmsa.dot.gov/comm/reports/safety/SerPSI.html?nocache=4823) resulting in more than 300 fatalities. Majority of the reported gas incidents have occurred on the gas distribution lines – i.e.  gas pipeline systems that are found in thousands of communities from coast to coast and distribute natural gas to our homes and businesses.

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The Effect of Interest/Discount Rates on Asset Replacement Decisions

The Effect of Interest/Discount Rates on Asset Replacement Decisions

Asset management in the mining industry is an intricate dance of financial and operational factors. It demands a firm understanding of complex financial concepts to make strategic decisions effectively, one of which is the discount rate. This number, far from being just an abstract figure, can fundamentally shape a business’s strategic path, particularly concerning asset replacement.

The discount rate is essentially the interest rate used to calculate the present value of future cash flows. The concept comes into play when considering an asset replacement. This decision involves weighing costs and benefits over a time horizon that often spans several years. The discount rate serves as the conduit that translates these future values into present terms, enabling apples-to-apples comparisons. Most of use use this in NPV calculations where we evaluate business improvement initiatives, and compare the viability and return of various projects.

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