.There is this ongoing discussion about asset management in the public sector and the private sector. The debate is about who is doing the “real” asset management stuff and where can we find the best practices. The topic is even more prominent now, especially with its global magnitude. It is being discussed in various conferences, training programs, publications and messages from consultants/vendors. Is one doing asset management and the other doing strategic asset planning? Is one better than the other?
At the end of the day in my opinion this is a futile discussion. If we look closely at both, the public and private sectors, they are both doing their part the best they can within their respective organizational context.
Rather than getting into the debate of who is doing better, we should be focusing more on how each of these sectors can share and improve their processes to achieve a more holistic asset management approach. Maybe the strategic portion is in place (top down approach), but not the tactical portion (bottom up approach) or vice versa - vertical alignment. Maybe organizations are doing the right things but in functional silos with poor collaboration – horizontal alignment.
Ultimately, what really matters most is how well the approaches/activities are aligned and coordinated. Of course there will always be areas of misalignment or weaknesses (constraints) that will need to be revisited. Of course there will always be gaps in processes, which are great opportunities for improvement.
What is the difference then, and why the ongoing debate?
In the public sector asset management planning is traditionally performed by the asset management/finance function with council endorsement. Engineering and public works take care of the asset management tactics in the form of refurbishments and routine maintenance.
In the private sector where the organizational context is different, asset management planning is usually done by senior management and endorsed by the shareholders or executive boards. Engineering and maintenance & reliability execute the asset management tactics.
So what does that mean?
Well in the private sector strategic asset planning is done at the board level and is pushed down to staff to execute the strategic direction, e.g. the board decides to expand the plant by next year in order to launch a new product. Market research and analysis have been completed, funding has already been arranged and decision has been made to stop manufacturing the old product, with all the related assets identified for disposal. All the related tactical projects need to be executed as per the approved plan and business priorities to generate maximum returns. In this case the tactical portion is very visible, while the principal-agent discussion is conducted behind closed doors. Hence we have the perception that “asset management planning” does not exist or is not carried out.
In the public sector it is actually a different approach. Council discussion and decision is public information – meaning we not only get to see more of the “asset management planning” and budgeting process, but we can also have our say and input. There are more open debates at the planning stage because of the political nature and impact of projects. Once decisions have been reached, then the actual execution is passed over to engineering/public works.
So both, the public and private sectors practice asset management based on their existing organizational context. As stated in ISO 55002, understanding the organization and its external and internal context is key in defining the scope of an organization’s asset management system, which will be used to set out the approach to enable the delivery of the organizational objectives.
With the changing landscape in asset management globally, organizations are now required to take a more holistic approach to manage their assets – both from a whole lifecycle perspective as well as enterprise-wide. So let us share and learn more from each other to make it happen.
In several asset management literatures I have been seeing terms such as demand analysis, demand management and need analysis being used. I was a little curious to understand how these terms relate to Asset Management, the difference and linkages between them and most importantly when to use them. A good place to start is to understand what each term exactly means.
A quick search on the internet gave the following definitions:
• Demand Analysis: Research into the desire of consumers for a particular product or service. Demand analysis is used to identify who wants to buy a given product, how much they are likely to pay for it, how many units they might purchase, and other factors that can be used to determine product design, selling cost, and advertising strategy for a product. http://www.investorwords.com/16338/demand_analysis.html#ixzz4nBkb8TEB
• Demand management: Demand management is a planning methodology used to forecast, plan for and manage the demand for products and services. This can be at macro-levels as in economics and at micro-levels within individual organizations. https://en.wikipedia.org/wiki/Demand_management
• Needs Analysis: Need Analysis is the process of identifying and evaluating needs in a community or other defined population of people. The identification of needs is a process of describing “problems” of a target population and possible solutions to these problems. Some people use the related term “needs assessment” or “needs identification”.
A need may be different from such related concepts as wants (“something people are willing to pay for”) or demands (“something people are willing to march for”). (McKillip, 1987) https://extension.arizona.edu/evaluation/sites/extension.arizona.edu.../files/.../needs.pdf
It can be pretty confusing when you consider needs, wants and demands.
From an article by Walter White - Needs, wants and demands are all marketing concepts and play a vital role in terms of marketing management. They help us build a strong relationship with the customer – customer level of service.
How does all this apply to asset management? For example when I implement asset management do I start with demand analysis or need analysis? Why there is no need management, while we do have demand management?
Let us start with needs. Needs are all the basic minimum requirements that have to be achieved to meet certain agreed upon level of service as defined by the organizational strategic objectives or by a type of legislation. For example: The need for safe roads, which are achieved by having clear road markings, functional traffic lights, minimum potholes, etc.
Since needs may be presented as fait accompli, there is no timing options (meaning it must be fulfilled right away or when it is actually due in the near future). It is the core requirements as listed in any AM Plan to maintain a certain level of service at a certain cost to a certain level of risk.
A need analysis may have been carried out to help find different ways of meeting those needs.
Demand is more about raising expectations and setting higher levels of service. For example there are demands to improve traffic congestion on this regional road by adding another lane. In this case there are timing options and the demands may not be fulfilled right away before a thorough demand analysis is carried out.
A demand analysis will help explore what is needed in the short-term and in the long-term, the different options, their feasibility, how much it will cost and the risks associated with each option. Through the demand analysis it may come up that the demand can be managed without adding another lane. Demand management is an effective tool in influencing the need for a service (to improve traffic congestion) and is an essential part of any effective asset management process in assessing options for the provision of a service. Depending on the types of assets and service being delivered, it may be possible to increase, decrease or contain demand. Different demand management techniques can be applied such as pricing differentiation, market education and service/product differentiation among others.
Whenever we use needs, demands or wants we must understand the full context. As a matter of fact in ISO 55002 under the Section "Understanding the needs and expectations of stakeholders" it clearly says that stakeholders are likely to make judgements about the organization's asset management outputs and outcomes based on their perceptions, which can vary due to differences in values, needs, assumptions, concepts and concerns.
So next time think about whether you will start with need analysis, demand analysis or demand management in your asset management planning process and in what context.