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APPLICATION OF THE PHYSICAL ASSET MANAGEMENT IN THE

CITY OF CAPE TOWN WATER SERVICES

THABANI MHLONGO

Research report presented in partial fulfilment of the requirements for the Degree of Masters in Business

Administration at the University of Stellenbosch

Supervisor: Dr. J Smith

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Declaration

By submitting this research report electronically, I Thabani Shadrack Mhlongo, declare that the entirety of the work contained therein is my own, original work and I am the owner of the copyright thereof (unless to the extent explicitly otherwise stated) and that I have not previously in its entirety or in part submitted it for obtaining any qualification.

7207075613087

Thabani Mhlongo 13 October 2009

Copyright © 2009 Stellenbosch University All rights reserved

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Acknowledgements

I would like to thank my family, Mayibongwe, Ndumiso and Langelihle for their understanding, patience and support throughout my studies. I also like to thank Victoria, Charity and Zama who provided me with technical support and assistance during my research. I also wish to thank the people from the City of Cape Town who contributed a lot of information towards this report. Lastly, I would like to thank Dr Johan Smith for his willingness to accept me as his student for this research report.

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Abstract

The City of Cape Town water services is currently operating on the reactive mode and their maintenance system is not effectively and efficiently utilized. The lack of proper utilization of Physical Asset Management (PAM) has resulted in the technical department failure to meet the departmental objectives of providing planned and scheduled maintenance activities, reducing equipment downtime and ensuring planned delivery of quality spares at the appropriate time. The aim of the report is to provide guidance in the implementation of physical assets management. The report looks at different maintenance strategies available and evaluates the current operating scenarios for the department and further recommends the relevant strategy that will suit the department. Physical asset management as a maintenance program provides an effective planned and scheduled maintenance system to reduce labor and downtime. This ensures that the correct materials and parts are utilized and that the workmanship is of a high quality. A Maintenance Plan provides documented and sequenced tasks with labour and types of material required to execute the plan.

Infrastructure assets are systems that serve defined operational needs, where the intention is to maintain the asset for continual use on a certain level. One of the main aspects in infrastructure network is the degree of interdependency not only within a particular asset network but also among networks. The failure of one component within a network may undermine the performance of other networks. One of the major objectives in an infrastructure network is to maintain the necessary service level through continuous maintenance while ensuring cost effectiveness

The initial step is to choose certain maintenance tactics and then decide how often these tactics will be performed. The frequency of maintenance, its actions or tactics depends on the current condition of the equipment which is linked within the technical characteristics of failure and specific monitoring technique.

“Regardless of the system you select, you must start from where you are and then develop an orderly series of steps to get where you want to end up, so start by assessing your current situation. The most essential ingredient in your maintenance management system is the people. An excellent system run by poorly trained or unmotivated people will be adequate at best but well trained people with positive attitudes can make an excellent system world class.”-Thomas Westerkamp

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TABLE OF CONTENTS

Declaration……….. ii Acknowledgements………... iii Abstract..………. iv Table of contents...……….……..…….…… v List of figures……….………….….…….….. x List of tables…... xi List of appendices... xi

List of acronyms... xii

CHAPTER 1- Introduction and background………...……… 1

1.1 Introduction………..………. 1

1.2 Statement of the problem………...…………..….. 2

1.3 The research objectives………...…………. 2

1.4 Assumptions and delimitations……….……….…… 4

1.5 Plan of study……….………..……....……….. 4

1.6 Research design and methodology………..………....……… 5

CHAPTER 2 – Literature and physical asset management strategy perspectives…. 7 2.1 Introduction………...………....……… 7

2.2 Defining physical asset management …… ………. 7

2.3 Different physical asset models………...………...…9

2.3.1 Campbell uptime strategy………...………….…….. 9

2.3.2 Pragma asset management improvement plan strategy……… 11

2.3.3 International infrastructure management manual strategy………...….. 12

2.3.4 Worley international………...…… 15

2.3.5 Why is physical asset management economically important?... 17

CHAPTER 3 – General asset management plan framework…..….……… 18

3.1 Introduction……….………. 18

3.2 Maintenance management framework ………... 18

3.3 Developing an asset management plan……… 20

3.4 Strategy development……… 21

3.4.3 Status analysis………... 21

3.4.4 Asset management objectives………... 21

3.4.5 Asset data classification………. 22

3.4.6 Data prioritization………. 23

3.5 Asset register……….. 23

3.5.1 Asset register set up………. 23

3.5.2 Managing asset register……… 24

3.5.3 Data capturing………. 24

3.5.4 Replacement program and costing………. 24

3.5.5 Provisional asset management plans………. 24

3.6 Physical asset management development………...……….. 25

3.6.1 Attributes……… 25

3.6.2 Basic condition assessments………... 26

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3.6.4 Critical asset identification……….. 26

3.6.5 Maintenance history data collection………... 26

3.6.6 The next generation maintenance plans……… 27

3.6.7 Documentation for decision making………. 27

3.6.8 Determining the target level of service……….. 27

3.7 Physical asset management implementation and monitoring……….. 27

3.7.1 Maintenance Procedures……….... 27

3.7.2 Work order system……….. 30

3.7.3 Creating a job card………. 31

3.7.4 Planning and scheduling tools……….. 33

3.7.5 Materials management……… 34

3.8 Maintenance tactics……….………. 35

3.8.1 Condition based maintenance……… 37

3.8.1.1 Vibration……….. 38

3.8.1.2 Lubricants……… 38

3.8.1.3 Temperature……….. 38

3.8.2 Preventative maintenance……….. 39

3.8.3 Expected cost of maintenance………. 39

CHAPTER 4 – Measuring maintenance performance……….………. 41

4.1 Introduction……… 41

4.2 Measuring maintenance productivity….………..………..……….… 41

4.3 Equipment performance measurement……….…..……. 41

4.4. Process performance measurement………..……… 42

4.5. Information management system………...………… 43

4.6 The balanced score card………..……. 44

4.6.1 Financial perspective……….. 44

4.6.1.1 Direct financial benefits……….. 45

4.6.2 Customer perspective………. 47

4.6.3 Internal business process……….. 47

4.6.4 Learning and growth……… 49

CHAPTER 5 – Assessment of the maintenance strategy for water and sanitation services ……….. 51

5.1 Introduction……….. 51

5.2 Organizational climate and culture………..… 53

5.3 Expertise and competence………..……. 55

5.4 Maintenance management systems and procedures………... 56

5.5 Fixed asset register………... 61

5.6 Computerized maintenance management system……… 62

5.7 Maintenance planning, scheduling and control………...… 65

5.8 Reliability maintenance management………...….. 68

5.9 Material management………... 70

5.10 Fleet management………... 74

5.11 Contracts………... 77

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CHAPTER 6 – Proposed strategy for technical services within water and sanitation.83

6.1 Introduction………..…….. 83

6.2 Implementation approach………. 84

6.2.1 Phase 1: Assessing the current asset management status and framework…… 84

6.2.2 Phase 2: Condition assessment and performance monitoring………. 86

6.2.3 Phase 3: Reliability and monitoring……… 90

6.3 The maintenance management planning………... …... 93

6.3.1 Important elements of maintenance planning……….. 93

6.3.2 Maintenance categories……… 94

6.3.3 Process of maintenance analysis……… 95

6.3.4 Creation of the maintenance plan……….. 97

6.3.5 Maintenance system………. 98

6.4 Conclusion………..………...99

CHAPTER 7 – Summary, conclusion and recommendations...………... 100

7.1 Chapter introduction………..………. 100

7.2 Summary of research results………..………. 100

7.3 Conclusions……….. 102

7.4 Recommendations……….……… 105

List of sources……..………...…109

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List of Figures

Figure 2.1: Uptime maintenance strategy model………..10

Figure 2.2: Asset management process………14

Figure 3.1: Asset life cycle………18

Figure 3.2: The relationship between maintenance and operations..………...28

Figure 3.3: Maintenance analysis process…….….………..29

Figure 3.4: The required information on a job card………..31

Figure 3.5: The space where the required task or work required is entered………33

Figure 3.6 Material management process……….34

Figure 3.7: Probability of failure……….……..37

Figure 3.8: Relationship between different maintenance related cost……….…….40

Figure 4.1: Cost strategies………...46

Figure 4.2: Measures to benchmark performance………...49

Figure 5.1: Maintenance backlog per section……….…………..59

Figure 5.2 Backlog of job cards per month………60

Figure 5.3: Average reactive versus proactive work percentage for 2008………...61

Figure 5.4: Maturity Graph………...64

Figure 5.5: Planning and review process………..67

Figure 5.6: Staff utilization due to lack of planning………..68

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Figure 6.1: Condition monitoring process……….88

Figure 6.2: Decision matrix………..89

Figure 6.3: Computerized Maintenance Management System objectives……….……...91

Figure 6.4: Reliability Centered Maintenance implementation………..92

Figure 6.5: Turning cost centre into profit centre………..………...96

List of Tables Table 3.1: Development of an asset management plan...20

Table 3.2: Implementation and Monitoring phase...21

Table 3.3.Classification of an asset on the system for horizontal and vertical identification...23

List of Appendices Appendix A: Maintenance and Equipment Audits……….…111

Appendix B: Maintenance Strategy Overview……….……….………...116

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List of Acronyms

AM Asset Management

AMP Asset Management Plan

AMiP Asset Management improvement Plan (Pragma)

CMMS Computerized Maintenance Management System

DCF Discounted Cash Flow

EAMS Enterprise Asset Management System

ELEC Electrical

ECSA Engineering Council of South Africa

IIMM International Infrastructure Management Manual

JIT Just In Time

KPA Key Performance Areas

MRP Material Requirement Planning

M &O Maintenance and Operation

MM Material Management

MTTR Mean time to repair

MIS Management Information System

NPV Net Present Value

NIMS National Infrastructure Management Strategy

OEE Overall Equipment Effectiveness

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PCS Process Control Systems

PM Plant Maintenance

RCM Reliability Centered Maintenance

ROI Return on Investment

SMAM Strategic Municipal Asset Management

SOP Safe Operating Procedure

SWP Safe Working Procedure

TQM Total Quality Management

USA United States of America

WSDP Water Services Development Plan

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CHAPTER 1

INTRODUCTION AND BACKGROUND

1.1 Introduction

The National Infrastructure Management Strategy (NIMS) was adopted and approved by the Parliament of South Africa in August 2006. The primary objective of the strategy was to strengthen the regulatory framework in governing, planning and maintenance in the public infrastructure and more importantly to assist in the process of continuous improvement. The key process of NIMS is to create an emphasis beyond operational issues of infrastructure including reliability and sustainability within the industry.

Production capacity is a function of engineering design, physical constraints and established managerial practices. Production results from the application of physical assets. The effective output of the operating environment can be increased through a systematic analysis and alteration of the physical asset. The responsibilities for such effectiveness are held by management, operations and the maintenance system. The desired effect of this analysis is an increase in production capacity, without the requirement for additional capital asset investments.

Maintaining an asset cannot reduce the inherent probability of failure produced by the interaction of physical limiting factors. However, the incorporation of dependability oriented innovations centered in engineering produces a mechanism for systematic analysis that improves the reliability of operating within the environment. Furthermore, the implementation of resulting programmes reduces the inherent probability of failure, increases the availability of production capacity and optimizes asset performance (Bleazard & Khu, 2001:36).

The inefficient use of resources for infrastructure has placed a major burden on public finances, diverting resources that could be used for social upliftment in the form of education, healthcare and other social development initiatives. Most organizations tries to meet the infrastructure needs through investment in infrastructure creation without recognizing the long term life-cycle costs associated with the on-going operations, maintenance and renewal of infrastructure (Urquhart & Bush, 2000:3)

Understanding which assets are mission-critical to a plan will ensure the need to focus and assist in prioritizing the allocation of limited resources. Asset managers need to understand the failures of each asset because this directly influences the type of maintenance required. An advanced and

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co-operative partnership between production and maintenance will produce a better planning schedule. With the help of a skilled planner, the plan can be implemented and developed. Valuable and precious resources are lost when not enough time is allocated for maintenance. Having proper information and a management system with strong supporting systems can help to plan and control a business ensuring that accurate information, analytical capabilities and skills are in place for value-added improvement (Coetzee, 2009:2).

1.2 Statement of the problem

This research aims to establish the relationships between physical asset management strategies and business objectives. The study will analyze current models used in the industry, especially in the water department within the City of Cape Town that maintains, operates and manages the physical assets. The analysis will aim to establish the gaps within the current asset management strategy and the best practices which should be followed.

The research questions are as follows:

 Can physical asset management models that are established and recognized internationally be used in the water and sanitation companies and organizations in South Africa?

 What are the fundamental requirements for the implementation of sustainable asset management practices?

 Are the applications of physical asset management models beneficial to organizations and companies?

1.3 The research objectives

This research will review the literature in the field of physical asset management which includes different models developed for this purpose and maintenance management philosophies. The study‟s aim is to provide a clearer understanding of the role of physical asset management in medium or large organizations and how this impacts and influences the quality of management in their operational asset base.

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The key elements of physical asset management are:

 A well defined service level and performance standard which are linked to strategic goals and objectives

 Equipment condition and life cycle approach

 Investment objectives (IIMM 2006 Version 3: 1.6)

These key elements provide the platforms to develop the basic design and techniques to manage and provide replacement programmes as well as project financial outlays. The next approach involves the collection and analysis of detailed information concerning the asset condition, performance, life cycle cost and any management options. The highlighted challenges faced by waste water and water treatment plants in water utilities provide an opportunity for the development of an asset management plan (AMP) which will enable water utilities and municipalities to manage and maintain the infrastructure as well as develop an infrastructure life cycle programme.

AMP is a long term tactic for managing infrastructure to achieve the organization‟s strategic goals. The plan provides mechanisms for long term strategic planning and capital budgeting. The plan also includes the following:

Organizational strategic goals;

Level of service delivery and performance standards to be used for measurement; Growth and demand projections;

Asset management strategies/tactics;

Financial projections including cash flow forecast; monitoring, control and review mechanisms for an asset improvement plan.

The objective of physical asset management (PAM) is to develop and maintain the infrastructure to ensure that asset requirements and asset management strategies are driven by defined service levels and performance standards. Scarce financial resources must be properly allocated and managed to optimize investments in the infrastructure. The life cycle of an asset is considered when determining asset operations, maintenance, renewal and development strategies (Schneider, 2000:2)

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The requirements to fund depreciation and corroding of waste water infrastructure have resulted in an intensive drive to focus on both valuations of infrastructure and improvement of physical asset inventories and skills. The life span of waste water infrastructure is far below that of any other water or electricity infrastructure due to the corrosive nature of waste water and the operating conditions. Most plants contain outdated infrastructure built over 30 years ago and the unavailability of compatible spares for most of the equipments poses a serious danger to human life and the environment.

The average life span of a wastewater treatment plant according to the sanitation department of the City is about 20 years whereas some of the current operational plants are currently over 30 years old. In most waste water organizations there is no standard equipment list, especially those of vital sewer networks. The inventory and spares become obsolete creating a major problem when, for example, pumps need to be repaired or replaced.

The responsibility and challenges faced by the company are to develop a sustainable infrastructure asset management. This system must provide planning and have an appropriate improvement programme for applying and delivering the best practices while moving towards a reliable asset management system. The strategy aims to address the most difficult challenges faced by the company, with the main challenge being the successful identification of gaps and how to implement action plans within the current system.

1.4 Assumptions and delimitations

The study focuses on water and wastewater treatment plants that are operated and maintained by the City of Cape Town. The focus will be on the operations and maintenance systems in the water and sanitation departments.

1.5 Plan of study

The research will develop systems and mechanisms to be used for maintenance planning, measuring performance, productivity and resource utilization to ensure equipment and resource reliability.

The study will develop the following three research propositions that aim to model the requirement of an integrated asset management framework in an organization.

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 The requirement for an appropriate linking mechanism in considering asset management for business decisions is by encouraging discussions between planners, operators and maintenance personnel.

 The requirement for management processes to monitor the relevance of physical asset management requirements and monitoring their performance.

 The requirement for appropriate skills and competencies within organizations to monitor and continuously review procurement or management strategies and take advantage of advances in technology development. The analysis will look at the organizational structure, communication processes, work flow and resources available against the work load for different teams. Issues of management will also be examined. The responses from all relevant stakeholders will be analyzed and information will be gathered from operations and maintenance manuals.

The information on the status of the equipment will be prioritized and categorized once all data on the current status conditions of the equipment/maintenance system have been assessed. The next step would be to select a maintenance option for the particular plant and machinery and then enter the option into a maintenance system.

1.6 Research design and methodology

This research made use of structured interviews, discussion forums and system analyses to determine the current practices used by the water and sanitation department within the City of Cape Town.

The literature review traced the evolving role of physical asset management and management practices against a background of rapid technological change and changing emphasis in management thinking about how best to manage business resources in fulfilling corporate objectives.

The research will be structured into three parts:

Literature review: The first part will provide an historical overview of (i) the role of physical asset

management by water and sanitation organizations and, (ii) a review of the economics of operational asset management with regards to resource management and asset life cycle.

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Models for physical asset management: The second part is an overview of developments in

business management that affects the practice of physical asset management. In this section the research will also examine the various models and variables and current options of asset management. Currently, practices are not in line with internationally recognized procedures. The researcher will use qualitative data that will be collected through interviews and interactions with the relevant stakeholders within the City of Cape Town.

Physical asset management: The last section will identify the gaps and recommend ways of

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CHAPTER 2

LITERATURE AND PAM STRATEGY PERSPECTIVES

2.1 Introduction

The benefits of maintaining physical assets correctly includes financial and capability gains. An asset is meant to provide a required service on a continual basis. The cost of maintaining physical assets vary, depending on the life stage and usage. Several different strategies are employed by various experts to ensure that the equipment is reliable.

2.2 Defining PAM

An asset management system represents the latest evolution in the traditional facility management approach and focuses on maintenance services and reliability. The services concentrate on achieving long term maintenance cost reduction based on applying innovative maintenance strategies in a total cost approach. (Heinemann, 2002:1)

Rather than relying on the bidding process in its requests for proposals, asset management relies on a more strategic and long term asset management system with cost control in mind. This can help municipalities to standardize their systems and reduce the inefficiencies of managing multiple systems, components and technologies from a variety of vendors which immediately reduces process cost (Garibay & Ronsivalli, 2008:36).

Computerized maintenance management systems (CMMS) and enterprise asset management systems (EAMS) have changed little conceptually in the past 25 years. Unlike their operational counterparts, enterprise resource planning packages which have undergone several significant changes continue to receive a lot of attention. Insufficient attention is given to extending the core functionality to take real advantage of EAM system‟s potential, not only for maintenance functions within organizations but also for the entire business. Developing such a strategy requires the correct data and monitoring equipment. It also requires a departure from the break–fix maintenance strategies (Dunks, 2007:17).

An issue related to operational excellence that frequently arises is that of physical asset management. A number of articles covering this topic have developed excellent ideas. But these articles are typically related to maintenance management rather than true asset management. Calling the process described asset management does not lend it greater business credibility and

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is therefore an important shift in thinking. For one to excel in asset management, it is essential to ensure that business expectations for the assets are operational in the short and long term. Furthermore it is vital to understand the assets‟ current condition and capacity relative to the business requirements now and in the future (Moore, 2006:35).

The majority of asset management software applications focus only on the maintenance and availability of plant equipment especially instrument assets. Although instrument maintenance is the key element of plant asset maintenance strategy, maintenance improvements by themselves do not maximize the performance of the overall manufacturing asset base. Demands to optimize plant operations with this limited asset management focus may result in a degradation of performance. Optimizing plant assets to meet business objectives requires a holistic approach to asset management that goes well beyond the traditional focus of asset management software and contemporary means (Fitzgerald, 2005:34).

Asset management is an evolving process that improves in condition, performance and operational cost requirements which can then become better understood. To ensure that supporting activities are improved and incorporated into asset management plans, an improvement plan is required to accomplish this in a planned and progressive manner. A typical methodology for preparing an asset management improvement programme is to review its current status and level of sophistication within the organization and the implementation of asset management activities, asset data and knowledge, reliability and accessibility, information systems to support asset management process and plans to identify the optimum life cycle of management tactics and resources (Worley International, 2000:9).

Initially asset management begins by asking why the asset is required and how it relates to the business plan. Subsequently a closer examination sets the purpose, function(s) and standards of performance. It is then justified by comparing costs to benefits and ranked as an investment option by the company. After company approval, a detailed design and the specifications are described, after which the asset is constructed or procured, installed, and finally operated and maintained. Physical Asset Management (PAM) can be described as a set of processes, tools, performance measures, cross functional collaboration and teamwork to optimize the complete life cycle impact of the physical asset on the business performance (Campbell, 1995:13).

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The reliability centered maintenance (RCM) is the method for determining the most appropriate policy for any given asset in its present operating context. (Campbell 2006: 224).

The benefits of reliability centered maintenance (RCM) is that it can work for any type of utility including electric, gas, water and waste water. It can increase efficiency and cut costs while providing regulated utilities with the evidence they need to prove compliance with stringent guidelines covering basic quality of service and service delivery (Geraghty, 2001:37).

2.3 Different PAM models

PAM focuses on performance-based maintenance systems. The two major benefits derived from PAM models are reliability and quality of service. The type of maintenance focuses on two strategies: reliability centred maintenance and quality management. The following section looks at various strategies recommended by asset management specialists.

2.3.1 Campbell uptime strategy

Maintenance improvement fails when there is little or no understanding of the situation at hand. There may be a strong inclination in the department to retain the status quo or this could lead to friction between production and maintenance. Technically, it may imply a lack of knowledge about automation or how to predict probable failures (Campbell 1995:13)

Campbell (1995:12) described the maintenance strategy as shown in Fig. 2.1. The foremost requirements in any business plan are the needs of the customers, shareholders and other stakeholders. The key objective for each function and element in the business strategy is drafted with those elements in mind. Maintenance is likely to have the following targets:

Maximise the production rate of a particular product Phase out the operation of a plant or product line Add productive capability (assets) for another plant Eliminate stores inventories through vendor collaborating.

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Campbell (2006:21) described the following four objectives as the foundation of the maintenance vision as it would shape the annual plans and budgets of the department.

To re-engineer the entire maintenance management process with particular emphasis onpreventative and planned work

To select and implement a computerized maintenance and inventory management system To introduce a multi-skilling pilot project in conjunction with the local union

To augment the short, medium and long range maintenance planning capabilities

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2.3.2 PRAGMA AMIP Strategy

Pragma is an asset management specialist organization that have developed various strategies to deal with asset management challenges, one of the strategy they have developed is called asset management improvement plan (AMIP) strategy (2005) is based on a set of comprehensive framework pillars. Pillars are the areas in which the asset management function must excel in order to achieve their goals of optimising asset effectiveness and performance. The four pillars are based on the original thirteen (13) pillars or the building blocks of the PAM model. The model is divided into different phases or focus areas. Each phase has its own objective and key performance areas that need to be achieved within the phase.

Phase 1- Strategy alignment- the aim of this phase is to develop and align the maintenance and business strategies.

Phase 2- Framework selection- once the strategies have been aligned the next step is to select the correct framework. This works as a guide towards the implementation of the strategy and takes place within the assessment, development and planning of the asset improvement plan.

Phase 3- Asset management maturity mapping- the maturity growth process is a mapping of the maturity of the asset in relation to industry standards. The aim is to establish a common understanding of the field of asset management, the AMIP framework to be used and what is each of the key Performance Areas (KPA).

Phase 4- Setting targets- after consideration of the specific operating environment and strategic focus, improvement targets can be set for prioritised pillars. This requires a careful analysis and understanding of asset management audits.

Phase5- AMIP Master plan- this is a facilitated process where a customised asset management and improvement programme is developed. The phase takes into consideration the resource constraints that might hamper the process. Here the required actions and targets are determined, documentation developed, responsibilities allocated and target dates set.

Phase 6-Implementation of the master plan- the execution phase: this phase ensures that all the required actions that have been developed during the master plan are completed. All the constraints and bottlenecks must be removed to ensure success of the master plan.

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Pragma has identified a number of areas that leads to inefficient and ineffective operation:

 Reactive maintenance i.e. time and effort spent fixing breakdowns, rather than investing in the preventive tasks.

 Over – maintenance i.e. running maintenance schedules too frequently

 Lack of good planning and scheduling which causes ineffective utilisation of resources

 Not measuring the correct performance indicators to support strategic direction

 Incorrectly devised maintenance tactics (preventive maintenance plans)

 Repetitive mistakes i.e. the absence of failure analysis in order to learn how to prevent similar future events

 Inadequate skills levels

2.3.3 International Infrastructure Management Manual strategy

Infrastructure assets are stationary systems that serve defined communities where the system as a whole is intended to be maintained indefinitely to a specified level of service by the continuing replacement and refurbishment of its components.

The international infrastructure management manual (IIMM) (2006 Version 3:1.3) refers to the following as infrastructure assets:

 Transportation networks (roads, rail, ports, airports)

 Energy supply systems( gas, electricity, oil production, transmission and distribution)

 Parks and recreation facilities

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 Flood protection and land drainage systems

 Solid waste

 Education and health sector

 Manufacturing and process plants

 Telecommunications

The IIMM provides the most comprehensive coverage of asset management practices. Section 2 of the manual provides a detail process for producing asset management plans whilst section 1 provides the asset management plan and the process of structuring the maintenance plan. It provides the step by step process of developing an asset management plan by providing a guiding framework; the initial sections concentrate on writing an asset management plan, developing an asset improvement plan with information systems, and data management strategy.

The overall structure reflects the asset management philosophy and framework, setting the direction and plans for implementation of asset management (section 2), the optimal programme of capital or asset renewal, operational, maintenance and management activities.

Section 3 of the IIMM reflects the enabling process of asset management and supporting systems as well as data analysis applied to identify needs or levels of service demand and optimal programme design (section 4).

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The figure 2.2 shows the IIMM framework, the pillar that drives the maintenance philosophy:

Fig. 2.2 Steps in the Asset Management Process( IIMM 2006 Version 3:1.3)

The tactical asset management plan needs to identify strategic outcomes that the plan specifically supports and focuses on. It also needs to have performance measurement and monitoring systems. The key elements of the asset management approach for ensuring effective and integrated planning include:

 Providing a robust process and corporate strategic plan to which an asset management is linked. This is achievable through a process of formalising the desired customer outcome and identifying the strategic plan, the adopted outcomes and the specific asset management plans, associated budgets and actions which support them. The assessment of the progress and monitoring is accomplished through performance management systems.

 Development and implementation of a performance development process to complement and support both the strategic plans and asset management plans. A hierarchy of performance measures decentralized from the strategic outcome statement is developed

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for use at different levels of decision-making. The process requires managers to link annual work programmes back to specific strategic plans outcomes via a business plan.

 Ensuring the process of strategic monitoring and review provides flexibility to advance identified changes in the asset management plans into strategic plans.

 Reviewing of the existing asset plans includes a discussion on how asset plans contribute to desired strategic outcomes, linking the asset management service to the managers‟ business plans and a focus on improving AM practices that influence the quality of strategic decision making.

2.3.4 Worley international

Circa 2000, the World Bank introduced new urban and local government strategies. The strategy was in response to the increased demand for World Bank assistance from the level of local government as well as an understanding that effective urban development is directly linked to the raising of living standards and promotion of equity (Circa2000:2).

The four objectives for urban and local government strategy based on sustainable cities are:

 Liveable: committed to ensuring that the poor achieve a healthy and designed living standard that provides a system for housing, secure land tenure, credit and transportation.

 Competitive: providing a supportive framework for productive firms, to promote buoyant, broad based growth of employment, incomes and investment.

 Well governed and managed: with representation and inclusion of all groups in the urban society, with accountability, integrity and transparency of government actions in pursuit of shared goals and with strong capacity of local government to fulfil public responsibilities based on knowledge, skills, resources and procedures that draw on partnerships.

 Bankable: financially sound and credit worthy, financial health of municipalities requires the adoption of clear and internally consistent systems of local revenues and expenditures, transparent and predictable inter-governmental transfers, general acceptable accounting

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procedures, asset management and procurement practices and prudent conditions for municipal borrowing.

Improving the management of municipal infrastructure can bring major benefits by ensuring that scarce resources are used in the most cost effective manner, thereby enhancing economic growth, improving living standards and improving environmental sustainability. Inefficient use of resources and infrastructure can place a major burden on public finances, diverting resources that might otherwise go to the most critical areas of meeting social objectives.

Strategic municipal asset management (SMAM) is an approach to develop and maintain municipally owned infrastructure assets to ensure that:

 Asset requirements and the management of municipal assets is driven by defined service level and performance standards linked to strategic planning.

 Scarce financial resources are properly allocated and managed to optimise investment in infrastructure.

 A long term approach is taken when determining asset operation, maintenance, renewal and development strategies.

Water services and water boards are responsible for management of water a commodity used in many different processes including fabrications, processing, washing and cooling, industries in power generation, steel mining, manufacturing and high technology. Agriculture and tourism are important beneficiaries of clean water supplies throughout the country.

The maintenance sector forms an integral part of South Africa‟s total construction delivery capacity; its activities are on-going and substantially local in nature. The adoption of asset management practices will lead to the growth of the maintenance sector which, together with its inherent labour intensity will stimulate sustained job creation, skills development and broad-base black economic empowerment. Poor operation and maintenance practices can increase the demand of limited water resources and further alter water quality which in extreme cases can deprive natural environments of its water requirement; which leads to changes in habitats and occasionally a loss of habitats.

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The application of asset management practices is aimed at improving the quality, integrity and operational efficiency of water supply systems. Infrastructure within the water sector is not being managed due to the lack of political will, management systems, knowledge, resources and appropriate skills.

2.3.5 Why is PAM economically important?

When a business is not doing well, especially in the midst of an economic downturn, most business organizations have a tendency of cutting back on „non essentials‟. In most cases those expenses represent the current expenditure for which the benefits are realised later. The question that arises is how a business can cut PAM costs without undermining the long-term prospects of the business. The following actions are extremely important to consider when ensuring that correct decisions are taken that will have the long-term benefits for the business:

 Extend the Asset life to delay capital expenditure or cost of replacement.

 Reduce the risk of failures that result in catastrophic effects.

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CHAPTER 3

GENERAL AMP FRAMEWORK

3.1 Introduction

It is important to describe the creation of a practical vision for maintenance and development of an asset management plan (AMP) that can be integrated into the business plan. This chapter looks at effective leadership for gaining control of the maintenance functions and advancing to continuous improvement activity, which translates to asset productivities. The chapter also looks at the procedural aspects of ensuring equipment life cycle productivity including processes of planning, scheduling, determining the level of maintenance and deciding which types of maintenance best ensures equipment performance and productivity.

3.2 Maintenance management framework

Maintenance forms one part of the asset life cycle; it is one step in a nine step asset management process described in Fig. 3.1. Asset management begins by asking why the asset is required and how it relates to the business plan. The business plan includes the purpose, function and standards of performance. The life cycle involves comparing cost to benefit and can be listed as an investment option by most companies. From the time of procurement, the asset has disposal or replacement value; there are several steps or processes that need to take place to ensure that the equipment life cycle is preserved and prolonged.

Fig. 3.1 Illustration showing stages in Asset life cycle. (Source: Uptime strategies for maintenance management2000: 4). Asset Strategy Plan Evaluate Design Procure Operate Maitain Upgrade Dispose

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The benefits of asset management requires the involvement of all departments from maintenance, operations, engineering, finance, design and any other relevant departments. The maintenance framework aims to maximise the production rate of a particular equipment or asset while increasing its productive capacity and eliminating wastage by reducing the inventory or procurement cycle.

Maintenance objectives are the foundation of maintenance vision and should outline the annual plans and budgets of the department. The first step in developing maintenance plans and budgeting processes is to understand the current condition of an asset. A typical maintenance objective would include the following:

 To align the maintenance management process with a focus on pro-active and planned corrective maintenance.

 To develop short- , medium- and long-term maintenance planning.

 To train and develop employees in line with their job requirements, career progression and attrition rate.

 To implement maintenance management systems to assist with work and resource management.

Evaluating the current condition and processes enables the maintenance person to develop and implement correct maintenance tactics by understanding the weaknesses and strengths of the current process. The evaluation and assessment could take the form of a questionnaire, process evaluation through observation or structured interviews. The assessment of equipment status and condition is done through condition monitoring, equipment performance analysis and normal periodic checks. These results will assist in developing the asset improvement plan.

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3.3 Developing AMP

The development of an asset maintenance plan (AMP) needs to be classified into different stages with targets, basic requirements and objectives at each stage. Table 3.1 shows a three-stage initial process of developing the asset management plan.

Table 3.1 Stages in the Development of an Asset Management Plan:

Stage: Target: Requirements:

Stage 1 Strategy development

Current status analysis

Setting the asset management objectives Asset data classification

Prioritization of data collected Stage 2 Asset register

Set up the asset register

Set up how the register will be managed Capturing of data

Replacement program and costing Provisional asset maintenance plans Stage 3 Asset management Attribute data

Basic condition assessments Prioritization based on condition Critical asset identification

Maintenance history data collected

Prepare the next generation maintenance plans Documentation of decision making process

Determine the target levels of service required

Table 3.1 provides the fundamental requirements for the developmental phase of the asset management. This is the foundation of asset management and if not developed correctly, the physical asset management will be incomplete or incorrect. The second phase of asset management development covers the implementation and monitoring. Table 3.2 summarises the stages, targets and requirements.

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Table 3.2 Implementation and monitoring phase of asset management

Stage: Target: Requirements:

Stage 4 Asset improvement/upgrade plan Maintenance procedures

Decision and process flow

Failure analysis

Stage 5 Techniques required Risk analysis

Identify where equipment is in its life cycle

Develop plan for replacement

Decision making based on life stage and budgets

Stage 6 Management system Performance management

Performance evaluation

3.4 Strategy development

The development of a maintenance plan for an existing asset will be based on best practices and the current state of the equipment. This should highlight the objective, the asset requirement and the current analysis of an asset.

3.4.3 Status analysis

The status of the equipment can be measured by performing an equipment survey, performance analysis and feedback process from a data registry. Information can also be collected from user feedback and surveys, and the age and condition of the equipment. The status of the equipment should be based on the types of problems or failures.

3.4.4 Asset management objectives

The objective of asset management is to develop and create a system that will ensure optimum utilisation of an asset or infrastructure. This can be achieved by implementing the best practices that will ensure that:

 Asset requirements and asset management strategies are driven by defined service levels and performance standards.

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 Life cycle approach is used when determining asset maintenance, operations, design and renewal strategies.

 Proper management and correct allocation of financial resources should optimise the investment in infrastructure.

Asset management is not a fixed process but evolves as the condition of operation and infrastructure status changes over time. This ensures that the equipment delivers as expected. The objectives assist the asset owners during decision-making processes with regards to the condition of the asset so that changes can be implemented for corrective measures when required.

3.4.5 Asset data classification

Asset classification is done to ensure a common understanding between all asset users. The first step is to define the asset or equipment and classify it. There is always a debate between finance and maintenance staff on exactly what an asset is and this impacts on the depreciation or capitalisation of the asset or equipment.

The asset must be classified into different classes and sub-classes with each class having a class code and sub-class with sub-class codes. This simplifies the operation when one needs to investigate and report on both a horizontal and vertical basis and when there is a need to check similar classes of equipment through the organization or within a particular area. Table 3.3 indicates the different classes that can be used to classify assets:

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Table 3.3 Classification of asset on the system for horizontal and vertical identification

Number Class Class Code Sub – Class

Sub - Class Code

1 BLOWERS BLR

Blower-centrifugal fan type.

BLR01

Blower-roots type,

belt-driven.

BLR02

2 BELT PRESSES

3 CENTRIFUGES CENTRIF

Centrifuge- horizontal spinner

type.

CENTRIF01

3.4.6 Data prioritization

Once the analysis has been completed, the condition of all the assets and equipment confirmed, the database created, and the data prioritized in terms of asset classes the next stage may commence. The data is prioritized to ensure that maintenance interventions are correctly developed and are based on the current condition of the asset and the performance requirements. This also ensures the proper utilization of resources.

3.5 Asset register

Asset register is a record of asset information considered worthy of separate identification including inventory, history, technical and financial information (IIMM 2006 Version 3: xii).

3.5.1 Asset register set up

The basic requirement for implementation of PAM is that the company must have a correct asset register reflecting all assets for the company. The asset register provides the functional location of an asset. This functional location describes where the asset is or installed in a hierarchical format with its attributes (make, model, size etc). The register will also have the serial numbers of the equipment to identify them during maintenance or when they are sent for repairs.

A properly developed asset register simplifies the process of developing historical information of the asset and recording all the repair costs and usage data. This will assist maintenance personnel

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to ascertain the time it has been running and what type of maintenance is required at any particular time.

3.5.2 Managing asset register

The management of an asset register is an important function within the business. It ensures the integrity of the asset database and if there is one central control point that nobody tampers with the asset database. An authorized person should control the process of registering or removing an asset as well as updating the master data.

3.5.3 Data capturing

To ensure that the master data is updated, the person in charge of the asset register needs to develop a process flow that will be known throughout the company so that everybody is aware of the process. It will highlight the flow of responsibility from the time a new asset is purchased. The data entry person is authorised to remove or scrap an asset when necessary.

3.5.4 Replacement programme and costing

Accurate information of the asset‟s condition, usage and expected life will enable the planning section to estimate a replacement period and cost of the asset. The basis for the correct replacement programme needs to be developed by the maintenance and replacement section. This will depend on the accuracy and the integrity of the master data.

3.5.5 Provisional asset management plans

The information gathered so far will enable planning for the basic maintenance and replacement of an asset. The available status of an asset will include the current usage and expected life span of the equipment. This will enable the development of an infrastructure maintenance programme showing required maintenance frequency and the type of repairs. Although it is difficult to estimate accurately the cost of maintenance, which includes the labour and material costs, estimated costs can be calculated for planning purposes.

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For efficiency, the provisional asset management plan must contain information that will assist in decision-making and the planning process for repair or replacement. The following information must be included:

 Labour- all wages and benefits of the traders and assistants.

 Materials- all the supplies, parts, components, consumables and other vital items that will be required by the maintenance personnel.

 Services- engineering workshops, facilities and stores or warehouses where equipment can be stored or repaired.

 Technical support- supervision, planning, materials coordination, administrative support and data capturing.

 Outside services- all contracted services, specialty services, training and consultants that maybe required.

 Functional location and equipment cost.

3.6 PAM development

3.6.1 Attributes

The structuring of attributes follows a pre determined pattern that puts them into hierarchical structures with functional locations and equipment registers, the next step is to group them into classes of assets. In each class, the attributes of the assets such as model, size, capacity, maintenance intervals, serial numbers and date commissioned are indicated. This information is crucial in developing the schedules that meets the asset requirement and performance expectation. The performance of the asset is measured against these attributes.

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3.6.2 Basic conditions assessments

The condition of the class of assets must be established and the basic assessments can be classified as poor, satisfactory or good. The condition establishes the basic step in developing the asset plans. A poor rating would indicate that the asset requires immediate remedial attention. An asset that is rated satisfactory will require normal routine maintenance, while an asset in good condition will require routine maintenance exceeding the service level required.

3.6.3 Prioritization based on condition

After establishing the classes and condition of the assets it is necessary to develop different categories of interventions based on their condition. Internationally recognized standards that classify maintenance tactics into three categories of maintenance services, A, B or C will be utilised. The different service levels depend on the usage, intervals, duration of service and the activities that need to be performed for each category.

3.6.4 Critical asset identification

Identification of the critical assets minimises delays during asset malfunction and speeds up the replacement process. The lead-time for most of the assets is very long and the procurement process can increase that lead-time due to delays in ensuring that all approval processes are followed. Classifying critical items minimises the delays and assists the maintenance personnel in identifying all assets that have an impact on service delivery when malfunction occurs.

3.6.5 Maintenance history data collection

The work order system which involves all the activities including the type of work and resources required, functional location and the cost for the work are logged to create historical data for the asset. The history makes it easier to analyse the performance and introduce the required maintenance intervention for an asset.

The first step in historical data collection is to assess the initial condition and examine owner manuals. Once the provisional maintenance plans have been executed, the data is logged into the system to create historical data.

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3.6.6 The next generation maintenance plan

Once the provisional maintenance plans are carried out, asset classes grouped, basic condition assessment carried out, and all the data logged into the system, the next step is to use all that information including the historical data to develop a proper asset maintenance plans. The plan will represent the base-line for creating the maturity target profile for the asset, asset classification, critical analysis and maintenance tactics.

3.6.7 Document for decision making

The asset maintenance plan is a definite requirement for decision making processes in asset management. When the asset malfunctions a decision needs to be made as to whether the cost of repairs is justified. The replacement cost must be evaluated against the renewal cost. This decision making process includes the cost benefit analysis which can be achieved by looking at the condition, cost and history of an asset.

The PAM strategy for asset management requires that enough information on an asset be available for decision-making. Lack of data makes this process difficult. Provisional maintenance may be recommended based on the initial condition of an asset.

3.6.8 Determining the target level of service

The target service level provides an idea of the required level expected from an asset. If the level of service is not satisfactory a decision needs to be made whether to alter the maintenance intervention or to replace the asset. It is important to determine whether an asset that will be measured against performance meets the required level; measurement against the set of standards will determine whether a replacement or renewal is required.

3.7 PAM implementation and monitoring

3.7.1 Maintenance procedures

The success of the PAM strategies depends on correct implementation and monitoring. This includes developing proper procedures to be followed by the technical and operations personnel. Best practices must be implemented and the operators must ensure that the equipment is well

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operated. The safe working procedures ensure that there is a common understanding between the different departments .Newly appointed personnel must understand how the equipment operates to reduce maintenance costs. Figure 3.2 indicates the relationship between the departments involved in asset management.

Fig. 3.2 The relationship between maintenance and operations

The maintenance plan includes the tasks and its key activities. Planning and scheduling includes identification, prioritization, materials, labour/skills required, safety considerations, execution and reporting. The maintenance plan also includes the estimated time required to complete certain tasks for optimum performance.

The objective of asset management is to create a programme that is effectively planned and scheduled to reduce labour and downtime. When a malfunction occurs, the programme will ensure that the correct parts and materials are used and that the work quality is higher than that of an unplanned one (John Campbell 2000).

The key steps in maintenance work starts with identifying what has to be done and ends with analysing the results of what has been done. The six steps are shown in Fig 3.3:

Identify- the need for maintenance work from a simple noisy bearing to the complexities of interpreting a vibration analysis and trends. The probability of identifying the real problem before it becomes serious increases from simple inspection to complex analysis.

Management

Maintenance

Operation

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Plan- this step ensures that all the resources necessary to execute the job are accounted for. The planning personnel determine what has to be done, the resources required and the sequence of activities required for safe working procedures. The planner must be a technically orientated person who is able to determine the sequence of events to complete the activity, including the estimation of required time.

Schedule- to schedule the work, the planner needs to know who is available, what resources and material will be required and the availability of the resources. It is important to have knowledge of which jobs are mandatory, the procurement system and the lead-time for procurement of various materials.

Assign- the assignment of the task depends on the maintenance policy and the process in place for prioritizing work. The maintenance system will schedule and assign job cards with details of activities to relevant teams for execution. The job card system makes it easier to track the progress and re-schedule the work.

Execute- the maintenance process is a revolving one and the execution is the easiest part if the initial steps are followed correctly. When the work scheduled on the job card is completed the information is captured by the data capturer.

Analyse- the information captured from the job card for completed work is entered back into the system. It becomes the history of an asset and is analysed for further action if required. This analysis can estimate the life span and expected problems of an asset to implement further maintenance activities and performance analysis.

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3.7.2 Work order systems

Two types of work order systems are currently being used by different companies. One is paper driven and the other is computer driven. A typical work order will include the originator, the planner, the supervisor, accounting officer, the scheduler, production and the tradesman. The work order will have a number for referencing and audit purposes. The benefits derived from a work order system are:

 Planning and scheduling mechanisms for complex jobs.

 Cost collection mechanism for labour, stores requisitions, purchase orders and services to charge against a piece of equipment or cost centre.

 Way to capture delays and measure productivity.

 Tool to manage and determine work backlogs.

 Assist to manage equipment history and to analyse the failures and effectiveness of maintenance efforts.

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3.7.3 Creating a job card

An example of how a work order or job card is created and the process of creating a work order on the maintenance system are shown in Fig. 3.4 and 3.5.

A job card is created and then work details are entered into the system and saved.

How to create a job card:

On your work order screen, click on ; a blank job card screen will open, with the following available job number.

Fig 3.4 Required information on a job card (Source: ERWAT On key system 2009: 4)

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Click on to open the asset tree, select the relevant asset.

Type in the work required, select the type of work.

The GL code and cost centre code are linked to the asset and will change accordingly. However, please check if it should be mechanical or electrical, as they differ.

Add the responsible trade (click to see which trades are available), select staff member and select work order importance (1 – most important, 4 least important)

Click to save job card.

Job card – labour required tab

Use the labour required tab to view the labour requirements for each task and assign labour resources to the job request, together with estimate time durations and dates.

Note!

The section and trade are mandatory but the staff member can be assigned at a later stage. ● If a staff member is assigned before the section and trade, then the section and trade are populated with the staff member‟s section and trade.

● If the section and trade are assigned before the staff members, then the staff members assigned to execute the work must be associated with that section or company and belong to the selected trade. The staff lookup list is limited to persons who work for the selected section or company and belong to the selected trade.

●Each labour item‟s date required must be within the work order‟s start on date and complete by date.

How to assign labour resources to a work order: 1. Click on the labour required tab.

The labour required tab appears. 2. Enter the required data.

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4. Click to save the data.

Labour required tab

Fig. 3.5. The space where the required task or work required is entered. (Source: ERWAT On key system 2009: 5)

3.7.4 Planning and scheduling tools

Different planning tools are available on the market. Most commercially available systems have comprehensive modules that include work order management, equipment records and history, preventative maintenance tasks and scheduling, costing and budgeting, material management and labour capacity planning.

Some of the tools that can be used for planning are the Computerised Maintenance Management Systems (CMMS), the Gantt chart, the Critical path method and the Pareto diagram.

The Gantt chart is a useful tool for planning and scheduling. It lists steps and activities along the vertical line and the time needed to accomplish them along the horizontal line. It gives the sequence, duration, start and finish times of events and the overall project start and finishing times. It is useful for planning and managing projects.

The Critical path method gives a relationship between different events; it is most useful when used in an activity network diagram. It determines the minimum time either required to complete a project, independently, sequentially or interrelated sequence. Once plotted, the path with the longest duration is the critical path.

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