Introduction
Dubai Electricity and Water Authority (DEWA) is an executive electricity and water provider in Dubai. It is responsible for the management, operation, and maintenance of electricity generation and water supply. In its operations, DEWA strives to achieve an extreme level of effectiveness and accuracy. Considering this, the given paper aims to evaluate the role of asset lifecycle management in the energy supply industry, to identify its role in strategic decision making and provide relevant practical recommendations for DEWA, which can be used in quality, safety, and cost-efficiency improvement efforts.
Hypothesis
Asset lifecycle integration is a few-step process. It is characterized by complexity and is associated with multiple risks. For this reason, it is hypothesized that a well-developed operation management system is essential for DEWA to design an effective decision-making strategy for its departments within its assets lifecycle management model. To verify or deny this hypothesis, 11 scholarly articles will be reviewed in the following paragraphs.
Literature Review
According to Akhtar et al. (2015), the lifecycle can be defined as the course of the product/material lifespan starting from its production, utilization, and maintenance to its ultimate disposal. When applied to the energy and water supply industry, the term “lifecycle” can be applied either to separate technology and resource or infrastructure as a whole, e.g., the water distribution system. If the infrastructure and material lifecycle is not taken into account in operation and strategic management, the organization can suffer significant economic losses due to disruptions in internal and external operations and processes.
To prevent this, the performance of life cycle assessment (LCA) is recommended. It implies a holistic approach to decision making aimed at “raw materials acquisition, product manufacture, transportation, installation, operation and maintenance, and ultimately recycling and waste disposal” (Akhtar et al., 2015, p. 974).
Production and System Construction Decision
A strategic decision on every stage of lifecycle and operation management can be made by using various decision support systems (DSSs). Razmak and Aouni (2015) claim that a software analytical DSS can be applied for strategic sourcing (i.e., acquisition of materials). Such tools provide a multi-criteria decision aid and help eliminate the factor of information overflow that can substantially bias a qualitative decision-making process.
At the system construction stage, the assessment of environmental opportunities and threats, as well as internal strengths and weaknesses is recommended (Lelek et al., 2016). For instance, LCA can be performed to determine and compare the impact of current and intended electricity production and supply on final users and the organization itself based on economic or environmental factors. As Lelek et al. (2016) notice, if a system involves multi-output processes (like DEWA does), the choice of an allocation method as described by y ISO 14044 (#4.3.4.2) can have a considerable impact on the outcomes. Additionally, the ways of partitioning inputs and outputs between co-products should be assumed − the management must reflect on their physical relationships and economic value (Lelek et al., 2016). In this way, volumes of production and price of water and electricity for the current years analyzed should be used by DEWA as the allocation criteria.
Operation and Support Decision
The operations included in asset lifecycle assessment and management are primarily related to such areas of performance as logistics and supply chain. The given fields are concerned with both supply and distribution networks, as well as value chain management. Even by merely focusing on such logistics operation as transportation and designing the best possible routes and means of distribution the company may reduce multi-commodity flow issues and excess financial and time costs (Li, 2014). At the same time, the optimization of logistics operations can help decrease the organization’s environmental footprint and, in this way add extra customer value to the final product or service, improving customer perception of the company (Braziotis et al., 2013).
Wai Foon and Terziovski (2014) state that, in the electricity supply industry, the strategic activities included in total quality management (TQM) − quality improvement efforts − and total productive maintenance (TPM) − prevention maintenance, record keeping, reliability centered maintenance, etc. − are the most essential. These operation models include both tangible and intangible elements.
Tangible practices are technical-oriented and focused on physical assets, while the intangible ones are people-oriented (Wai Foon and Terziovski, 2014). As stated by Baum and Vlok (2013), “physical assets include plant infrastructure, machinery, vehicles, and other items that are of distinct value to an organization” (p. 48). These physical assets often serve as the main sources of revenue. Heavy industries, such as the energy and water supply industry, especially rely on the built infrastructures as the major means for operation and service delivery (Baum & Vlok, 2013).
Since efficient management of physical assets is core to profitability and business sustainability, the role of physical asset management (PAM) is hard to underestimate. Overall, as stated by Baum and Vlok (2013), PAM implies the support of an organizational strategic plan “by ensuring service delivery and the most effective use of physical assets” (p. 48). PAM is meant to translate strategic goals into actionable steps focusing on operation optimization and elimination of existing defects in the system.
It includes the design of information flows, structural changes, alignment of motivations, and clarification of strategic decisions. For this reason, Baum and Vlok (2013) state that such intangible or soft factors as supporting organizational culture, cross-sectional collaboration, increased employee motivation, and commitment are required. The leverage of such intangible assets as human capital, information systems, customer relationships, leadership, and innovation capabilities may have a favorable effect on physical asset management and mobilization of operational efficiency (Kaplan and Norton, 2004).
Retirement and Disposal Decisions
Different physical assets in organizations are associated with distinct life expectancy. For instance, various facilities, such as chemical and power plants, usually exceed the anticipated time of the function, while systems operating there often become worn more rapidly and require replacement (Schuman and Brent, 2005). During previous stages of the system development, the management should thus always keep possible asset retirement in mind and create systems in a way that leads to greater cost-efficiency and environmental sustainability (Schuman and Brent, 2005).
At the final stage of lifecycle management, its holistic nature becomes especially evident. The functional flow in the lifecycle of assets comprises the identification of need, design, implementation, and disposal. As the final phase is achieved, the management and lifecycle development repeats.
Cost Management
According to Sinisuka and Nugraha (2013), lifecycle cost is defined as “the total discounted dollar cost of owning, operating, maintaining, and disposing of a building or a building system” within a certain amount of time (p. 5). It is also associated with such operations as asset acquisition, maintenance, and disposal. However, the assessment of the lifecycle’s cost efficiency should include the measurement of probabilistic costs including “cost of failure, repairs, spare parts, downtime, lost gross margin,” etc. (Sinisuka & Nugraha, 2013, p. 5). The given type of evaluation is essential to strategic management because it allows choosing the most cost-effective alternatives and identifying the lowest long-term costs of ownership.
Conclusion and Recommendations
Asset management and operational performance are interrelated practices. As the literature review shows, asset acquisition, maintenance, and disposal may pose a big challenge for companies in the energy supply industry. To sustain operational efficacy and availability of equipment, infrastructures, and facilities, and meet costs and regulatory requirements, appropriate operation management systems should be integrated into DEWA’s strategic management.
The system should comprise solid analytical assessment tools and practices (e.g., DSS, inter-departmental decision making), for the implementation of which structural and cultural changes may be needed. The costs and prices, environmental impacts, as well as other possible good or bad value chain outputs, must be measured throughout the asset lifecycle management. The results of the assessment may serve as the foundation for operational and infrastructural improvements at DEWA.
Annotated Bibliography
El-Akruti, K & Dwight, R 2013, ‘A framework for the engineering asset management system’, Journal of Quality in Maintenance Engineering, vol. 19, no. 4, pp. 398-412.
Aim
In the present-day management discourse, the role of asset management in controlling various organizational operations is not well comprehended. Therefore, in their study, El-Akruti and Dwight (2013) aimed to integrate asset lifecycle management activities into the strategic management model. To achieve this, the authors focused on the way asset management practices, interrelations, and mechanisms control asset-related activities within a company.
Summary
By using the results of the systematic literature review and the theoretical framework of Porter’s value chain model, El-Akruti and Dwight (2013) outlined and described the major asset management activities: acquisition, deployment, operation, and disposal. Additionally, they indicated the role of asset management in strategic management. As the authors state, when using Porter’s value chain model, asset management contributes to the firm’s value creation capacity by providing the required assets that allow the management to actualize the initial strategic intent. However, not all asset management activities are similarly relevant to strategic value creation.
For example, asset maintenance is regarded by El-Akruti and Dwight (2013) as the most significant as it is related to business operations, compared to asset acquisition, which is considered to be linked only to supporting operational activities. However, asset management practices as such substantially assist organizations in developing competitive advantages including better prices, unique products, and valuable services, etc.
Evaluation
The study provides a unique perspective on asset lifecycle management activities and its interconnections with organizational strategic management and value creation endeavors. Since the available evidence in the given area of knowledge remains scarce, the author’s contribution to the research is essential and unarguably valuable. The findings and conclusions made by El-Akruti and Dwight (2013) have some practical implications as well − they provide clear recommendations for the implementation of the asset management framework, indicate the barriers to its application (e.g., the need for extensive cross-sectional and cross-level collaboration), and suggest the ways for the elimination of those obstacles (e.g., development of supporting organizational culture). However, the qualitative and theoretical nature of the study may have some drawbacks regarding the credibility findings. The introduction of new empirical qualitative data could help increase evidence validity to a large extent.
Conclusion
To sum up the research paper, El-Akruti and Dwight (2013) briefly recapped the major findings. The authors stated that proper information and knowledge management systems could facilitate the integration of the asset management framework at the whole-organization level. Additionally, they acknowledged the limitations of the given study by mentioning that further applied research might be required to validate the framework they have developed.
Reference List
Akhtar, S, Reza, B, Hewage, K, Shahriar, A, Zargar, A & Sadiq, R 2015, ‘Life cycle sustainability assessment (LCSA) for selection of sewer pipe materials’, Clean Technologies & Environmental Policy, vol. 17, no. 4, pp. 973-992.
Baum, J & Vlok, P J 2013, ‘Mapping primary constraints in physical asset management strategy execution, using social network analysis’, South African Journal of Industrial Engineering, vol. 24, no. 2, pp. 47-58.
Braziotis, C, Bourlakis, M, Rogers, H & Tannock, J 2013, ‘Supply chains and supply networks: distinctions and overlaps’, Supply Chain Management, vol. 18, no. 6, pp. 644-652.
El-Akruti, K & Dwight, R 2013, ‘A framework for the engineering asset management system’, Journal of Quality in Maintenance Engineering, vol. 19, no. 4, pp. 398-412.
Kaplan, R S & Norton, D P 2004, ‘The strategy map: guide to aligning intangible assets’, Strategy & Leadership, vol. 32, no. 5, pp. 10-17.
Lelek, L, Kulczycka, J, Lewandowska, A & Zarebska, J 2016, ‘Life cycle assessment of energy generation in Poland’, International Journal of Life Cycle Assessment, vol. 21, no. 1, pp. 1-14.
Li, X 2014, ‘Operations management of logistics and supply chain: issues and directions’, Discrete Dynamics in Nature and Society, vol. 2014, pp. 1-7.
Razmak, J & Aouni, B 2015, ‘decision support system and multi-criteria decision aid: a state of the art and perspectives’, Journal of Multi-Criteria Decision Analysis, vol. 22, no. 1/2, pp. 101-117.
Schuman, C A & Brent, A C 2005, ‘Asset life cycle management: towards improving physical asset performance in the process industry’, International Journal of Operations & Production Management, vol. 25, no. 5, pp. 566-579.
Sinisuka, N I & Nugraha, H 2013, ‘Life cycle cost analysis on the operation of power generation’, Journal of Quality in Maintenance Engineering, vol. 19, no. 1, pp. 5-24.
Wai Foon, S & Terziovski, M 2014, ‘The impact of operations and maintenance practices on power plant performance. Journal of Manufacturing Technology Management, vol. 25, no. 8, pp. 1148-1173.