setting service levels- a simple task or a major challenge in asset management?
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Setting Service Levels- A simple task or a major challenge in Asset Management?. Kevin Young Hunter Water Corp. 11 April 2002. Asset Management - A Definition. Different approaches to meeting or determining service levels - Kevin Young - PowerPoint PPT PresentationTRANSCRIPT
Setting Service Levels-A simple task or a major challenge in
Asset Management?
Kevin YoungHunter Water Corp.11 April 2002
2
3
Asset Management - A Definition
Different approaches to meeting or determining service levels - Kevin Young
Asset capability / whole of life costing - Peter Buckland
Meeting agreed customer service levels while minimising whole of life costs
4
Setting Service Levels
A number of categories Environment
Health
Customers
Requires alignment of service levels with Business Plan / Corporate Planning
5
Setting Service Levels
Range of approaches world wide Fixed mandatory levels under an
operating contract / licence
Continuous improvement to higher service levels
Maintaining condition of assets (a proxy approach)
Determined in consultation with customers
6
Hierarchy of Service Indicators in an Operating Licence Framework
Vehicle
Penalty
Data
Performance Indicators
Operating Licence
7
Service Levels under an Operating Licence
Determined based on historic performance
A minimum safety net of customer protection
Water Supply - Discontinuity
88
90
92
94
96
98
100
1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00
% P
rops
With
out S
uppl
y >
5 H
ours
C
umul
ativ
ely
Per
Ann
um
Result Licence
8
Continuous Improvement to Higher Service Levels
By benchmarking
By “league tables” - comparison by embarrassment
Needs good information of cost / service level trade-off
9
Setting service levels and trade-offs
Ser
vice
Lev
el(E
ffec
tiven
ess)
High
Avg
Low
Low(High Costs)
High(Low Costs)
Avg
Productivity Level(Efficiency)
Expected Tradeoff
• L
• G
BestPerformers
K•
•
•
• A H
EI•
•
•
•
•
•
•
B
F
J
MD
C
Inefficient:High Cost/Unit of Service
Poor Performers:High Cost/Low Service
Service LevelPotentially Inadequate
Setting of Service Levels - Link to Replace/Repair Decision
PE
R U
NIT
CO
ST
TO
CO
MM
UN
ITY
INCREASEDFAILURES
REDUCEDFAILURES
LEVEL OF SERVICE
RISK(INTERNAL & EXTERNAL)
ie repair costs/ social costs
HIGH ASSET LIFE LOW
11
Life Cycle Costs
Must include community costs water continuity direct costs social disruption costs traffic property damage environmental costs
Setting of Service Levels - Link to Replace/Repair Decision
PE
R U
NIT
CO
ST
TO
CO
MM
UN
ITY
INCREASEDFAILURES
REDUCEDFAILURES
LEVEL OF SERVICE
RISK(INTERNAL & EXTERNAL)
ie repair costs/ social costsPLANNED (I
NTERNAL)
HIGH ASSET LIFE LOW
Setting of Service Levels - Link to Replace/Repair Decision
PE
R U
NIT
CO
ST
TO
CO
MM
UN
ITY
TOTAL
INCREASEDFAILURES
REDUCEDFAILURES
LEVEL OF SERVICE
INCREASING COST-DECREASING SERVICE
INCREASING COST-INCREASING SERVICE
AB
A=MIN. COST
B=MAX. SERVICE PER UNIT COST- “ BEST VALUE FOR MONEY”
RISK(INTERNAL & EXTERNAL)
ie repair costs/ social costsPLANNED (I
NTERNAL)
HIGH ASSET LIFE LOW
Setting of Service Levels - Link to Replace/Repair Decision
PE
R U
NIT
CO
ST
TO
CO
MM
UN
ITY
TOTAL
INCREASEDFAILURES
REDUCEDFAILURES
LEVEL OF SERVICE
INCREASING COST-DECREASING SERVICE
INCREASING COST-INCREASING SERVICE
RISK(INTERNAL & EXTERNAL)
ie repair costs/ social costsPLANNED (I
NTERNAL)
HIGH ASSET LIFE LOW
CU
STO
ME
R D
EM
AN
D
CC= APPROPRIATE
CUSTOMER SERVICE LEVEL AND COST
15
Total Costs (NPV)
User Costs (NPV)Minimum Total LCC
Agency Costs (Max Network NRM)
Agency Costs (Average NRM)
Network Roughness (NRM)
Life Cycle Cost vs Network NRM
Ann
ual A
genc
y C
ost (
$ M
ill i
ons )
Tot
al L
ife
Cyc
le C
ost (
NP
V)
($ M
illi
ons)
16
Conclusions
The setting of service levels requires
An understanding of customers’ requirements and the cost trade-offs
Knowledge of asset degradation and repair/replace trade-offs
Assessment of full community costs
Pricing to be based on full costs of asset replacement and servicing
Good asset management to lead regulatory debate
17
Cumulative Reduction in Operating Cost per Property
-0.45
-0.4
-0.35
-0.3
-0.25
-0.2
-0.15
-0.1
-0.05
0
0.05
1990/91 1992/93 1994/95 1996/97 1998/99 2000/2001
Hunter Water Corp
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