How to Reduce the Total Cost of Ownership with Asset Lifecycle Management
Owners of capital projects and public infrastructure face the challenge of delivering reliable, sustainable assets that provide long-term benefits in the most affordable way. A key factor in ensuring affordability is the owner’s ability to proactively contain the total cost of asset ownership, which accrues over the years or decades of the asset lifecycle. Asset lifecycle management is a proven strategy to reduce the total cost of asset ownership while delivering higher-quality outcomes across the lifecycle.
Total Cost of Ownership Across an Asset’s Lifecycle
What is Total Cost of Ownership?
An asset’s total cost of ownership (TCO) encompasses all the expenses the owner incurs throughout the asset’s lifespan. Disconnects in the flow of data between the various phases of an asset’s lifecycle lead to information gaps that dampen productivity and prevent informed decision-making. The inability to make consistently data-driven decisions leads to suboptimal processes that result in waste, inefficiency, and rework, increasing an asset’s TCO.
What is Asset Lifecycle Management?
Asset lifecycle management is a strategic approach to stewarding a physical asset across its lifecycle. Asset lifecycle management connects people, processes, data, technology, and systems across the asset’s entire lifespan — from planning, design, and construction through operation and maintenance. This holistic, end-to-end approach improves decision-making and enhances efficiency at every lifecycle phase, significantly reducing the total cost of owning an asset.
Effects of Asset Lifecycle Management on Total Cost of Ownership
Data Management
Organizations frequently rely on legacy systems and siloed processes that reflect a project-centric approach. This compartmentalized approach often results in disconnected data management systems and independently managed asset phases, leading to data loss, communication gaps, and lack of informed decision-making.
The adoption of asset lifecycle management technology addresses these challenges by taking an asset-centric approach, connecting data and workflows across all phases of the asset lifecycle. This connectivity eliminates the data loss and communication silos that often occur as the asset evolves from one lifecycle phase to the next—while providing the context of a project to all of that data. Harnessing, centralizing, and sharing asset data from one phase to the next helps improve decision-making at every phase.
Operation and Maintenance Costs
An estimated 75% of an asset’s total cost occurs during the operation and maintenance phases of its lifecycle, which is generally the vast majority of an asset’s lifespan. To make the biggest impact on an asset’s TCO, owners need to design and build assets with a view toward reducing the costs of operating and maintaining the asset over many years or even decades.
The design and construction phases are when most of the asset data is created that can be put to valuable use in later phases. Once an asset is built, the financial requirements to operate and maintain it are already pre-determined and difficult to change. Therefore, to reduce the operation and maintenance costs and, in turn, significantly lower the total cost of asset ownership, owners must design and build the asset with long-term efficiency and cost-effectiveness in mind — and must harness the data from those early phases so it may be used by future teams.
Asset owners, in collaboration with architects, engineers, and contractors, should begin engaging in asset lifecycle management discussions during the planning and design phase to identify cost-saving opportunities throughout the asset's lifespan. They should take appropriate action to generate and capture high-quality data during these early phases and throughout the construction phase. Being able to access and analyze the resulting large datasets, and use them to make well-founded cost-saving decisions during the operation and maintenance phases, is what enables the largest reductions in the total cost of asset ownership.
Performance Requirements and Organizational Goals
Asset lifecycle management is essential for organizations aiming to minimize their asset’s TCO while meeting performance standards and organizational goals. With asset lifecycle management technology, organizations can connect and share data across all phases of an asset's lifecycle, from planning, design, and construction, through ongoing operation and maintenance.
This interconnected approach allows stakeholders—both within departments and across organizations—to improve collaboration and make data-driven decisions. Ensuring seamless data flow and communication across lifecycle phases not only reduces TCO but also helps in optimizing processes, enhancing asset performance, and aligning with organizational objectives.
Why Considering TCO is Important in Asset Lifecycle Management
From an asset lifecycle management perspective, considering TCO from the early planning phase is crucial to achieving the owner’s target levels of asset sustainability, resiliency, and maintainability. Each decision made during the planning phase has a downstream effect on the asset's overall performance and cost.
Owners who use asset lifecycle management can reduce the TCO of their assets by up to 40%.
As Doug Reichard, Director of Industry Strategy at Trimble, explains in the Cutting the Total Cost of Asset Ownership webinar, "The goal for an organization in relation to asset management should be to implement infrastructure, people, processes, technology, systems, and data that position everyone to make the best possible decisions in terms of both total cost of ownership and maintaining performance standards throughout the asset lifecycle."
Owners who implement an end-to-end asset lifecycle management strategy that optimizes decisions across the lifecycle can reduce the TCO of assets by as much as 40%, according to Woolpert’s analysis of multiple reports.
4 Ways to Reduce TCO with Asset Lifecycle Management
By taking strategic actions, owners can drive down TCO while delivering high-performing assets for the long term. Here are four ways to reduce TCO using asset lifecycle management.
Use Early-Stage Data for Informed Design
Early-stage data, such as information from an environmental impact study in the planning phase, can inform initial design choices that lead to cost savings and improved sustainability. That data can then be used to create constructible models and inform construction designs, processes, and teams, ensuring that sustainability and cost-efficiency are integrated from the beginning of a project.
Leverage Data for Meaningful Decisions
When organizations adopt an asset lifecycle management strategy, they replace data silos with a connected data environment, where digital information is available in one centralized system of record rather than in multiple disconnected systems. The connected data environment allows stakeholders to access and leverage data across the entire asset lifecycle for better informed decision-making. For example, decisions made during the design phase can help define material choices to increase an asset’s lifespan and significantly reduce maintenance costs. In addition, during the build phase, if a material delay necessitates an adjustment to the design or timeline, the data collected can help construction management and owners make informed decisions. This, in turn, influences decisions in the operation and maintenance phases, facilitating consistency and efficiency.
Asset Lifecycle Management
Connect People, Processes, Data, Technology, and Systems
Organizational goals and budgets are key factors that drive and shape the asset management strategy. For organizations that aim to achieve more long-term value from their asset investments, an asset’s TCO guides strategic decisions about people, processes, data, technology, and systems. When an organization establishes a connected data environment, it creates opportunities to properly position people and resources to implement a proven, cost-saving asset stewardship strategy.
An example outlined in the Cutting the Total Cost of Asset Ownership webinar involves a bridge in the western United States that requires pieces of it to be cut away every couple of years so that inspectors may perform the necessary inspections of its structural integrity. This complicated and expensive process requires the closure of lanes on the bridge surface as well as risky work beneath the bridge to cut away and inspect the structural components, then reweld them in place after the inspection. Risks to safety and structural integrity, as well as customer inconvenience and bi-annual re-inspection work, greatly increase the bridge’s TCO.
These costly and time-consuming workflows could have been avoided if the designers had applied a forward-thinking, “design for maintainability” approach by taking operation and maintenance requirements into account during the planning and design phases.
When the bridge needed to be replaced, the designers changed its design to make structural inspections safer, less intrusive on the structure, and less disruptive to traffic patterns. Designing the new bridge for maintainability will not only improve the inspection process for decades to come, but will also help to reduce the total cost of ownership of the bridge over time.
Eliminate Data Silos and Communication Gaps
Data silos and communication gaps can negatively impact project workflows and outcomes. Connecting data across lifecycle phases reduces the total cost of ownership by empowering organizations with insights to increase efficiency and improve results at every phase.
In addition, increased data transparency across the lifecycle helps improve asset safety, performance, and public trust. As Reichard explains, “Most organizations have lots of data, but it exists in disparate systems where it can't be accessed or is completely lost. If asset owners lack contextual understanding of a 3D model, how can they actually leverage this data to do something meaningful with it?”
Breaking down data silos using technology that supports data sharing and collaboration ensures that relevant stakeholders have access to actionable data at the right time. Transportation agencies, for example, use transportation asset management software to analyze and share data that helps optimize operation and maintenance activities across asset lifecycles for various asset types—from roads and bridges to signs, signals, and more—throughout the entire transportation network.
Digital Transformation Facilitates Asset Lifecycle Management
For asset owners looking to implement an asset lifecycle management strategy, a key step is to digitally transform their organizations using technologies that support a more holistic approach across teams and departments. Many organizations are making such a transformation part of their long-term strategic plan, which involves increasing the organization’s digital maturity over time.
Digital Maturity: 4 Levels of Transformation
Level 1: Centralized Information Management
The first level of digital maturity begins with digitized information as the basis of all asset-related activities and decision-making. At this level, information resides in separate systems and in 2D or file-based formats, often with inconsistent mechanisms in place to ensure data security and accessibility. For many forward-looking organizations, this level represents the legacy systems of the past.
Level 2: Connected Systems of Record and Interoperability
The second maturity level connects sources of data into a single system of record for core workflows related to 3D planning and design, construction, and asset management. This level represents the current state of data management for organizations that are actively starting to modernize their processes across the asset lifecycle.
Level 3: Asset Lifecycle Management Platform Integration
The third level builds on the previous two levels by adding a lifecycle platform featuring a modular, open, and connected data environment that provides the digital twin (3D model or connected models) for each asset. This level represents the next generation of technology that replaces many physical tasks with digitized or automated tasks. At the third level, data consistency and smoother handoffs between teams help to drive up productivity.
Level 4: Predictive Analytics
At the fourth and highest level of digital maturity are the predictive analytical capabilities that use artificial intelligence (AI) and machine learning to inform forecasting models, augmented inspections, and sensorized feedback. This level represents emerging and future technologies that will facilitate even more accuracy and automation than the technologies of today, with even more complex analytics to enable optimized decision-making and operations.
Leading consultants in asset management agree that owners who use predictive analytics to fine-tune their decisions at this high level of digital maturity can save up to 30% more than what they already saved by using an asset lifecycle management approach at the lower levels of their digital maturity.
While implementing all four levels of maturity enables the most comprehensive approach to ALM in the long term, putting even the first two or three levels of digital transformation in place empowers the organization with higher-quality, more accessible data for improved efficiency, productivity, and decision-making.
Levels of Digital Maturity
for Asset Lifecycle Management
Starting Your Organization’s Digital Transformation
Forward-looking organizations in both the public and private sectors are adopting information strategies that unify data sources into powerful systems of record that inform the entire asset lifecycle and reduce TCO. Implementing digital technologies that establish an effective connected data environment and advance digital transformation is a critical step in empowering ALM. Such transformation allows owners of public and private assets to centralize asset data, streamline collaboration, and improve outcomes at every lifecycle phase.
Digital transformation helps ensure that critical data is transparent and accessible to the right teams at the right time, promoting efficiency and reducing errors. By adopting a digital strategy and the technologies that support it, organizations can improve asset reliability, sustainability, and performance while also achieving significant TCO savings.
To learn more about asset lifecycle management, read Asset Lifecycle Management: A Guide for Capital Project & Infrastructure Owners.