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Outsourcing a Part of Physical Asset Management – How to Decide

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Original date: 
Thursday, December 13, 2018

Asset-intensive industries have changed radically because of regulatory and technological changes. This has allowed many new investors to enter existing markets and forced established companies to consider new markets for growth. Simultaneously, new technology has levelled the playing field as high efficiency changes economies of scale and market dynamics. To manage their risks and uncertainties associated with new technology, while still focusing on improving profits, many asset owners look to outsourcing part of the physical asset management responsibility to specialized operations and maintenance companies. The owners gain advantages through the transfer of non-core activities to the supplier to reduce costs or to reduce risk. Whatever the rationale for outsourcing, the owner requires a method to evaluate outsourcing options to determine which is right for it, given its own internal capacity and strategy. The decision process must be capable of selecting the right type of service level based on a number of tangible and intangible strategic criteria. This type of multi-faceted decision necessitates process based on a sound theoretical foundation that can compare different options against the critical criteria of lifecycle costs, revenue influences, quality, health and safety, and other key drivers. In this workshop, we’ll look at a case study model using the analytical hierarchy process (AHP) as a tool capable of evaluating this type of diverse multi-levelled decision. AHP is simple and straightforward, and uses an easy-to-understand hierarchical structure to sort criteria based on their relative importance.  

BoK Content Source: 
Practitioner Produced
BoK Content Type: 
Presentation Slides
Asset Management Framework Subject: 
01 Strategy & Planning, 1.02 Asset Mgmt Strategy & Objectives, 02 Asset Management Decision Making, 2.02 Operations & Maintenance Decision-Making, 2.04 Resourcing Strategy
Maintenance Management Framework Subject: 
01 Business & Organization Context, 1.1 Requirements & Expectations, 1.3 Mgmt & Operational Frameworks, 1.4 Strategic Maintenance Plan, 02 Maintenance Program Mgmt, 2.2 Organizational Structure, 2.3 Maintenance Program Models, 2.9 Outsourcing
Author Title: 
Principal, Self employed consultant
Author Bio: 

A senior manager with more than 30 years of experience in energy, infrastructure, asset management, and operations and maintenance, Bill Mercer is a power engineer 1st Class with an MBA and certifications in quality assurance and asset management. He presently works as plant manager for Capital Power at the York Energy Centre in Ontario. Bill has broadly based progressive management experience, primarily in the power generation industry with a strong background in general management, operations, R&D, asset management, and R&M. Starting in operations at coal-fired generating plants in central Alberta, Bill progressed through business development, financial management, and maintenance management before starting off on an international career operating and managing facilities and service departments in New Zealand, Asia, Europe, and Canada. He has been an active member of PEMAC for more than five years, including one year on the executive of the Alberta Chapter before moving to Ontario.