Physical Asset Risk Management

Physical asset management (PAM) can be defined as the specification, selection, procurement, installation, commissioning, maintenance and disposal of capital assets for the production of goods and/or services. It focuses on the value that can be realized from physical assets through balancing risk, cost, and performance level. The management of these assets is a multidisciplinary activity and involves strategic, tactical and operational aspects. PAM must adopt a long-term perspective, i.e., a life-cycle view of the asset, which considers all stages of an asset, from the specification of requirements to the discarding or decommissioning. Furthermore, it is well known that long planning horizons incorporate variability and uncertainty. The longer the planning horizon, the less knowledge one has about failure rates, costs related to asset management, repair times and other critical variables. In addition, the complexity of physical asset systems and the interrelationship that exist between their components increase uncertainty, and hence increasing operational risks. These risks should be managed through different approaches, using several methods, and considering different approaches. From a business perspective, the variation in both revenues and costs must be considered. In this chapter, we propose the use of triangular numbers to capture variability and the inherent risk of PAM through a Fuzzy TDABC model. This model can be used for the analysis of PAM as a whole or for specific subprocesses as exemplified here with maintenance management. The use of this model for the different subprocesses and in an integrated way for PAM using fuzzy logic or other techniques opens new avenues for research on both physical asset and risk management domains.