In part 1 of this blog about Asset Lifecycle Mapping we asked the reader to imagine a path showing the significant stages in an asset’s life and how income and costs ebb and flow as we pass along it.
This is the Asset Lifecycle Value Map. Its purpose is to give Asset Managers an NPV for a property and an ability to see how the NPV is likely to change as the property passes through the significant stages within its life.
We also mentioned that we are developing this for one of the great Social Housing Providers in the country, and that we would tell the story of the development as it progresses.
We have now defined the pathways that a property can follow. For example, if we build a property for rent, over its lifespan of perhaps 30 years we might expect it to travel several times around a ‘management’ pathway (please see below), and perhaps once along a ‘change’ pathway. At some point a ‘disposal’ pathway will beckon.
Major stages in the life of a property built for rent. (Other pathways exist which are not shown here e.g. acquisition through transfer, or build to sell. )
We now have two challenges. We must establish a cost for each step taken along each path. We must then use what we know of the lives of our properties to date to predict the paths that properties might follow in the future and the implications that each path represents for both cost and income.
The first of these is straightforward and already underway. We are building a catalogue of all the activities that take place across the organisation and the time and cost that they typically involve. By grouping activities and their costs under each event in the lifecycle map we can create a unit cost for each event, one that reflects the cost for all the activity that takes place. (e.g. the cost of a repair is often defined as the cost of materials and of the time taken to perform the repair. We will include the full administrative effort that sits behind each repair – e.g. scheduling, monitoring, invoicing, customer queries and feedback).
Once this is complete we will be able to attribute costs to properties based upon records of their lifecycle events. We will also attribute costs based upon events that lie outside the Asset Manager’s influence e.g. reports of Anti Social Behaviour or efforts to chase arrears. These will be of interest to those planning the Customer Service Strategy.
The second challenge is yet to come and will require a small act of faith. We can’t predict how long a property will last or the path that it will take. But we may be able to divide up all of today’s properties by age and the path that they have followed so far. If so, the costs today for properties that have reached a certain point within a lifecycle may give some clues about the costs that others will have incurred by the time they have reached the same point.
Asset Managers will then be able to ask:
- Is there anything that we can do earlier in the life of a property that might offset some of the costs that we might otherwise expect to incur?
- Or, what might the consequences be if we attempt to save money by delaying certain types of work?
- Or, can we adapt properties to meet the changing needs of our customer base without undermining property values?
Look out for Part 3 in the Asset Lifecycle Value map story early in September 2014. We should have our activity catalogue fully populated and will be close to realising some of the key unit costs that will make it all possible.