Frequently Asked Questions

As the Spend Optimization Suite (SOS) is designed to support the AM decision process – identifying and filtering the risks down to investments and then to an optimized portfolio of spend – all modules are recommended. That being said, your company may choose to only implement a subset of modules and then expand into other modules as processes become more clearly defined. If a partial implementation is desired, there are three primary module groupings:

• SA and RIO (risk focus),
• SA and IDS (investment portfolio prioritization), or
• SA, IDS, and IO (investment portfolio optimization).

Absolutely. Considerable thought and attention have been placed on the flexible design of the application, as the only thing certain about tomorrow is that it is not today. As the business evolves, changes will be necessary. The comprehensive administrative interface allows key users to easily modify the text, configure questions and question choices, change question order, apply filtering, visibility rules and/or validations, activate help buttons, enable attachments, and initiate many other configuration options. Administrative settings and controls are configured in each implementation to match the customer’s planning approval process and requirements.

Like a ship sailing across the ocean, a business needs to continuously adjust its course to account for changing currents, winds, and to avoid storms and the occasional iceberg. New regulations, strategic opportunities, and performance outcomes (both good and bad) have an impact on our business and its ability to achieve success.

The Strategic Alignment (SA) Module provides leaders with the means to set and adjust the company’s strategic objectives and their relative priorities (weightings) as the business environment changes. Weightings are applied to scoring results in the RIO, IDS, and IO modules so that these priorities are accurately reflected throughout the decision making processes.

The weightings are meant to reflect relative priorities in terms of gap closure rather than intrinsic value – where are there currently performance issues or strategic initiatives? Something like Safety, where issues are typically addressed real time or related projects are mandatory, is typically assessed from an “incremental safety” rather than “base safety” perspective.

Yes. The Issues/Assets section of the RIO Module focuses on creating a register of key asset health based or company specific issues (sometimes called “problems”) facing the organization, or, this section can also serve as a comprehensive asset register. The identified issues/problems (or evaluated assets) can then be prioritized and escalated to the Needs Assessment analysis stage.

A complete line-of-sight view is available within the RIO Module, showing the linkage of Assets/Issues to Needs (Risks) to Solutions (Investments) to the funding status in the optimized portfolio. This shows whether the identified risk has been fully or partially mitigated, and how much remains outstanding.

Yes. Our interactive Long Term Asset Management Planning function within RIO allows for the prioritization, analysis, and creation of a longer term asset management plans via high level solutions looking out 10-20 years in the future.

UMS Group has pre-defined, yet highly configurable, scoring approaches for assessing an investment’s impact on the company’s strategic objectives and success criteria (sub-objectives). Every investment is evaluated across the defined success criteria measures on two dimensions: a value/benefit dimension (what will happen if you fund the investment?) and a risk of deferral dimension (what will happen if you defer the investment?). As multiple questions are used to derive the value and risk of deferral scoring, a clear and understandable line of thought to the investment justification is established.

The IDS is designed to accommodate a wide variety of investment analysis techniques from highly quantitative financial and reliability impact analysis to simple qualitative methods. UMS Group recommends a combined approach using empirical and qualitative methods to ensure both consistency and accuracy is present in the evaluation of investments.

Yes, via implementation of the ‘Cost Calculator’ feature. This functionality allows users to build up the cost of the project line-by-line by pre-established unit prices/offsets per product/ asset type. It’s entirely customizable and can be set up for single year or multi-year pricing per category (e.g. product type #1 – materials unit cost for 2018), with the ability to align with existing accounting systems and/or enter monthly costs.

Yes.  Each investment can be linked to one or more risks for mitigation, along with the mitigation amount. Since assets/issues are linked to risks, this creates a complete line of sight based on the final optimized investment portfolio.

UMS Group’s investment scoring approaches have been refined over many years of implementations. Our early approach, based on simple pick-list scoring, did result in “clumping” of scores and sub-par results. Our current approach of user-friendly yet robust scoring, along with analysis techniques and levers for adjustment, result in differentiation amongst investments and maximizes the value of the results.

Yes, the SOS can be initially implemented or later expanded to include multiple business units, such as Generation, Transmission, Distribution, IT, Facilities, and Fleet for an electric utility. UMS Group works closely with subject matter experts to determine the desired criteria and scoring approach configuration details for each business unit. Generally this includes a mixture of common and asset-specific scoring approaches (e.g. Asset Health and Condition – IT). Once the process and configuration are in place, UMS Group will then work with subject matter teams to calibrate scoring across multiple business units and ensure that fair and comparable comparisons are being made.

IO users can then decide to optimize across all investments at once using common constraints, optimize business units separately, and/or optimize investments collectively while applying separate budget, reliability and resource constraints per business unit.

Yes. The IO Module has been designed as a yearly budgeting decision support application capable of running multi-year analysis for up to a 10 year time frame. If longer term planning is desired, investments can be entered and scored for up to a twenty-year project horizon and can then be analyzed in the IO in a series of 10 year-span batches.

Within the multi-year optimization capability, IO users can choose to optimize each year of a multi-year investment separately or activate the ‘Force Once Started’ functionality, whereby once the first year of a multi-year investment is selected for funding, all subsequent years will be funded as well.

Portfolio optimization algorithms (linear programming) used in the IO Module do differ from traditional prioritization techniques or heuristics where an investment is simply ranked or prioritized based on a value score or business rules. Following these ranking methodologies, the selected projects are those with the highest value score above a particular budget cutoff line. This approach has built-in error and may not produce an optimal portfolio of investments. This error is compounded as more constraints are utilized (financial and resources, etc.).
That being said, although the IO is designed as a true optimization model using linear programming and simplex optimization algorithms, UMS Group has still included the ability to perform simple rankings or prioritizations on the portfolio of investments. In addition to the optimized results of any given scenario, the standard optimization reports also provide a total value, overall risk, and/or value per dollar ranking of each investment.

Definitely. In the IDS Module, an administrator can create unlimited critical resource constraint input fields to collect investment required resource data (man-hours / man-days / etc.) by resource category and by year. In the IO Module, corresponding resource constraints can then be applied during a particular optimization scenario. By constraining on a particular resource type (e.g. IT resources), we can ensure that the most beneficial/critical work within the set resource limit is funded, thus effectively aligning available resources to critical work. Alternatively, resource minimums can be set, applicable where there may be contractual minimums for labor requirements.

There is no model that can replace the expertise and judgement of human subject matter experts. The SOS is a decision support application; its power lies in its ability to rapidly run “what-if” scenarios, thus providing different perspectives around which to optimize. This framework provides for a trackable and systematic approach to define key “base case” solutions (i.e. maximize value, minimize risk) and then various combinations/sensitivities (i.e. exclusive focus on reliability and / or aging and deteriorating infrastructure) to consider several perspectives before arriving at an optimal portfolio.

The IO Module includes a Results Comparison Report, allowing users to easily store and compare up to 10 optimization scenarios. This allows for easy targeting of investments with mixed results across scenarios (color coded for quick visual identification), which might require further in-depth analyses and discussions prior to making the final funding decision.