Understanding the Concepts and Principles of Asset Management
In order to implement an asset management system, it is vital to understand what is involved in an asset management system. The aspects involved have been tested over time through many different industries. These industries have proven to be what it takes to be successful.
So let’s see what it takes to be successful in asset management.
Characteristics of good asset management
- Cross-Functional – Asset management across functional boundaries, and is focused on extracting maximum value from the asset.
- System based – the system is applied consistently throughout the organization, at all levels, and in all departments
- Risk-based – balancing risk is a consideration in all decision-making activities
- Optimizing – balancing risk, cost, and performance of the assets to ensure short and long term value is extracted from the asset
- Sustainable – the plans should ensure that the right balance between risk, cost and performance is applied at all stages of the assets life cycle.
Assets & Value
Remembering the definition of an asset; an item, thing, or entity that has potential or actual value to an organization, the asset management program should seek to extract the maximum value from the assets.
The term value may vary greatly depending on which stakeholder you ask. This is why the asset plan should reflect the mix of stakeholders that you currently have. A shareholder and a user will have two distinct points of views. Both must be considered.
Obviously, there are trade-offs that must take place when balancing the needs to the stakeholders. The needs also need to be considered against risks, costs and against a timeline varying from now and in the future and how they will change. This is part of the life cycle activities that need to take place.
Life Cycle Activities
The balancing that takes place between performance, risk, and cost affect the entire life cycle of the asset. Once the initial decision is made during the specification and design phase, organizations are limited in their ability to dramatic influence the life cycle costs without significant investment.
Yet, it is up to the organization and to do the most to maximize and leverage the balance established during the initial phase. This may be deciding to refurbish an asset instead of replacing it, or upgrading a component to extend the life of the asset.
Deciding on the maintenance and operational strategy also has a significant impact on the life cycle of the asset. For example, turning up or down the speed of equipment will influence its output, but may also influence the speed of wear out or the level of quality defects. This must be optimized through data-driven decision making.
Data Driven Decision Making
Successful decision making and asset management must be based on data, not intuition or emotion. The data is used to make those decisions that balance risk, performance and cost across all stages of the asset.
Having the risk profile, budget, short & long-term sales forecast and asset performance data is what allows asset managers to manage the lifecycle of the assets. If there is a lull in short-term sales, the asset(s) can be taken down and upgraded or repaired in the preparation for an increase in long-term sales.
Simple decisions can be based on a few data points, but more complicated decisions may require additional data and a defined method to evaluate the options and make a decision.
A Management System
Asset Management is not something that can be implemented in the maintenance department. It requires all functions within an organization to work together towards a common goal. As a Quality system requires many functions and disciplines to work together, so does an asset management system.
This system should be led from the top of the organization and cascade down to all levels. This ensures everyone is aligned to a common goal.
The alignment between the various department, or business units is an absolute must for asset management. Without an aligned organization, which shares common goals and KPIs, the asset management system is likely to fail. The functions, departments or units will go back to their way of doing things… in their silo.
This alignment is started with the organizational goals and objectives, which is then cascaded to an Asset Management Policy, then to a Strategic Asset Management Plan, followed by Asset Management Plans for various asset classes. These documents will be the topic of the next blog post.
Asset Management systems are based on key concepts and principles which were briefly described. Before embarking on the asset management journey, it is critical that you fully explore these concepts and principles. Do you see the key principles in place in your organization?
Remember, to find success, you must first solve the problem, then achieve the implementation of the solution, and finally sustain winning results.
I’m James Kovacevic
Where Education Meets Application
Need help understanding how Asset Management can help your organization? What to benchmark your Asset Management system? Eruditio, LLC has Certified Asset Management Assessors on staff to support your journey into asset management. Click here to book a free 1-hour consultation to see how we can help you achieve your goals.
- ISO 55000 Asset Management Series
- Asset Management Landscape – GFMAM
- Certified Asset Management Assessors
- Asset Management: An Anatomy – IAM
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