June 10, 2016

How about physical asset management

A well-considered Asset Management framework enables asset-intensive companies or local and regional governments, which have a large and/or complex physical asset base, to strengthen the management of these assets and to increase their Return on Assets employed. Good Asset Management provides the information needed in improving decision and registration processes with regard to physical assets, IT infrastructure concepts, internal controls and gaining a better understanding of financing needs. These insights may, ultimately, allow asset owners to better quantify and anticipate the impact of future decisions.

there are at least five such risks that primarily contribute to an organization’s failure to optimally manage their assets:

1)not knowing what they have;

While it might seem intuitively obvious, many organizations either don’t appreciate the need to know with a high level of confidence, the assets that they have or they choose not to take the time to do so.

2)over or under maintenance;

During the operational phase of the asset life cycle, there can be a problem of over maintaining as well as under maintaining. The key issue regarding over maintaining typically involves two issues that will make the asset management system ineffective. Firstly, there is generally a significant cost associated with the execution of non-value-added maintenance. Secondly, the typical organization that can be accused of over-maintaining its assets will most likely be performing intrusive maintenance tasks more frequently.

3)improper operation;

Many organizations suffer first of all from a lack of understanding of the inherent design capabilities of their assets and secondly, how best to operate within their ranges to optimize the asset life cycle. For some assets, either operating below or above the design range adversely affects the life of the asset.

4)improper risk management;

Risk management takes place on two major fronts: 1) assessment or identification; and 2) management and controls. Each area, when not done well, is a continued contributor to ineffective asset management. One doesn’t have to stretch the imagination too far to understand this concept.

Asset management is an integrated approach to optimizing the life cycle of your assets beginning at conceptual design, through to usage, decommissioning and disposal. The true excellence in asset management performance does not lie only in avoiding the pitfalls, but in turning each and every one of these opportunities to fail into an opportunity to excel.


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  1. I agree with your very well thought blog. This is true because normally in organizations management see assets on the balance sheets and then get confirmed through the auditor’s report. If auditor confirms the similar life span of an asset as of management calculations, then everything is fine. But auditor is not going to inform and explain over/under utilization or maintenance of an asset, he just going to confirm its existence and net present value. Sometimes management believes that they need new assets like machines but they fail to identify what they already have got, they fail to understand that is this the problem of capacity running out or mismanagement of existing assets.

    From my accountancy background, we were taught that maintenance cost is to be appraised against the cost of sales(COS) and COS with sales. If sales are increasing then increase in COS is obvious and so in maintenance. Although there is some relationship between this but maintenance is a different domain. Maintaining for security, enhanced life, less break down and etc. In my previous module of design for environment, one of guest speaker presented that every year according to statistical calculations 2-3% value of assets is depreciated due to rust on the metals(assets), and the major reason for this substantial percentage was a lack of maintenance and management of assets.

    12 Jun 2016, 14:58


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