Wednesday, March 4, 2009

Fundamentals of Asset Management - 3

Asset Management Fundamentals

4.0 Asset regisrty

4.1 These are a few questions that an organization need to ask or answer about their assets:

a. What assets are owned or owned by others
b. When the assets are acquired;
c. When the last date repaired?
d. Why the assets are acquired;
e. Where the assets are (that is the location of assets);
f. Who is the custodian of the assets
g. How the assets are maintained;
h. How much is the cost of acquisition and maintenance of the assets

4.2 If the organization has all the answers for the above questions, the organization has a good asset registration system, which is a pre-requisite to a good management system.

4.3 If the organization is able to only a few of the questions, it is high time now to start registering all the assets acquire, owned or leased by the organization. The asset register must be able to answer the basic questions whilst a more advance asset register will be able to do analysis and data drilling. The assets to be registered must comply with the two (2) requirements listed below or whatever the organization policy.

4.4 Once we have done the asset register, the organization now has a complete picture of the organizational assets. It is easier to say than doing it, but the task is needed before anything else.

4.5 Earlier, we have defined an asset as:

a. An item/physical component/facility that have a distinct value to the organization; and/or

b. An item/physical component/facility that enable services to be provided

4.6 1.1 The above criteria are the basis of an asset register. When setting up an asset registry, we must also realize that assets have generic or similar characteristics between other assets in the organization. As we know that physical assets deteriorates with time through normal wear and tear or even technology changes, these factors must be incorporated in the asset registry especially on its designed or intended life.

4.7 Usually, an asset has these generic, familiar and typical characteristics, that is:

a. Design life;

Design life is the period from acquisition to a time determined by the designer, which the asset expected to work or function within the specified design parameters.

b. Economic life;

Economic life is the period from acquisition to a time when the asset becomes a burden or too costly to operate and maintain the asset to a particular level of service (that is ceases to be the lowest cost alternatives in delivering its service)

c. Functional life;

Functional life is the period from acquisition to a time when the asset ceases to perform the function specified

d. Operation and Maintenance regime;

Operation and maintenance regime are planned activities necessary to retain the assets as near to its original condition or function. The planned activities includes operating the asset, doing repair works, and so forth. Maintenance may come as planned maintenance, routine maintenance or even breakdown maintenance

e. Service provided or its function;

The service provided is meant by the performance or function expected from the asset during its life span and characterize by either quality, quantity, availability or safety. The service provided always relates or links to the strategic objectives of the organization.

f. Dynamic or passive assets;

Asset is ether a dynamic or a passive asset. Dynamic assets have moving parts while passive assets have none.

4.8 To relate the design, economic and the functional life of an asset, the figure below explain in a graphical form the relationship between those three (3) live spans.

Fig. 4.8 – relationship between design life, economic life and functional life


4.9 Once we have known our assets and an asset registry, we can go to the next fundamental that is role and responsibility.

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