Physical Asset Management

Frontmatter

Chapter 1. Introduction to Asset Management

Abstract

Aim: The aim of this chapter is to introduce to the main concepts of asset management.

Outcomes: After reading this chapter you will know about:

• The purpose of this book,
• The historical background to asset management,
• The ISO 55000 series of standards for asset management,
• Definitions of assets, liabilities and related terms with reference to ISO 55000 and to accounting applications,
• The broad types of assets which organizations have,
• The types of industry to which asset management is particularly important;
• The aim of asset management within an organization,
• An outline of the asset management life cycle,
• The basic questions to be addressed by asset management,
• The benefits of good asset management,
• The dangers of the asset death spiral.

Topics:

• Purpose of this book
• Evolution of asset management
• ISO 55000 series Asset Management Standards
• What is an Asset?
• The asset management role
• An accountant’s view of assets
• What is asset management?
• Asset management system
• The asset life cycle
• Asset management basic questions
• Dangers of poor asset management
• Benefits of good asset management
• The asset death spiral
• Exercises 

Nicholas Anthony John Hastings

Chapter 2. Structure and Activities

Abstract

Aim: To describe how asset management fits in to the structure of an organization and to summarize the activities involved in asset management.

Outcomes: After reading this chapter you will know about:

• The link between asset management and business strategy, including the factors involved in business development which impact on asset strategy,
• The role of the Chief Asset Management Officer,
• How the asset management function should be structured,
• The role of asset management groups which have personnel working in particular technical areas,
• The basic knowledge required by asset managers,
• The main activities of asset management,
• Organizational activities which are not part of asset management,
• The need for financial, legal and engineering support for asset management,
• What is meant by an asset management policy and an example related to ISO 55001,
• An introduction to asset management plans with reference to ISO 55001.

Topics:

• Business Strategy and Asset Management
• Asset Management in the Organization
• Chief Asset Management Officer Role
• Asset Management Groups
• Integrated Project Teams
• Asset Management Activities
• Asset Management Policy
• Asset Management Plans
• Policy, Strategy or Plan?

Nicholas Anthony John Hastings

Chapter 3. Asset Management Personnel

Abstract

Aim: To describe the matrix nature of asset management, the need for liaison with many groups and the need to understand the context of the organization and its stakeholders. To indicate the need for leadership in asset management in an organization. To indicate the competencies needed by people who work in asset management. To describe how the asset management system should plan for competency in asset management roles.

Outcomes: After reading this chapter you will know about:

• Understanding the organisational context.
• Matrix management nature of asset management and areas with which liaison is needed.
• Awareness of the needs of stakeholders.
• Leadership.
• The definition of competence.
• Competencies needed in asset management.
• Filling competency gaps.
• Key activities where competence is needed,
• Personnel roles in asset management and related engineering and maintenance roles
• Personnel development.
• Competency assessment.
• Communication.

Topics:

• Organizational context.
• Matrix management and stakeholders.
• Leadership.
• Competence.
• Required areas of competence.
• Personnel roles, responsibilities and authorities.
• Engineering and maintenance roles.
• Personnel development system.
• Competency assessment.
• Communication and response.

Nicholas Anthony John Hastings

Chapter 4. From Concept to Project Approval

Abstract

Aim: The aim of this chapter is to describe the asset development process from concept to project approval. This chapter shows how asset management works with other parts of the organization in order to create sound development plans. The focus is on procedures for larger scale developments, such as major acquisitions. The chapter starts at the concept level, goes through the preliminary approval stage, to feasibility planning and onto final project approval.

Outcomes: After reading this chapter you will know about

• The stages involved in asset development,
• The structure and role of development planning teams,
• The concept of capability, with examples,
• The identification of business needs,
• The concept of capability gap analysis, the development of a capability requirements statement and an operational concept,
• Pre-feasibility analysis of development options, leading to a proposal at the preliminary approval stage,
• Feasibility analysis and the creation of an acquisition or development plan.

Topics:

• Business development planning
• Capital project initiation
• Types of acquisition or development
• The business development group
• Major and minor projects and development flexibility
• Delegation of financial authority
• Capability concept
• Development planning teams
• Demand analysis and forecasting
• Needs analysis
• Remaining life and retirement schedule
• Capability gap analysis
• The capability requirements statement
• Value engineering
• Pre-feasibility analysis
• Feasibility analysis
• Development plan topics
• Stakeholders
• Existing process and the status quo
• Lead time activities
• Operational concept
• Function and performance specification
• Level of service
• Financial analysis
• Acquisition strategy
• Project maturity measures.

Nicholas Anthony John Hastings

Chapter 5. Financial Methods

Abstract

Aim: The aim of this chapter is to introduce the concepts of discounted cash flow in the context of asset management decisions and to see how these are applied in establishing asset investment criteria. Asset managers need to have a working knowledge of business finance, so they can provide input to business decisions.

Outcomes: After reading this chapter you will know about

• Interest rates
• The time value of money
• Present value and net present value
• The discount factor
• Cash flow diagrams
• Equivalent annual cost and equivalent unit cost
• The use of Excel financial functions
• The annuity factor and the capital recovery factor
• Asset investment criteria
• Payback period
• Internal rate of return
• Minimum acceptable rate of return
• Profitability index
• Return on investment (ROI).

Topics:

• Introduction
• Discounted cash flow
• Present value
• Discount factor
• Net present value
• Cash flow diagram
• Equivalent annual cost
• Annuity factor
• Capital recovery factor
• Equivalent unit cost
• Payback period
• Internal rate of return
• Minimum acceptable rate of return
• Application of Excel functions NPV, PMT.

Nicholas Anthony John Hastings

Chapter 6. Developing a Business Case

Abstract

Aim: The aim of this chapter is to outline the principles and steps involved in developing a business case. Asset managers are frequently involved in developing business cases, which may range from the level of major capital projects to process improvements or systems changes. Business cases are also required for activities such as outsourcing. This chapter is concerned with the overall structure and outline content of business cases.

Outcomes: After reading this chapter you will know what steps to take in order to develop a business case. You will have available a list of headings under which a business case can be developed, for both large and small projects. You will have enjoyed reading about the use of business case methods to choose a bottle of wine in a restaurant.

Topics:

• Business case introduction
• Development plan
• Business case outline
• Smaller project business case outline
• Impact of downtime
• Final decision to proceed
• Approved development plan

• Wine selection example.

Nicholas Anthony John Hastings

Chapter 7. Implementing Development Plans

Abstract

Aim: To present the steps involved in implementing an asset acquisition or development plan from project approval to introduction into service.

Outcomes: After reading this chapter you will be aware of the steps required to implement an asset acquisition or development plan. You will gain an overall perspective of the steps and activities involved in the implementation of asset development, from the establishment of a project team, through acquisition to commissioning, introduction into service and change management. This will assist you in managing or participating in asset development.

Topics:

• Asset development portfolios,
• Project team and activities,
• Project management,
• Project milestones,
• Reliability-centered procurement,
• Evaluation of suppliers,
• Equipment selection and trials,
• Through life support,
• Financial and contract process,
• Project maturity status,
• Assigning responsibilities, the RACI or ARIC chart,
• Project management reports,
• Financial overview report,
• Project progress monitoring,
• Project Portfolio management,
• Commissioning,
• Operational readiness,
• Training,
• Introduction into service,
• Change management.

Nicholas Anthony John Hastings

Chapter 8. Life Cycle Planning and Costing

Abstract

Aim: The aim of this chapter is to describe the techniques of life cycle planning and costing and to illustrate them with an example.

Outcomes: After reading this chapter you will understand the reasons for life cycle planning and costing and have seen a check list of factors that go into a life cycle cost analysis. You will understand the concept of a life cycle asset management plan, and you will have seen an example of life cycle planning and cost analysis.

Topics:

• Life cycle asset management plan,
• Life cycle costing,
• Creating life cycle plans and costings,
• Life cycle planning and costing elements,
• Life cycle planning and costing example,
• Input to plans and budgets,
• Summary of applications of life cycle plans and costs.

Nicholas Anthony John Hastings

Chapter 9. Know Your Assets

Abstract

Aim: The aim of this chapter is to draw attention to the need for asset managers to be familiar with their assets in a technical, business and operational context. The role of the asset manager involves being well informed across the application of the assets, although this does not mean that the asset manager will be the ultimate expert on any one functional aspect. The asset manager will have an integrated view of the assets as a whole and will understand the relationships, interdependence and degree of criticality among the deployed assets and be aware of asset condition.

Outcomes: After reading this chapter you will be aware of the importance of understanding the range of assets which are used in the business, their roles, the technologies involved and the relative criticality of particular assets. You will be aware of the value of expert teams which have in-depth asset knowledge of particular asset types. You will be aware of the significance of bottlenecks which can occur particularly in flow process businesses and of possible backlogs of work and of asset condition. These are factors which may require an adjustment of resources.

Topics:

• Awareness of key assets,
• Summary of physical assets,
• Asset portfolios,
• Acquisition of asset knowledge,
• Block diagrams,
• Criticality,
• Expert teams,
• Bottlenecks,
• Backlogs,
• Asset condition.

Nicholas Anthony John Hastings

Chapter 10. Asset Continuity Planning

Abstract

Aim: The aim of this chapter is to describe how to plan for the provision of assets which are required to meet an ongoing need. This is a very common situation, in which demand for a type of asset continues into the future, but older items require replacement and variations occur, due to changes in demand levels and to market developments and technical developments.

Outcome: After reading this chapter you will have learnt how to plan the purchase of items to sustain an ongoing capability requirement, by calculating the pre-plan capability gap and then working forwards over the planning horizon calculating the purchase needs year by year and making suitable purchase decisions. You will become familiar with a spreadsheet-based method for carrying out the necessary calculations and for graphically illustrating the gap analysis and the acquisition costs.

Topics:

• Asset continuity,
• Factors in continuity planning,
• Asset data,
• Planning terminology,
• Planning schedules,
• Pre-plan gap analysis,
• Gap analysis graph,
• Planning process,
• Planning steps,
• Spreadsheet example,
• Capital requirements graph,
• Planning formulas,
• Capability continuity planning.

Nicholas Anthony John Hastings

Chapter 11. Strategic Asset Management Planning

Abstract

Aim: The aim of this chapter is to introduce and discuss the principles of Strategic Asset Management Planning. This is concerned with providing the organization with asset capabilities which match the needs of the organization’s business plan and are consistent with the organization’s financial plan. This involves creating or updating:

• the “Plan for the Asset Portfolio”, which shows what physical assets the organization will have over a given planning period,
• the “Plan for Asset Support” which is the plan for the supporting facilities such as maintenance and logistics over the same planning period,
• the “Asset Information Systems and Procedures” such as the asset register and documented procedures such as change management.

These plans are then incorporated into a document known as the Strategic Asset Management Plan. ISO 55001 at Clause 4.4 states that: “The organization shall develop a Strategic Asset Management Plan (SAMP)…”. This is an overview document which provides information both to asset management personnel and to others who need to be aware of the role of asset management in meeting organizational objectives. This includes senior managers and a range of external and internal stakeholders.

Outcomes: After reading this chapter you will be aware of how to tackle the issues of aligning the asset capabilities with the business plan. In particular you will be aware of the concepts and roles of the “Plan for the Asset Portfolio”, the “Plan for Asset Support” and the “Asset Information Systems and Procedures”. You will have seen how these plans are developed. You will be aware of the document called the “Strategic Asset Management Plan” and will have learnt about its purpose and content.

Topics:

• Introduction
• Strategic Asset Management Planning Elements
• The Plan for the Asset Portfolio
• The Plan for Asset Support
• Asset Information Systems and Procedures
• Planning Teams
• Development Steps
• Plan Summary and Follow-up Action
• Planning Considerations
• Top-down and Bottom-up
• Support Activities
• Engineering and Technical Services
• Strategic Asset Management Plan.

Nicholas Anthony John Hastings

Chapter 12. Capital Planning and Budget

Abstract

Aim: To introduce the concepts of capital and operating budgets. To describe the process for developing a capital budget. To consider capital budget prioritization, based on returns, risks, criticality of assets and the availability of funds.

Outcomes: After reading this chapter you will know:

• The difference between capital and operating budgets
• The typical structure of capital budgets
• The process for developing capital requirements for particular equipment types and consolidating them across types
• The meaning of capital rationing and how it affects budgets
• Methods of dealing with capital rationing including prioritization based on financial return, equipment criticality, equipment age and condition and risk
• How to summarize the capital budget and to be aware of factors involved in managing the capital project portfolio.

Topics:

• Capital planning considerations
• What is a budget?
• Types of budget
• Budget structure
• Devolution of authority
• Planning process
• Planning periods
• Source and application of funds
• Capital requirement plans for asset types
• Aggregation across types
• Capital budget cycle
• Project prioritization
• Financial return
• Capital rationing
• Condition/criticality rating
• Financial return and risk ranking
• Risk and regulation
• Reliability
• Urgency
• Timing
• The capital budget
• Managing the capital project portfolio
• Contingency allowances.

Nicholas Anthony John Hastings

Chapter 13. Asset Management Information Systems

Abstract

Aim: The aim of this chapter is to outline the functions of an asset management information system and to consider issues relating to the use, resourcing and operation of the system.

Outcomes: After reading this chapter you will know the main applications for which an asset management information system is programmed and the type of identification systems which are used to identify equipment, componentization, locations and activities. You will be aware of the need for adequate resources to maintain the system and for user training in its use. You will see the structure of the data flows and be aware of the role of the system in the ongoing management of current tasks.

Topics:

• Information system role and applications
• Base data and the need for identification coding
• Functional locations
• Location code structure
• Mobile plant coding
• Activity and trade codes
• Resourcing and managing the system
• Data administration
• Users
• Features
• Reports and their uses
• Document control
• Implementing changes.

Nicholas Anthony John Hastings

Chapter 14. Cost–Benefit Analysis

Abstract

Aim: The aim of this chapter is to discuss situations where the benefits of some or all of the activities are not measurable in terms of direct financial returns. We then indicate how asset management decisions may be approached in these cases.

Outcomes: After reading this chapter you will be aware of those areas where benefits are wholly or partly of a nature which is not readily quantifiable in financial terms. You will learn about how to approach problems of this type and how to carry out cost–benefit analysis using a planning balance sheet.

Topics:

• Definition
• Non-financial benefits
• Cost–benefit analysis outline
• Needs and wants
• User pays principle
• Measures of benefit
• Cost benefit analysis steps
• Activity-based cost–benefit example
• Planning summary sheet
• Regional health clinics exercise
• Cost–benefit spider diagram.

Nicholas Anthony John Hastings

Chapter 15. Risk Analysis and Risk Management

Abstract

Aim: This chapter introduces the concept of risk, gives references to standards and major documents which deal with risk and defines terms relating to risk. The procedures in the management of risk are then outlined, and the legislative approach to risk is discussed and illustrated by an example. Various types of risk are described, and hazard analysis and the assessment of consequences are discussed. Factors in mitigating risk and contingency planning are presented. The chapter continues with an example of risk analysis and management in a water supply system. Risk considerations in safety critical plant are addressed in the separate chapter under the title of “Safety.”

Outcomes: After reading this chapter you will know how to analyze and treat risk. This will include an awareness of the legal approach based on meeting duty of care and regulatory obligations and the analysis and assessment of risk in relation to projects and to plant and machinery. You will be aware of techniques of hazard analysis, the assessment of consequences, the use of contingency allowances and of methods of mitigating risk. You will have seen how risk analysis was used in a water supply system application.

Topics:

• Introduction
• Definitions
• Introduction to risk
• Legislative approach
• Management of risk
• Water supply system example
• Risk identification
• Risk register
• Risk analysis and treatment
• Consequences
• Likelihood reduction
• Risk treatment
• Contingency planning
• Types of risk
• Quantitative risk analysis
• Risk-cost
• Risk rating
• Risk matrix
• Project risk examples.

Nicholas Anthony John Hastings

Chapter 16. Outsourcing

Abstract

Aim: The aim of this chapter is to outline the main things to be considered by management in regard to outsourcing of asset management and maintenance work. Both positive and negative aspects of outsourcing are indicated, with the aim of helping managers to get the best value from their outsourcing options.

Outcomes: After reading this chapter you will know what type of tasks to outsource and what type are best kept in-house. You will learn about the types of outsourcing contract and about the points to watch for in creating and management outsourcing contracts. You will also read about outsourcing from a contractor viewpoint, which will assist both parties to an outsourcing contract to achieve a favorable outcome. You will also read about forms of contract such as build own operate transfer and public–private partnerships.

Topics:

• Introduction
• What to outsource
• Owner/Operator model
• What not to outsource
• Benefits of outsourcing
• Costs of outsourcing
• Types of contract
• Contract features
• Outsourcing risk avoidance
• Audit
• Contractor viewpoint
• Build own operate transfer
• Public–private partnerships

Nicholas Anthony John Hastings

Chapter 17. Logistic Support

Abstract

Aim: The aim of this chapter is to describe the factors involved in supporting physical assets from introduction into service, over their life time through to disposal. These factors also influence the initial choice of equipment.

Outcomes: In the chapter you will learn that many problems in physical asset management can be reduced by considering the supportability of equipment at the acquisition stage. You will learn about the factors that need to be taken into account in planning equipment support and will be provided with checklists to assist this type of planning.

Topics:

• Introduction to logistic support
• Logistic support analysis
• Level of repair analysis
• Integrated logistic support
• Logistic support plan
• Through life support
• Configuration management plan
• Supplier viewpoint

Nicholas Anthony John Hastings

Chapter 18. Asset Basic Care

Abstract

Aim: To describe the features and organizational structures used in caring for assets, from good housekeeping through to basic maintenance. To consider performance monitoring and recording and continuous improvement techniques.

Outcomes: After reading this chapter you will understand the importance of good housekeeping and basic maintenance and how to organize the workplace so that these are well managed. You will be aware of the continuous improvement cycle and techniques associated with it.

Topics:

• Introduction
• Total productive maintenance (TPM) or asset basic care.
• Workplace tidiness, standards and training
• Machine knowledge
• Basic observation and action
• Japanese guide words
• Basic maintenance
• Accreditation of workers
• Performance recording
• Test analyze and fix
• Continuous conformance
• Continuous improvement
• Deming wheel
• Fishbone diagram
• Improvement coordinator
• Summary and benefits

Nicholas Anthony John Hastings

Chapter 19. Maintenance Organization and Budget

Abstract

Aim: The aim of this chapter is to describe the features and organizational structure used in asset maintenance and to show how the maintenance budget can be created and managed.

Outcomes: After reading this chapter, you will be aware of the main features of the maintenance function including maintenance, technical services, workflow management and budgeting.

Topics:

• Maintenance aim
• Maintenance organization
• Maintenance layout
• Types of maintenance activity
• Maintenance work management
• Planning, scheduling and control
• Planners checklist
• Prioritization
• Information flow
• Personnel roles
• Weekly scheduling process
• Maintenance budgeting
• Zero-based budgeting
• Direct labor, indirect labor and overheads
• Backlog
• Budget cost control
• Budget reports
• Activity based costing.

Nicholas Anthony John Hastings

Chapter 20. Stock Control

Abstract

Aim: The aim of this chapter is to describe the various aspects of inventory management required for asset management. This starts from the initial purchase of spare parts and consumables and continues with through-life support. Inventory control methods are presented for routine demands and for fast and slow moving spares and insurance spares.

Outcomes: After reading this chapter, you will be aware of the main issues that confront asset managers in regard to spare parts and consumables inventory. You will know everything that is worth knowing about spare parts inventory management, but this will not mean that you can solve all the problems.

Topics:

• Introduction
• Initial spares purchase
• Cataloging
• Aims of inventory management
• Inventory management basics
• Stock keeping units
• Spare parts basics
• Procedure when item is needed
• Stock control terminology
• Dependent demand
• Independent demand
• MIN and MAX
• Target level
• Forecasting
• Reorder risks
• Lead time
• Reorder rules, fast moving items
• Consignment
• Cannibalization
• Returned stores
• Storekeeper personnel
• Repair pools
• Item criticality
• Slow moving items
• Insurance spares
• Performance indicators
• Accounting for inventory.

Nicholas Anthony John Hastings

Chapter 21. Reliability, Availability and Maintainability

Abstract

Aim: To introduce key elements of reliability, availability and maintainability from an asset management perspective.

Outcomes: After reading this chapter you will be aware of the. need to specify and check for reliability availability and maintainability (RAM) requirements for asset acquisitions and developments. You will learn about how reliability, availability and maintainability are measured, and about the factors that lead to successful management of assets in regard to RAM considerations. You will be aware of a number of specific techniques which assist with these tasks.

Topics:

• Introduction
• Reliability
• Specification and testing
• Design for reliability
• Managing reliability of in-service assets
• Operator logs and incident reports
• Failure patterns and causes
• Useful life
• Failure reporting and corrective action system (FRACAS)
• Pareto analysis
• Failure mode and effects analysis (FMEA or FMECA)
• Root cause analysis (RCA)
• Condition monitoring
• Reliability-centered maintenance
• Maintenance policy review
• Availability
• System availability
• Cost of downtime
• Availability when needed
• Availability related to total time
• Maintenance effectiveness
• Maintenance load
• Maintenance regime
• Maintainability.

Nicholas Anthony John Hastings

Chapter 22. Safety

Abstract

Aim: The aim of this chapter is to outline the main factors involved in general safety issues related to asset management. Safety critical systems are also considered, and techniques applicable to high risk plant are introduced.

Outcomes: After reading this chapter you will be aware of safety issues in two main areas. Firstly, there are general safety concepts which apply to all physical assets. Secondly, there are concepts such as safety integrity levels which apply to high risk plant. You will also be aware of the need for approved engineering standards to be applied by competent personnel when developing repair specifications.

Topics:

• Safety requirement and competence
• Safety practices
• Training and information
• Permits
• Tags
• Danger indications
• Safety critical equipment
• Risk-based Inspection
• Asset integrity management
• Layer of protection analysis
• Safety integrity level
• Facility siting and layout
• Repairs requiring engineering.

Nicholas Anthony John Hastings

Chapter 23. Profit, Depreciation and Tax

Abstract

Aim: The aim of this chapter is to describe how tax and depreciation are taken into account in asset management decisions. Asset managers work with accounting and financial specialists and need familiarity with the terminology and principles involved in dealing with issues of depreciation and taxation.

Outcomes: After reading this chapter you will understand how after-tax profit is calculated, how depreciation is calculated and how asset management decisions are influenced by tax considerations.

Topics:

• Introduction
• Capital transactions
• Depreciation
• Acquisition cost
• Book value
• Written down value
• Effective life
• Straight line depreciation
• Declining balance depreciation
• Profit and Loss account
• Profit calculations
• Cash flow statement
• Tax credits
• Tax on resale
• Pre-tax and after-tax cash flow diagrams.

Nicholas Anthony John Hastings

Chapter 24. Asset Decision Examples

Abstract

Aim: The aim of this chapter is to present some examples of cases where asset decisions are required and to illustrate the financial and operational considerations involved.

Outcomes: After reading this chapter you will be aware of the application of discounted cash flow to repair or replace decisions and equipment acquisition decisions and also the importance of taking operational factors into account in the overall decision-making process.

Topics:

• Repair/replace decision example,
• Replace option,
• Overhaul option,
• Cost analysis,
• Availability and reliability,
• An asset-based investment case study,
• Exercises,
• Excel features of PMT and PV functions.

Nicholas Anthony John Hastings

Chapter 25. Economic Life

Abstract

Aim: The aim of this chapter is to present the concept of economic life and to discuss the role it plays in asset management decisions relating to life cycle costing and replacement decisions.

Outcomes: After reading this chapter you will know what is meant by economic life and how it can be estimated from cost data

Topics:

• Economic life concept
• Economic life examples
• Hand and spreadsheet calculations
• Calculations in the undiscounted case
• Calculations in the discounted case.

Nicholas Anthony John Hastings

Chapter 26. Equipment Replacement Decisions

Abstract

Aim: The aim of this chapter is to present the factors involved in decisions relating to the replacement of equipment, and to show how replacement decisions can be analyzed. Various scenarios relating to replacement analysis based on increasing maintenance cost with age presented. The use of spend-limits as a replacement control mechanism is presented and also the role of risk analysis in replacement decisions. Factors involved in the replacement of linear assets such as pipelines, power lines, roads and rail lines are discussed and also component replacement policies.

Outcomes: After reading this chapter you will be aware of the factors which influence equipment replacement decisions. You will know that financial analysis of replacement policy is based on comparing the estimated future costs of the existing equipment with that of a challenger. You will know about spend-limits and their role in the setting of replacement policies and how risk might be taken into account. You will also be aware of factors involved in component replacement decisions.

Topics:

• Replacement planning
• Reasons for equipment replacement
  • Technical
  • Commercial
  • Regulatory
• Technical assessment
• Data analysis
• Cost analysis
• Like-with-like replacement
• Equivalent annual cost of the challenger
• Steadily increasing cost
• Savings
• Unevenly changing cost
• Spend-limits
• Risk
• Linear assets
• Component replacement.

Nicholas Anthony John Hastings

Chapter 27. Further Financial Topics

Abstract

Aim: The aim of this chapter is to discuss a number of financial topics beyond the basic financial analysis methods that were introduced in Chap. 5. These topics are important in the management of assets. An understanding of these topics will be of value in contributing to asset management decisions.

Outcomes: You will learn about aspects of business financing, about comparing and selecting projects and issues involved in leasing. The chapter concludes with a consideration of the concepts of fixed and variable costs and break-even analysis.

Topics:

• Debt and equity financing
• Weighted average cost of capital
• Comparison and selection of projects
• Planning horizon
• With and without analysis
• Inflation
• Asset valuation
• Sinking fund
• Leasing
• Loan repayment
• Fixed and variable costs
• Break-even analysis
• Asset investment analysis example
• Regulation
• Stranded assets
• Due diligence
• SWOT analysis
• Economic concepts.

Nicholas Anthony John Hastings

Chapter 28. Performance, Audit and Review

Abstract

Aim: The aim of this chapter is to introduce and to give examples of indicators of asset performance and to discuss auditing and review of the asset management system itself.

Outcomes: After reading this chapter you will be aware of the role of performance indicators and of some of the factors to consider in creating and applying them. You will have available some examples of performance indicators in specific applications. You will be aware of the need for audit of the asset management system and the requirement for review of the system to ensure its continuing effectiveness.

Topics:

• Key performance indicators
• Railway systems
• Water supply systems
• Electricity supply systems
• Overall equipment effectiveness
• Maintenance-related performance indicators
• Audit of the asset management system
• Management review.

Nicholas Anthony John Hastings

Chapter 29. ISO 55000 Series Standards

Abstract

Aim: The aim of this chapter is to provide a guide to the ISO 55000 series of asset management standards, published by the International Standards Association. The ISO 55000 series standards describe and specify requirements for the implementation of physical asset management in asset-intensive organizations. These standards provide a general framework for the management of physical assets.

Outcomes: Reading this chapter will provide information on the requirements of the ISO 55000 series of standards and give cross-references to the relevant sections in this book and in other publications. The adoption of ISO 55000 can provide:

• A structured view and understanding of asset management,
• Effective relationships between top management, financial management, asset management, operations and maintenance,
• Improvements in asset financial returns,
• Well-informed asset management decisions,
• Insurance, health and safety, regulatory and risk management benefits,
• Company recognition/marketing,
• Improvements in training and development.

Topics:

• ISO 55000
• ISO 55001
• ISO 55002
• ISO/TS 55010
• Overview of planning and the standards
• ISO 55001 Clauses and Book Cross-reference
• ISO 55001 Clauses and Figures
• ISO 55002 Annexes and Book Cross-references
• ISO 55010 Annexes and Book Cross-references
• Strategic Asset Management Plan (SAMP)
• Functional gap analysis.

Nicholas Anthony John Hastings

Backmatter