Introduction to Asset

Management
INFRASTRUCTURE IS THE FOUNDATION TO SUSTAINED QUALITY OF LIFE

Prof. Khanindra Pathak,

Department of Mining Engineering
INDIAN INSTITUTE OF TECHNOLGY KHARAGPUR
Why do you need scientific Asset Management
• Aging Infrastructure: how reliable are they
• Increasing owning costs
• Inadequate monetization of your land and assets
• Diminishing resource valuation
• Increasing demands for utility services
• Compatibility with contemporary developments and mindsets
• Reduction in technical core competency with retirement of
experienced staff
• Increasing quality and competency demands from customers
• More expectation from the existing infrastructure
• To be Proactive from being Reactive
Are your assets performing all right or are they failing?
 What we expect today in an organization?

• Extending Asset Life with sustaining and enhancing services

• Optimize maintenance and renewal of assets
• Sustain long term performance
• Ensuring Reliable and cost effective infrastructure
• High standard of quality of life
What is the concept of Assets?

Any item of economic value owned by an individual, organization or corporation,

especially that which could be converted to cash or services directly or indirectly.
Examples are cash, securities, accounts receivable, inventory, office equipment, real
estate, a car, and other property.

On a balance sheet, assets are equal to the sum of

liabilities,
common stock,
preferred stock, and
retained earnings.
From an accounting perspective, assets are divided into the following categories:

Current assets (cash and other liquid items),

Long-term assets (real estate, plant, equipment),
Prepaid and deferred assets (expenditures for future costs such as insurance, rent,
interest), and
Intangible Assets (trademarks, patents, copyrights, goodwill).
Asset management has more to do beyond valuation

Asset Management involves:

Minimization of Life Cycle Costs of the organization by proper decision

making regarding its assets through out its life for
Acquisition
Operation
Maintenance
Renewal
All involved in asset usage in an organization need to know:

• What is asset management?

• Why does an Institution or a company need it?
• What is to be expected as deliverables of Asset Management job?
• What are the sequential activities to achieve objectives of Asset
Management?
• How to get a company to initiate asset management ?

What, then, is asset management (AM)?

Asset Management (AM)?

Systematic integration of advanced and sustainable

management techniques into a management
paradigm or way of thinking with Primary focus on
the long-term life cycle of the asset and its
sustained performance, rather than on short-term,
day-to-day aspects of the asset
How to develop a framework for asset management in
an Institution?

Asses where you stand to adopt an approach from various alternative, e.g.
1. Approach of cost minimization to work with limited resources
for delivering the objectives through an accepted level of risks in
all infrastructures across various sections of company
6.2. Approach
Approach of business
of developing processImprovement
Business life cycle and manage
Plans based the core
on risk processes
profiling,
3. Approach
through
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Total
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human knowledge
considering tomanagement,
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4.and
Approach
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framework to optimalpsychology
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initiatives through supply
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theoutput
mining and associated business
process
5. Approach of investigating through basic issues to reveal current
status of assets, required level of service, critical assets for sustaining
performance, best investment strategy for capital, operation and
maintenance and viable long term funding strategy.
Developing Asset Registry

1
Assessing Performance

2
and Failure Mode

3
Remaining Life
Assessment of Assets
Determine Assets

4
Lifecycle and
Replacement costs
Fixing Target Level of

5
Service (LOS)
Determine Critical
6
Business Risk
Optimize Operation
and Maintenance
7

Investment
Optimize Capital
8
Approach of sequential actions in 10 steps process

Investment

Determine Funding
9

Strategy

Build Asset
10

Management Plan
10 Step Asset Management Activities
Approach of AM accepting the following seven principles

1. Value Added/Level of Service Principle— assets exist to deliver services and

goods that are valued by the customer-stakeholder; for each consumer-
stakeholder there is a minimum level of service below which a given service is
not perceived as adding value.
2. Life Cycle Principle— all assets pass through a discernable life cycle, the
understanding of which enhances appropriate management.
3. Failure Principle— usage and the operating environment work to break-down all
assets; failure occurs when an asset can not do what is required by the user in its
operating environment.
4. Failure Modes Principle— not all assets fail in the same way.
5. Probability Principle— not all assets of the same age fail at the same time.
6. Consequence Principle— not all failures have the same consequences.
7. Total Cost of Ownership Principle— there exists a minimum optimal investment
over the life cycle of an asset that best balances performance and cost given a
target level of service and a designated level of risk.
Savings through Asset Management

• Efficiency gains
• Cost avoidance (defer, eliminate,
reduce)
• Cost effectiveness and redirection

AM play-offs

• Reduced life cycle costs from better-focused (redirected)

resource use
• Better value-per-dollar spending
• Confidence in decision-making
How to go ahead?
Start using and applying concepts ……
 Conclusions

• Benefits of systematic Asset Management are manifold. Institutions and

organizations need to initiate asset management project for its early
implementation.

• Special taskforce for implementation of proper Asset Management should

be initiated at least at one project as a pilot study and its performance
should be critically evaluated for adopting necessary policy for organization
wide implementation.