What is Asset Management?

Understanding the Value of an Asset Management System

All stakeholders have different perspectives, and as a result, place value on different aspects of an asset. Trying to balance all the requirements is not an easy task. Whether the requirements are performance, cost, or the level of risk. Keep in mind, that performance can not only be uptime or OEE, but the beauty of a park, or the condition of a road. This is where asset management comes in.

To understand, what Asset Management is, we must first under what an asset is. According to ISO 55000, an asset is an item, thing, or entity that has potential or actual value to an organization.

Know what an asset is, we can then define Asset Management. Asset Management is a coordinated activity of an organization to realize value from assets. This involves managing all assets from the initial concept to the disposal of it, therefore it is a holistic approach. Sounds simple enough.

Asset Management Consists of Key 4 Fundamental Principles

These fundamentals need to be embedded into any Asset Management system, regardless of the size of the Asset Management system. Only when these fundamentals are embedded, will an organization truly realize the value of asset management;

Value: assets exist to provide value to the organization and stakeholders. Asset Management does not focus on the asset itself, but the value that the asset can provide. This value can be tangible, intangible, financial or non-financial (remember the beauty of the park?). The value will be determined by the stakeholders and the organization managing the asset.
Alignment: asset management translates the organizational objectives into technical and financial decisions, plans and activities. All decisions collectively enable the achievement of the objectives, and as such everyone (and all functions) must be aligned to the common purpose or goal.
Leadership: leadership and workplace cultures are determinants or realization of value. Commitment is required from all levels of the organization to successfully implement and operate an asset management system. From the CEO to the operator, all most know and live the asset management systems.
Assurance: Asset Management gives assurance that assets will fulfill their required purpose. This assurance is provided through a robust governance process, that not only looks at the performance of the assets, but also the performance of the asset management system.

The ISO 55000 Standard

Asset Management can be complex. This can impact the ability of organizations to implement a proper system. Thankfully, there is now a global standard for Asset Management, ISO 55001. The ISO 55000 series includes;

ISO 55000 Asset Management – Overview, principles, and terminology
ISO 55001 Asset Management – Management systems – Requirements
ISO 55002 Asset Management – Guidelines for the application of ISO 55001

Utilizing this framework, you can be assured that your asset management will provide value from the assets.

The Elements within ISO 55001

The ISO 55001 standard consists of 7 elements. These elements come together to provide the requirements of an asset management system.

Context of the Organization – any organization needs to take into account its internal and external context. This takes into account stakeholders, regulators, culture, financial constraints, etc. Only when an organization takes into account its full operating context, will the asset management systems be fit for purpose.
Leadership – Top management is not only responsible for developing the asset management system but also living it. If top management is not talking about the systems and communicating the vision, it will not be accepted by the lower levels of the organization.
Planning – implementing and sustaining an asset management program requires a plan that is aligned with the organization’s plan. A Strategic Asset Management Plan (SAMP), is that plan that translates the organization’s objectives into asset management objectives.
Support – Asset management is integrated with all other parts of the organization. This integration requires the various functions to work together and often share resources. This support can range from people, equipment, or information.
Operation – When operating the assets, it may not always go as planned. Changes in risk or configuration will occur and adhering to the asset management systems and guidelines, will ensure that the assets continue to provide value. Outsourcing the operation of the asset management systems does not remove responsibility for the system. The organization that owns the assets must ensure the outsourced activities are completed.
Performance Evaluation – The asset management systems and the performance of assets must be monitored and evaluated. Any gaps to the objectives shall be evaluated and improvement actions identified.
Improvement – No systems in perfect, and all systems require continued improvement. The assets or the asset management systems can be improved to reduce the risk, or increase the performance level, or lastly, reduce the cost to operate.

One key point, that needs to be emphasized. Asset Management is not a system on its own, left to specific individuals to implement. It is a fully integrated system that works with other Management systems (ISO9001, ISO33001, etc.). The system needs to be driven from the top down and have all objectives aligned between the various functional groups.

The Value Of Asset Management

The Asset Management system is designed to gather maximum value from the assets while balancing risk and cost. With the rigor and integration involved in the asset management system, there are numerous other benefits;

Improved Financial Performance
Informed Asset Investment Decision Making
Managed Risk
Improved Service and Outputs
Demonstrated Social Responsibility
Demonstrated Compliance
Enhanced Reputation
Improved Sustainability
Improved Efficiency & Effectiveness

In summary, an asset management allows an organization to understand what the users and stakeholders require from an asset. Armed with this understanding, an organization can develop the most appropriate balance between the performance of the asset, the cost of the asset and the risk associated with the asset.

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
Eruditio, LLC
Where Education Meets Application

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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. Schedule a free one-hour consultation to know more.

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Image Credit:
Richmond Dresden Bridge by Paul VanDerWerf

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Understanding the Value of an Asset Management System