Blog

LEARNER GUIDE SITXFIN005 – Manage physical assets Table of Content CHAPTER 1: DEVELOP PRACTICES FOR SYSTEMATIC MAINTENANCE, REPAIR AND PURCHASE OF PHYSICAL ASSETS 2 1.1 Develop and maintain an accurate and current physical assets register 7 1.2 Develop practices for managing physical assets that reflect overall business objectives. 12 1.3 Establish and implement maintenance and repair regimes that minimize disruption and loss of revenue 16 1.4 Integrate practices to support environmental sustainability into use of physical assets 24 1.5 Evaluate current and potential financial ability to acquire physical assets 27 CHAPTER 2: MONITOR THE CONDITION AND PERFORMANCE OF PHYSICAL ASSETS 34 2.1 Establish and implement regular reporting practices to ensure effective performance of physical assets 37 2.2 Identify physical asset problems promptly and take appropriate action 40 2.3Assess long-term physical asset performance 41 2.4 Evaluate need for, and access, specialist assistance 46 CHAPTER 3: COORDINATE FINANCING AND PURCHASE OF PHYSICAL ASSETS 51 3.1 Prepare accurate equipment specifications to guide the acquisition process 53 3.2 Estimate acquisition costs based on evaluation of current, accurate and relevant data 59 3.3 Make decisions on replacing and acquiring physical assets. 61 3.4 Select methods of financing to meet current financial objectives 66 3.5 Finance acquisitions in consultation with financial specialists 68 3.6 Keep accurate records of all financial agreements 71 References 76 CHAPTER 1: DEVELOP PRACTICES FOR SYSTEMATIC MAINTENANCE, REPAIR AND PURCHASE OF PHYSICAL ASSETS Types of physical assets required in the tourism and hospitality industry may include: Needless to mention that these physical assets need to be maintained properly for the sustainability and growth of the company. There are several maintenance strategies adopted by various businesses in the industry of tourism and hospitality. A brief review of some of these commonly practised maintenance strategies will enable you to appreciate the whole phenomena more comprehensively. 1. Reactive maintenance (breakdown maintenance) As the name suggests, this kind of approach is adopted in reaction to when something breaks down or stops working. It works well for equipment that is not so crucial in the operations. The only advantage of this approach is that it does not require any planning. While it requires little or no planning, the drawbacks could run your business into a disaster. As mentioned earlier, it is good for some non-essential equipment, but you cannot apply this strategy to every piece of equipment. If adopted as a blanket approach for all, it could lead to unnecessary delays in the production. For example, getting the right parts may take a few days or weeks. And any attempts to expedite the delivery of parts may incur extra shipping costs. In conclusion, reactive maintenance often results in means more downtime and higher maintenance costs when it’s not used strategically. Activity: Go online and search for any potential advantages and disadvantages of this approach. 2. Preventive maintenance-PM (scheduled) PM, also known as proactive maintenance, involves pre-scheduled periodic maintenance of equipment. The goal is to avoid unexpected breakdowns from occurring. Many organisations practisingPM use a software called CMMS to trigger maintenance alert whenever the next preventative maintenance is due. The use of such software allows organisations to mechanise much of their scheduling efforts. Since planning is done preventatively, it allows for the availability of any parts or resources should a problem occurs. Like the reactive maintenance, PM also has some potential if solely relied upon. For example, if the PM schedule isn’t regularly supervised, audited, and upgraded, it can cause “PM creep” to occur. Similarly, if performed too many times, there could be some post-PM breakdowns. Even though there are several ways to prevent this from happening, the risks get higher as the frequency of PMs gets higher. Activity: Go online and search for any potential advantages and disadvantages of this approach. 3. Predictive maintenance (PDM) Predictive maintenance (PDM) aims to predict any break downs before they happen so maintenance can take place at the right time. PDMreceives data through machine sensors and smart technology to generate alerts regarding the health of a piece of equipment. For instance, a sensor may use vibration analysis to warn that a certain piece of equipment is at risk of breaking down. The maintenance team can then take the equipment offline, inspect it, and repair it as required. PDMs can be carried out by having visual inspections of the equipment. But the most convenient way is to use a software called CMMS to track meter readings. PDM has the edge over PM due to the cost savings achieved through a substantial reduction in hours spent on the maintenance. It also helps the maintenance team to develop more insight into the performance and issues related to the use of the machine. Besides, it also minimises any room for human error through sensor-generated information. Like all the other types of maintenance, PDM also has some problems. For example, it could be expensive to implement. Activity: Go online and search for any potential advantages and disadvantages of this approach. 4. Reliability-centred maintenance (RCM) Reliability-centred maintenance– RCM- seeks to analyse all the possible failure modes for each piece of equipment individually. And then customise a maintenance plan for each machine. The ultimate goal of RCM is to enhance the availability or the reliability of equipment. Activity: Go online and search for any potential advantages and disadvantages of this approach. 1.1 Develop and maintain an accurate and current physical assets register Many organisations generally use a couple of spreadsheets for their stock inventory and assets. Most small businesses tend to manage their fixed assets themselves which eventually impacts the cash flow, debt and financing avenues. They don’t realise that their income heavily rests on the availability of these assets. According to research, a well-maintained asset register can impact your revenue and cash flow by 5 – 18%. It might seem extra administrative work, but in the long run, it’s worth it. So what is an asset register? An asset register is an itemised list of all the assets, and it also includes information about the location, condition and owner/user of each asset. The main purpose of an asset register is to help businesses to know: the statusprocurement datelocationpricedepreciationthe present value of the asset What goes into your asset register is governed by the capitalisation policy of your organisation. For example, your capitalisation policy may specify that the asset register will only have assets that are worth a minimum of $2000. Now if a computer is worth $1200, it cannot be entered into the asset register. The capitalisation policy varies from business to business depending on their size and worth. Types of asset register: An average small business usually has only one asset register that contains an itemised list of all your assets. Such an asset register is also known as the Fixed asset register. However, most medium to large-sized companies or businesses likely to have 3 different types of asset registers. https://comparesoft.com/asset-management-software/blog/asset-register-and-fixed-asset-management-strategies/ https://comparesoft.com/asset-management-software/blog/asset-register-and-fixed-asset-management-strategies/ Keeping an asset register consistently accurate? Generate a list of all your assets from the accounting or asset management system.Then conduct a physical audit of all these assets. You will likely pick up some discrepancies between the audit report and the list of assets as recorded in the accounting or asset management system. This discrepancy indicates the missing assets which can then be written- off. After creating your fixed asset register, the next key step is to keep it updated and accurate which could be challenging, if your assets move across different locations. Many businessesmark all their property with barcodes or RFID tags so they can track their asset movement. If your assets are Capex-heavy, then you should perform a review of your assets for trackability at least twice a year. Challenges-maintaining the accuracy of an asset register Organisations also rely on spreadsheets to maintain their register of resources. While we are all aware that spreadsheets are very easy to use, they are not designed to maintain an accurate asset register. Most of the asset-related information is dynamic and complicated. For example, it may include information about the: LocationClientWarranty informationMaintenance dataDepreciation valueUser data As you handle complex data, it is very difficult to maintain the reliability of a spreadsheet, and in most situations, multiple teams insert various information about your properties. This is why an asset register software is highly effective to ensure the accuracy of your asset register. Many modern asset register mechanism is cloud-based. In other words, multiple teams can edit data about your assets from multiple locations. The internet-based cloud system minimises the number of manual inputs. For example, a compressor would update its position and forward the data to the asset register. You do not need to use tags or barcodes for tracking purposes. The significance of Asset Audit and Depreciation Method used to maintain an accurate asset register. Although digital management of an accurate asset register is vital, physical audits can also complement the efficacy of an asset register. Physical audits can sometimes provide you with data that is almost impossible to capture through digital technologies. For instance, environmental wear and tear are only possible to be captured with a physical audit. Another advantage of a physical audit is that it enhances the reliability of your data. As a result, you will be able to handle better the issues related to compliance and external audits. Every form of depreciation needs to be registered to manage the plans for fixed asset management. Tax authorities also determine the form of the method of depreciation. Following are the four most commonly applied depreciation methods. It is important to note that your asset type may vary by asset type. For example, the straight-line method does not apply to most intangible assets. Maintaining an accurate asset register may seem like a lot of admin work, but using an asset register program will automate it to some degree. You should be able to affect your profits by 5 to 18% with tactful use of the asset audit and the correct depreciation process. 1.2 Develop practices for managing physical assets that reflect overall business objectives. Developing Asset Management Plans Plans for asset management are the foundation of an efficient asset management system. The latest ISO 55000 series of asset management principles clearly define the value of asset management plans. Through balancing expense, threat and quality across the lifecycle of an asset, they provide the blueprint to extracting value from physical assets. Asset management plans (AMPs) describe the execution activities needed to achieve the asset management goals of an organisation. Asset Definition and Selection It may not be as simple as it might seem to identify resources that can then be filtered through a selection process. Assets can be managed at different levels from an expanded perspective of asset management. Assets are perceived individually at a foundational level. Assets can also be described and perceived in terms of systems. Examples of asset systems may include Networks,Production linesFacilities systems (HVAC, wastewater, compressed air) And a third enlarged view can eventually describe portfolios of capital. Examples may involve oil rigs, real estate, business units, and municipalities. The most important element of asset management principles is a well-defined selection process. Assets should be selected by their criticality and the specific threat to the value flow. A Risk-Based Asset Management (RBAM®) approach should be used which involves a specified process for classifying, analysing, controlling and measuring the operating and equipment maintenance strategies. From a pure process perspective, identifying and choosing assets is most likely a result of the strategic asset management plan and setting goals for asset management. The aim is to preserve the link within the AMPs to achieve organisational goals. AMP Maturity Levels Another important start-up activity involves determining the approach to data collection and analysis. The effort to developing an asset management system that provides the necessary information to create advanced AMPs is often described as a real journey of continuous improvement. The simplest way to begin is to gather all the existing data and analyses and start constructing the plan. Where data are needed but do not exist, the organisational experience and judgment are used as alternatives. Documented assumptions bridge knowledge gaps. This approach enables AMPs to be constructed quickly. The alternative approach allows the organisation to carry out a gap assessment against its current capabilities. It also enables companies to establish a strategic implementation plan and bridge certain gaps before AMPs are ready. This approach requires more time and resources, but the data and analysis are more detailed leading to better decision making. Using the current information, develop the first AMP as a provisional plan. It can bring numerous benefits. It helps the company: review the strengths and weaknesses of current practices in asset managementdefine goals for plans.stop allocating unnecessary data gathering without fully understanding the needs. It is almost certain that the AMP’s maturity level will grow over time irrespective of how a company chooses to operate. The AMP development process will recognise resource deficiencies and growth opportunities that need to be addressed consistently through a continuous improvement method. Construction of the Plan The active asset management strategy outlines the tasks to be undertaken and the tools to be used to achieve the asset management targets as well as the organisational goals. An asset management strategy provides guidance and objectives for an individual asset or a portfolio, group or class of assets. Asset management plans should be drawn up to suit the organisation’s time and horizons. Time horizons must meet the needs of the organisation and consider the scope of responsibility of the organisation as well as the life cycle of its assets. To achieve organisational goals, a template for an asset management plan will help you outline the specific activities, resources and schedules needed for an individual asset or a group of assets. The asset management plan’s maturity level and the complexity of the asset management system may influence those parts of the plan that are prioritized over others. Following are some recommended sections your AMP template should include: Overview- Asset Management Plan An Asset Management plan consists of many sections. Levels of Service A key element in the asset management plan is matching the level of service that resources provide to meet customer expectations. This provides a balance between the delivery cost and the required level. Specific service levels include cost, performance value, quality, quantity, consistency, security and awareness. Future Demand Future demand offers specifics of projected growth and use of capitals. This section also discusses the following. The demand driving factorsHow the changes in demand impact assetsA demand contingency planningInvestment planning essential to meeting the demand forecast Asset Lifecycle Manag

ement This section summarises how to maintain and run the asset at the negotiated level of service while minimising ownership costs at an acceptable level of risk. This section is the most important part of the AMP. It consists of the following.  Financial Summary This section summarizes all the financial requirements emerging from the activities carried out in the sections mentioned above. The financial analysis is an important link to the other parts of the organisation. It sets the importance of asset management by incorporating the financial impact of the operations into the financial and strategic operations of the business. The overview should include the cash flow projections for 1-years. It should also provide the essential details on how to handle revenue (capital versus expense)to assess appropriate funding and timing strategies. Continuous Improvement This section aims to outline: The current and future practices in asset managementThe details on the planning and monitoring of the asset management plansAny recommendations for improving the asset management systems Writing, Reviewing the Plan It is time to start writing the AMP once the resources are selected and the strategy is established. The trick is to always bear in mind the priorities and depend on the most up-to-date and full available data. Where hypotheses are needed, be sure to document such hypotheses. Some parts of the model can, in many cases, include summary information with links to the exact locations where the data or study is stored. For consistency reasons, many such references to specific locations within the asset management system are very likely to be included in the AMP. While various subject matter experts may write different sections of the AMP, but a single point of accountability should be organized. For reliability and precision, the whole group must study the AMP. Making an independent party review the project for further insight and understanding may also be beneficial. Finally, the project should be seen as a living document to be revised and maintained as per the criteria defined. Compliance When businesses choose to adopt the ISO 55000 Asset Management Standard certification course, there are several key principles to consider when drafting asset management plans. Section 6.2.2 of ISO 55001 defines the main specifications and can be summarised as follows: 1.3 Establish and implement maintenance and repair regimes that minimize disruption and loss of revenue Maintenance strategies There are numerous maintenance strategies available to choose from. These include proactive approaches that reduce maintenance requirements. There are some that cover ways to keep well and methods for assessing performance to eliminate current failures. Pre-emptive Detection and Elimination On the drawing board, strategic maintenance preparation must begin. Remember, you’re stuck with it once a plant item is installed! To retain its quality, a piece of equipment requires what maintenance it needs. The fact that the model specifies the specifications for maintenance does not escape. If you want less maintenance, you need to start with proper design choices which reduce the maintenance number. The approaches used to illustrate maintenance mitigation incentives are focused on the mode of failure and assessment of consequences (FMEA). An easy way to understand the approach is to look at it as a set of responses to ‘ what – if ‘ questions given in every section of the unit. Preventive maintenance techniques are the best because they are the least costly way of reducing maintenance! Quality Control and Assurance This technique emerged in the manufacturing industries and is equally applicable to maintenance work.It is essentially the proper and appropriate production and assembly control so that equipment with correct and accurate parts is constructed as planned. This includes substantiating and showing that each piece of equipment meets the design requirements and is properly installed into the equipment. It typically involves writing procedures specified on how the work is done. This requires steps of screening and reviewing to ensure adherence and documented evidence that the protocol has been followed. Using the right parts, if the equipment is correctly and properly assembled it will last longer between repairs. Adopting a repair plan of Quality Control and Assurance increases the accuracy of parts and workmanship. It translates into better equipment working between faults with shorter intermediate periods. Although avoiding mistakes, this tactical maintenance step will yield results instantly. Within 6 to 12 months, you will begin to see the benefits. Preventative Maintenance One of the very first techniques was Preventative Maintenance (PM) and it is still very successful. This comes in two forms: 1) review and analysis, and 2) substitution and interference. The first method of Preventative Maintenance is the usual response to equipment and parts showing signs of age or wear-out.This includes examining and observing and periodically checking the state of the equipment and its components, such as replacing the old lubricant. It is an excellent time to look for signs of imminent faults in vital or working parts when maintenance is completed. When proof of failure is detected, immediately or at the earliest convenient time before breakage, the component will be replaced for new. With the very first application, a preventive maintenance technique prevents failures. You could expect a well-run PM strategy to stop failures by up to 90 per cent at all times. Maintenance will not be greatly reduced; only most breakdown errors will be avoided. Shutdown – Overhaul Maintenance The second PM type involves removing the old. It uses related degradation at a fixed rate shorter than the intermediate time between failures. This should avoid an unforeseen failure and allow for maximum time for production. This work is typically done as a reconstruction where the entire machine is removed during a shutdown and brought to the factory to be stripped down to its parts and assembled as new. However, due to poor quality control, assembly errors, incorrect choice of materials and implemented harm, you are also exposed to ‘ infant mortality ‘ risks. Predictive- Maintenance Predictive Maintenance (PdM) is a powerful strategy for maintenance. This includes tracking within the equipment for signs of changing conditions. The amount of change and the rate of change are tracked and used to predict the time of failure. PdM is based on the understanding that it takes time for many failures to occur. There is usually a starting point, a steady decline, and finally a point where the object is unable to function. When the early onset of the failure can be identified, there is always time to properly monitor the equipment and continue to operate until a replacement is required. PdM techniques include: Thermographyoil debris analysisvibration monitoringUltrasonic measurement for the thickness These are all the methods that detect a change and allow the rate of change to be measured so that observations can be made on the ongoing output of the equipment. You can immediately spot issues when using a predictive maintenance management strategy and can respond to them before a failure occurs which shuts down the project. Intentional Selection Over-Design There are times when choosing more durable equipment is useful. This is a strategic choice of maintenance aimed at generating longer periods of service of equipment between failures. This means selecting equipment with better, heavier, more durable parts. There may be a higher buying price, but over the life of the equipment, it is offset by more production output. Improved Technologies In response to existing problems, new inventions and innovative designs usually occur. It is highly recommended to constantly looking for new technologies that reduce equipment operational issues. When a useful piece of technology is discovered, test it to see if it suits your situation and needs. Actively explore such innovative technologies as they make your operations smooth. Allocate this task to an engineer who is to spend time in pursuit of improved software that can prevent the need for maintenance or improves performance. Root- Cause Elimination and Design-Out You need a maintenance strategy that will solve your problems and continuously improve the performance of your plant and equipment! This is a strategic maintenance move which may result in a long-term deterioration in the quality of the production plant if not done. When operational issues are not solved by planning them out, the problems can escalate to the point that output drops due to constant failure of equipment. A problem can only be stopped from happening again if it is eliminated. There are methodologies available to track the root cause of problems. Proactive Education & Training One of the best maintenance strategies is to train the operators and maintainers who will operate and take care of the equipment’s engineering design requirements.This is a good strategic measure as it means passing key information to computer users. Competent consumers can make wise decisions and take the right actions. The knowledgeable operation of the equipment means longer periods of trouble-free production. A comprehensive training program includes 10 working days of training per worker per year on the development and function of the equipment and systems used in the company. Continuous improvement requires constant learning. Train the employees well, and within six months they will bring benefits to the project. Most importantly, they’re going to think about new ideas and introduce new technologies that carry competitive advantages. Maintenance Planning and Scheduling This is a crucial step in strategic planning for maintenance! It is based on the principle of enhancing the actual performance and implementation of previous planning and preparation. That’s why elite athletes don’t qualify for the competition unless they’ve practised. We know they won’t succeed unless they’ve planned extensively in advance! The same applies to operations and maintenance – each has to be prepared and coordinated before it is completed. Getting the Right combination of Strategic Maintenance Management Strategies For all conditions and all businesses, there is no one maintenance technique! Alternatively, you need a combination of maintenance management strategies that are appropriate for your project and equipment age. You will always need a preventive maintenance number, as well as a predictive maintenance amount as equipment ages, along with the root cause analysis to remove non-random failures. Added to this are adequate practice, periodic shutdowns of renovation, replacement of old technologies with new ones, and so on. Alignment of Maintenance Tasks to Failures Failures can be divided into three groups below. Induced IntermittentWear out Induced failures result from an outside force causing the failure mode. For example, the manufacturing process may be performed by a plant in such a way that the resources are pushed into a potential failure situation prematurely. Although the process and PdM monitoring can help detect these possible failures (removing an unplanned stop), it is crucial to understand that induced failure must be identified and evaluated to determine the root cause. Intermittent failures can occur at any time. Some may use the word “random,” but the meaning is that it is not possible to specify the mean time between failure (MTBF). They vary from induced failure as they usually occur far enough up the P-F Curve to be able to plan and schedule the repair effectively. These differ from induced failure because they typically happen far enough up the P-F Curve.If possible, a plant can better diagnose these modes of failure by the system and PdM monitoring. Most plants often find that PMs are unsuccessful in assessing the onset of failure in either triggered or intermittent failures and thus a waste of capital. Many plants also find that PMs are not effective in determining the onset of failure in either induced or intermittent failures and, therefore, a waste of capital. Too often then, a plant may choose to increase PM rates, or worse, write and schedule new procedures to try to mitigate such failures. This is what ultimately leads to a maintenance program that is inefficient, costly and out of reach. Wear-out failures are also known as MTBF. They occur when a component’s useful life is exhausted. These types of failure modes are often spotted via process and PdM monitoring. Time-based refurbishment, however, is typically the most effective strategy for maintenance. The Definition of PM A PM, by default, is a repair/replacement operation that restores an asset’s functionality or useful life to its original state. Other types of PM include failure-finding or condition- evaluation tasks. If the consequences of failure or the risks associated with failure are tolerable, a plant should deploy a failure-finding mission. These tasks are also beneficial in finding concealed failures. Tasks for condition assessment are performed to determine the failure rate of a part. If companies choose to carry out activities of condition assessment, it is with the awareness that condition assessment is used to try to determine the MTBF. It should be qualitative in nature when properly applied. In other words, a measure of precision is taken and compared to defined criteria determining when replacement is needed. There are two main reasons why a plant should put quantitative measures in place. Implementing Maintenance Strategies Via failure modes and effects analysis (FMEA) for each plant type of equipment, a detailed understanding of possible failures of each piece of equipment can be established. FMEA templates can be created at any level- a class, a sub-class, or qualifier level. A significant amount of time can be saved by developing these templates. A plant should be able to answer the seven fundamental RCM questions with each type of equipment. Find a logical path to using the three tools – system monitoring, PdM monitoring, and PM in that order – when answering Question 6 as mentioned above. Once completed, the FMEAs can be applied at the asset level. In the criticality rating criterion, this granular analysis reveals if the consequences of failure are sufficiently large to perform the task. This is really an economic decision principle, “Is the failure cost greater than the mitigation cost? This is extremely important to note as the goal of these initiatives is to minimise maintenance costs while maintaining high utilisation of resources. Now a plant can identify and communicate system parameters as well as restore and enforce PdM routes. For example, a plant can use slow or high-speed vibration monitoring, electrical and mechanical thermography, analysis of the motor circuit, oil analysis, and NDT thickness testing. It is then possible to remove from the system existing PM tasks which cover the same failure modes that are now being identified with the PdM tasks. Example- Maintenance Strategy The worn part will be replaced if a plant decides that a PM is the most efficient way to mitigate failure. For example, if for a PM that concerns hanger bearings, a screw conveyor is shut down, the bearings would be replaced instead of checking to decide if the replacement is required. This method is often taken as the cost of shutting down the line and the work required to tear down the inspection equipment is higher than the cost of a few hanger bearings. After repairs have been made, the removed bearings may be checked “at the table” to help define the MTBF further and, if necessary, “tweak” the task frequencies. It removes almost all tasks in the form of condition assessment. The frequency of PMis determined by the history of work order and experience of craftsmanship. If there is a doubt about MTBF, the longer time to set the PM frequency will be selected by any given pla