The Asset Management Principles

The principles of asset management are universally applicable across all asset categories, from passive assets such as buildings and infrastructure, to static assets like land, and active assets including mechanical, electrical, electronic, mobile equipment, or software. While the techniques, practices, and lifespans vary for each asset type, the overarching principles remain constant across the board.

For most organizations, even those managing a diverse range of assets, these fundamental principles provide a unified framework. This allows senior management to evaluate the relative value of different activities or services, applying a consistent approach to decision-making. An asset management system must be capable of delivering the required outcomes at every stage of an asset’s lifecycle, ensuring optimal performance and longevity.

Core Asset Management Principles:

“Value Added/Level of Service”

Assets exist primarily to facilitate the delivery of services or products that stakeholders deem valuable. For each consumer or stakeholder, there exists a baseline service level, beneath which a service loses its perceived value. Ensuring that assets consistently meet or exceed this level of service is fundamental to asset management.

“Life Cycle”

Every asset undergoes a distinct lifecycle, with identifiable phases including acquisition, operation, maintenance, and disposal. Understanding and managing each stage of this lifecycle enables more adept asset management practices, optimizing performance and extending asset longevity.

“Failure”

All assets degrade over time due to usage and environmental factors. Failure occurs when an asset can no longer fulfill its required function. Effective asset management involves anticipating and mitigating these failures through regular maintenance, upgrades, and monitoring.

“Failure Modes”

Not all asset failures have the same consequences. Some may have minimal impact, while others can cause significant operational disruptions. Identifying and understanding the different failure modes helps prioritize maintenance and mitigation strategies.

“Probability of Failure”

Assets of identical age do not necessarily fail concurrently. The likelihood of failure varies and is influenced by multiple factors, including usage patterns, operating conditions, and maintenance history. Accurate prediction models and regular inspections can help manage these probabilities.

“Consequence of Failure”

The impact of asset failures varies. Some may be minor inconveniences, while others can lead to major operational disruptions or safety hazards. Assessing the potential consequences of failure is crucial for prioritizing asset management efforts and resources.

“Total Cost of Ownership”

An ideal investment threshold exists across an asset’s lifecycle, balancing performance and cost. This threshold ensures optimal service levels while mitigating risks. Total cost of ownership (TCO) includes acquisition, operation, maintenance, and disposal costs, and should guide asset management decisions.

Importance of Asset Classification

A granular classification is essential for effective asset management. It allows organizations to tailor their strategies and resources to specific asset types, ensuring optimal performance and cost-efficiency.

Key Classification Factors

1. Criticality: Assess the asset’s importance to the organization’s operations.
2. Value: Determine the asset’s financial worth and potential revenue generation.
3. Risk: Evaluate the potential risks associated with the asset, including failures, security breaches, and environmental hazards.
4. Life Expectancy: Estimate the asset’s useful life and plan for its replacement or decommissioning.

The challenge is to apply these principles systematically within a complex organization – through an asset management program.

Implementing Asset Management Principles

To effectively implement these principles, organizations must adopt a comprehensive approach that integrates asset management into their overall strategy. This includes:

1. Developing an Asset Management Framework: Creating a structured framework that outlines processes, policies, and responsibilities for asset management.
2. Investing in Technology: Utilizing asset management software and tools to streamline processes and enhance data management.
3. Training and Development: Providing ongoing training and development opportunities for staff to ensure they have the skills and knowledge needed for effective asset management.
4. Continuous Monitoring and Improvement: Regularly reviewing and improving asset management practices to ensure they remain effective and aligned with organizational goals.

NEXGEN Asset Management: Your Partner in Implementation

NEXGEN Asset Management software provides the support you need to implement your asset management program. Including asset inventory, work orders, inspections, preventive maintenance, seamless GIS integration and management reporting. NEXGEN also manages your Asset Management Processes including risk-based capital improvement, predictive maintenance, asset lifecycle planning, and condition assessments that automatically update asset useful life. In other words, one solution is to meet both needs.