ENG8104: Asset Management Strategy for Precision-Plus Motors
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This report provides a comprehensive analysis of asset management strategies, focusing on a hypothetical manufacturing company, Precision-Plus Motors Spare Manufacturing Company. It explores the company's assets, including manufacturing plants, machinery, and vehicles, and examines their current state and the services they provide. The report emphasizes the importance of effective asset management for achieving quality production, efficient operations, and financial control. It reviews the asset life cycle, including acquisition, maintenance, and disposal, and highlights the need for improved policies to streamline processes and reduce costs. The report underscores the significance of technological advancements and the adoption of new technologies to improve work efficiency and quality service delivery. It also covers the expectations of stakeholders and the board of directors, providing insights into how to boost their confidence through strategic asset management practices.
ASSET MANAGEMENT
[Author Name(s), First M. Last, Omit Titles and Degrees]
[Institutional Affiliation(s)]
[Author Name(s), First M. Last, Omit Titles and Degrees]
[Institutional Affiliation(s)]
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Abstract
Asset management is an important exercise that must be taken seriously by any organization that
intends to achieve its missions, goals, and objective either in the short term or long term. An
organization may achieve a balanced quality performance if there are good governance and
effective-controls of its assets and asset network.
In the past years, several problems had been witnessed that included a traditional way of
production and constant use of obsolete in manufacturing processes that brought a lot of
difficulty in managing the company's assets (Love, Matthews and Lockley, 2015).
Therefore, the objective of this study is to come up with an effective strategy that will ensure
better asset management, improving the company’s asset management processes and necessary
standards that will ensure high-quality services in both the short and long term. This should be
done while reflecting on the expectations of the organization’s stakeholders and the board of
directors.
This study revolves around a hypothetical manufacturing company called Precision-Plus Motors
Spare Manufacturing Company with several tangible assets to be managed to ensure sound
performance, quality service delivery and better profit maximization (Smith, 2016). It is believed
that through the availability of funds, the company will be able to streamline its processes and
operations. In the end, the implementation of this reviewed asset management strategy will boost
the confidence of stakeholders, customers, and the management teams as well.
Background
Industrial manufacturing commenced in the past with people coming up with different products
from the existing natural resources with the aim of benefiting others. The industrial revolution
Asset management is an important exercise that must be taken seriously by any organization that
intends to achieve its missions, goals, and objective either in the short term or long term. An
organization may achieve a balanced quality performance if there are good governance and
effective-controls of its assets and asset network.
In the past years, several problems had been witnessed that included a traditional way of
production and constant use of obsolete in manufacturing processes that brought a lot of
difficulty in managing the company's assets (Love, Matthews and Lockley, 2015).
Therefore, the objective of this study is to come up with an effective strategy that will ensure
better asset management, improving the company’s asset management processes and necessary
standards that will ensure high-quality services in both the short and long term. This should be
done while reflecting on the expectations of the organization’s stakeholders and the board of
directors.
This study revolves around a hypothetical manufacturing company called Precision-Plus Motors
Spare Manufacturing Company with several tangible assets to be managed to ensure sound
performance, quality service delivery and better profit maximization (Smith, 2016). It is believed
that through the availability of funds, the company will be able to streamline its processes and
operations. In the end, the implementation of this reviewed asset management strategy will boost
the confidence of stakeholders, customers, and the management teams as well.
Background
Industrial manufacturing commenced in the past with people coming up with different products
from the existing natural resources with the aim of benefiting others. The industrial revolution
which was witnessed in the early 18th century catalyzes operations for the industrial
manufacturing industry. Innovations and inventions were the major activities that came into play.
This is the basis within which this hypothetical manufacturing company called Precision-Plus
Motors Spares was founded.
Description of organization (The Precision-Plus Motors Spare Manufacturing Company)
This is a medium-sized company with a manageable number of human workforces. The
workforce in the company comprised of different staffs with different qualifications and
speculation.
On the topmost leadership of this company comprises the Board of Directors, Chief Executive
Officer (CEO), several departments and junior management staff. Asset management is found in
the finance department. This company too believed in revolutionary ideas and ensuring that there
is strong revolutionary leadership just like other companies (Campbell, Jardine, and McGlynn,
2016). The company believes in its core values, mission, vision, goals, and objectives for proper
functioning.
The board of directors is charged with the responsibility of making important decisions. The
Chief Executive Officer may come up with company policy for ratification by the board. The
company Chief Executive Officer is equally in charge of day to day running of the company. The
remaining staff is required to implement the board's decision and give feedback where
appropriate.
manufacturing industry. Innovations and inventions were the major activities that came into play.
This is the basis within which this hypothetical manufacturing company called Precision-Plus
Motors Spares was founded.
Description of organization (The Precision-Plus Motors Spare Manufacturing Company)
This is a medium-sized company with a manageable number of human workforces. The
workforce in the company comprised of different staffs with different qualifications and
speculation.
On the topmost leadership of this company comprises the Board of Directors, Chief Executive
Officer (CEO), several departments and junior management staff. Asset management is found in
the finance department. This company too believed in revolutionary ideas and ensuring that there
is strong revolutionary leadership just like other companies (Campbell, Jardine, and McGlynn,
2016). The company believes in its core values, mission, vision, goals, and objectives for proper
functioning.
The board of directors is charged with the responsibility of making important decisions. The
Chief Executive Officer may come up with company policy for ratification by the board. The
company Chief Executive Officer is equally in charge of day to day running of the company. The
remaining staff is required to implement the board's decision and give feedback where
appropriate.
Precision-Plus Motors Spare Manufacturing Company organization structure (Torres-Machí et
al., 2015)
Company’s assets and asset network.
The company is charged with the development of car spares parts in large-scale. These car spare
parts are sold to other industrial companies who use them for their consumption as well as selling
to customers. This gives it a unique identity in the field of manufacturing industry since its
tangible assets and asset network comprises manufacturing plant, machinery, lorries, motor
vehicles, office furniture and fittings, customers, suppliers, inventories, storage premises and
human capital who are specialized in different fields. These assets are used for different purposes
to facilitate production processes (Torres-Machí et al., 2015). The asset manager has sole
responsibility in ensuring that they function, being maintained and their records are kept and
safeguarded.
There exists a networking system of the company assets that facilitates the production of motor
spare parts. The network of assets is centralized. The movement of the company assets is tracked
from the company headquarters to its distribution outlets. The manufacturing plant is used in the
al., 2015)
Company’s assets and asset network.
The company is charged with the development of car spares parts in large-scale. These car spare
parts are sold to other industrial companies who use them for their consumption as well as selling
to customers. This gives it a unique identity in the field of manufacturing industry since its
tangible assets and asset network comprises manufacturing plant, machinery, lorries, motor
vehicles, office furniture and fittings, customers, suppliers, inventories, storage premises and
human capital who are specialized in different fields. These assets are used for different purposes
to facilitate production processes (Torres-Machí et al., 2015). The asset manager has sole
responsibility in ensuring that they function, being maintained and their records are kept and
safeguarded.
There exists a networking system of the company assets that facilitates the production of motor
spare parts. The network of assets is centralized. The movement of the company assets is tracked
from the company headquarters to its distribution outlets. The manufacturing plant is used in the
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manufacture of the company motor spares parts. For the motor spares to be designed properly,
machinery is used for design, shaping and fixing purposes. These processes use old technology
methods to carry out which are considered to be slow. The manufactured motor spare parts
(inventory) are packed and packaged awaiting distribution by Lorries to several distribution
outlets and to other companies that require the motor spares parts for various industrial
applications. These spare parts cannot be manufactured without the supply of relevant raw
materials. Suppliers are charged with the mandate of making some supplies to the company. It
can be reported that the supply of low-quality raw material has greatly contributed to the low-
quality production of motor vehicle spare parts (DiMase, Collier, Heffner and Linkov, 2015).
In the asset, networking are the customers who use the manufactured motor spares parts for their
various consumption needs. The has been a shift in the demand for these consumers due to
several challenges that the Precision-Plus Motors Spares manufacturing company has undergone.
The short-term assets in the Precision-plus Motor Spares manufacturing are considered to have
five years of useful lives and are even projected to continue functioning slightly above their
useful lives. For long term assets, their useful lives are ranging from ten to twenty years.
Services provided by the asset network
The assets in this company are primarily used to generate the spare parts for motors. The
manufacturing plant is based on factory building having several offices. Some of these offices
are used for the general administration of the company (Pavlovskis, Antucheviciene, and
Migilinskas, 2016). The fleet of Lorries and motor vehicles helps in the distribution of the spares
to various outlets accessible by customers and other manufacturing which uses them for various
industrial applications. The management staff is also allocated some motor vehicles to promote
machinery is used for design, shaping and fixing purposes. These processes use old technology
methods to carry out which are considered to be slow. The manufactured motor spare parts
(inventory) are packed and packaged awaiting distribution by Lorries to several distribution
outlets and to other companies that require the motor spares parts for various industrial
applications. These spare parts cannot be manufactured without the supply of relevant raw
materials. Suppliers are charged with the mandate of making some supplies to the company. It
can be reported that the supply of low-quality raw material has greatly contributed to the low-
quality production of motor vehicle spare parts (DiMase, Collier, Heffner and Linkov, 2015).
In the asset, networking are the customers who use the manufactured motor spares parts for their
various consumption needs. The has been a shift in the demand for these consumers due to
several challenges that the Precision-Plus Motors Spares manufacturing company has undergone.
The short-term assets in the Precision-plus Motor Spares manufacturing are considered to have
five years of useful lives and are even projected to continue functioning slightly above their
useful lives. For long term assets, their useful lives are ranging from ten to twenty years.
Services provided by the asset network
The assets in this company are primarily used to generate the spare parts for motors. The
manufacturing plant is based on factory building having several offices. Some of these offices
are used for the general administration of the company (Pavlovskis, Antucheviciene, and
Migilinskas, 2016). The fleet of Lorries and motor vehicles helps in the distribution of the spares
to various outlets accessible by customers and other manufacturing which uses them for various
industrial applications. The management staff is also allocated some motor vehicles to promote
their movement to and from distribution outlets. The asset storage premises are purposely meant
for storage of the company’s inventory.
The current state of asset network
The current condition of these assets network requires a lot of improvement to increase
efficiency, productive capacity and quality products. The use of old model Lorries and vehicles
in the network has led to the loss of time and money as a result of delayed processes. Due to the
current technology some assets have become obsolete. The customer's attention also has shifted
to the new entrants in the market.
Introduction
Asset management refers to a strategy that incorporates processes like financial-management,
engineering work, operations, and regular maintenance to achieve the best life-time
effectiveness, usefulness and best return from the tangible assets
Precision-Plus Motors Spares Manufacturing Company just like other companies in different
sectors does face several challenges. Asset management is a general concern across many outlets
of this hypothetical company which requires management intervention. Assets had short useful
lives and many cases of breakages were reported. The productive capacity of this company was
low and equally, the company was faced with a lot of financial challenges (Shahid, Mahamood
and Das, 2016).
It can be noted that in the past decades many manufacturing companies were using obsolete
systems in managing their assets. Quality of production was an issue and many customers
expressed a lot of dissatisfaction and this lowered the profitability of several companies. The
for storage of the company’s inventory.
The current state of asset network
The current condition of these assets network requires a lot of improvement to increase
efficiency, productive capacity and quality products. The use of old model Lorries and vehicles
in the network has led to the loss of time and money as a result of delayed processes. Due to the
current technology some assets have become obsolete. The customer's attention also has shifted
to the new entrants in the market.
Introduction
Asset management refers to a strategy that incorporates processes like financial-management,
engineering work, operations, and regular maintenance to achieve the best life-time
effectiveness, usefulness and best return from the tangible assets
Precision-Plus Motors Spares Manufacturing Company just like other companies in different
sectors does face several challenges. Asset management is a general concern across many outlets
of this hypothetical company which requires management intervention. Assets had short useful
lives and many cases of breakages were reported. The productive capacity of this company was
low and equally, the company was faced with a lot of financial challenges (Shahid, Mahamood
and Das, 2016).
It can be noted that in the past decades many manufacturing companies were using obsolete
systems in managing their assets. Quality of production was an issue and many customers
expressed a lot of dissatisfaction and this lowered the profitability of several companies. The
asset management exercise was really cumbersome because there were no proper asset registers.
Entries made by new firms in the market became a threat to the company.
Effective and sound asset management plays a very important role in the company since it
facilitates the production of quality products, provision of quality services and good financial
control. In the previous few years, a good number of companies started realizing the significance
of asset management as a business strategy that should be fully implemented to achieve effective
and better financial performance. The framework within which this exercise underpins is the
process of strategy implementation as well as integrating the processes into one single system
that will ensure asset security, performance and useful life (Shahid, Mahamood and Das, 2016).
The basis of this research report is to review the strategy and framework within which the assets
of Precision-Plus Motors Spares manufacturing company are managed, improve on the
production efficiency and to ensure quality standard services.
For manufacturing companies, technological advancement is key to many activities. It facilitates
the spirit of technology market research, unique innovation, and product development.
Automating many processes will help increase the work efficiency in the company.
It is also intended the management company will implement the new policies framework and
regulations regarding the company’s asset networking systems, control measures and
maintenance processes. Further, the adoptions of new technology which help improve work
efficiency, quality production, and quality service delivery.
The asset life cycle
Many organization posses several tangible assets of different kinds that employees in the top
leadership are expected to manage or can get value on them. The company is indeed one of the
Entries made by new firms in the market became a threat to the company.
Effective and sound asset management plays a very important role in the company since it
facilitates the production of quality products, provision of quality services and good financial
control. In the previous few years, a good number of companies started realizing the significance
of asset management as a business strategy that should be fully implemented to achieve effective
and better financial performance. The framework within which this exercise underpins is the
process of strategy implementation as well as integrating the processes into one single system
that will ensure asset security, performance and useful life (Shahid, Mahamood and Das, 2016).
The basis of this research report is to review the strategy and framework within which the assets
of Precision-Plus Motors Spares manufacturing company are managed, improve on the
production efficiency and to ensure quality standard services.
For manufacturing companies, technological advancement is key to many activities. It facilitates
the spirit of technology market research, unique innovation, and product development.
Automating many processes will help increase the work efficiency in the company.
It is also intended the management company will implement the new policies framework and
regulations regarding the company’s asset networking systems, control measures and
maintenance processes. Further, the adoptions of new technology which help improve work
efficiency, quality production, and quality service delivery.
The asset life cycle
Many organization posses several tangible assets of different kinds that employees in the top
leadership are expected to manage or can get value on them. The company is indeed one of the
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many kinds. These assets could comprise of inventory, equipment, motor vehicles, Lorries,
storage premises, and factory building. Management of these assets by the asset manager is not
so much the assets-themselves but rather the value addition that a given class of assets would be
able to deliver to the company over its useful life commonly referred to as “asset life cycle”.
The asset life cycle has played a pivotal role in the acquisition of assets in the Precision-Plus
Motors Spares manufacturing company (Shahid, Mahamood and Das, 2016). The asset life cycle
is very essential in determining processes of the asset acquisition, the supply or delivery period
and the attached workforce that will ensure its maintenance.
The asset acquisition normally involves several processes that should be properly carried out as
indicated below;
There should be well thought out the need to identify the assets by being in constant
conversation with parties using or operating that particular asset.
Development of asset plans to meet the intended expectations from the acquired asset.
Asset specifications-meeting the minimum purchase design requirements. In this stage,
the asset modification procedure is well set out for effective cost control than carrying out
this modification at the acquisition stage.
After careful evaluation of the three procedures, asset procurement should be carried out.
The management team is held responsible to decide on the asset purchase and to rent or
lease the asset.
Installation of the acquired asset by ensuring the company is able to meet its intended
objective based on the purchase-contract promise (Amaratunga, Baldry, Sarshar and
Newton, 2002). The acquisition-team should commission the asset delivered and ready
for immediate use after careful installation.
storage premises, and factory building. Management of these assets by the asset manager is not
so much the assets-themselves but rather the value addition that a given class of assets would be
able to deliver to the company over its useful life commonly referred to as “asset life cycle”.
The asset life cycle has played a pivotal role in the acquisition of assets in the Precision-Plus
Motors Spares manufacturing company (Shahid, Mahamood and Das, 2016). The asset life cycle
is very essential in determining processes of the asset acquisition, the supply or delivery period
and the attached workforce that will ensure its maintenance.
The asset acquisition normally involves several processes that should be properly carried out as
indicated below;
There should be well thought out the need to identify the assets by being in constant
conversation with parties using or operating that particular asset.
Development of asset plans to meet the intended expectations from the acquired asset.
Asset specifications-meeting the minimum purchase design requirements. In this stage,
the asset modification procedure is well set out for effective cost control than carrying out
this modification at the acquisition stage.
After careful evaluation of the three procedures, asset procurement should be carried out.
The management team is held responsible to decide on the asset purchase and to rent or
lease the asset.
Installation of the acquired asset by ensuring the company is able to meet its intended
objective based on the purchase-contract promise (Amaratunga, Baldry, Sarshar and
Newton, 2002). The acquisition-team should commission the asset delivered and ready
for immediate use after careful installation.
The asset acquired should be put to use, well maintained and monitored regularly.
Capturing of full asset life-cycle costs is very essential at this stage and regular checks to
ensure its efficiency.
The need for proper modification or upgrade of the acquired asset should it meet its
intended expectations, use and objectives.
The appropriate methods of asset disposal facilitating its immediate replacement
From the above steps, it can be noted that for a better asset the company should adhere to its key
policy guidelines regarding asset acquisition up to the time it should dispose and replaced with
another.
The Precision-Plus Motors Spares manufacturing company has been faced with a bigger
challenge in managing its entire assets life-cycle in an effective way. The asset costs have been
selectively applied in isolation and sorted out in a fragmented form (Kassem, Kelly, Dawood,
Serginson and Lockley, 2015). Implementation of the acquired assets is based on the confines of
the approved budget and prescribed time limit at the same time ensuring that the asset is in strict
compliance of technical-specification requirements.
The asset life cycle approach in this company has made the maintenance cost go high due to poor
record keeping that should be useful in tracking the costs of the acquisition of various assets.
Therefore, there is a serious need for the management team to carefully come up with
appropriate policy measures that should ensure that the procedures outlined above are frequently
applied.
Expectations of stakeholders
Capturing of full asset life-cycle costs is very essential at this stage and regular checks to
ensure its efficiency.
The need for proper modification or upgrade of the acquired asset should it meet its
intended expectations, use and objectives.
The appropriate methods of asset disposal facilitating its immediate replacement
From the above steps, it can be noted that for a better asset the company should adhere to its key
policy guidelines regarding asset acquisition up to the time it should dispose and replaced with
another.
The Precision-Plus Motors Spares manufacturing company has been faced with a bigger
challenge in managing its entire assets life-cycle in an effective way. The asset costs have been
selectively applied in isolation and sorted out in a fragmented form (Kassem, Kelly, Dawood,
Serginson and Lockley, 2015). Implementation of the acquired assets is based on the confines of
the approved budget and prescribed time limit at the same time ensuring that the asset is in strict
compliance of technical-specification requirements.
The asset life cycle approach in this company has made the maintenance cost go high due to poor
record keeping that should be useful in tracking the costs of the acquisition of various assets.
Therefore, there is a serious need for the management team to carefully come up with
appropriate policy measures that should ensure that the procedures outlined above are frequently
applied.
Expectations of stakeholders
Stakeholders are very important individuals in a company set up. They consist of individual
people who care about the company or have a lot of vested interest. These stakeholders expect
high returns on their investments in a given company. The company is expected to distribute its
dividends in a given financial year. This can be distributed if a company is able to make a profit
and this main concern of most stakeholders.
Stakeholders can be categorized into different groups namely employees, customers, suppliers,
and the community or government. These groups have different expectations of the company.
Employees
These are staff that is employed by the company. They are composed of management from Chief
Executive Officer to junior staff. Their primary concern is to get paid for the work done.
Employees devote much of their time in production activities that will ensure that the company
generates maximum revenue at a very minimal cost. It is out of these revenues that the company
is able to pay salaries and wages for the work done Matějka et al., 2016.
Employees use the assumption of going concern principle to enable them to achieve their various
dreams, objectives, and goals. They get motivated in the sense that the company will continue
operating in a foreseeable future that will make them remain in employment. In situations where
a company faces going concern problems then the employee’s expectations are greatly
diminished and threatened.
Customers
A company without customers is a dead one. These are the final consumers of the manufactured
products in the company. Their level of confidence is exercised in situations where the company
is able to meet its demand sufficiently. They expect that the company will provide quality
people who care about the company or have a lot of vested interest. These stakeholders expect
high returns on their investments in a given company. The company is expected to distribute its
dividends in a given financial year. This can be distributed if a company is able to make a profit
and this main concern of most stakeholders.
Stakeholders can be categorized into different groups namely employees, customers, suppliers,
and the community or government. These groups have different expectations of the company.
Employees
These are staff that is employed by the company. They are composed of management from Chief
Executive Officer to junior staff. Their primary concern is to get paid for the work done.
Employees devote much of their time in production activities that will ensure that the company
generates maximum revenue at a very minimal cost. It is out of these revenues that the company
is able to pay salaries and wages for the work done Matějka et al., 2016.
Employees use the assumption of going concern principle to enable them to achieve their various
dreams, objectives, and goals. They get motivated in the sense that the company will continue
operating in a foreseeable future that will make them remain in employment. In situations where
a company faces going concern problems then the employee’s expectations are greatly
diminished and threatened.
Customers
A company without customers is a dead one. These are the final consumers of the manufactured
products in the company. Their level of confidence is exercised in situations where the company
is able to meet its demand sufficiently. They expect that the company will provide quality
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products that match their demand, offers effective and efficient service delivery and a sufficient
variety of products to choose from at affordable prices.
Customers can be disappointed if the company's product quality is that of a substandard one.
This discourages them hence shift their attention to alternative companies that are able to provide
competitive quality products in the market. In situations where the operations of the company are
curtailed, customers hope deteriorates and withdraw from such a company.
Suppliers
They play a very important in an organization by ensuring that there is an adequate supply of raw
materials or supplies of services. This group of individuals expects that the company will offer
competitive prices and make prompt payment for the services rendered or products supplied.
Suppliers are the creditors in the company and when the company is wound up or liquidates, they
rank higher. Therefore, they should be paid first before other stakeholders. A company that is
incapacitated in paying its debts will have very few suppliers (van Riel et al., 2016). The gearing
ratio is a going concern indicator.
Community or Government
The government expects to raise its revenue through the taxation process. A company that is able
to pay tax to the government on time will enable the government plans its fiscal policy in
advance. Community, on the other hand, expects that the company will carry out important
development in its surroundings that will ensure better living standards. They further expect that
a company will provide employment to the members of society as well as protecting the
environment.
variety of products to choose from at affordable prices.
Customers can be disappointed if the company's product quality is that of a substandard one.
This discourages them hence shift their attention to alternative companies that are able to provide
competitive quality products in the market. In situations where the operations of the company are
curtailed, customers hope deteriorates and withdraw from such a company.
Suppliers
They play a very important in an organization by ensuring that there is an adequate supply of raw
materials or supplies of services. This group of individuals expects that the company will offer
competitive prices and make prompt payment for the services rendered or products supplied.
Suppliers are the creditors in the company and when the company is wound up or liquidates, they
rank higher. Therefore, they should be paid first before other stakeholders. A company that is
incapacitated in paying its debts will have very few suppliers (van Riel et al., 2016). The gearing
ratio is a going concern indicator.
Community or Government
The government expects to raise its revenue through the taxation process. A company that is able
to pay tax to the government on time will enable the government plans its fiscal policy in
advance. Community, on the other hand, expects that the company will carry out important
development in its surroundings that will ensure better living standards. They further expect that
a company will provide employment to the members of society as well as protecting the
environment.
Possible outcomes to achieve in Short-term (5-years period)
Following a number of challenges that have been witnessed in the Precision-Plus Motors Spares
Manufacturing Company, the following possible outcomes are expected within a period of 5
years;
A monitoring and evaluation committee that is tasked to assess the statuses of the
company’s assets life cycles to be formed immediately reporting directly to the asset
manager and gives its findings in a period not more than two years.
Investigate the main causes of low product quality and design appropriate measures that
will ensure correct procurement and tendering procedures are followed. The tendering
committee to work in tandem with the procurement department.
Design a new asset networking system that will result in a high level of effectivity and
efficiency (Pasini et al., 2016).
Acquisition of new machines to replace the outdated ones and this to be done in phases
within three years.
Ensure proper records of each company assets are well prepared, frequently updated and
safely guarded.
Address several complaints raised by different stakeholders with regards to asset
management in the company and come up with immediate solutions.
Modify and upgrade the inefficient existing company assets to meet their intended uses
within this short period of time.
Train sets of employees in phases on how to operate the newly acquired machines and the
needed safety measures in a period of two to three years.
Conduct a piloting process using the technology in production processes.
Following a number of challenges that have been witnessed in the Precision-Plus Motors Spares
Manufacturing Company, the following possible outcomes are expected within a period of 5
years;
A monitoring and evaluation committee that is tasked to assess the statuses of the
company’s assets life cycles to be formed immediately reporting directly to the asset
manager and gives its findings in a period not more than two years.
Investigate the main causes of low product quality and design appropriate measures that
will ensure correct procurement and tendering procedures are followed. The tendering
committee to work in tandem with the procurement department.
Design a new asset networking system that will result in a high level of effectivity and
efficiency (Pasini et al., 2016).
Acquisition of new machines to replace the outdated ones and this to be done in phases
within three years.
Ensure proper records of each company assets are well prepared, frequently updated and
safely guarded.
Address several complaints raised by different stakeholders with regards to asset
management in the company and come up with immediate solutions.
Modify and upgrade the inefficient existing company assets to meet their intended uses
within this short period of time.
Train sets of employees in phases on how to operate the newly acquired machines and the
needed safety measures in a period of two to three years.
Conduct a piloting process using the technology in production processes.
The possible outcome to achieve in the long term (10 years)
Development and implementation of the company's assets software systems that will help
automate the safe record keeping of assets. To be real-time systems.
Developments of new policies regarding the asset life cycle management that will see
most of the company assets last longer.
Adopt automation in the production through the use of current technology and carry out
phase change over to ensure a complete overhaul of the old systems.
Develop a policy framework within which company assets are maintained, monitored and
safeguarded
Constant check, update, and review on the procedures that deal with asset acquisition
until its time of disposal (Whyte, Stasis and Lindkvist, 2016).
Establishment of systems for remote sensing methods to give the exact location of
various assets owned by the company.
Performance, serviceability requirements and indicators
The performance of the company is dependent on the proper use and sound management of all
the company assets to facilitate a competitive advantage. Asset performance is very important in
an organization since it is subject to proper maintenance, reliable and service level requirements.
This will help to improve the asset condition, life cycle, and its usage.
The management of the company should be attentive to capital-intensive of some assets like
Factory building and warehouse premises, durability nature of these assets, adaptability to
changes in technology, possible liabilities as a result of depreciation and overall effects on
Development and implementation of the company's assets software systems that will help
automate the safe record keeping of assets. To be real-time systems.
Developments of new policies regarding the asset life cycle management that will see
most of the company assets last longer.
Adopt automation in the production through the use of current technology and carry out
phase change over to ensure a complete overhaul of the old systems.
Develop a policy framework within which company assets are maintained, monitored and
safeguarded
Constant check, update, and review on the procedures that deal with asset acquisition
until its time of disposal (Whyte, Stasis and Lindkvist, 2016).
Establishment of systems for remote sensing methods to give the exact location of
various assets owned by the company.
Performance, serviceability requirements and indicators
The performance of the company is dependent on the proper use and sound management of all
the company assets to facilitate a competitive advantage. Asset performance is very important in
an organization since it is subject to proper maintenance, reliable and service level requirements.
This will help to improve the asset condition, life cycle, and its usage.
The management of the company should be attentive to capital-intensive of some assets like
Factory building and warehouse premises, durability nature of these assets, adaptability to
changes in technology, possible liabilities as a result of depreciation and overall effects on
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company performance. Performance-measurement of company assets is essential in the sense
that it is a tool for effective asset management (Whyte, Stasis and Lindkvist, 2016).
The asset performance can be measured within the confines of; economic measures, functional
measures, physical measures, service measures, and environmental measures. Economic-
measures deal with policy decisions at a strategic-level that ensure value for money optimization
on the company assets more so in the long term. Functional-measures deal with decisions made
by management that leads to desirable environmental working conditions and to ensure constant
alignment of supply of relevant functional-space (Whyte, Stasis and Lindkvist, 2016).
Physical-measures as a means of asset performance deals with current operations of the existing
assets that are being managed to ensure efficient and effective asset management. Service-
measures as asset performance measure deals with decisions and steps taken to ensure quality
service delivery to customers within the organizational cultural context. Finally, environmental-
measures as asset performance deals roles played by the assets, effects to end-users and society
as well as the ecological surrounding.
The asset performance measures will, therefore, be evaluated against various key performance
indicators in the company. Indicators are good tools of management and benchmarks. The key
performance indicators should be simple and give quick-assessments of the current condition that
will help guide future company actions.
For tangible assets having performance standards as;
Asset life-cycle that require long term service-delivery should be evaluated against its
performance indicators like age-profile and usage
that it is a tool for effective asset management (Whyte, Stasis and Lindkvist, 2016).
The asset performance can be measured within the confines of; economic measures, functional
measures, physical measures, service measures, and environmental measures. Economic-
measures deal with policy decisions at a strategic-level that ensure value for money optimization
on the company assets more so in the long term. Functional-measures deal with decisions made
by management that leads to desirable environmental working conditions and to ensure constant
alignment of supply of relevant functional-space (Whyte, Stasis and Lindkvist, 2016).
Physical-measures as a means of asset performance deals with current operations of the existing
assets that are being managed to ensure efficient and effective asset management. Service-
measures as asset performance measure deals with decisions and steps taken to ensure quality
service delivery to customers within the organizational cultural context. Finally, environmental-
measures as asset performance deals roles played by the assets, effects to end-users and society
as well as the ecological surrounding.
The asset performance measures will, therefore, be evaluated against various key performance
indicators in the company. Indicators are good tools of management and benchmarks. The key
performance indicators should be simple and give quick-assessments of the current condition that
will help guide future company actions.
For tangible assets having performance standards as;
Asset life-cycle that require long term service-delivery should be evaluated against its
performance indicators like age-profile and usage
Available company assets that operate as per the downtime required level should be
evaluated against its performance indicators like percentage of downtime of its operating
time, a number of break-down recorded, major defect-costs per area and total defect-cost
per yearly expenditure (Maletic et al., 2016).
Asset performance within the required standard level should be evaluated against its
performance indicator like the number of complaints received monthly.
The serviceability requirement to be evaluated against asset-functionality requirements like; for
demand-level evaluate against the level of service, user requirements-scales evaluate against
serviceability-rating-scales, for user-functions evaluate against physical-features of assets, etc.
Development of reliable asset inventory
Inventory management is a very important exercise in an organization since it helps to institute
appropriate control measures that will facilitate asset identification, location, storage and
safeguards through loss as well as keeping lean inventory. A reliable asset inventory should be
the one that captures methods of collection, analysis of data-requirement needs, frequent update
level and customer information (Suprayitno and Soemitro, 2018).
The following approaches can be employed to develop a reliable asset inventory system;
Establish suitable information-source regarding each company involving other
departmental managers.
Carry out a piloting process on the frequent asset transportation system of the company to
facilitate the understanding of asset maintenance and usage.
The information gathered during the piloting process should be used to;
evaluated against its performance indicators like percentage of downtime of its operating
time, a number of break-down recorded, major defect-costs per area and total defect-cost
per yearly expenditure (Maletic et al., 2016).
Asset performance within the required standard level should be evaluated against its
performance indicator like the number of complaints received monthly.
The serviceability requirement to be evaluated against asset-functionality requirements like; for
demand-level evaluate against the level of service, user requirements-scales evaluate against
serviceability-rating-scales, for user-functions evaluate against physical-features of assets, etc.
Development of reliable asset inventory
Inventory management is a very important exercise in an organization since it helps to institute
appropriate control measures that will facilitate asset identification, location, storage and
safeguards through loss as well as keeping lean inventory. A reliable asset inventory should be
the one that captures methods of collection, analysis of data-requirement needs, frequent update
level and customer information (Suprayitno and Soemitro, 2018).
The following approaches can be employed to develop a reliable asset inventory system;
Establish suitable information-source regarding each company involving other
departmental managers.
Carry out a piloting process on the frequent asset transportation system of the company to
facilitate the understanding of asset maintenance and usage.
The information gathered during the piloting process should be used to;
Establish asset frameworks for the whole process with data quality-management-plans
Identify a suitable tool for that will help in cost-effectiveness evaluation in managing
inventory
Carry out reviews on the possible accountability measures from the people charged with
inventory handling and management
Establish suitable techniques for monitoring inventory management systems as well as its
implementation processes.
Evaluate the possible identification requirement-needs of inventory systems and
document them for publication
Identify possible guidelines and steps that require documentation
Deterioration and condition monitoring
This is a very essential practice in the asset management process. Condition monitoring is a
process that constitutes fault evaluation regarding the operating assets to help in predicting their
possible break down or failure.
This process of deterioration and condition monitoring can be efficient if processes are
automated. This should be carried out where the manufacturing plant is located to ensure the
assessment of its current status and identify future system estimations (Niekamp et al., 2015).
The possible outcomes of condition monitoring are very useful for taking corrective measures,
planning, maintaining and optimizing the manufacturing plant's working condition. It is an
important practice to carry by the company due to: -
Take necessary measures to prevent any damages
Make the system to become reliable
Identify a suitable tool for that will help in cost-effectiveness evaluation in managing
inventory
Carry out reviews on the possible accountability measures from the people charged with
inventory handling and management
Establish suitable techniques for monitoring inventory management systems as well as its
implementation processes.
Evaluate the possible identification requirement-needs of inventory systems and
document them for publication
Identify possible guidelines and steps that require documentation
Deterioration and condition monitoring
This is a very essential practice in the asset management process. Condition monitoring is a
process that constitutes fault evaluation regarding the operating assets to help in predicting their
possible break down or failure.
This process of deterioration and condition monitoring can be efficient if processes are
automated. This should be carried out where the manufacturing plant is located to ensure the
assessment of its current status and identify future system estimations (Niekamp et al., 2015).
The possible outcomes of condition monitoring are very useful for taking corrective measures,
planning, maintaining and optimizing the manufacturing plant's working condition. It is an
important practice to carry by the company due to: -
Take necessary measures to prevent any damages
Make the system to become reliable
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Reduce losses
Ensure that processes of the plant operator are better and more information availed
Initiate a change from regular plant maintenance to condition-dependent maintenance of
the assets
Ways of achieving optimum performance from the asset network
Planning and Reliability-analysis: This process involves proper determination and
communication of performance-indicators to help check improvements like production-
downtime, timely maintenance cost reduction and minimization of spare parts costs.
Condition-monitoring: The analysis of assets like machines is very essential since the
asset condition affects quality, productive-capacity, asset-safety, asset-risks, availability
and costs of operation (Maletič, Maletič, Al-Najjar and Gomišček, 2018). Therefore, this
must be monitored over time throughout the ass’s life cycle to identify changes of
possible asset failure and take action in a timely manner.
Implementing the asset-maintenance plan: The creation of a system for implementation
depends on the output-used from a reliable plan. Asset optimization requires some inputs
like work scheduling, planning, making maintenance resources available and evaluating
asset-problem-history.
Ensuring that the process of asset control is well monitored for precautionary and safety
measures as well as product specifications.
To achieve a desirable level of asset optimization, then there is a need to plan operations
for production efficiency.
Ensure that processes of the plant operator are better and more information availed
Initiate a change from regular plant maintenance to condition-dependent maintenance of
the assets
Ways of achieving optimum performance from the asset network
Planning and Reliability-analysis: This process involves proper determination and
communication of performance-indicators to help check improvements like production-
downtime, timely maintenance cost reduction and minimization of spare parts costs.
Condition-monitoring: The analysis of assets like machines is very essential since the
asset condition affects quality, productive-capacity, asset-safety, asset-risks, availability
and costs of operation (Maletič, Maletič, Al-Najjar and Gomišček, 2018). Therefore, this
must be monitored over time throughout the ass’s life cycle to identify changes of
possible asset failure and take action in a timely manner.
Implementing the asset-maintenance plan: The creation of a system for implementation
depends on the output-used from a reliable plan. Asset optimization requires some inputs
like work scheduling, planning, making maintenance resources available and evaluating
asset-problem-history.
Ensuring that the process of asset control is well monitored for precautionary and safety
measures as well as product specifications.
To achieve a desirable level of asset optimization, then there is a need to plan operations
for production efficiency.
Safety is key in a manufacturing company and therefore strict compliance to asset safety
and regulation is necessary hence useful in achieving a desirable optimum level of asset
network.
Current and future technologies
Technological advancement plays a very important role in the manufacturing industry and
therefore its adoption will help improve several production processes.
Employment of accurate Asset-Register will help improve the way company assets are managed.
Through this serialization and asset file referencing is made possible hence easy asset location.
Technological investment in cloud computing will help to increase various platforms for asset
monitoring and evaluation in the future.
Coming up with the new technology like 3-D printing for the future plan of the company to
ensure the adoption of a process that will help revolutionizes the manufacturing sector with
regards to product-development (Brous et al., 2017)
The increasing the level of automation of processes in the company. The use of robots in
manufacturing will help improve the quality and standard of production. Robotic technology will
ensure a high level of precision and quality standards.
Adoption of Business to Customers (B2C) technology in the manufacturing company will help
reduce customer complaints, increase quality service delivery and company sales revenue.
The invention of augmented-reality will enable the manufacturing company to virtually test its
products in real life platform from the start of product-development until end-product is realized
and also increase production capacity.
and regulation is necessary hence useful in achieving a desirable optimum level of asset
network.
Current and future technologies
Technological advancement plays a very important role in the manufacturing industry and
therefore its adoption will help improve several production processes.
Employment of accurate Asset-Register will help improve the way company assets are managed.
Through this serialization and asset file referencing is made possible hence easy asset location.
Technological investment in cloud computing will help to increase various platforms for asset
monitoring and evaluation in the future.
Coming up with the new technology like 3-D printing for the future plan of the company to
ensure the adoption of a process that will help revolutionizes the manufacturing sector with
regards to product-development (Brous et al., 2017)
The increasing the level of automation of processes in the company. The use of robots in
manufacturing will help improve the quality and standard of production. Robotic technology will
ensure a high level of precision and quality standards.
Adoption of Business to Customers (B2C) technology in the manufacturing company will help
reduce customer complaints, increase quality service delivery and company sales revenue.
The invention of augmented-reality will enable the manufacturing company to virtually test its
products in real life platform from the start of product-development until end-product is realized
and also increase production capacity.
Development of corporate asset management plan
The asset management plan is very crucial in any organization for an efficient asset management
system. Below is the process of coming up with the desired corporate management plan:
Stage I: Conduct a complete asset-inventory. This will help establish a number of assets
available, asset-value and location, time of acquisition or construction and anticipated life cycle.
Stage II: Calculation of asset life-cycle costs. The accuracy of the plan will facilitate the
calculation of asset life cycle costs as well as other associated costs like maintenance-costs,
disposal costs, etc.
Stage III: Establish Level-of-Service (LOS). This will give necessary asset-safety, asset-capacity,
asset-quality and functional requirements provided by the company asset. Service requirements
will help in the operation, maintenance and modification processes.
Stage IV: Application of cost-effective-management. This is achievable in the long term if asset
management is believed to be proactive as compared reactive-management.
Stage V: Execution of long term financial plans. This will help facilitate asset priority by
determining feasible-objectives (Zhou, 2018).
Use of appropriate asset management systems
A company that uses traditional way or manual processes to manage its assets is most likely to
generate losses, inefficient and give low-quality products. Tracking of company's assets becomes
a very difficult task. Most assets become idle, get lost, increase the level of break down and
consume time if the technology is not looked into. Therefore, the development of asset
The asset management plan is very crucial in any organization for an efficient asset management
system. Below is the process of coming up with the desired corporate management plan:
Stage I: Conduct a complete asset-inventory. This will help establish a number of assets
available, asset-value and location, time of acquisition or construction and anticipated life cycle.
Stage II: Calculation of asset life-cycle costs. The accuracy of the plan will facilitate the
calculation of asset life cycle costs as well as other associated costs like maintenance-costs,
disposal costs, etc.
Stage III: Establish Level-of-Service (LOS). This will give necessary asset-safety, asset-capacity,
asset-quality and functional requirements provided by the company asset. Service requirements
will help in the operation, maintenance and modification processes.
Stage IV: Application of cost-effective-management. This is achievable in the long term if asset
management is believed to be proactive as compared reactive-management.
Stage V: Execution of long term financial plans. This will help facilitate asset priority by
determining feasible-objectives (Zhou, 2018).
Use of appropriate asset management systems
A company that uses traditional way or manual processes to manage its assets is most likely to
generate losses, inefficient and give low-quality products. Tracking of company's assets becomes
a very difficult task. Most assets become idle, get lost, increase the level of break down and
consume time if the technology is not looked into. Therefore, the development of asset
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management systems is imperative and provides a solution to a number of challenged
highlighted above.
Suitable asset management systems will help the company track all its assets. The use of cloud
computing technology is a better way to track all company assets. This system eliminates the
manual way to track company assets since it is fast and efficient. It is able to keep the historical
record of assets and gives appropriate asset locations.
The development of an asset register system will facilitate asset report generation that is suitable
for decision making in the company.
The development of in-built-barcode scanners can ease the process of asset acquisition to replace
it with another. Further, system implementation in line with company asset policy will facilitate
the development of other software like enterprise asset management, financial asset
management, etc.
Benefits and costs
The adoption of this strategy will ensure the optimum level performance of assets hence
complete reduction of service interferences and loses to be incurred as a result of asset-failure
It will facilitate the reduction of maintenance cost of the asset and ensure asset efficiency and
extension of asset useful life (Zhou, 2018)
Promotion of cost savings due to appropriate management of asset life cycle
Increase quality production standards, efficiency, safety and reliability during production
processes.
Adoption of these strategies will help improve the accountability in the asset management
highlighted above.
Suitable asset management systems will help the company track all its assets. The use of cloud
computing technology is a better way to track all company assets. This system eliminates the
manual way to track company assets since it is fast and efficient. It is able to keep the historical
record of assets and gives appropriate asset locations.
The development of an asset register system will facilitate asset report generation that is suitable
for decision making in the company.
The development of in-built-barcode scanners can ease the process of asset acquisition to replace
it with another. Further, system implementation in line with company asset policy will facilitate
the development of other software like enterprise asset management, financial asset
management, etc.
Benefits and costs
The adoption of this strategy will ensure the optimum level performance of assets hence
complete reduction of service interferences and loses to be incurred as a result of asset-failure
It will facilitate the reduction of maintenance cost of the asset and ensure asset efficiency and
extension of asset useful life (Zhou, 2018)
Promotion of cost savings due to appropriate management of asset life cycle
Increase quality production standards, efficiency, safety and reliability during production
processes.
Adoption of these strategies will help improve the accountability in the asset management
Conclusion
Manufacturing companies play a very essential role in the production sector. This is achieved if
there are proper working policies and systems that guide the company's assets used. An effective
way of asset management in a company will enable the company to continue in business or
curtail its operations.
A company that intends to get good returns on its assets and increase asset efficiency should
ensure sound asset management. The development of a new asset management system will help
track all the assets in the company. Various stakeholders in the company will be able to achieve
their expectations and invest more of their efforts in the company.
Automation of the company processes plays a vital role by ensuring that there is improved
product quality. This will enable customers to be satisfied and get associated with the company.
Efficiency and effectivity of company assets will increase hence will be cost saving, quality
service delivery and increased profitability index.
Recommendations
The company management board should ensure full implementation of asset policy that
guides the asset management plan and the asset networking systems.
The company management to carry out frequent reviews of the asset policy paper and
monitor if the management is following the standard procedures.
Develop and implement an asset management system that uses the current technology
and benchmark with previous processes to establish possible areas that need further
attention.
Manufacturing companies play a very essential role in the production sector. This is achieved if
there are proper working policies and systems that guide the company's assets used. An effective
way of asset management in a company will enable the company to continue in business or
curtail its operations.
A company that intends to get good returns on its assets and increase asset efficiency should
ensure sound asset management. The development of a new asset management system will help
track all the assets in the company. Various stakeholders in the company will be able to achieve
their expectations and invest more of their efforts in the company.
Automation of the company processes plays a vital role by ensuring that there is improved
product quality. This will enable customers to be satisfied and get associated with the company.
Efficiency and effectivity of company assets will increase hence will be cost saving, quality
service delivery and increased profitability index.
Recommendations
The company management board should ensure full implementation of asset policy that
guides the asset management plan and the asset networking systems.
The company management to carry out frequent reviews of the asset policy paper and
monitor if the management is following the standard procedures.
Develop and implement an asset management system that uses the current technology
and benchmark with previous processes to establish possible areas that need further
attention.
Development of policy framework that helps guides the asset acquisition procedures, life
cycle management and possible methods of asset disposal. The management board is
therefore charged with a responsibility to ensure that this policy framework is
implemented.
Management of the company to ensure the installation of business to customer (b2c)
management systems for quality service delivery in the short-term period.
Regular training of employees to ensure that they cope up with new asset management
regulations and changes.
QUESTION 2
Depreciation and Annual Cost
Methods of depreciation in the Asset Management process
There are different methods of working out annual depreciation of an asset in the organization
Straight line method
This is the simplest method of calculating an annual depreciation as compared to other methods
of calculating depreciation of an asset. It is a popular method and easy to use. In the asset
management process, it has been widely and extensively employed to determine the annual
depreciation of an asset since it is in compliance with the matching concept. It majorly suitable
for premises, furniture, and intellectual-properties (Brous et al., 2017)
Normally, this is given by;
Annual depreciation = Cost−Salvage/ Residual/Scrap Value
Economic useful−lifeof an asset
cycle management and possible methods of asset disposal. The management board is
therefore charged with a responsibility to ensure that this policy framework is
implemented.
Management of the company to ensure the installation of business to customer (b2c)
management systems for quality service delivery in the short-term period.
Regular training of employees to ensure that they cope up with new asset management
regulations and changes.
QUESTION 2
Depreciation and Annual Cost
Methods of depreciation in the Asset Management process
There are different methods of working out annual depreciation of an asset in the organization
Straight line method
This is the simplest method of calculating an annual depreciation as compared to other methods
of calculating depreciation of an asset. It is a popular method and easy to use. In the asset
management process, it has been widely and extensively employed to determine the annual
depreciation of an asset since it is in compliance with the matching concept. It majorly suitable
for premises, furniture, and intellectual-properties (Brous et al., 2017)
Normally, this is given by;
Annual depreciation = Cost−Salvage/ Residual/Scrap Value
Economic useful−lifeof an asset
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Double declining balance method
This method is known as reducing balance method. It is best for machinery, motor vehicles,
buildings, etc. It gives a bigger amount of annual deprecation in the earlier years while in the
later-years the annual depreciation is completely reduced or very small. In calculating
depreciation using this method, a fixed rate of depreciation is normally applied to the Net Book
Value (NBV) of an asset.
The fixed rate of chosen is very difficult to determine properly hence could be quite involving
when compared to another method of calculating depreciation of an asset.
It is expressed as;
Annual depreciation = ( Net Book Value× Rate of depreciation )
Where the Net Book Value = (Cost − Accum ulated depreciation)
Units of production (Output) method
Under this approach, the depreciable amount is assigned to each unit of product-manufactured or
services-rendered by that asset equally. This approach is not popular as compared to other
methods of determining the depreciation of an asset since it is used where there is a need for
constant use of assets that could result to complete failure of an asset.
The depreciable amount is calculated per-unit out is multiplied by the number of units of goods
or services realized during the accounting period.
It is worked out as follows;
This method is known as reducing balance method. It is best for machinery, motor vehicles,
buildings, etc. It gives a bigger amount of annual deprecation in the earlier years while in the
later-years the annual depreciation is completely reduced or very small. In calculating
depreciation using this method, a fixed rate of depreciation is normally applied to the Net Book
Value (NBV) of an asset.
The fixed rate of chosen is very difficult to determine properly hence could be quite involving
when compared to another method of calculating depreciation of an asset.
It is expressed as;
Annual depreciation = ( Net Book Value× Rate of depreciation )
Where the Net Book Value = (Cost − Accum ulated depreciation)
Units of production (Output) method
Under this approach, the depreciable amount is assigned to each unit of product-manufactured or
services-rendered by that asset equally. This approach is not popular as compared to other
methods of determining the depreciation of an asset since it is used where there is a need for
constant use of assets that could result to complete failure of an asset.
The depreciable amount is calculated per-unit out is multiplied by the number of units of goods
or services realized during the accounting period.
It is worked out as follows;
Depreciation per-unit =
Cost −Salvage Value
Eexpected number of units
useful −life
Therefore, Annual depreciation =
(Number of units produced∈the period × depreciation per unit per annum )
Sinking Fund method
This is where the depreciable amount is accumulated until the asset in question is completely
written off. It is used when cash is needed for replacement at the end of the asset's useful life.
This cash with its interest is invested in another company. The method is very complex as
compared to other methods above and suitable in the large-scale industries with costly-long-term
assets.
Sum of year’s digits method
This approach gives more accelerated write-off of assets as compared to the straight-line method
but much less accelerated write-off than reducing the balance method. It's useful when the asset
gives more production is earlier years.
The annual-depreciation is given by multiplying the depreciable-cost by series of fractions
depending on the sum of the asset’s useful-life digits.
Depreciation role
Used to allocate the cost of tangible assets over useful lives
Measures the economic value of worn-out assets.
v. Hourly charge out=Total factory overheads/Total machine hours
=$(155+60+50)/1500=265/1500
Cost −Salvage Value
Eexpected number of units
useful −life
Therefore, Annual depreciation =
(Number of units produced∈the period × depreciation per unit per annum )
Sinking Fund method
This is where the depreciable amount is accumulated until the asset in question is completely
written off. It is used when cash is needed for replacement at the end of the asset's useful life.
This cash with its interest is invested in another company. The method is very complex as
compared to other methods above and suitable in the large-scale industries with costly-long-term
assets.
Sum of year’s digits method
This approach gives more accelerated write-off of assets as compared to the straight-line method
but much less accelerated write-off than reducing the balance method. It's useful when the asset
gives more production is earlier years.
The annual-depreciation is given by multiplying the depreciable-cost by series of fractions
depending on the sum of the asset’s useful-life digits.
Depreciation role
Used to allocate the cost of tangible assets over useful lives
Measures the economic value of worn-out assets.
v. Hourly charge out=Total factory overheads/Total machine hours
=$(155+60+50)/1500=265/1500
=$0.177/hour
QUESTION 3
a) Issues that may be considered in assessing and comparing alternative options for
purchasing, rehabilitating, or replacing assets
Analyze the cost: Thoughts should be done along with the long term in the analysis of the
replacing or repairing costs. The cost of purchase of equipment should be taken into
consideration for the case of new equipment as well as the service life, operating costs, any
revenue increase it could bring possible salvage value. For the case of old equipment such issues
as the market value, remain service life, as well as future salvage rate, may need to be taken into
consideration
Age of equipment: Equipment does not undergo aging with grace. The older a machine is the
greater the degree of repairs it would need (Brous et al., 2017). This normally translates into
higher costs of maintenance. More and more repair makes the machine provide less and less for
investments in the repair. There may need to replace the old non-functioning equipment piece
with a newer and technologically enhanced model that would offer better longevity and
efficiency. When the equipment is still new, repairing it once it experiences malfunctions makes
sense.
Considering the repair costs: What would be the costs of repair and of greater importance is what
would be the frequency of incurring such costs? Taking note of the events of asset repair offers
information on the number as well as the frequency of the events of breakdown alongside repairs
costs. , whether the equipment would require several repairs in a year or just a single fix, should
be established.
QUESTION 3
a) Issues that may be considered in assessing and comparing alternative options for
purchasing, rehabilitating, or replacing assets
Analyze the cost: Thoughts should be done along with the long term in the analysis of the
replacing or repairing costs. The cost of purchase of equipment should be taken into
consideration for the case of new equipment as well as the service life, operating costs, any
revenue increase it could bring possible salvage value. For the case of old equipment such issues
as the market value, remain service life, as well as future salvage rate, may need to be taken into
consideration
Age of equipment: Equipment does not undergo aging with grace. The older a machine is the
greater the degree of repairs it would need (Brous et al., 2017). This normally translates into
higher costs of maintenance. More and more repair makes the machine provide less and less for
investments in the repair. There may need to replace the old non-functioning equipment piece
with a newer and technologically enhanced model that would offer better longevity and
efficiency. When the equipment is still new, repairing it once it experiences malfunctions makes
sense.
Considering the repair costs: What would be the costs of repair and of greater importance is what
would be the frequency of incurring such costs? Taking note of the events of asset repair offers
information on the number as well as the frequency of the events of breakdown alongside repairs
costs. , whether the equipment would require several repairs in a year or just a single fix, should
be established.
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Downtime: What are the implications of downtime as the asset is replaced? In case it requires
several days to undergo repairs and in case this occurs quite often, then there are chances of a lot
of hours of lost productivity. This should be considered a choice is being made between the
replacement and repair of the asset. It should, however, be remembered that repair of a machine
often requires less time in comparison with replacement since replacement encompasses such
activities as waiting for the arrival of the replacement, new training, installation among others. A
lot may be lost in production in case one is working on a fixed schedule and the equipment is
very import for the process in case it may take less time to replace (Brous et al., 2017).
Safety: Older equipment is likely to result in injury to the works in case of malfunctions. This is
despite staying up to date with maintenance as the equipment with the breakdown as it gets
older. A thorough inspection should be done on the machinery prior to making a decision to aid
in the determination if the current equipment would be able to continue offering a safe working
environment for the workers. In case it will not then replacement remains the obvious choice.
Efficiency: The efficiency of operation of the machine at the time is evaluated and the possibility
of maintaining the efficiency at the needed levels by the user or otherwise a new equipment piece
of low fuel, provides new features alongside having minimal breakdowns
b vi) The role of the discount rate and other factors in the assessment of asset development
and management projects
The estimation of cash or products in the present is seen as higher than the normal estimation of
merchandise furthermore, budgetary returns later on. The further a potential advantage or cost is
later on, the less its esteem. This idea is made unmistakable by a procedure called limiting. This
is the place a rebate rate is connected to foreseen expenses and advantages of a task over the term
several days to undergo repairs and in case this occurs quite often, then there are chances of a lot
of hours of lost productivity. This should be considered a choice is being made between the
replacement and repair of the asset. It should, however, be remembered that repair of a machine
often requires less time in comparison with replacement since replacement encompasses such
activities as waiting for the arrival of the replacement, new training, installation among others. A
lot may be lost in production in case one is working on a fixed schedule and the equipment is
very import for the process in case it may take less time to replace (Brous et al., 2017).
Safety: Older equipment is likely to result in injury to the works in case of malfunctions. This is
despite staying up to date with maintenance as the equipment with the breakdown as it gets
older. A thorough inspection should be done on the machinery prior to making a decision to aid
in the determination if the current equipment would be able to continue offering a safe working
environment for the workers. In case it will not then replacement remains the obvious choice.
Efficiency: The efficiency of operation of the machine at the time is evaluated and the possibility
of maintaining the efficiency at the needed levels by the user or otherwise a new equipment piece
of low fuel, provides new features alongside having minimal breakdowns
b vi) The role of the discount rate and other factors in the assessment of asset development
and management projects
The estimation of cash or products in the present is seen as higher than the normal estimation of
merchandise furthermore, budgetary returns later on. The further a potential advantage or cost is
later on, the less its esteem. This idea is made unmistakable by a procedure called limiting. This
is the place a rebate rate is connected to foreseen expenses and advantages of a task over the term
or 'life expectancy' of the venture to convert the estimation of arrival later on into the present
esteem. Henceforth, for example, the profits of a multi-year venture are normally alluded to as
limited returns. The lower the rebate rate some of the time alluded to as financing cost, the
higher the arrival estimation of the task's future expenses and advantages. On the other hand, the
higher the markdown/loan costs the lower the future return esteem will be. The determination of
the suitable markdown rate is critical to guarantee that future undertaking returns are not being
finished or under-assessed in the current value.
esteem. Henceforth, for example, the profits of a multi-year venture are normally alluded to as
limited returns. The lower the rebate rate some of the time alluded to as financing cost, the
higher the arrival estimation of the task's future expenses and advantages. On the other hand, the
higher the markdown/loan costs the lower the future return esteem will be. The determination of
the suitable markdown rate is critical to guarantee that future undertaking returns are not being
finished or under-assessed in the current value.
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pavement management: Integrating economic, technical, and environmental aspects in decision
making. Transportation Research Record, 2523(1), pp.56-63
DiMase, D., Collier, Z.A., Heffner, K. and Linkov, I., 2015. Systems engineering framework for
cyber-physical security and resilience. Environment Systems and Decisions, 35(2), pp.291-300
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for evaluation of asset redevelopment solutions. Studies in Informatics and Control, 25(3),
pp.293-302
Shahid, M.A., Mahmood, M.N. and Das, N., 2016, September. Integrated asset management
framework for Australian wind farms. In 2016 Australasian Universities Power Engineering
Conference (AUPEC) (pp. 1-5). IEEE
Amaratunga, D., Baldry, D., Sarshar, M. and Newton, R., 2002. Quantitative and qualitative
research in the built environment: application of a "mixed" research approach. Work study, 51(1),
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September. Exploiting the Internet of Things and building an information modeling framework
for the management of cognitive buildings. In 2016 IEEE International Smart Cities Conference
(ISC2) (pp. 1-6). IEEE
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projects: Configuration management, asset information, and ‘big data'. International Journal of
Project Management, 34(2), pp.339-351
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projects: Configuration management, asset information, and ‘big data'. International Journal of
Project Management, 34(2), pp.339-351
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Niekamp, S., Bharadwaj, U.R., Sadhukhan, J. and Chryssanthopoulos, M.K., 2015. A multi-
criteria decision support framework for sustainable asset management and challenges in its
application. Journal of Industrial and Production Engineering, 32(1), pp.23-36
Maletič, D., Maletič, M., Al-Najjar, B. and Gomišček, B., 2018. Development of a Model
Linking Physical Asset Management to Sustainability Performance: An Empirical
Research. Sustainability, 10(12), p.4759
Brous, P., Janssen, M., Schraven, D., Spiegeler, J. and Duzgun, B.C., 2017. Factors Influencing
the Adoption of IoT for Data-driven Decision Making in Asset Management Organizations. In
IoTBDS (pp. 70-79)
Zhou, H., 2018. An engineering asset management approach to the evaluation of underground
power transmission cables(Doctoral dissertation, Department of Engineering)
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