PG 34 AFRICA PRINT JOURNAL APRIL MAY 2014 www.AfricaPrint.com

FEATURE

PROCURING AN ASSET ENABLEM

ENT & CALIBRATION MANAGEMENT & OPTI

MISAT

ION

DI

SPOS

AL &

EVALUATI

ON

Assets can be defi ned as owned or controlled economic resources that contribute to the positive fi nancial value of a company.

INTROdUCTION TO ASSET LIFECYCLE MANAGEMENTby RIAN vAN dER mERwE

In fi nancial accounting the two major listed categories of assets are tangible assets and non-tangible assets.

There are so many different classifi cations and types of assets, but we will be focusing on tangible or fi xed assets generally accounted for on the balance sheet under Property, Plant and Equipment. We will include non-capital assets (rented assets) within the same category.

If one studies the King III report on corporate governance, it is clear that there is a key responsibility placed on the directors of a company to manage and protect all tangible and non-tangible assets. Within this governance guideline companies are required to control the purchasing, upgrading, servicing, licencing, security and disposal of all assets.

Companies have a further social responsibility to ensure that they understand the carbon impact that their assets pose to the environment and reduce this impact by carefully controlling the asset lifecycle and disposal.

WItHIn tHIs sERIEs, WE WILL bE FocussInG on tHE FouR MAJoR stAGEs oF tHE LIFEcYcLE oF An AssEt, bEInG:

PRocuRInGAn AssEt

EnAbLEMEnt And

cALIbRAtIon

MAnAGEMEnt And

oPtIMIsAtIon

dIsPosALAnd

EvALuAtIon

dIsPosAL

An AssEt

EnAbLEMEnt And

cALIbRAtIon

MAnAGEMEnt

oPtIMIsAtIon

MAnAGEMEnt

oPtIMIsAtIon

And EvALuAtIon

The stages above form a closed loop, implying that the knowledge gained from the utilisation of an asset reaching its end of life, combined with solid

knowledge on the latest technology offered in the market should be incorporated to the best benefi t of a company when procuring the next generation of assets.What follows is a high level overview of the stages that will be covered in the series.

PRocuRInG An AssEtThe procurement of an asset starts with a low level understanding of the demand and application of an asset followed by the ability to capture this requirement in a technical specifi cation.

Within a comprehensive asset evaluation process, the outgoing asset should be used as a measurement and not as a baseline. It is fairly common practice to use the current asset as a baseline, therefore doing a like for like replacement. In doing this companies would not necessarily benefi t from constant improvement as their demands change, but either stagnate or loose effi ciency.

Once a company have determined their requirements, technical specifi cations to assist

PG 35www.AfricaPrint.com AFRICA PRINT JOURNAL APRIL MAY 2014

FEATURE

with the evaluation of the various options in the market should be documented. The ideal is to setup neutral specifications that address a category of equipment instead of a specific product within a selected manufacturer’s range. Generic specifications will always be more price competitive than brand specific specifications.

Some key procurement strategies in this process include:• Process selection i.e. RFI, RFP, RFQ, Tender• Determining the asset refresh rate• Commercial modelling• Pre-qualifications• Scoring and weighting methods• Tender governance

The objective of the procurement phase is to ensure that the right asset is procured at the best cost and that the asset is covered by a maintenance agreement throughout its lifecycle.

The procurement phase needs to take cognisance of policies and good governance and should as far as possible be a transparent, fair and neutral process.

EnAbLEMEnt And cALIbRAtIonAfter the procurement of an asset, a similar focus should be placed on the initial enablement and calibration of the asset. Failure to enable an asset effectively will impact the entire lifecycle efficiency of an asset.

There are different components to the process of enablement:• Project management – setting up a project

plan to guide the process of delivery, setup, calibration, training, testing and sign-off.

• Integration – assets often need to be

integrated into existing systems and processes.

• Accounting process – registering an asset on the fixed asset register / rental asset register, ensuring that the asset is listed on the insurance inventory.

• Signing of maintenance contracts – even though this process is usually part of the procurement process, it should be regarded as a key process to complete. A copy of the signed contract should always be placed in a contract file.

A well constructed enablement process unlocks the full value of an asset using a minimum amount of time and governs all risks relating to the asset. A dedicated enablement process is therefore vital to achieve maximum return on an investment.

MAnAGEMEnt And oPtIMIsAtIonCompanies often install systems to monitor the effective utilisation of assets. Such systems collect data that need to be analysed in line with projected levels.

In order for an asset to perform optimally it needs to function within a specified range stipulated by the manufacturer. If an asset continually exceeds the recommended output, it creates a real risk of fatigue that will lead to excessive downtime, early termination, etc. Underutilisation on the other hand pose a direct cost implication as the asset will not be utilised at maximum efficiency.

Other useful tools that companies employ in the management of assets to optimise the lifecycle of assets include:• Registry tools – to document the asset on

a fixed / rental asset register with periodic validations and performance evaluations.

• Utilities management tools – to create a record of the tool’s mechanic performance in order to structure maintenance cycles.

• Tracking and validation tools – to track and determine whether the asset is operating in the correct location and function.

dIsPosAL And EvALuAtIonOnce the decision is made to discontinue the life of an asset there is a final important stage that a company needs to complete to meet environmental commitments, secure the release of the asset and potentially further mature the function in the new procurement phase.

The disposal process further provides a step by step accounting discipline to deactivate the asset’s financial status within the company’s income statement and balance sheet. Failing to implement strict disposal policies causes companies to continue payment on disposed assets and even misplace current assets.

cLosEControlling the lifecycle of your company’s assets is a key strategy to obtain optimum productivity, leading to growth and a reduced operating cost which ultimately lead to an increased bottom line.

The aim with this series is to provide companies with sufficient information to implement basic controls on a spreadsheet whereby asset control and efficiency can be improved.

Rian van der Merwe +27 (0) 83 257 2601(+27 11) 234 8116

rian@fine-print.co.za

CONTROLLINg ThE LIFECyCLE OF yOUR COmPANy’s AssETs Is A kEy sTRATEgy TO ObTAIN OPTImUm PROdUCTIvITy, LEAdINg TO gROwTh ANd A REdUCEd OPERATINg COsT whICh ULTImATELy LEAd TO AN INCREAsEd bOTTOm LINE.