Nicholas Anthony John Hastings - Physical Asset Management

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Part I
General Introduction

Springer International Publishing Switzerland 2015

Nicholas Anthony John Hastings Physical Asset Management 10.1007/978-3-319-14777-2_1

1. Introduction to Asset Management

Nicholas Anthony John Hastings 1

(1)

Wellington Point, QLD, Australia

Nicholas Anthony John Hastings

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Abstract

The aim of this chapter is to introduce to the main concepts of Asset Management. Outcomes After reading this chapter you will know about:

• The purpose of this book;
• The historical background to asset management;
• The ISO 55000 series of standards for asset management;
• Definitions of assets, liabilities, and related terms with reference to ISO 55000 and to accounting applications;
• The broad types of assets which organizations have;
• The types of industry to which asset management is particularly important;
• The aim of asset management within an organization;
• An outline of the asset management life cycle;
• The basic questions to be addressed by asset management;
• The benefits of good asset management;
• The dangers of the asset death spiral.

1.1 Purpose of This Book

This book presents a systematic approach to the management of physical assets from concept to disposal. The aim is to develop the general principles of asset management in order to make them accessible to a wide audience.

The book is intended to act as an introductory text which can form the basis for educational courses in asset management at the postgraduate or advanced undergraduate level, as well as being suited to the asset management practitioner as a convenient reference on asset management topics.

1.2 Evolution of Asset Management

The development of physical assets has been a hallmark of human activity from early times. Figure shows military wagons from the city of Ur dating from 2600 B.C. Clearly the citizens of Ur were familiar with the wheel, but this means that there must also have been artisans who were familiar with the bearing, on which the wheel depends, with lubrication on which the bearing depends, and with the lathe and other woodworking and metalworking tools needed to build the wheels and the wagons. A developed system of manufacture, maintenance, and logistic support for these assets must have existed from a very early date.

Fig. 1.1

Military assetscity of Ur 2600 B.C. From the Standard of Ur

Despite these early beginnings, physical asset management has never been a well-understood activity within populations at large. The pattern of educational and professional specializations has generally by-passed the physical asset management field. Various technical areas, such as defense, aviation, and civil works, have evolved their own approaches to the topic, under such headings as logistics, systems engineering, public works engineering, infrastructure, and maintenance.

1.2.1 Why Do We Need Asset Management?

The need for asset management as a recognized discipline arises from the complex technical nature of modern systems. Let us take an example from aviation. A contrast can be drawn between, on the one hand, the Wright Brothers Flyer of 1903 (Fig. ), which was the first aircraft to achieve controlled flight, and on the other hand, the modern aviation industry.

Fig. 1.2

Wright Brothers Flyer 1903

Initially, the Wright brothers designed, built, flew, repaired, and financed their own aircraft. They did not need asset management as a separate activity. But, aviation today involves flight operations, engineering, maintenance, finance, human resources, and a wide range of asset types on a huge scale. Figure gives some indication of this. It is this vast increase in complexity, across a wide range of industries, which has led to the need for asset management as a recognized discipline.

Fig. 1.3

Modern aviation industry assets

1.3 ISO 55000 Series Asset Management Standards

In recent years, a determined effort by those working in the field has resulted in the development of a formal approach to asset management systems, knowledge, and education. This led to the publication in 2014 of the International Standards Organizations ISO 55000 series of Asset Management standards. These developments have been accompanied by the formation of Asset Management professional organizations in many countries. This has acted as a catalyst for the recognition of the key role of asset management in modern organizations and has led to a demand for mainstream education and training in physical asset management.

The ISO 55000 series standards are designed as a guide for organizations involved in establishing, implementing, and maintaining asset management systems and for the planning, design, and implementation of asset management activities.

ISO 55000 gives an overview of the asset management topic and the definitions of terms used.

ISO 55001 specifies requirements for establishing and maintaining an asset management system and for supporting the delivery of asset management activities.

ISO 55002 provides guidelines for the implementation of the requirements specified in ISO 55001.

This book links its main subject matter to the ISO 55000 series of standards and provides examples, exercises, explanations, and discussion to assist in the implementation of the principles involved. It also covers a range of related topics which are important in a business setting. These include financial analysis, budgeting, risk analysis and risk management, and reliability and maintenance management.

Footnotes to various sections in this book give cross references to the corresponding clauses in the ISO 55000 series standards. In addition, Chap. assist the reader to relate their own asset management system and its status to the requirements of the standard.

1.4 What is an Asset?

The asset management standard ISO 55000 defines an asset as:

an item, thing or entity that has potential or actual value to an organization.

This is a very general definition which can cover any type of asset. To focus our thinking, we can recognize the following types of assets which can normally be identified within organizations:

• Physical Assets
• Financial Assets
• Human Assets
• Information Assets
• Intangible Assets

Physical assets are items such as plant, machinery, buildings, roads, vehicles, railways, aircraft, pipes, wires, communications equipment, and other infrastructure.

Besides physical assets, we also consider financial, human, and information assets to the extent that they support the management of physical assets. Intangible assets are nonphysical things such as goodwill and intellectual property.

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