Chapter 3.1 - Apply whole-life asset management principles in a range of sectors and industries Flashcards
Whole life asset management
Process of evaluating the total price and all associated costs of a product to make an informed decision as to which option will provide the organisation with the best value for money option
Whole life costing
In depth costing analysis used to help buyer determine the end-to-end cost of providing a service, manufacturing and procuring a product
Fixed assets
An accounting term used to describe items acquired by an organisation which are not routinely sold but used within the organisation. Typical examples are land and buildings, fixtures and fittings, office and warehouse equipment. Fixed assets are also known as non-current assets
Discounted cash flow
An investment appraisal method based on future cash flows and the time value of money
Name 4 ways whole life asset management can help organisations
- Encourages procurement to consider cost elements beyond just the initial purchase price, and ensures the costs are examined for a long-term perspective
- Forces procurement to consider the impact of the purchase, hire or lease of an asset, item or service may have on other functions
- WLAM can also account for discounted cash flow
- Forced to consider environmental aspects of asset management, in relation to the sale and responsible disposal of waste materials required over its use and maintenance, in addition to end of life options available for the asset itself
Name the 9 steps in the CIPS WLAM cycle
- Analysis of historic performance
- Lessons learned feeds into identification of needs/specification
- Pre-acquisition costs
- Acquisition costs
- Installation and commissioning costs
- Operating costs
- Maintenance costs
- Performance / Downtime monitoring
- End of life disposal / recycling
Name 14 examples of value
- finance
- economics
- marketing
- operations
- maintenance
- through life performance
- sales
- ethics
- sustainability
- obsolescence
- environmental
- quality
- IT
- disposal
Name 8 elements to consider from the CIPS WLAM cycle
- Identify need / objectives / risk
- procurement
- construction
- commissioning
- deterioration / maintenance
- condition performance monitoring
- decommissioning
- renewal / replacement
Give 5 examples of why a need has developed
- Current asset is becoming unfit for purpose
- Competition in the marketplace
- Raised/reduced demand
- Regulations / legislation
- Financial concerns
Name 5 factors linked to risk
- Downtime
- Lost sales/revenue
- Associated costs
- Incompatibility
- Resistance
Mass production
Continuous production of standard products that can benefit from economies of scale
What does construction mean in terms of WLAM
The designing and manufacturing of the asset
Commissioning
Bringing something new into working condition
Name 6 costs included in commissioning an asset
- Installation
- Training
- Insurance
- Testing
- Operational efficiencies/performance
- Quality
Name 5 things that training is likely to include
- Operational capabilities
- Health and safety
- Accountability
- Risk assessment
- General maintenance
Name 4 specified losses within insurance
- Fire
- Theft
- Accidental damage
- Force Majeure
Insurance premium
Amount per annum the insurance costs an organisation
PAT (portable appliance testing)
A process in some countries where electrical are safety checked
Name 5 types of test you may need to run to ensure equipment is working effectively
- Virtual tests
- PAT
- Health and safety test
- Emissions test
- Production run
Name 5 examples of operational efficiencies
- Electrical consumption
- Products produced per minute
- Miles per gallon
- Noise levels
- Pollution levels
Is cost attributable to both good and poor quality
Yes
Name 6 maintenance costs that need to be accounted for
- Reliability
- Price of spare parts
- Availability of spare parts
- Skilled technicians or engineers
- Frequency of service requirements
- Downtime due to maintenance
What is the purpose of calculating the depreciation of an asset
To give the organisation a fair and current view of what the asset is worth at a particular time
Up time
The time in which an asset is performing or functioning effectively
What is condition performance monitoring
Focuses on selected elements if the asset that are integral to its performance
Name 7 things condition performance monitoring can measure
- Temperature
- Vibration
- Output
- Speed
- Noise
- Emissions
- Quality
Name 5 options for condition performance monitoring
- Do nothing: use like a commodity
- Reactive: fix it when it breaks
- Preventative: scheduled maintenance
- Predictive: fix it before it breaks
- Proactive: continuous improvement
What happens when an asset reaches the end of its expected life cycle
It needs to be decommissioned in its current state
Name the 3 processes in which decommissioning can happen
- Removal of asset
- Recommissioning
- Disposal
Name 3 types of removal costs
- Transport
- Hired expertise/labour
- Downtime
Recondition
To overhaul, repair or make good a once-redundant asset
Primary sector
Industry sector that extracts raw materials
Secondary sector
Industry that manufactures things
Tertiary sector
Industry sector that provides services
Name an asset for each of the below organisations
1. Manufacturing company
2. Agriculture
3. Legal firm
4. Transport business
- Machinery
- Machinery, land or livestock
- Office building
- Vehicles
Name 4 factors that influence whether an asset is purchased in full or leased
- Cash flow of the organisation
- Tax implications
- Depreciation value
- Is ownership required?
Name 3 advantages of buying assets
- Ownership
- Changes (upgrades) can be made
- Usage is not limited
Name 3 disadvantages of buying assets
- Depreciation has to be calculated
- More difficult to upgrade
- Maintenance costs are incurred
Name 5 advantages of leasing assets
- no initial capital outlay
- Total amount payable is known
- Budgeting is easier
- Fewer tax and depreciation calculations
- Tax efficiency in some instances
Name 5 disadvantages of leasing assets
- Commitment to payment over an agreed period of time
- Overall price may be higher than if bought outright
- Ownership never transfers
- Could be limits on usage
- Could be onerous maintenance or contractual stipulations
Name 3 reasons why WLAM is generally only undertaken for large value procurements
- It takes considerable time
- It requires numerous resources
- It involves many stakeholders
Name 8 departments involved in WLAM
- Marketing
- finance
- research and design
- operations
- sales
- human resources
- procurement
- maintenance
Name a practical example of WLAM in the primary sector
Farming organisation looking to buy a combine harvester
Name a practical example of WLAM in the secondary sector
A printed circuit board manufacturer looking to buy and install a new surface mount technology (SMT) machine
Name a practical example of WLAM in the tertiary sector
A hair and beauty service organisation looking to buy or lease a new building space to provide services to customers
What are hidden costs
costs that do not always present themselves at the onset of a project
World Trade Organisation
The only global international organisation dealing with the rules of trade between nations
What is the purpose of global sourcing
To enable the procurement profession to take advantage of international economies to achieve cost savings
Global sourcing
The practise of obtaining products or services from the worldwide market