L4M8- LO3- Application of WLAM Flashcards
What are fixed assets?
An accounting term to describe items acquired by an organisation whihc are not routinely sold but used within an organisation.
Examples would be buildings, land, office equipment, vehicles, machinery
What are the benefits of WLAM?
Encourages consideration of prices beyond just the initial purchase price and examined for a long term perspective
Helps consider purchase or hire/lease considerations
Helps understand discounted cash flow ie. how much an asset will be worth in the long term and adjusted for time value of money
Forced to consider environmental aspects of asset management
Think about a car as an example. What is the upfront cost, should it be hired or leased, what are the different types of fuel, insurance, tax, resale value
What are the stages of whole life asset management?
Pre- acquisition costs
Acquisition costs
Installation and commissioning
Operating costs
Maintenance costs
Performance/downtime monitoring
End of life disposal/recycling
Analysis of performance
Lessons learned and spec development
What are the different ways value could be assessed?
Price (how much does it cost)
Economic benefits (what are the benefits from owning)
Marketing to customers (what is it worth to customers)
Operations (how easy is it to use)
Maintenance (how easy it is to repair)
Through life performance (is there deterioration through life)
Sales (does it give the organisation an advantage)
Ethics (does it provide value in promoting good behaviour)
Obsolescence (how much does it cost to keep compliant)
Environmental (is it kind to the environment)
Quality (is it durable, long lasting and fit for purpose)
IT (is it compatible)
Disposal (cost of decommission and disposal)
What is commissioning?
Costs associated with commissioning are:
1) Installation
2) Training
3) Insurance
4) Testing
5) Operational efficiencies/performance
6) Quality
What is decommissioning?
It is the opposite of commissioning. It is when an asset reaches the end of its expected life and you need to remove, recommission or dispose
What are the primary, secondary and tertiary sectors?
Primary- extracts raw materials e.g. mining, drilling for oil, agriculture
Secondary- Manufactures things by converting raw materials into finished products e.g. car manufacturing
Tertiary- this sector provides services e.g. insurance, education etc. Public sector are usually tertiary
What are the ADV and DISADV of buying an asset?
ADV
Ownership
Changes/upgrades can be made
No usage limit
DISADV
Depreciation needs to be calculated
May be difficult to upgrade
Maintenance costs are incurred
May be an expensive upfront cost (sunk)
What are the ADV and DISADV of leasing an asset?
ADV
No capital outlay
Total amount payable is known
Budgeting is easier
Fewer tax/ depreciation calculations
Tax efficient
Think about how this would be a common challenge with the primary sector because they are often rural, need equipment to mine the land and will have both environmental and H&S to consider
DISADV
Commitment to pay over a period of time
Overall price may end up being higher than bought
Ownership never transfers
Could be usage limits
Could be maintenance or contract stipulations
Why should WLC costs only be done on large value procurements?
It takes considerable time
Requires resource
Involved many stakeholders
Which departments would be involved in WLAM?
Procurement- what is TCA, environment impacts, stakeholder views
HR- what skillsets are needed for commissioning, what training is needed, which risks
Operations- easy to operate, costs of training
Maintenance-
Marketing- competitive advantage to shout about
Finance - tax, insurance, life, resale
R&D- benefits a new asset can bring
Sales- is it easier, quicker and better quality, is there a competitive advantage
What considerations should be made for a primary industrial sector e.g. farming need to think about with WLAM?
Lease or buy equipment e.g. harvesting is seasonal so do you want to own it AYR
Which type of equipment is required? e.g. are you harvesting a standardised crop or are there specialisms
How will the equipment be delivered?
What fuel is used?
What insurance is required?
Is the equipment new or second hand?
What benefit will the combine bring?
How frequently is maintenance required?
What considerations should be made for an secondary sector e.g. printing company, need to think about with WLAM?
What is the initial purchase price? How will it be financed
What training is required
What is the benefit that the equipment will bring
Is any system technology required?
What spares and maintenance is required?
How long does install take?
How many units can the asset product per hour?
What is the set up/ downtime?
What are the waste materials?
Does the machinery need manning?
What are the end of life plans?
What considerations should be made for an tertiary sector e.g. hair and beauty service organisation need to think about with WLAM?
How much space is required?
What accessibility is required?
Is the space rented or bought?
How much are utility costs?
What insurance and security are required?
Why would global sourcing be an advantage to a buyer?
Cost savings
Access to skilled labour/ raw materials
Reduced import tariffs
Potential currency benefits
What is meant by the extended supply chain?
a supply chain that includes more than just the immediate suppliers and customers of a business. This can be present in global sourcing. It is normally linked from the primary sector all the way through to retailers and consumers
Its purpose and management is to ensure that all organisations meet the same standards, have the same end goal and achieve ethical/sustainable processes
