Slide 1 D1.HML.CL10.06 D1.HRM.CL9.11 D2.TRM.CL9.11.

MANAGE PHYSICAL ASSETS AND INFRASTRUCTURE

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D1.HML.CL10.06 D1.HRM.CL9.11

D2.TRM.CL9.11

Subject elements

This unit comprises three Elements:

Develop strategies for systematic maintenance, repair and purchase of physical assets

Monitor the condition and performance of physical assets in the workplace

Co-ordinate financing of physical assets

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Assessment

Assessment for this unit may include:

Oral questions

Written questions

Work projects

Workplace observation of practical skills

Practical exercises

Formal report from supervisor

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Element 1:Develop strategies for systematic maintenance, repair and purchase of physical assets

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Performance Criteria for this Element are:

Develop strategies for managing physical assets that reflect overall enterprise business and marketing objectives

Evaluate current and potential financial objectives and constraints in developing asset management strategies

Integrate all occupational health, safety and welfare requirements into physical asset management

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Develop and maintain an accurate and current physical assets register as part of the asset management strategy

Incorporate maintenance and repair regimes, which minimise disruption and loss of revenue and which involve appropriate specialists

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Physical assets

Importance of physical assets

As a provider of tourism services, how you manage your assets is integral to how well you do.

What are examples of assets in a tourism business?

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Physical assets

Types of physical assets

Buildings

Land

Equipment and machinery

Fixtures, furniture and fittings

Vehicles

computer systems

Office equipment

Physical surroundings

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Classification of physical assets

Infrastructure assets

These are physical assets fundamental to the existence of the facility

They include buildings, paths, roadways, car parks, the beach at a resort and the rides in a fun park

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Classification of physical assets

Incidental assets

These are those physical assets which are not essential to the existence of the facility

They include furniture, fittings, equipment, computers and vehicles

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Development strategy

Setting an asset development strategy

It is generally accepted that a business development strategy relies on two complementary missions:

Service mission

Economic mission

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Setting an asset development strategy

What needs to be considered when deciding what asset development needs to take place in a tourism business?

Refer to questions on TM

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Steps in developing a strategy

Assess what opportunities you have in improvement in your market position

Assess what opportunities you have in creating new markets

Assess trends and indicators from the economy, consumerism and social change

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Steps in developing a strategy

Review your competition’s assets

Review current asset performances

Understand that assets are simultaneously securities and risks

COMPLETE ACTIVITY 1

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Asset acquisition questions

Questions to ask when considering purchase of assets

Why do we want the asset?

Is it part of our business or strategic plan?

How long will it take to get our money back?

Will we lose money on this investment?

How will we pay for the asset? Will it be financed? If so, how?

Are there any non-financial reasons for wanting the asset?

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Purpose of assets

Why are physical assets acquired?

To achieve the organisation’s long term strategic business objectives

To control assets, and ensure their maintenance and reliability

Overall image, social and economic status as well as operational productivity and efficiency

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Life cycle of assets

What is the life cycle of physical assets?

Planning

Acquiring

Operations and Maintenance

Disposal

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ROI of assets

Return on investment on assets

Many organisations make decisions on new assets and new projects by considering how long it will take to get their money back on their potential investment

Usually investments should pay back investments in no more than 3 years

COMPLETE ACTIVITY 2

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Asset management

Asset Management

Asset management, is the way in which we look after the assets in an organisation, either:

Day-to-day - maintenance and operations

Medium to long term - strategic and forward planning

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Asset management

Asset management activities

Planning for assets and reviewing current stock based on customer requirements

Creating or acquiring new assets

Accounting for assets and determining the actual cost of the services they provide

Operating and maintaining assets

Monitoring performance and condition of assets

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Asset management

Asset management activities

Assessing refurbishment, renewal and replacement options

Disposing of assets that are no longer required

Auditing the way in which assets are managed and the asset management practices and procedures

Identifying and working to minimise life cycle costs of new assets

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Asset management

Asset management strategies

Asset management strategies may include:

Maintenance

Repair

Replacement

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Asset management planning

Benefits of strategic asset planning

Companies adopt asset management systems which provide short, medium and long term benefits.

What are:

Short term benefits?

Medium to long term benefits?

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Types of long term assets

Tangible and intangible assets

Fixed, non-current assets are those assets owned by the facility that are intended to remain for a period in excess of one year to help generate income.

They can be:

Tangible assets

Intangible assets

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Depreciation

Concept of depreciation

Where the value of an asset is progressively written down in the accounts over an expected life

The full amount of depreciation is:

Historical cost

Less salvage value

Equals the depreciation or “loss” which is apportioned over the useful life of the asset

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Depreciation

Causes of depreciation

There are three causes of depreciation:

Physical deterioration

Technical obsolescence

Commercial obsolescence

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Asset management software

Role of asset management software

What are the:

Benefits of asset management software?

Types of asset management software?

Functions of asset management software?

Considerations when selecting asset management software?

COMPLETE ACTIVITY 3

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Asset OSH requirements

Identify OSH requirements when selecting assets

The health and safety of employees and customers is an important issue and should not be overlooked

In all ASEAN countries, legislation and regulations will exist that must be taken into account when purchasing and using assets

COMPLETE ACTIVITY 4

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Occupational safety, health and welfare requirements

OHS safety and welfare requirements may include:

Routine servicing of equipment

Tagging electrical equipment

Reporting faults in assets

Recording near-misses and accidents when handling equipment

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Safety

As an asset manager you are responsible for ensuring the human interface with the work environment remains safe at all times.

What are the responsibilities of a manager to ensure the safety of people using assets?

What are common safety issues?

What causes these issues?

How can they be prevented?

COMPLETE ACTIVITIES 5 AND 6

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Security

In this context security is seen as a distinct component of an overall safety strategy for both the public and staff

Security policy concerns protection from invasive, deliberate (eg theft) or negligent actions of others

Protect people first then property

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Asset Security

What are examples of asset security?

COMPLETE ACTIVITY 7

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Asset Register

What is an asset register?

Asset Register requires the identification and registration of all physical assets

The registration process involves the use of an asset information system

The asset information system is a database of asset information and is generally referred to as an Asset Register

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Asset Register

Assets register

Assets register may be used to:

Record, track and manage assets

Provide complete, accurate and timely data

Provide information for internal management and external financial reporting purposes

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Asset Register

Assets register information

The purchase price

The date and place of purchase

The manufacturers serial number

An estimate of disposal value and estimated life

The depreciation rate used in the accounts

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Asset Register

Assets register information

The current value

The insurer and its insurance value

The reference number of the organisation

The maintenance schedule

The location of the asset

COMPLETE ACTIVITY 8

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Equipment data cards

Equipment data cards

An equipment data or inventory card is a record of information describing a physical asset.

Type of plant or equipment

Location of plant or equipment

Energy source

Age

“Condition” of plant or equipment

Forecasted or expected lifespan of plant or equipment

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Equipment history recordsEquipment history records

The equipment history record logs the inspections of equipment and its repair history

Used to decide when to replace rather than repair plant and equipment

Determine whether a repair is under warranty

Evaluating the need for spare parts and backup units

Establishing if the equipment has reached the end of its useful life

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Maintenance request forms

Maintenance request forms

Information required on a Maintenance request form include, but are not limited to:

Date

Description of problem

Department responsible

Name of person reporting problem

Urgency

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Inventory control

Inventory control

Inventory control is making a list of all assets that are owned and controlled by an organisation.

What is the purpose of preparing an inventory control list ?

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Asset primer

An asset primer

An asset primer is a basic listing of assets common to the tourism industry with monitoring and checks required to be undertaken on a regular basis.

Review Asset Primer in TM

COMPLETE ACTIVITIES 9 AND 10

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Maintenance and repair planning

Maintenance

Maintenance is all work that concerns effective preservation of facilities, equipment and systems so that they can perform at a level that is satisfactory to needs

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Maintenance and repair

To ensure that these machinery, equipment and tools can meet or exceed their “lifespan’, assets need to be maintained and used in the appropriate conditions and specifications

This will maximise the usage time and minimise cost for replacement

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Role of management in maintaining assets

The manager has the following responsibilities when maintaining assets:

Planning

Estimating

Programming

Review

Corrective action

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Categories of maintenance

Preventive and predictive maintenance

Routine maintenance and minor repairs

Major repairs

Emergency repairs

Alterations and improvements

Housekeeping

COMPLETE ACTIVITY 11

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Scheduling of maintenance

Scheduling is the allocation of labour power, materials and equipment, at specific times and locations, for accomplishment of prescribed maintenance work.

What must be taken into account when scheduling maintenance?

When is the best time to schedule maintenance activities?

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Scheduling of maintenance

Consider scheduling as synchronisation of:

Labour available

Materials available

Contingencies allowed for sudden emergencies

Minimised impact

Most efficient cost

Minimised customer awareness

Minimum downtime

Quick start-up and return to operability.

COMPLETE ACTIVITY 12 Slide 47


Timing of maintenance

Long-term

Weekly

Daily

What maintenance activities take place at each of these time intervals?


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Environmental considerations

Environmental sustainability asset management practices

Energy conservation

Garbage and chemical disposal

Maintenance

Facility cleaning

Fittings

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The Environmental Protection Authority (EPA)

The EPA is responsible for protecting the environment from pollution by minimizing and controlling wastes and noise

It does this through a range of statutory and non-statutory processes and programs, the cumulative effect of which is to change community behaviour in relation to the environment

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Environment law

In many countries environment law has been continuously evolving to cover ever wider areas of activity.

Environment law is generally developed in the form of codes, acts and quality standards.

What are examples of environmental law in your country?

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Element 2:Monitor the condition and performance of physical assets in the workplace

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Establish and implement systems to ensure that the condition and performance of physical assets are regularly reported and discussed within the enterprise

Establish and implement systems to identify timely replacement of physical assets

Make assessments of physical asset performance based on safety, operational efficiency and customer service quality

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Identify problems promptly and take appropriate action

Identify the need for and access appropriate specialist assistance when required

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Monitoring assets

Monitoring asset performance and conditions

As manager it is your overall responsibility to see that systems are set up to ensure that the condition and performance of physical assets is regularly reported and discussed within the enterprise.

How can this be achieved?

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Monitoring assets

Asset monitoring system

An asset monitoring system collects and reports information on the condition and performance of assets.

What asset monitoring systems can be used?

What is asset performance measured against?

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Monitoring assets

Asset monitoring system

The performance of the asset is evaluated against the level of service provided to the customer.

This can generally be measured in terms of:

Reliability

Availability

Capacity

Meeting customer demands and needs

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Monitoring assets

Systems to monitor condition and performance of physical assets

Systems to monitor condition and performance of physical assets may include:

Integration of reporting into day to day operating procedures

Regular management reports

Internal and external inspections and audits

Regular staff feedback

Analysis of maintenance costs over a period of time


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Monitoring assets

Preventative Maintenance Program (PM)

The most effective way of ensuring assets are maintained well is to have a Preventive Maintenance program.

What is the purpose of a PM?

What are the benefits of a program?

How can a PM be introduced in the workplace?

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Monitoring assets

Preventative Maintenance

Preventative maintenance should be ongoing and included in everyday operations.

Preventative maintenance is designed to prevent breakdowns and complaints and is vital in maintaining the investment.

What are examples?

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Monitoring assets

Planned Maintenance

Planned maintenance is maintenance that is carried out during quiet periods, overnight or when areas are closed.

What are examples?

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Monitoring assets

Selecting assets for a PM program

Selecting assets for such resource-dedication is subject to the following factors: Criticality of the equipment to overall operability of the

facility Cost of repair or replacement if it fails Cost of downtime History to date of the asset’s performance Manufacturer’s recommendations Likely way it will fail Cost of monitoring versus costs of doing nothing The resources available

Slide 62

Asset management software

Computerised maintenance management software (CMMS)

CMMS is designed to be a database of assets and their profiles, recording maintenance histories and reporting on cost, efficiency and effectiveness trends.

What software programs exist in your country?


Slide 63

Asset observation

Importance of asset observation

How can you involve staff in asset observation?

What should they monitor?

How can they monitor?

How can they report faulty assets?


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Energy management

Energy Management

The principles of energy management are to reduce the amount and cost of energy tourism organisations.

Energy management is:

An analysis of uses of energy, which

Makes recommendations for reductions or changes in usage, if required

Is a quick, cost effective way of savings in energy

An in-house process involving all departments


Maintenance administrative processesEstablish maintenance administrative processes

Most administrative tasks relating to maintenance issues relate to asset control, managing costs and contracts and reporting back.

Controlling equipment

Maintenance manuals

Maintenance schedules

Collating other records

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Identify asset replacement

Identify need for asset replacement

Replacement describes the situation where an asset cannot be repaired or refurbished and must be replaced.

How can you identify when assets need to be replaced?

How can you report faulty assets?

What is the process involved in replacing expensive assets?

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Replacement, refurbishment or augmentation

Assets can be:

Replaced

Refurbished

Augmented

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Replacement, refurbishment or augmentation

Considerations:

Initial cost

Annual and periodic maintenance and operating costs

When capital will be needed and whether it is likely to be available

Possible increases in effective life or expected life

Benefits to customers

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Replacing major equipment

What must be considered:

During planning phase

When purchasing

When removing old equipment

When installing new equipment

Training of staff

What activities take place?


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Monitor asset condition and performanceMonitor the condition and performance of physical assets

EXAMPLE

Provide an example of how can monitor the condition and performance of physical assets in the workplace


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Identify problems and take action

Importance of TQM

The best way for managers to identify problems in a timely manner comes down to their own 'Total Quality Management' initiatives.

What TQM initiatives can be implemented?

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'Total Quality Management' initiatives

Inspecting

Assessing

Recording processes

Determining protocols and responsibilities

Apportioning or delegating responsibilities

Tuning operability as a whole

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Support mechanisms to identify problems

Build up staff communication mechanisms

Create a sense of ownership among staff of quality operability

Avoid culpability track-downs if some asset fails

Keep the incident records up to scratch

Have your contractors and emergency service listing up to date, including out of hours numbers

Note customer comments and whether an asset investigation is required

Slide 74


Support mechanisms to identify problems

Keep on to environmental risk assessments

Develop performance indicators for major assets and, via your PM program, assess whether they’re trending up or down

If a staff member reports a potential problem then list it as a “to do” immediately

Use CMMS systems as monitors

Keep a “nightmare list”

Slide 75

Identify need for specialist assistanceConsiderations

What are examples of considerations when deciding on specialist assistance?

What types of assistance is available?

What are the benefits of using specialist assistance?

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Identify need for specialist assistanceOutsourcing asset management

What are:

Advantages to outsourcing?

Disadvantages to outsourcing?

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Identify need for specialist assistanceTypes of appropriate specialists

Whilst the range of various outsourcing options is endless, these may include:

Trades people

Professional cleaners

Contractors

Manufacturers

Assessors

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Identify need for specialist assistanceIn-house or outsourcing asset management

What are examples of:

Commonly outsourced asset management items

Commonly in-house asset management items

Combinations of the two


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Identify need for specialist assistanceEnsuring quality in outsourced repairs and maintenance work

In-house observation and supervision

Independent technical audit

Plain language explanations

Written reports of work done

Uninterrupted jobs

Bonus and penalties

Work warranties

Asset performance

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Element 3:Co-ordinate financing of physical assets

Slide 81



Prepare accurate work or equipment specifications to guide the acquisition process

Estimate acquisition costs based on evaluation of current, accurate and relevant data, including supplier quotations and estimates

Make appropriate decisions on the acquisition of physical assets in accordance with enterprise policies and procedures

Slide 82



Select methods of financing to meet in accordance with enterprise policies and procedures

Implement the financing process in accordance with enterprise policies and procedures

Make and keep accurate records of all financial agreements and related documents

Slide 83

Prepare asset specifications

What is a ‘Specification’?

A specification refers to the manner in which a good or service is to be provided

This includes constituents, construction, appearance, performance of a material or apparatus or the standard of workmanship required in its manufacturer

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Work or equipment specifications

Work or equipment specifications may relate to:

Description of equipment or work to be provided

Standard of equipment or work to be provided

Purpose of equipment or work to be provided

Design or capability requirements

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Specifying the asset

It is important to specify the asset required in detail.

Detailed specifications are used in the tender process and to obtain quotations and prices.

Work and equipment specifications should detail:

The intended use of the asset

The limitations of this intended use

The material that to be used and its quality

Slide 86

Potential service provider questionsQuestions for potential service providers

What is your experience in this line of provision?

What qualifications does your company have?

What qualifications and training do your workers have?

How does the company ensure its workers work well?

Do you use subcontractors?

What is the TOT (Turn Around Time)?

Slide 87

Potential service provider questionsQuestions for potential service providers

Have you done what I asked? Have I got what I needed?

What if you don’t meet your promises?

How do you assess your costs?

What warranties do you provide?

What’s the cost?

Slide 88

Types of specifications

Types of specifications

Specification are normally based on:

Functional – what is it used for, its prime purpose

Performance – how does it perform

Technical – what is it made of, engineering and construction features

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Benefits of specifications

Benefits of good purchase specifications

Provides knowledge

Reduces misunderstandings

Reduces time

Enhances competition

Sets a standard

Gives instructions

Provides verification

Are specific

Guarantee price conformity

Outlines warranties Slide 90

Inclusions in specifications

Inclusions in a specification

Characteristics of an item in terms of quality, size, weight, production, age, degree and preparation

A precise listing and regime of the tasks you want done

Name and description of product or service

The performance requirement

The intended use of the product or service

Quality, durability and cost limitations

Test or inspection procedures

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Warranty or service requirements

Frequency of use related to product or service

Size, weight, amount and number of items

Energy usage specifications

General instructions

Source

Specific bidder instructions

Payment methodology Slide 92



Bonus and penalty scenarios

Agreed mechanisms for performance assessment

Equipment to be supplied by parties

Report methodology

Duration of contract

Early severance conditions

Procedures for contract variations

Required qualification levels of labour


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Estimate acquisition costs

Estimating costs to acquire assets

Costs are estimated on:

Evaluation of quotations

Tenders from external suppliers

Appropriate maintenance agreements

In-house advice from appropriate departments

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Major steps in the purchasing cycle

Recognising the need to purchase goods or services

Preparing specifications

Collecting current, accurate and relevant data relating to items and prices

Selecting a supplier

Ordering the goods or services

Receiving the goods or services

Slide 95


Current, accurate and relevant data relating to items and prices

The whole purpose of the tender process is to gather current, accurate and relevant data used for estimating costs.

This information can be gathered from:

Quotations from suppliers

Current maintenance contracts

Published or advertised prices

Previous contracts and costs

Slide 96

Tendering process

The tender process

Collect tender information

Evaluation of tender information

Rating essential and negotiable requirements

Identify criteria used to evaluate delivery response times by supplier

Identify different ways to purchase goods

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Selecting a contractor

Choosing a contractor / supplier of assets

What are considerations you would have?

What are the benefits and dangers of contractors?

What are questions you would ask when identifying suitable contractors

What are critical requirements you seek in contractors?

What are contractual considerations you would identify?


Slide 98

Making acquisition decision

Different ways to purchase assets

Off-the-shelf products

Custom built

Used equipment


Slide 99

Making acquisition decision

Identify supplier progress payments

What payment requirements do suppliers have in place when selling major assets to your organisation?

What payment methods would they accept?

Slide 100

Making acquisition decisionIdentify early costs

Testing or compliance costs

Transportation costs

Site preparation costs

Installation costs

Training costs

Specialty training may be required

Make-ready costs

Tooling, parts and suppliers

Spare parts costs


Identify methods of financing

Purchasing decision considerations

Before purchasing decisions are made, it is necessary to consider the following:

Return on investment (ROI) you get from capital

Net profit margin you make out of cost centres

Asset turnover

Liquidity ratios

Gearing

Employee ratios

Slide 102


Types of assets

Current

Non-current (fixed assets)

Intangible

Investments

Slide 103


Methods of financing

In summary, the different methods of financing include

Purchasing

Leasing

Hiring

Slide 104


Purchasing, leasing and hiring

When are they best used?

What are the advantages and disadvantages of each?

What are considerations / processes involved in using each method of financing?


Slide 105

Making a final financial decision

Factors for consideration

Will the asset significantly improve customer satisfaction?

Will the asset rectify a problem or issue that is substantive in nature?

Is acquisition desirable or essential?

Is it creating diversification, improved efficiency or expansion in your market niche?

Is the membership supportive of the acquisition?

What are others in the industry doing?

What is cash flow and overall liquidity like?

Slide 106

Making a final financial decision

Factors for consideration

What investments exist to reinforce a decision?

How many “volatile” factors exist

What is the ROI of the asset as a % of the facility’s turnover?

What is the asset’s percentage internal rate of return?

What is its pay-back period estimated to be? (purchase)

What is its ROI relative to loan payments? (purchase)

What is its ROI relative to lease payments? (lease)

Slide 107

Evaluation techniques

Evaluation techniques

Property managers are often required to purchase plant, equipment, furniture and fittings.

To do this effectively they use three different techniques to evaluate various options.

Pay back period

Net Present Value (NPV)

Internal Rate of Return (IRR)


Slide 108

Implement financing process

Responsibility of financial processes

Who should be responsible for the financial arrangements of acquiring assets?

What considerations must be taken into account when financing assets?

What assistance can be sought from others?

Slide 109


Seeking assistance when acquiring assets Your accountant Your auditor Your management and executive team Local government business development advisory units Peak body industry advisors Government business advisory services Bureau of Statistics Local commercial land agents Your financier or broker Other facilities not in direct competition to you

Slide 110


Investment decision considerations

Pay back period

A discounted pay back period assessment

A percentage internal rate of return

The net present value of the investment

A sensitivity analysis

Market analysis


Slide 111

Keep accurate records

Importance of keeping accurate records

It is usual business practice to retain and file originals of all financial agreements and related documents.

These should be able to accessed promptly and easily from secure locations.

What documents should be kept?

How should you maintain / store them?

Slide 112


Service Contracts

A contract is a legal document, which is an agreement between the buyer and seller.

It consists of a set of terms and conditions, which both parties agree to follow.

What information should be kept in a service contract?

Where should they be kept?

Slide 113


Maintenance records

Maintenance scheduling

Maintenance checklists

Manufacturers’ specifications

Fault reports

Backlog reports

Work orders

Slide 114


Maintenance records

Budgets

Buying reports

Incident reports

Labour-hours

Material costings and permits


Slide 115

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