1. PG 34 AFRICA PRINT JOURNAL APRIL MAY 2014 www.AfricaPrint.com
FEATURE
PROCURING AN ASSET
ENABLEMENT
&
C
ALIBRATION
MANAGEMENT&OPTIMISA
TION
DISPOSAL
&
EVALUATION
Assets can be defined as owned or controlled economic resources that contribute to the
positive financial value of a company.
INTROdUCTION TO
ASSET LIFECYCLE MANAGEMENT
by RIAN vAN dER mERwE
In financial accounting the two major listed
categories of assets are tangible assets and non-
tangible assets.
There are so many different classifications and
types of assets, but we will be focusing on tangible
or fixed 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:
PRocuRInG
An AssEt
EnAbLEMEnt
And
cALIbRAtIon
MAnAGEMEnt
And
oPtIMIsAtIon
dIsPosAL
And
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 benefit
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 AssEt
The 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 specification.
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 benefit from constant improvement as
their demands change, but either stagnate or loose
efficiency.
Once a company have determined their
requirements, technical specifications to assist

2. 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 cALIbRAtIon
After 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 oPtIMIsAtIon
Companies 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 EvALuAtIon
Once 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.
cLosE
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.
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.