What is a Strategic Asset Management Plan?

What is a Strategic Asset Management Plan?

A Strategic Asset Management Plan (SAMP) specifies how organizational objectives are to be turned into asset management objectives. It also describes the methods to be utilized by an organization in order to comply with Asset Management Objectives (AMO).

Who uses a SAMP?

Organizations and businesses that want to map out their assets and prepare for the future
Companies that are applying for ISO certification

ISO, or International Organization for Standardization, published a set of three standards in 2014 (revised in 2016 and 2018). These ISO standards on asset management help organizations and companies get value from their assets. They operate as follows:

ISO 55000 – Presents an overview of the certification process, and sets out the terminology and principles
ISO 55001 – Stipulates an asset management systems requirements
ISO 55002 – Provides guidelines for applying ISO 55001

What is an Asset Management Strategy vs. a Strategic Asset Management Plan?

An Asset Management Strategy is a blueprint for an organizations documentation and implementation of asset management:

Plans
Practices
Procedures and
Processes within an organization

It’s a high level and incredibly important:

Brainstorming and
Documentation project, which includes the oft referred to “Strategic Asset Management Plan” or SAMP

An Asset Management Strategy guides all the asset management activities within an enterprise.

There is quite a bit of confusion surrounding the terms Strategic Asset Management Plan and Asset Management Strategy. People often wonder if they are one and the same or if they refer to different things. ISO 55000/1/2 uses the terminology Asset Management Plan instead of “strategy,” and sometimes uses it interchangeably with SAMP.

Quite confusing.

To be clear, an Asset Management Strategy or Plan represents how decisions are made within an organization. Meanwhile, the SAMP depicts the document that details the strategic actions required to meet the organization’s Asset Management Objectives. A SAMP is usually derived from an enterprise’s organizational plan.

Both a Strategic Asset Management Plan and Asset Management Strategy are required for effective Asset Management.

So, what should a strategic asset management plan contain?

The Strategic Asset Management Plan

The SAMP ensures that an organization meets its organizational objectives. The Strategic Asset Management Plan provides the framework for all high level, strategic actions to be accomplished.

Here are a few tips:

The focus of the SAMP is the Strategic Initiatives. These actions are needed to bridge the gap between current/forecast Asset Management performance and meeting Asset Management Objectives
Write the SAMP with its readership in mind. Answer pertinent questions and provide details
Provide context to provide justification as to the enterprise’s vital need for an Asset Management Strategy and SAMP. This could include:
An outline of the organizational strategy/context/competitive pressures/external environment, etc.
Current and forecast Asset Management Objectives. Explain how these are connected to overall Organizational Objectives
Projections and trends in Asset Management performance, compared with the Objectives
Asset Management Risks and Opportunities
Assuming a “business as usual” attitude, identify specific gaps. Show the disparity between the expected and required performance, to meet Asset Management Objectives (AMO)
Not all initiatives should be considered strategic. Only consider actions as imperative if:
They require considerable effort, funding and time to complete
They will have significant impact on the wellbeing of the organization – if not completed
They’ll hinder the organization’s ability to achieve the AMO and, therefore, overall Organizational Objectives – if not completed
Require coordination across multiple operating units or business functions
For each action/initiative, the following should be outlined:
The high-level actions that are required
Individual roles and responsibilities for completing each action
The needed resources, i.e., funding, people, etc.,
Timeframes for completion of each action item
The plan and progress of the project should be monitored and updated accordingly. This should be accomplished as part of your organization’s standard “Plan-Do-Check-Act” cycle. Project monitoring could be done at least once a month
Do not produce a bulky document that is tedious to read. A 20-30 paged document will suffice

So, “How can an organization develop a Strategic Asset Management Plan?”

How to Develop a Strategic Asset Management Plan

Owning assets is fundamental to running an enterprise that’s present in either the private or public sector. The development and implementation of a Strategic Asset Management Plan allows for detailed understanding of:

All physical assets that are presently held,
The current value and projected (future) value of those assets and
All costs associated with maintaining or disposing of them

Strategic asset management plans are, more often than not, created as part of a comprehensive disaster plan. They can include intangible assets, for example, brand, patents, and reputation. A comprehensive SAMP allows an organization to manage its assets best and also deliver services efficiently.

SAMP development takes into consideration:

The readership. Who will read the document? What information do they need? What do they need the SAMP for?
The Strategic Initiatives to bridge the gap between current Asset Management performance and the Asset Management Objectives

To simplify this process, and because SAMP development is an iterative process, the following three methods are recommended.

Method 1: Preparing Strategic Asset Management Plans

Learn how a SAMP can help.

Asset management is a strategic and calculated way in which a company reaches decisions and conducts business. A SAMP helps an entity know how to process, use, and communicate any information pertaining to its assets. Therefore, creating a SAMP helps an organization obtain the maximum amount of worth from its assets.

Examining the assets owned by your organization and having a strategic asset management plan helps you to:

Understand your organization’s asset utilization habits and patterns
Value, determine and plan the entire lifecycle of an asset
Generate funds by disposing of unnecessary and costly assets

Collect information about assets.

Before you can make a SAMP, you’ll need to gather information about the assets you’ll be planning for. In compiling this information, focus on how well the assets serve your organization’s needs. This information will allow you to make a decision on which assets need your attention and which ones need to be sold.

Get information from your company accounting records. Confirm the information provided by physically auditing all tangible assets
Consider your company’s short- and long-term goals to determine the useful assets
Scrutinize the assets projected costs and determine the steps to take

Decide which assets receive your focus.

After you have evaluated your company’s assets, prioritize the assets. Create a list of categories based on asset importance and frequency of use. For example, a critical asset that is used infrequently should be replaced with a more affordable rental.

Certain assets may be necessary but may need upgrades
Some assets may be deemed extraneous or non-essential, and may, therefore, not be retained by your organization. For example, your company may lease a building to own a manufacturing plant for administration or operations. The plants value to cost ratio will need to be assessed to determine its importance to your organization’s goals.

Be sure to separate assets within a building based upon contribution, cost, frequency of use, and importance. Work with all departments to fully comprehend their procedures.

Create strategies for each asset.

Once you understand which assets you need to focus on, and their order of importance, you can build the strategic asset management plan. A basic SAMP will include the following phases:

Acquisitions (including rentals or leases)
Disposal
Funding
Maintenance
Operations
Risk assessment and management

Method 2: Creating a Strategy for Assets

Study necessary acquisitions.

During the acquisitions phase, you will determine the assets that need to be purchased or made available. This part of the strategy includes financial planning, which details the funding designated for acquisitions and where it’ll come from. This phase should also include:

Replacement assets
Cost to benefit analysis calculations, before leasing or acquiring and asset
Only assets that have been evaluated and deemed necessary
Expansion plans. For instance, acquiring a new facility should be part of the acquisitions planning phase

Plan for asset operations.

The operational phase of the SAMP will take into account the functions of existing assets in your organization. This will empower you to understand better the exact role of an asset, who is accountable for it, how secure it is, and its performance. Also, to be considered in this phase are:

Operational costs
Required training, e.g., training for factory machine operators
Unique asset functions, e.g., an industrial water filter, will, over time, have a certain amount of expense attached to its role. Include this cost so as to compare it to other expenses, to formulate a good management strategy

Plan for maintenance of assets.

All assets need maintenance over time so that they can continue serving the organization well. This phase of your SAMP will allow you to plan the future maintenance of all company assets. The plan should reveal in detail, the level of maintenance the assets will receive.

It should also mention the individuals who will be held responsible for the maintenance. Bear in mind:

All of an organization’s assets are important. Therefore, do not neglect the maintenance needs of any physical asset
Precise details of future maintenance should be included in this phase
Include projected costs of planned future maintenance, over time. For example, your company may be located at an older facility. It should be expected that maintenance costs will rise. Those rising costs should factor into any decision pertaining to the future of the facility

Prepare to dispose of old assets.

Not all assets will be deemed valuable or important enough to continue holding. The assets that require disposal should be included in your SAMP, as well as any tax consequences. Include details of the disposal process. That is, how the assets will be disposed of and any costs incurred during the disposal. Also, include the following information:

The reasons for the disposal
The methods for disposal
If an asset is up for sale, list the income it could generate
List the disposal plan for each asset and include details on how, when, and where they are to be disposed of. For example, you can plan a newly acquired aircraft’s retirement date based on projected maintenance and operational expenses. Compare the costs with how critical the aircraft is to your organization’s functions

Include information about funding.

Assets require funding to hold, maintain, or even dispose of them. During the funding stage of your strategic asset management plan, disclose:

The source of funding
How much each asset will receive
The specific use of the funds and whether they are recurring or one-off payments
The cost of an individual asset over its lifetime
The expenses incurred during disposal, as well as any income generated from selling assets

Manage risk.

The risk management stage of your SAMP should describe potential threats to your assets and their priority levels. Losses include customer relations, downtime, negative press, and any other factors that may damage value. A risk management plan should specify:

All potential risk to assets
The likelihood of occurrence and solutions should the potential risks happen
All of a company’s assets, be they financial, physical, information, tangible or intangible (e.g., data). List and address all the risks associated with each asset
In the instance of an emergency, the funding available to replace essential assets
Replacement plans to quickly replace critical assets in the event of a loss. For example, your company’s generator may stop working if not properly maintained. Therefore, having a plan in place can minimize loss

Method 3: Using the ISO 55000

Understand the ISO 55000

The ISO 55000 details an efficient system for designing a strategic asset management plan. ISO 55000 can help a company develop a plan that fits an organization’s unique needs. The ISO 55000:

Will take you through the process of producing your strategic asset management plan
Can help you meet regulatory requirements and laws that may be demanded from your company
Meets international standards including the ASTM International standards and American National Standards Institute
Is becoming the necessary gold standard with clients, investors or insurers

Understand what a good SAMP looks like.

The ISO 55000 offers guidelines on the final form of your strategic asset management plan. Review the key points below to understand the qualities that your SAMP should include:

A thorough planning process that is backed up by robust strategies suited to your organization
Asset systems, in addition to assets
Objectives should be stated clearly and plainly

ASSET MANAGEMENT OBJECTIVES

According to ISO 55000, an objective is “a result to be achieved.” Objectives set the direction and context of an organization’s activities. They are conceived through the strategic level planning meetings of the organization.

Image via ISO

Asset management objectives describe the desired future state of the organization. In drawing up a strategic asset management plan, every organization should have seven goals in mind:

Political goals
Economic goals (profit)
Social goals (people)
Technological goals
Legal goals
Environmental goals (planet)
Other important goals

Political Goals

These goals are driven by the need to be sensitive to external factors that can influence the business environment, for example-

Labor laws
Environmental laws
Tax laws and
Political stability and climate in the region where the company is located

In this regard, an example of a political goal is “To enhance the enterprise’s reputation in the local community.”

Goals to achieve:

To enhance the business’s reputation

Physical consequences to avoid:

Environmental disturbance from noise, smells, vibrations, etc. that affect the peaceful enjoyment of the property and neighboring properties
Increased outages associated with gas, water, and power supply, and other utilities
Increased disruptions with essential services, e.g., elevators, etc.
Reduced reliability of systems and assets
Unsightliness that detracts from the interior and exterior aesthetic appearance of the company’s building
Premature replacement of some assets due to the accelerated deterioration of the assets

Economic Goals (Profit)

These goals are formed by external factors such as local inflation, local interest rates, and internal factors, for example, staff efficiencies. For instance, interest income earned on the company’s replacement reserve can be optimized via selecting appropriate financial instruments.

One example of an economic goal is: “To maximize interest income in the enterprise’s reserve fund and to ensure satisfactory cash flow. This will be achieved by procuring appropriate investment vehicles. These vehicles will have timeframes that fit the remaining useful life of individual assets identified in the capital plan.”

Goals to achieve:

Physical consequences to avoid:

salability of assets due to stigmatization, etc.
in the coordination of people, use of energy and other resources
for leveraging economies of scale, etc.
waste and ground contamination
allowances for substrate repairs

Social Goals (People)

These types of goals apply to external factors, for instance, population growth rates, age distributions, cultural and community factors, and staff career attitudes.

An example of a social goal: “To formulate a succession plan for senior management who intend to retire over the next five years.”

Goals to achieve:

Physical consequences to avoid:

for conflict between owners/business partners (or shareholders, etc.), due to time concerns at general meetings, unresolved issues, etc.

These goals consider an organization’s information and technology (I.T.) hardware and software needs that are necessary for improving effectiveness.

An example is: “To equip essential staff and top management with appropriate technology which is supported by a database of all the enterprise’s asset records.”

Goals to achieve:

A modernized workforce

Physical consequences to avoid:

Computer software and hardware crashes due to gadget misuse and or inadequate training

Legal Goals

These goals are connected to external factors, e.g., labor laws and internal factors, e.g., active warranties on some assets. For instance, a new roof with a five-year labor warranty.

Goals to achieve:

Compliance with every aspect of the law
Awareness of every assets warranty terms and dates

Physical consequences to avoid:

Firewatch
Increased insurance deductibles because of failure to mitigate
Heightened risk exposure to the company and individual owners because of a failure to conduct due diligence
Jeopardizing of warranties because of failure to meet the duty of care
Litigation
Potential accidents to guests, owners, and staff due to negligence that enables slip, trip and fall conditions
Potential for penalties and fines due to non-compliance

Environmental Goals (Planet)

These goals apply to external factors, e.g., global warming and internal factors such as on-site water features, e.g., streams.

An example: “To protect on-site water sources from industrial pollution and contamination.”

Goals to achieve:

To reduce/eliminate dependence on fossil fuels
To promote green and environmentally building design and construction
To encourage cycling, walking, and using public transit as the preferred transportation modes. Therefore:
Improve the infrastructure for cycling pathways and walking pavements
Implement a bike-share program
Provide more low emission buses and snazzy station upgrades
To reduce carbon
To create zero waste or reduce waste
To reduce water use
Reduce ICI – institutional, commercial, and industrial water use
To increase biodiversity and maintain healthy ecosystems
To reduce current greenhouse gas emission levels by 33%

Physical consequences to avoid:

Inefficiencies in the coordination of people, use of energy, and other resources

Other Goals
To transfer knowledge of aging workforce
To ensure the organization is socially responsible for the wellbeing of the immediate and surrounding community
To unlock/create value for the organization

I hope that you are now better equipped to write your Strategic Asset Management Plan!