Ch

Chapter 26
Strategic Asset Management
Strategic Asset Management Process

 Strategic asset management concerns asset owner perspective

and is the process where he measures
 a) the asset operating performance

 b) assesses improvement ideas

 c)) C
Conceives,
i evaluates
l t andd initiates
i iti t assett investment
i t t projects.
j t

 d) Implements projects

 This is important in the context of business divisions or business

lines being measured as part of portfolio and each business line is
measured independently on its own. In the current business
environment of mergers & acquisitions,
acquisitions this is a key factor in
decision making.
AACE International’s Total Cost Management framework
defines TCM as the sum of practices and processes that an
enterprise
t i uses tot manage the th t t l life
total lif cycle
l costt
investment in its portfolio of strategic assets

The practices are called Cost engineering.

engineering

The process through which the practices are applied is

called TCM.
TCM

The bridge of link between the owners strategic asset

management and project control process is called its
“project system”
For the asset owner, the concept, tools and resources of cost engineering
are applied in an integrated way through the strategic asset management
sub-process of total cost management (TCM)

In the ‘stages-and-gates’ or gated project system, the performance of

planning tasks is done in successively more definitive stages.stages If the
project is meeting the stated objectives at the review, the asset owner
approves sufficient funds to complete the next stage of plan development
or to complete
p the pproject.
j If the p
project
j is not meeting
g the objectives,
j it
can be cancelled, rescoped or redirected.

TCM requiresi th t ERP implementations

that i l t ti measure both
b th assett costs
t (for
(f
profitability) and project costs (to support earned value assessment).
Definitions

Benchmarking – is an assessment technique used to compare the

enterprise’s assets and project performance measures to external peer
enterprises.

Front–end Loading or FEL is the project definition phase and enables

removing significant uncertainties about the project scope and execution
plan.

Influence curve - the potential to influence the value of an asset diminishes

as asset planning and implementation progresses.
Capital assets/Fixed assets

Capital or fixed assets include such items as manufacturing plants

and equipments, buildings, roads, and similar items that are not
easily moved and have significant useful life spans.

Commercial airplanes are capital but not fixed assets.

Products include such items as manufactured goods and similar

things that have a useful life span and are not fixed in place.

Software is difficult to classify as either fixed asset or a product