A capital intensive asset is a significant portion of the component of the balance sheet of the company. Many giant companies like Reliance Industries; General Electric invests heavily in machineries and equipment. The industries which are highly capital intensive encompasses aviation, automobile, oil exploration etc.The investment in assets in such companies generally forms greater than 50% of the total assets of the company. The amount of these assets runs in Billion and huge cost is spent in marinating these assets. Further, among the pool of assets which are core and highly capital intensive and encompasses major chunk of the asset cost. The report deals with these heavy capital intensive assets. Few examples of such assets are detailed as under: Spectrum under telecommunication, oil exploration machinery under offshore drilling, airplane under aviation etc. Further, since no specific detail of asset of company is available, general highly capital intensive machinery used for manufacturing of FMCG is considered from public domain. The chosen organisation is a Mid Size company engaged in manufacturing of FMCG goods and the machinery is RH 24 which is a FMCG good machinery.
In case of capital intensive industry, the following expectations from such highly capital intensive unit:
Further, the need encompassed the following:
The maintenance organisation to meet the above expectation shall plan properly the purchase of capital intensive asset along with establishing the technical specification of the machinery to be purchased. In addition, the maintenance organisation shall take Insurance of the asset. Further, the scope of maintenance shall comprise the following:
Some form of documentation of formal nature is necessary like collection, storage of data, interrogation of data, analysis of data and processing information for the effective working of the maintenance department of the organisation. Further, the system of documentation can be manual or computerised. In the present case a general functional model of the system shall comprise of seven interrelated principal modules which perform different documentation functions. In addition, significant amount of clerical and engineer effort is required in the department to maintain an effective function.
Module 1: Start with Plant Inventory;
Module 2: The information which is significant for maintenance department to be held in the information base egg life plans ;
Module 3: Preventive work listed in the life of asset- Inspection and preventive schedule;
Module 4: Encompass Module 3
Module 5: Work and any correction and modification work is fed into short term work planning system;
Module 6: Long term work planning system;
Module 7: Feedback of information and up dation of base of information.
(Kelly, 2019)
Under risk based maintenance management, priority is given to those resources that carry the significant risk if they fail. The management finds out the most economical way of managing resources and the chance of risk of failure is minimised. Under this phase, the leadership follows two step. The steps have been detailed as under:
Further, in this area the type and frequency of maintenance is prioritised based on the probability of risk of failure. Under this, the leader commits to pay greater time for inspection and management of those assets which have a greater chance of failure and assets which have a lower risk are subject to lower maintenance. Thus, by implementing risk based maintenance management commits to deliver lower failure under the most economical way. (Fiix Inc, 2019)
The Life cycle of a plant comprises of designing of equipment, establishing of technical specifications, procuring the equipment, installation, commissioning, operating and maintenance and removal.
Further, the cost involved in the life cycle comprises Operational Costs, Maintenance Cost, and Development Costs, Design Purchase and Construction Cost and Disposal cost.
In addition, life cycle costing is used in the organisation to understand in detail the requirement of input over the life cycle of the asset, improvement of design of the system by understanding the trends of input like utilities, labour over the life cycle, resource accounting i,e resource used now and in the past.
Also maintenance cost shall include the following costs:
Life Cycle costing helps to better analyse the cost and reduce the above three components of maintenance cost while minimising the risk. ( Water Research Foundation, GWRC, GHD Consulting Inc., 2019)
In the present system of asset management some of the shortfalls that have been identified with goods practices or international standards like ISO 5500X standards, ISO 55000-55002 Standards, EN 16646- Maintenance with Physical Asset Management and ISO 15686-5:2017:
Conclusions with opportunities for improvement (along with reasons for your conclusions)
On the basis of above, it can be inferred that the maintenance department of the organisation is in place and is performing actively in mitigating the downtime through a seven module documentation and risk based maintenance management. Further, the stakeholders and the leaders are also playing an active role in the maintenance of asset along with minimisation of risk and cost. Further, there has been certain gaps which are not in alignment with international standard or best practices. The same needs to be corrected by implementing the policies set out in the standard. Further, the following course of action shall be followed by the organisation to manage the asset more effectively:
This are some of the actions that organisation can take to weed out the gaps.
The time value of money represents a concept that money available today is more than the money available tomorrow on account of numerous factors like Inflation and earning capacity of rupee. This is a core principal in Finance and is sometimes represented as present discounted value. (Defmacro Software Pvt. Ltd., 2019)
The concept derives its idea that a rational investor shall always wish to receive money today rather than tomorrow on account of potential capacity of money to grow in value in a given time frame. Further, from utility point of view the utility is higher under present consumption rather than deferred consumption. (CFI Education Inc., 2019)
Let us take an example to illustrate the same. Suppose a firm x has 10000 in US $ today and 20000 in US $ 5 days later. It shall prefer US $ 10,000 today as it shall earn an interest in saving account for 5 days.
Further, the formula for computation of present value under time value of money has been presented as under:
FV= Future Value of Money;
PV= Present Value of Money;
I= Rate of Interest;
N = Number of compounding periods per year;
T = Number of Years
FV= PV x[ 1+ (i/n)]^(n*t)
On the basis of above formula let us take a sample sum
PV = $10000
T= 1year
I = 10%
FV =PV x[ 1+ (i/n)]^(n*t)
FV= $10,000 x (1 + (10% / 1) ^ (1 x 1) = $11,000
Further, under time value of money compounding is done for calculating the future worth of present money and discounting is done to calculate the present worth of future money. Further, annual worth is annual equal amount of money over a given period. There are various tools for time value of money.
The different types of availability measures like MTTR,MTBF and MTTF .These are very much essential for the organization who have equipment related opearation.Tracking the assets reliability is a very big challenge that the managers of the assets generally faces on a daily basis. To use all the metrics very carefully one should know the proper meaning of all the words and how to compute all those and what does that tell you about your assets.
MTTR is the minimum amount of time required to repair the full functionality of the system and restore to its original condition. To compute the effectiveness it is computed through the following formula: (LimbleCMMS LLC, 2019)
MTTR=Total maintenance time/Total number of repairs
MTBF is the second metric which means the estimated time that passes between one previous failures of an electrical system to the next failure to a normal function. (WCM Consulting AB, Vaxholm, Sweden, 2019) To compute the effectiveness it is computed through the following formula:
MTBF=Total Operational Time/Total number of Failures
MTTF is a very basic measure used for the system which is non repairable. It shows the maximum length of time the machine will lasts until it fails to operate.
MTTF=Total hours of operation/Total number of units.
The above three methods are used to compute the availability of machinery in the plant and helps to better analyse the uptime & down time and control the same for effective maintenance in the concerned organisation.
Further, availability and maintainability of asset in the work place can be improved through following actions:
Measurement of Maintainability in the Organisation
Maintainability is measured by computing mean time to failure, Constant rate of failure and mean time to repair. The said measure is used in the organisation to compute the maintainability and availability of machinery.
The methodology of measurement has been described here-in-below
MTTR is the minimum amount of time required to repair the full functionality of the system and restore to its original condition. To compute the effectiveness it is computed through the following formula: (LimbleCMMS LLC, 2019)
MTTR=Total maintenance time/Total number of repairs
Maintainability = 1- Exp (-T/ MTTR)
The above method is used to compute the availability of machinery in the plant and helps to better analyse the uptime & down time and control the same for effective maintenance in the concerned organisation. (Beaumont, 2019)
If the time taken to repair the machinery is greater than 1 day then appropriate action is taken. However, , the engineer always try to maintain the time within 6 hours.
Further the measurement of maintainability is enclosed in the excel.
Also, based on the computation it can be said that the process is under control.
Yes, the process is under control
References
Water Research Foundation, GWRC, GHD Consulting Inc. (2019, March 26). Overview: What is Life Cycle Costing? Retrieved from simple.werf.org: https://simple.werf.org/simple/media/LCCT/index.html
Beaumont, T. (2019, March 31). Availability, Reliability, Maintainability, and Capability. Retrieved from https://www.barringer1.com: https://www.barringer1.com/pdf/ARMandC.pdf
CFI Education Inc. (2019, March 31). Time Value of Money. Retrieved from corporatefinanceinstitute.com: https://corporatefinanceinstitute.com/resources/knowledge/valuation/time-value-of-money/
Defmacro Software Pvt. Ltd. (2019, March 31). Time Value of Money ( TVM ) – Definition, Formula & Example. Retrieved from cleartax.in: https://cleartax.in/s/time-value-money-tvm
Fiix Inc. (2019, MArch 26). Risk Based MAintenance. Retrieved from www.fiixsoftware.com/: https://www.fiixsoftware.com/maintenance-strategies/risk-based-maintenance/
Jain, M. (2019, March 26). Maintenance of Equipment’s: Meaning, Scope and Types | Industries. Retrieved from www.yourarticlelibrary.com: https://www.yourarticlelibrary.com/maintenance-management/maintenance-of-equipments-meaning-scope-and-types-industries/90693
Kelly, A. (2019, March 26). Maintenance System and Documentation. Retrieved from tpm4u.files.wordpress.com: https://tpm4u.files.wordpress.com/2010/03/maintenance-systems-documentation.pdf
Komonen, K. (2019, March 31). Maintenance within Physical Asset Management. Retrieved from www.slideshare.net: https://www.slideshare.net/SFSedu/maintenance-within-physical-asset-management
LimbleCMMS LLC. (2019). MTTR, MTBF, or MTTF? – A Simple Guide To Failure Metrics. Retrieved MArch 26, 2019, from limblecmms.com: https://limblecmms.com/blog/mttr-mtbf-mttf-guide-to-failure-metrics/
WCM Consulting AB, Vaxholm, Sweden. (2019, March 31). he WCM App for Lean, 5S, Continuous Improvements, Preventive Maintenance, and Lean Leadership. Retrieved from world-class-manufacturing.com: https://world-class-manufacturing.com/KPI/mtbf.html
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