2-C-3 Coordinate and/or monitor the movement of equipment and assets within the organization

1 ) Organizational policy for asset classification

The process of grouping economic resources under appropriate categories is asset classification. Asset categories would include current assets, fixed assets, intangible assets, investment assets and deferred costs. Assets are classified to facilitate the organization's financial health. These assets are defined as:

• Current assets -The short-term resources owned by an organization, including cash, inventory and accounts receivable. (ISM Glossary, 2006.) These assets have a life of one year or less or the normal operating cycle of the organization.

• Fixed assets - Defined as an asset that lasts more than a year, with an impact on shareholder value and is considered by management to be worth controlling. (ISM Glossary, 2006.) Fixed assets are usually referred to as property, plant and equipment. They are depreciated over a certain monetary amount. Depreciation is the recovery of a capital investment over time by expensing a portion in each financial period. Depreciation is a non-cash expense that reduces an organization's reported income. Amortization is a similar treatment for intangible asset use, costing and control.

• Intangible assets -These include assets such as a brand name, goodwill, reputation, patents or trademarks and have value but cannot be physically seen or touched. (ISM Glossary, 2006.) Intangibles usually have a life in excess of one year. An example of an intangible asset is goodwill from having purchased another organization for an amount greater than the sum of its net worth.

• Investment assets -This is the use of capital to create more money, either through income producing vehicles or through risk oriented ventures designed to result in capital gains.

• Deferred cost -This is the incurring of a~ expenditure that has a future benefit in excess of one year that is capitalized to an asset account.

These assets are usually classified by specific accounting rules established by the AICPA or the SEC in the United States. The organization's policies and procedures should be periodically reviewed to ensure that they are consistent with these established rules as well as the reporting requirements established by the Sarbanes-Oxley Act. Internationally there are other organizations that specify the country’s accounting rules. However, there is a lot of work being done with the goal of developing one global accounting system.

Inventory policies are aligned with the term current assets. The processes, policies and procedures for inventory control should be designed to meet the overall business objectives and to satisfy customers, internal or external. Organizations will typically use the inventory classification systems discussed in Task 2-C-2 such as first in-first out (FIFO), last in-first out (LIFO) or ABC analysis.

Capital expenditure policies are more aligned with the term fixed asset. These fixed assets have an impact on shareholder value and are considered by management worth controlling. Proposed assets are typically evaluated prior to purchase. The supply management professional will perform cost comparisons such as lease vs. buy scenarios.

2) Physical tracking systems (for example, bar coding, asset tags, serial numbers, RFID)

Any asset that is considered of value to the organization and its stakeholders must be monitored and tracked. Assets can move from one department to another or even arrive at some other organization's inventory. The system that each organization chooses to implement to track its asset will be predicated on the complexity, volume and/ or the frequency of use.

A popular way to track fixed assets is to implement asset tags. Asset tags provide a record of the asset and can verify ownership. Asset tagging is often accomplished through bar codes for easy and accurate .information.

A bar code is a machine readable code; a pattern of alternating parallel bars and spaces, representing numbers and other characters.The major advantages of using bar coding technology in receiving and store operations are the reduction in error rate and improved entry speed and count accuracy. The bar codes provide an easy, precise and cost-effective method of identification by using a unique identification number. The cost associated with asset management by bar coding is minimal and the benefits are plentiful.

Adding serial numbers to an asset tag will improve the tracking integrity. Serial numbers on asset tags will add value to the reliability of security, as well. Serializing is a method of printed alpha and numerical characters arranged using an alpha/ numerical sequence. The serial numbers can be based on a fixed-asset department or a master list. Using special characters in the prefix to create a unique set of numbers for the identification of the type of asset, the department or for assets purchased in a particular year is common.

Radio frequency identification (RFID), as discussed in Task 2-C-2, is a passive or active radio data chip that is attached to products to allow management to track, access and compile data as part of the supply chain flow process. (ISM Glossary, 2006.) RFID is the technology that is required for real-time physical tracking of equipment and assets. RFID monitors and tracks assets as they move and reports on status of the location. This technology will identify any deviations from the norm and report on the conditions.RFID will validate and maintain the correct accurate physical inventories with less labor than the traditional bar coding methods. The system may have alerts and triggers that report on any non-conforming procedures in the asset management policy.

Tracking assets is an important concern of every organization regardless of size. While employees may use a specific tool or tools, the asset ultimately belongs to the organization and must be returned. And therefore without an accurate method of keeping track of these assets it would be very easy for an organization to lose control of them.

Asset tracking software is available that will help any size business track valuable assets, such as equipment, supplies and inventory.

Asset tracking software allows organizations. to track what assets it owns, where each is located, who has it, when it was checked out, when it is due for return, when it is scheduled for maintenance, and the cost and depreciation of each asset. Many assets of companies and organizations are on the property of customers and suppliers. Too many times the same organization might have assets on the property that are actually owned by a supplier, customer or another company or organization. Examples are tools, dies, packaging equipment, pallets, control and quality-checking devices, computers, software and even leased items. Tracking systems are essential to keep track of such assets.

Other automated methods for tracking equipment and inventory include optical character reading (OCR), machine vision, magnetic stripe and surface acoustic wave (SAW).

Sarbanes-Oxley Act compliance policies have mandated publicly owned corporations to make significant changes in the methods that fixed assets are tracked and managed. Records and controls need to be documented, policies are imposed and need to be adhered to, physical asset inventories performed and audit trails sustained. (See Tasks 1-B-4 and 3-B-5 for more information on the Sarbanes-Oxley Act.)

3) Financial tracking systems

Tracking the value of an asset is required by all organizations. Measuring the net value and reporting the value are key performance indicators on how well an organization is performing financially. Accuracy of the data used for this process is critical. Con1munications and validating the equipment of the asset is essential to the success of financial reporting. Capital assets are typically assigned to a schedule in which their value is depreciated for a predetermined period of time.

A) Capital equipment -As defined in the ISM Glossary, capital equipment is equipment used by an organization for its production potential that costs more than a predetermined threshold value and whose cost will be depreciated over time. There are basic equipment and asset tracking systems like commercial spreadsheet programs. These can be a useful tool for setting up simple methods of tracking assets as they are purchased through their life cycle. Excel can be charted for analytical use and be simply graphed for visual presentation.

Also, most advanced fixed asset tracking software systems include implementing RFID or bar coding tracking devices to assure that the asset is properly documented. These commercial software and hardware systems are readily available and most can be purchased as built on tools for standard ERP systems. Modules inside of the ERP system can be programmed and/ or customized to manage the tracking on capital assets similar to the way that inventory is tracked.

All of these software and other financial tools can track capital equipment and should have methods of tracking the deprecation values of the assets in addition to the other requirements.

B) Software tracking system -There are many software programs available to track inventory and assets for organizations. Programs can be complex, such as an integrated tracking system, or as simple as a spreadsheet.

14) Internal distribution (for example, distribution channels)

Internal distribution is the moving of materials, such as raw materials, parts and sub assemblies within the organization, whether to an internal customer or to the next stage of the manufacturing process.

A) Internal transportation - Internal transportation relates to the infrastructure in an organization that allows materials to be moved. Pallet jacks, fork lifts, conveyer belts and storage-and-retrieval machines are examples of internal transportation equipment.

5) Types of equipment and assets (for example, cars, airlines, railroads, copiers)

Equipment and assets vary from organization to organization. Cars, airlines, railroads, copiers, computers, machinery and finished goods are examples. These typically are items used in the production or delivery of goods or services to meet internal and external customer requirements.

6) Asset management

Asset management is the process of tracking fixed assets that an organization owns and has listed on its balance sheet. Most organizations track their assets using inventory management software, bar coding or RFID tools. After assigning a unique code to each asset, it then is scanned and the information is entered into a database.

The purpose of asset management and tracking of the asset is to sustain accurate financial accounts, to prevent theft and manage the movement of the organization's assets.

An asset management program should have assigned responsibility of ownership and particular attention should be paid to the financial reporting process for detail and accuracy. The process encompasses the purchase, use and disposal of assets with the aspiration to maximize the return of investment for each corporate asset. Assets should be used to their fullest potential and after their useful value has expired the asset should be evaluated for disposal.

A) Inventory management - Inventory management is defined as the business function concerned with planning and controlling inventory. (ISM Glossary, 2006.) However, it should be noted that an inventory of fixed assets is different than an inventory of expendable goods that are managed in a manufacturing process. The latter represents raw materials, components and finished goods that are expended and replenished on an ongoing basis and normally have experienced staff focused on inventory control. Developing and implementing_ an inventory management system is discussed in Task 2-C-2.

For most of the other types of organizational assets, usually IT and finance are the primary stakeholders in managing the asset tracking unless the organization has a dedicated asset or facility management department. In either case the tracking methods are similar.

Many department managers do not normally keep track of what they are replacing or removing. IT and/ or finance usually are accountable for collecting, reporting and performing physical inventories of the organization's assets.

There are numerous tools and software programs available commercially. Most of these packages include a serialized bar coding tool that allows the detailed tracking of the assets. Human resources (HR) plays a key role in this process.

If someone is hired or leaves the organization, HR usually is responsible for asking what equipment the employee needs or had, and where is it located.

Usually IT, finance and HR work as one entity and are accountable for acquisition, collecting data on location, reporting and performing physical inventories of the organization's assets along with reporting the financial obligations of asset value for government reporting requirements.

B) Asset recovery -Assets should be used to their fullest potential and be maintained properly during the life cycle. After the asset has exceeded it usefulness, the practice of asset recovery begins.

Asset recovery is the re-employment, reuse, recycling or regeneration of something of value (property, equipment or goods) that is no longer needed for its original intent. (ISM Glossary, 2006.) Finding a new use for existing assets is a good business practice. It can minimize environmental impacts and reduce an organization's disposal costs. In some cases, the asset or the entire organization may be in the process of going through asset retirement, bankruptcy or foreclosure.

Assets represent a significant investment for any organization. They must be classified, tracked and monitored during their life cycle, and when appropriate, must be disposed of in a manner that results in maximum return.

During the asset recovery process, the organization will have an outsourced expert, an asset recovery organization, or a staff employee who specializes in this area. Determining the potential value of the assets as residual value is complicated due to the financial risks that are associated with the decisions. If the decision is to outsource the services to an asset recovery organization, that organization will manage the entire process.

The objective of asset recovery is to increase the cash position of the organization by optimizing the return on the assets. Through the process of asset recovery, some of the action items consist of:

• Identifying for removal the asset from the organization's asset inventory.

• Consideration for asset tracking, inventory accuracy.

• Data security, removal of organization information.

• Environmental compliance, current and cradle-to-grave or cradle-to-cradle responsibilities. (See Task 3-B-7 for more information.)

• Logistics, storage and handling.

• Life-cycle completions.

• Value analysis, optimal return from the asset.

All issues in these areas must be addressed and resolved before removing the asset from the organization's balance sheet.