Difference between ISO 55001 and Toyota’s Asset Management Method
1: The asset management processes at Toyota is differs from ISO 55001 in several aspects. The first point of difference lies in the approach to asset management which ISO 55001 advocates and the methods which are followed in Toyota. ISO 55001 emphasises on asset management from three perspectives. They are acquisition process, analysis and storage and quality assurance approach (Iso.org. 2018). Toyota on the other hand uses lean six sigma management of assets to ensure ‘zero breakdown’. The approach involves recycling the wastes into the production line in order to utilise them for further production of finished. The global automobile manufacturer uses lean production techniques like total productive maintenance and just in time or JIT in asset management (Godau and Mary McGeoch 2016).
Figure 1 Asset management steps as per ISO 55001
(Source: Iso.org. 2018)
The second difference between the ISO 55001 and the asset management method of Toyota is that while the former mainly emphasises on internal asset management, the latter stretches to external asset management which in turn contributes to asset management in Toyota (Toyota-global.com. 2018). This is evident from the fact that the company has set up Toyota Financial Services to finance sale of its vehicles. This results in faster generation of sales of models of vehicles and spare parts, which form of parts of its inventory which in turn form of a part of its assets. This results in more dynamic sale of goods for the company enables unlocking the financial assets invested or locked in manufacturing and warehousing these finished products. Thus, it can be inferred the asset management of Toyota attributes financial liquidity to the company which ISO 55001 does not cover (Iso.org. 2018).
Figure 2. Asset management stages at Toyota
(Source: Toyota-global.com. 2018)
2: Toyota places equal emphasis on all the four stages while managing asset lifecycle namely planning, acquisitions, operations and maintenance and disposal. The automobile manufacturer uses automatic asset management to plan and acquire assets. The company uses lean six sigma to operate and maintain assets. Toyota uses methods to integrate the assets to workflow to enable maximum utilisation of assets, thus reducing the disposed amount of assets (Lee, Bagheri and Kao 2015). The lean management enables the company to adjust its workflow of manufacturing to remove non-productive steps, thus enabling use of assets in more productive activities, thus enabling their maximum utilisation.
Approach towards Asset Lifecycle
3: Toyota implements all the aspects of ISO 55001 but omits the policies coined down for other industries. This is because this several policies are meant for companies operating in the road sector organisations. Toyota operates in the automobile manufacturing and financing industries and hence, the policies applicable for road sector or infrastructure sector does not apply to the former (Bloom, Sadun and Van Reenen 2015).
Figure 3. Asset management system according to ISO 55001
(Source: Iso.org. 2018)
4: The asset management of Toyota adopts the basic concepts of the asset management of ISO 55001. ISO 55001 mentions that the main aims of asset management systems in organisations are to improve financial decisions, more accurate investment in assets, risk management, boosting productivity, minimising social impacts and compliance with legislations in power (Kerzner and Kerzner 2017). The asset management strategies of Toyota comprising of lean six sigma and JIT also aim to achieve these aims. Thus, it can be inferred from this comparison that the asset management processes of Toyota aims to achieve the same aims the asset management processes of ISO 55001.
5: The safety plan and risk management plan at Toyota is made by the maintenance by following the asset management policies laid down by the apex management of the company. The maintenance department keep record of all the assets throughout their lifecycle. They take record of the operations of the assets and compare between the actual productivity against the standard productivity. If the machine are not able to achieve standard productivity levels, then the maintenance departments make strategies either to service and reuse the plant or dispose it. This maintenance actually enables management of four main types of risks. First, proper maintenance of assets ensure reduction in accidents, thereby managing workplace risks or OHS risks. Secondly, efficient and timely maintenance of plants ensure that they do not emit large amount of wastes like smoke (Bromiley et al. 2015). This enables Toyota utilise maximum portion of the fuel to produce good and reduce financial losses or risks due to wastage of fuel. Thirdly, this enables the firm to reduce environmental pollution, thus reducing environmental risks and penal charges for breaching environmental laws (Mooren et al. 2014). Fourthly, proper maintenance of plant ensure ‘zero breakdown’ in the production system of Toyota, thus enabling the company to ensure huge production. This enables Toyota to generate immense revenue, thus managing financial risks (Kerzner and Kerzner 2017). Thus it can be inferred that the maintenance department of Toyota enables risk management by efficient maintenance of the plants.
6: The production department is not directly involved in asset acquisition stage processes like allocation of funds towards acquisition of assets. This allocation of funds to acquire assets comes under the purview of the accounts departments. Similarly, the production department of Toyota is not directly involved in the disposal of plants which comes the responsibility of the waste management department. The production department should directly be involved in these steps to ensure more efficient management of plants throughout its lifecycle (Kahn and Lemmon 2016).
7: Toyota adequately considers the costs of maintenance as a part of its asset acquisition process. This is evident from the table below showing the return on assets and return on equity. The ROA and ROE as shown are 4 percent and 7 percent respectively. Thus, it can be inferred that Toyota efficiently manages the acquisitions of its assets and takes into consideration the amount of income the assets being acquired would attribute to the company (Garleanu and Pedersen 2018).
|
Particulars |
FY2017 first half (Six months ended September 30, 2016) |
|
Current assets |
15,653,139.00 |
|
Fixed assets |
9,288,831.00 |
|
Total assets |
24,941,970.00 |
|
Total liabilities |
43,776,105.00 |
|
Shareholder’s equity |
16,958,812.00 |
|
Sales |
12,216,706.00 |
|
Operating profit |
1,116,865.00 |
|
ROA (Operating profit/total assets) |
4% |
|
Return on equity(Operating profit/shareholders’ equity) |
7% |
Figure 4. Calculation of ROE and ROA of Toyota
(Source: Toyota-global.com. 2018)
Reference:
Bloom, N., Sadun, R. and Van Reenen, J., 2015. Do private equity owned firms have better management practices?. American Economic Review, 105(5), pp.442-46.
Bromiley, P., McShane, M., Nair, A. and Rustambekov, E., 2015. Enterprise risk management: Review, critique, and research directions. Long range planning, 48(4), pp.265-276.
Garleanu, N. and Pedersen, L.H., 2018. Efficiently inefficient markets for assets and asset management. The Journal of Finance, 73(4), pp.1663-1712.
Godau, R. and Mary McGeoch, F.A.H.R.I., 2016. ISO 55001 Ready–Focus on improving Asset Management Maturity. Change.
Iso.org. 2018. Iso.org. [online] Available at: https://www.iso.org/standard/55089.html [Accessed 9 Oct. 2018].
Kahn, R.N. and Lemmon, M., 2016. The asset manager’s dilemma: How smart beta is disrupting the investment management industry. Financial Analysts Journal, 72(1), pp.15-20.
Kerzner, H. and Kerzner, H.R., 2017. Project management: a systems approach to planning, scheduling, and controlling. John Wiley & Sons.
Lee, J., Bagheri, B. and Kao, H.A., 2015. A cyber-physical systems architecture for industry 4.0-based manufacturing systems. Manufacturing Letters, 3, pp.18-23.
Mooren, L., Grzebieta, R., Williamson, A., Olivier, J. and Friswell, R., 2014. Safety management for heavy vehicle transport: A review of the literature. Safety science, 62, pp.79-89.
Toyota-global.com. 2018. Toyota-global.com. [online] Available at: https://www.toyota-global.com/company/history_of_toyota/75years/data/business/finance/overview.html [Accessed 9 Oct. 2018].
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