Asset visibility: Seeing the opportunity in asset management

Overview:

No corporate performance measure correlates more closely to increases in market capitalization than return on assets (ROA).

Based on the Manufacturing Insights Global Performance Index, no corporate performance measure correlates more closely to increases in market capitalization than return on assets (ROA). This tried-and-true measure evaluates executive management on making profitable use of the capital employed by the firm and rewards high performers with greater earnings multiples.

Harnessing robust global growth and industry consolidation via both public and private equity funding has set the strategy to drive higher asset returns in recent years. As growth steadies and financial resources become more scarce (and therefore more expensive), the emphasis for management will be to make the assets in its portfolio perform consistently and incrementally stronger. Maximizing asset performance will become a key corporate strategy.

Despite the shifting emphasis to wringing more performance out of existing assets, a recent benchmarking study conducted by the Americas’ SAP Users’ Group (ASUG) reveals some disturbing data. Seventy-five percent of respondents said that none of the metrics that govern asset performance were available in real time, 77% said that the measures were of low or mixed reliability, and an astonishing 90% said that the metrics were only somewhat effectively (or not at all) linked to overall business measures.

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