Understanding Asset Management
Your assets and equipment are the most important part of your business and also the most costly. Businesses maintain a wide range of assets that include fixed and liquid assets. As a business owner, it is important to be able to identify and manage your assets and use them to get the maximum possible return on your investment. Improper business asset management means unscheduled downtime, leading to additional costs that have a major impact on your bottom line.
Proper management of assets contributes to your company’s growth, financial success, and promotes sustainability.
What Is Asset Management?
Asset Management is the process of managing the maintenance of physical assets and equipment of an organization throughout each asset’s lifecycle. The objective of asset management is to maximize asset/equipment lifespan, minimize costs, enhance the quality and utilization of assets, increase efficiency, and improve safety.
What Is Asset Lifecycle?
Asset lifecycle encompasses all activities and expenses from planning through the disposal or retirement of the asset.
There are 5 main stages that assets go through during the lifecycle process. All of the stages are important to the life of the asset, but the majority of the activity is spent in the utilization and maintenance stages.
Asset Lifecycle Stages
Procurement: This is the purchase decision which is made by some upfront planning and analysis from gathered data to identify the needs of the organization along with the forecasts to justify the actual purchase.
Acquire: Once you have decided what you needed, the next step is purchasing the asset and getting it to your facility.
Utilization: At this time, the asset is finally ready to put to good use for its intended purchase.
Maintenance: Through the utilization stage of the asset, maintenance work is needed to extend the life of the asset.
Dispose: If you determine that at this point additional maintenance will no longer be a financially sound decision, then disposal will be a better decision.
In this phase, you do have several options on how to dispose of the asset:
- Can you keep the asset for parts?
- Can you sell it to a refurbishing company for spare parts?
- Is there another facility that the asset can be sold to?
- Are there any environmental restrictions on disposal of the asset?
- Are there additional costs associated for disposal of the asset?
When disposing an asset, you need to figure out the financial impact and what is the best way of disposing of your asset.
Different Types of Asset Management
Assets are important to every organization and taking care of assets is very important. It is vital that you know all the essential assets in your company. Especially those assets that have value and need to be managed.
Below are a few different types of asset management:
- Financial Asset Management (Investment Management)
- IT Asset Management (ITAM)
- Infrastructure Asset Management
- Digital Asset Management (DAM)
- Fixed Asset Management
- Enterprise Asset Management
Developing a Strategic Asset Management Plan
Developing and implementing a strategic asset management plan gives you a detailed understanding of what physical assets are currently held, their value, and future value.
Below are some effective asset planning steps to help you through the process.
- Create an Asset Inventory
To help ensure that the business has a clear understanding of the assets it owns and that the assets are being utilized in the most efficient and cost-effective way, an owner needs to take an account of the assets that they own
- Calculate Life Cycle Costs
To have a more precise asset management plan, the business owner should calculate the entire life-cycle costs of each asset. Some business owners only calculate the original purchase costs. But, during the assets life cycle there are additional costs that will come up during the life of each asset, such as maintenance, repairs, spare parts, etc.
- Set Levels of Service
A key aspect of asset management planning is to match the level of service that assets provide to the business owners expectations. This step provides the balance between the cost to deliver, and the level required. Some of the levels of service include cost, safety, efficiency, quality, quantity, reliability, and responsiveness. This information gives business owners the ability to determine the operating, maintenance, and renewal activities needed to keep the assets in good condition.
- Cost-Effective Management
This approach encompasses applying maintenance at the right time which is a preventive or proactive approach.
- Executing Long Term Financial Planning
Most businesses have some type of budget constraints. Having a long-term financial plan will help you to determine which of your objectives are obtainable, which are the most important and how long you are going to be able to maintain your priority assets over the long term.
What Does Asset Management Software Do?
Asset management software is a centralized system that gives users the ability to keep track of assets, analyze maintenance fees, and extend an asset’s lifespan. Maintenance software tracks and records asset history from purchase through retirement. Instead of maintaining spreadsheets with thousands of assets, the processes are automated through asset management software. Managing your assets through this software decreases administrative costs, increases productivity, and gives your business a greater insight into asset utilization, costs and maintenance.
The ideal asset management software will have the capability to provide asset mapping. Asset mapping gives organizations the ability to track and map assets exterior and interior, providing a visual on asset(s) location, along with other pertinent information such as work orders, nearby assets, etc.
Investing in asset management software, capital costs are slashed, and money is saved due to preventive maintenance scheduling and automatic alerts.
Why Is Asset Management Software Important?
Asset Management software is a very important system for any organization that wants an automated system to help them manage their assets. Asset Management software helps organizations manage, track, assess, and optimize asset quality and reliability.
Let’s take a look at what Asset Management software can do for your business:
- Centralize Asset Information
- Increasing Return on Asset (ROA)
- Calculate Depreciation
- Improve Asset Utilization and Reduce Costs
- Oversee Maturing Resources and Infrastructure
- Identify and Resolve Issues Before They Occur
- Removing Ghost Assets
- Regulatory Compliance
Do You Need Asset Management Software?
No matter what industry you may be in, or what size company you may have, everyone has assets that need to be maintained. Do you need asset management software to help you better manage your assets? If you can relate to a number of these issues below then it is time to invest in asset management software to automate your processes.
- You have assets and equipment that you need to keep track of.
- You have assets across multiple departments and need to improve communications and streamline processes.
- You have hundreds of physical assets, complex systems, and operations across multiple sites.
- You need to control security settings to ensure that only authorized personnel have access.
- You need better asset and inventory management to reduce the costs of redundant purchases.
- You need to standardize your asset strategy to be consistent across your organization.
- You need to make sure you are meeting all regulatory reporting compliances for your organization’s industry.
- Enterprise asset management can shrink capital costs, lower asset-related operating costs, extend the life span of an asset, and improve ROA (return on assets).
Benefits of Asset Management
If you take care of your assets they will last a long time; if you neglect them, they will cost you a lot of money in breakdowns and business disruptions
Some of the most important benefits of Asset Management Planning include:
- Increased Operations Efficiency
- Centralization of Asset Information
- Improved Asset Reliability
- Minimize Maintenance Costs
Challenges of Asset Management
Being successful in managing your assets can be a challenge, but if you plan appropriately, invest in the right software and vendor support team, it can be less stressful. Some of the challenges that organizations face include:
Identifying Assets: The best decisions are made on having the most accurate information. You need to know what assets you have, where they are located, what’s in use, repair history, and how old they are or if they are in the process of being retired or disposed of.
Uncontrolled Assets: Controlled asset management is a cost that can be altered based on a business decision. An example would be direct materials or direct labor costs. Uncontrolled asset management is an expense over which a business has no direct control.
Uncontrolled assets are assets brought into an organization without authority or approval. These types of assets increase business expenses, along with the risk of security and compliance issues.
Cross-Functional Assets: Businesses are trying to work leaner and smarter and look for ways to work more efficiently while cutting costs. Businesses that manage assets across organizations are a major challenge for businesses. The sharing of assets with other organizations increases the risk of business interruption when an asset is needed by more than one organization and is not available.
Your assets are the core of your business. Not managing your assets properly costs you time and money. Having an asset fail can put you behind schedule, incur additional costs and cuts into your bottom line. Investing in assets is expensive, and you want to manage them efficiently so that you can keep your assets running at peak performance for a long time, as well as keeping repair costs down.
Asset planning using a spreadsheet is not going to work for any organization that has a significant number of assets or limited resources. The most important step is asset planning which is the foundation for an effective asset management system. Asset management plans provide a road map so that an organization can understand their objectives and long-term asset management strategy.
Now that you have acquired all of your assets, and your plans are all in place, you need to invest in the right tools to help you manage these assets. Taking control of assets and investing in an asset management system is the solution to help you manage all of your asset tasks, while improving the efficiency and financial strength of your business. The bottom line is it helps you overcome all these asset management problems by centralizing your data and streamlining your workflows through focused automation. This maximizes the value of the assets, providing the best returns to stakeholders.
Jeff Roscher is Co-Founder and President of eWorkOrders (Information Professionals, Inc). eWorkOrders is an industry leader in Enterprise Asset Management (EAM) software. Jeff can be reached at jeff@eWorkOrders.com.