5 Key Stages Of Asset Management Life Cycle
Assets are the strength of every company. Knowing what you have, where it is and its condition helps in planning for future assignments and meeting business requirements. Earlier, rudimentary asset management was done by the people using traditional methods. Why fix what ain’t broken? As times have changed, it became more and more obvious that the traditional method of just keeping the asset in working condition was not enough. Mass production led to the realization that an asset when not in use had to be stored properly so that it could be brought back into the production line as and when demand increased. Changing laws for environment safety forced business owners to accept that an object could not just be thrown out anymore. It had to be processed and made safe for disposal and scrap. Therefore, arose the modern concept of asset management.
What Is An Asset?
An item, entity or thing (tangible or intangible) that holds value, for a company or a person, or has potential thereof is an asset. It is something that can be used as collateral in meeting commitments, debts etc. Essentially estate, resources, equipment, inventory, valuables etc. are assets.
One of the main aims of business is to minimize costs. Asset management goes a long way in fulfilling this requirement. Knowing what you have, its quantity and quality, where it is kept, how to retrieve it, the time taken to do so etc. will help in maintaining an optimum level of inventory and reallocating resources when needed.
A business owner does not have to worry about wasting time searching for the asset in their stores and purchasing it only to find that it lay wasting in the warehouse. Such wasteful and costly activities can be avoided through asset management.
Asset management can be described as a systematic process which maintains and monitors things of value to a company.
5 Key Stages Of Asset Management Life Cycle
An asset management team manages a company’s asset. Their aim is to assist the company in tracking the changes in their asset, how they are configured and the location thereof. An asset no matter how big or small, cheap or valuable goes through 5 key stages of asset management lifecycle.
1. Acquisition - The first stage is at the very beginning which means actual purchasing of the asset. Based on multiple options available the best decision is taken which fulfils both the company requirements and meets the budget. Usually, the acquisition is by planning where the needs are identified, data is gathered and forecasts are made to justify the actual acquisition. Once the asset is purchased it belongs to the company to use as it deems fit and profitable.
2. Deployment - This is the stage where all the action takes place before the asset is finally put to use. If required, the asset is assembled and preliminary checks are conducted on it. It is checked for physical defects as well as design and engineering problems, whether it is installed correctly and safely, testing for any performance issues, tagged or barcoded for tracking purpose etc.
Contracts and licenses are also checked and rechecked to make sure that the business is getting everything that was promised. Basically, efforts are made at this stage to make sure that the asset will deliver as expected, meet all the standards and be compliant when it is finally put to use. During deployment, the stage is set for optimum use of the asset.
3. Utilization - This is the longest stage of asset management. At this time the asset is finally put to good use for which it was purchased. It earns revenue and returns on capital are seen. Upgrades, patch fixes, purchasing of new licenses, compliance audits, cost-benefit analysis etc. are all a part of this stage.
Usually, it is the operations team which manages the utilization stage of an asset. The asset is continuously monitored for performance issues that may arise unexpectedly when it is on the production floor. The prime area of focus during the “utilization” stage is to get the most out of the asset.
4. Maintenance - Continuous use puts the asset through wear and tear due to which maintenance becomes a common occurrence. As the asset ages, maintenance increases helps in increasing its productive life. Technological advancements also demand changes in the asset to make it more secure and safe to use. Modifications and upgrades are done to make the asset more in sync with the times. This also makes them faster and better than before. At times it also improves the quality of work.
The focus of maintenance is to identify potential improvement areas so that operational requirements are met in the best possible manner.
5. Disposal - At the end of an assets useful productive life, it has to be disposed of. The decision to dispose of an asset should be based on the service deliverables. But disposal is not as easy as putting the asset in scrap or the next put out day. Everything has to be treated or processed to ensure that it cannot harm nature or society.
To that effect, if necessary, all data has to be wiped from the asset. It is then dismantled piece by piece, all parts that have further use are stored and those that have no use sent in scrap. If the asset has any parts that can cause an environmental hazard, they are to be segregated and disposed of as dictated by the environmental laws of that geographical area.
Asset lifecycle management helps to optimize the performance of an asset throughout its useful life. It starts at the planning stage and moves along in a sequential manner until the product is no longer useful and has to be disposed of. A true asset management system would allow an organization to know the operational costs, usage frequency, and performance associated with an asset throughout its lifetime. This allows comparison against set business metrics to know how your assets fare as compared to the business standards. To maintain a competitive edge in the market it is necessary to have a meticulous asset lifecycle management.