Physical Asset Management: Strategies and Best Practices
Physical asset management has gone through a massive evolution recently, with digital transformation and global disruption fueling the need for innovation.
Good physical asset management optimizes the use of resources and assets, which, when broken down, means lowered costs and enhanced profits — name one company in the world that doesn't want that!
While most businesses create their physical asset policies with these two endpoints in mind, those that take an ad hoc, reactive approach often see a loss of time and money and are left scratching their heads as to why.
There may be a lot of reasons their policies aren't working — perhaps they're using outdated methods to track assets, or their asset management team isn't collaborating with the top levels of management. In fact, the latest research shows that a significant barrier to collecting and applying asset management data is the lack of integration across departmental collection processes.
Effective physical asset management should be closely linked to corporate governance, aligning the management of assets to the overall corporate vision. When implemented correctly, it will streamline operations, maximize the output of your assets, and deliver the best ROI from your inventory pool.
Creating a rigorous asset management policy doesn't come easy — it requires an interdepartmental, collaborative approach and a first-class SaaS infrastructure.
In this article, we'll look at the evolution of physical asset management and how companies can leverage technology to create a proactive physical asset management policy, making the most of your assets and your people.
Physical asset management
Physical asset management makes sure physical assets are available, reliable, cost-effective, compliant, and sustainably managed and disposed of. This is essential for any business looking to minimize risks and maximize value from their given asset pool, from educational institutions to government departments.
With the global asset management market valued at 373 billion USD in 2022, businesses that have capital assets — which, let's face it, is pretty much every business in existence — need to be adjusting their business systems to embrace fixed asset management.
But not all asset management frameworks are created equal. There are two types of asset operations management.
Two types of asset management
Reactive asset management
Reactive asset management is a strategy that's deployed once equipment failures have already occurred.
Reactive asset management requires little foresight and planning and only addresses problems and risks when they arise. Reactive asset management — sometimes called run-to-failure maintenance or breakdown maintenance — leads to hazards, unplanned downtime, lost revenue, and a lack of compliance. While only 3% of organizations hold reactive maintenance to be effective, an astonishing 60% of manufacturing companies are still using it today.
Proactive asset management
The flip side of reactive management is proactive asset management. This framework leverages a range of strategies, including monitoring and tracking assets in real-time, predicting potential failure of equipment, and allowing for preventative maintenance. Proactive management reduces risks, increases compliance, and decreases the likelihood of asset loss and theft, maximizing the value of physical assets across time and space.
With the predictive asset management market expected to reach USD $16,761 million by 2028, businesses are clearly catching on to the value of this framework.
Modern proactive and predictive physical asset management practices utilize new technologies such as AI, IoT, and data analytics to predict maintenance needs in an unprecedented way. Companies implementing these technologies are streamlining operations and saving time and money.
By leveraging a modern IoT-enabled cloud-based tool such as RedBeam, teams can stay on top of the purchase, operations, and maintenance of all their equipment and facilities.
Benefits of physical asset management
The purpose of physical asset management is to maximize the operational benefits of an asset from deployment to disposal.
Efficient physical asset management provides techniques and strategies to minimize operational downtime and maximize ROI.
The benefits of physical asset management are wide-reaching and include the following:
- Increased asset availability and reliability
- Reduced downtime and repair costs
- Improved safety
- Enhanced efficiency and cost-effectiveness
- Extended asset life and improved sustainability
- Better risk management and decision-making
- Reduced risk of asset loss and theft
- Reduced risk of non-compliance with government/IRS requirements
Physical asset management lifecycle
For physical asset management to be effective in terms of boosting operational efficiency and maximizing return on investment, it's essential to consider the physical asset management lifecycle.
An asset generally refers to any piece of physical infrastructure that a team uses to achieve its organizational goals. This includes tangible assets such as equipment, IT hardware, machinery, and buildings.
When businesses lack a clear understanding of assets and their entire lifecycles, businesses start to run into trouble. They may find themselves reverting to reactive asset maintenance, which in turn leads to accelerated asset depreciation and unnecessarily high maintenance costs.
Conversely, when teams embrace life cycle management, from procurement to disposal, they can make informed decisions and take a systematic approach to providing exemplary asset efficiency across the board.
Various stages of the asset lifecycle are as follows:
When your team's current assets are unable to meet the needs of your business and a new asset needs to be purchased, the asset life cycle begins.
It is in this initial planning stage that your team will define exactly what asset is needed and what purpose it'll serve in your organization. The asset manager and procurement team should collaborate with several departments at this stage to determine the following:
- What asset is required
- What purpose it'll serve
- How it'll improve operations
- Available budget
- Asset health forecasting and estimated depreciation over time
At this first stage of the lifecycle, it's crucial to assess how an asset fits with your overall business goals, including how it can add to operational efficiency and revenue generation.
Commission the asset
Once asset planning has been used to identify the asset that's needed, it's time to commission or purchase the asset.
The steps in commissioning an asset include:
- Defining the asset
- Conducting thorough market research to identify and shortlist suppliers
- Negotiating pricing and delivery options
- Finalizing the purchase
Operation and maintenance
During this, the longest stage in the asset lifecycle, the asset is now deployed and operational in its intended role. Throughout this phase, the asset should be tracked for performance and maintenance requirements using a comprehensive asset maintenance strategy and quality software. Businesses that fail to implement a maintenance plan are likely to experience a dip in asset reliability and performance Good maintenance planning will reduce downtime, minimize repair costs, and maximize asset longevity.
At the end of the asset lifecycle, the asset is removed from service and needs to be disposed of. This may occur through selling, repurposing, recycling, or disposing of the infrastructure in question. It is the role of the asset manager to determine the most effective and purposeful time for disposal. They should consider a range of factors, including environmental regulations and data security issues. If the asset needs to be replaced, the lifecycle returns to the planning stage and an alternative asset is planned for.
The role of physical asset management software
From global multinationals to SMEs, physical asset management software is one of the most valuable investments a team can make.
Asset management software allows your team to make the most of your assets while making sure you remain financially and legally compliant.
By leveraging RedBeam's complete asset-tracking solution, even the most asset-heavy organizations can streamline their asset workflow and avoid potential pitfalls.
Through RedBeam's field-friendly mobile app, businesses can reliably track activities throughout the asset's lifespan.
RedBeam's efficient automation helps complex organizations to:
- Reduce the risk of loss and/or theft: By tracking assets in real time, managers can ensure that all assets are accounted for, reducing the risk of theft or loss. With a recent study showing that employee theft has jumped by 19% as the rising cost of living triggers a wave of workplace crime, this is more important than ever.
- Follow regulations: Our fixed asset tracking solution provides a comprehensive audit trail helping organizations follow industry regulations, reducing the risk of penalties or legal consequences.
- Improve decision-making: With accurate and up-to-date asset data files, IT managers can make informed decisions about asset allocation, maintenance, and replacement.
- Allocate resources efficiently: By having real-time visibility into their assets via radio frequency identification (RFID) tracking capabilities, IT managers can allocate resources more efficiently, reducing the risk of costly errors.
- Budget and forecast: With accurate asset information, IT managers can improve budgeting and forecasting and reduce the risk of overcapitalization.
Creating a physical asset management strategy
An effective physical asset management plan involves establishing clear organizational objectives, aligning those objectives across all departments, and documenting the entire approach. This requires using first-class fixed asset tracking software such as RedBeam.
Identify critical assets and equipment
First things first. Whether your asset management strategy is driven by the IT department or an asset manager, the initial stage in creating an asset operations management strategy is determining which of your assets are most critical. But how do you do this? Teams should use a criticality assessment ranking system that's aligned with the company's vision, values, and operational hierarchy.
Empower your organization and people
To ensure optimized asset performance, your physical asset management policy and corporate strategy need to be aligned.
This is a top-down function, requiring a management team that understands the importance of asset management in delivering your business objectives.
Furthermore, the entire team, from technicians to operators to managers, needs to be looped into the asset management policy so they can integrate it into their daily workflow.
Transparency allows all team members to see the benefits of efficient asset management and ensure buy-in and enhanced collaboration.
By integrating fixed asset management software such as RedBeam, your team will have access to a complete history of your assets with date, time, and user-stamped changes. This will empower your team to make data-driven decisions that are aligned with your overall corporate governance.
Evaluate the data
One of the most beneficial aspects of an asset management plan is the access to data and the corresponding analytics teams can collect over time. RedBeam allows teams to track assets from demand to disposal. Our SaaS solution provides data on asset uptime, downtime, GPS location, maintenance requests, and repair costs.
This data can then be leveraged to provide deep business performance insights into how to structure and refine the asset management journey.
Review and revise processes
Most teams are already using a form of physical asset management, whether they realize it or not. When teams haven't followed the above processes, they may have asset data located in various departments and are probably still using outdated spreadsheets to try to gain control of their assets. Unfortunately, this approach to asset tracking usually means teams are waiting for an asset to break or become outdated before they address the issue. These businesses rely on reactive asset management. They are failing to capitalize on their assets long-term and should look to conduct a review and implement an approach to asset tracking that prioritizes a preventive management framework.
Even teams that are using advanced technology solutions, such as RedBeam, should be using their collected data to inform and revise their frameworks.
Track your way to success with RedBeam
No matter your company's size or vertical, physical asset management software is one of the most valuable tools your team can invest in. RedBeam's asset management solutions ensure all your asset data is in a central location. This reduces the risk of human errors and gives your team deep insights into your asset portfolio. By integrating our SaaS solution with the above strategies, your team can track its way to success, one asset at a time. Contact our team today to learn more.