Physical Asset Management: Definition and Key Strategies

Are you struggling with keeping track of your organization's physical assets? Do inefficiencies and maintenance issues frequently disrupt your operations? If so, you're not alone. Many organizations face significant challenges in managing their physical assets effectively.


Imagine having a seamless system that tracks the location and condition of your assets and helps in planning maintenance and upgrades. This vision becomes a reality with effective physical asset management, leading to reduced costs, improved productivity, and enhanced asset longevity.

In this blog post, we will define physical asset management and provide you with key strategies to manage your assets effectively. Whether you are new to the concept or looking to enhance your current practices, this guide will offer valuable insights to help you maximize the efficiency and lifespan of your physical assets. Let's dive in and explore how you can transform your asset management approach today.

Main Takeaways From This Article: 

  • Physical assets are tangible items, including equipment, machinery, vehicles, and buildings, owned by an organization to generate value.
  • Effective physical asset management solutions minimize risks, maximize asset value, minimize costs, and ensure reliability, safety, and compliance.
  • Reactive asset management addresses issues after they occur, while proactive asset management anticipates and prevents problems.
  • Physical asset management benefits include improved efficiency, increased asset availability, enhanced safety, and extended asset life.
  • Creating a good physical asset management system involves identifying critical assets, conducting regular audits, prioritizing maintenance, and leveraging asset management software.

What Is a Physical Asset?

A physical asset is a tangible, physical item an organization owns to generate value for its customers.  

Physical assets can include a variety of items like:

  • Equipment
  • Machinery
  • Technology
  • Vehicles
  • Infrastructure
  • Buildings

On the other hand, intangible assets have value but do not have a physical presence. Examples include software, trademarks, licenses, films, patents, and copyrights. 

Examples of Physical Assets

Depending on the industry and the company's operations, a wide range of physical asset types can exist. Here are the most common physical assets used within an organization:

  • Manufacturing: Tools, equipment, machinery
  • Transportation: Vehicles, infrastructure, planes, boats
  • Real Estate: Land and buildings
  • Inventory: Raw materials, work-in-progress (WIP), finished goods
  • Energy: Pipelines, power plants, transmission lines
  • Utilities: Reservoirs, water treatment plants, distribution systems

These physical assets form the backbone of an organization's operational capabilities, ensuring efficiency and productivity across various sectors. Proper management and maintenance of these assets are crucial for sustaining business growth and achieving long-term success.

What Is Physical Asset Management?

Physical asset management manages an organization's physical assets to maximize their value and output while minimizing costs associated with owning and operating them. 

A successful physical asset management strategy aims to maintain an efficient upkeep through the entire asset lifecycle, ensuring that an organization's physical assets are:

  • Reliable
  • Well maintained
  • Available when needed
  • Cost-effective to operate
  • Safe to use
  • Sustainably managed
  • Compliant with regulations
  • Used for as long as possible (while maintaining quality)

By implementing these principles, organizations can enhance their operational efficiency and achieve long-term sustainability.

Two Types of Asset Management

Understanding the two primary types of asset management—reactive and proactive—is essential for comprehensive asset management. Let's explore their distinct functions, benefits, and how they work together to support organizational goals and optimize resource utilization.

  1. Reactive Asset Management

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 still use it today.

  1. 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, 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 catching on to the value of this framework.

Benefits of Physical Asset Management

Let's understand how effective asset management can enhance efficiency, reduce costs, improve safety, and ensure regulatory compliance to drive overall organizational success and sustainability.

Enhanced Organization and Operational Efficiency

Using asset management software to track physical assets provides clear visibility into their location, condition, and operators. This improved organization offers new insights, allowing for better decision-making. You'll save time by eliminating guesswork, enabling you to focus on enhancing operations. Identifying underutilized assets will help you maximize their value and boost team efficiency daily.

Increased Asset Availability and Reliability

Increased asset availability and reliability are critical to a successful physical asset management strategy. Organizations can ensure that their assets are consistently operational and dependable by implementing regular maintenance schedules and monitoring. This proactive approach reduces downtime and prevents unexpected failures, improving productivity and efficiency. 

Moreover, leveraging advanced technologies such as IoT sensors and predictive analytics enables organizations to anticipate issues before they become significant problems. Ensuring that assets are always available and reliable boosts operational performance, enhances customer satisfaction, and supports the overall achievement of business objectives.

Improved ROI

Underutilized and poorly maintained assets will always cost your company more over time. Ineffective asset management, whether through underutilization or high maintenance costs, leads to a lower return on investment (ROI)

Each asset should be viewed as an investment, similar to stocks, with significant influence over the potential returns. Better tracking and managing physical assets can optimize their use, reduce downtimes, and avoid unnecessary replacement costs. This results in improved ROI and increased profit margins.

Improved Safety

If you're neglecting your physical assets, like complex machinery, and delaying crucial maintenance, you could put your organization’s employees at risk of potential injury or even death. Improving asset management will help mitigate the potential dangers of equipment malfunctions and other risks. Since you'll be keeping better track of the condition of your assets, you'll be able to spot potential threats earlier and maintain the integrity of your equipment.

Extended Asset Life and Improved Sustainability

Extended asset life and improved sustainability are crucial benefits of effective physical asset management. By regularly maintaining and optimizing the use of assets, organizations can extend their lifespan, delaying the need for costly replacements. This reduces capital expenditure and minimizes environmental impact by decreasing waste and resource consumption. 

Implementing sustainable practices, such as energy-efficient operations and environmentally friendly disposal methods, further enhances sustainability. A well-managed asset strategy ensures that assets remain reliable and safe, contributing to a sustainable future while maximizing their value and efficiency for the organization. 

Better Risk Management and Decision-Making

Effective physical asset management enhances risk management and decision-making by providing comprehensive data and insights into asset performance. By continuously monitoring and maintaining assets, organizations can identify potential issues before they escalate, reducing the likelihood of unexpected failures and costly downtimes. 

Detailed records and tracking data enable informed decisions regarding asset utilization, maintenance schedules, and resource allocation. This proactive approach minimizes risks associated with asset management, such as compliance breaches and safety hazards, ensuring a safer and more efficient operational environment.

Reduced Risk of Asset Loss and Theft

Implementing effective physical asset management significantly reduces the risk of asset loss and theft. Organizations can use asset management software to maintain accurate asset locations, conditions, and custodianship records. 

Tracking and regular audits ensure assets are accounted for, minimizing opportunities for loss or theft. Enhanced security measures, such as barcoding and RFID tagging, add additional layers of protection. These strategies not only safeguard valuable assets but also promote accountability among employees.

Reduced Risk of Non-Compliance With Government/IRS Requirements

Proper physical asset management significantly reduces the risk of non-compliance with government and IRS requirements. By maintaining accurate records and ensuring timely updates, organizations can adhere to regulatory standards more effectively. This compliance avoids costly fines and penalties and builds trust with stakeholders and regulators. 

Asset management software's automated tracking and reporting features ensure that all assets are accounted for and meet legal requirements. Additionally, well-maintained assets are less likely to cause safety incidents, further reducing legal liabilities.

Creating a Physical Asset Management System

Here are the key steps and best practices for establishing a robust system that ensures efficiency, cost-effectiveness, and compliance throughout the asset lifecycle.

Identify Critical Assets and Equipment

Whether driven by IT or an asset manager, the initial stage in creating an asset operations management strategy is identifying your most critical assets. Implement a criticality assessment ranking system aligned with your company's vision, values, and operational priorities to do this. This ensures you focus on assets vital to your business's success.

Conduct Regular Audits

If you do only one thing from this list, make it this: regularly audit your physical assets. Conduct monthly or quarterly reviews to gain valuable insights into their condition. Regular audits reveal your current status, enabling better asset management decisions.

By thoroughly examining your physical assets through scheduled audits, you can accurately track them, forecast maintenance and replacement costs, and identify errors in asset records. This proactive approach ensures optimal performance and cost-efficiency.

Record and Track Asset Information

Recording and tracking asset information is crucial in asset management. Without accurate records, audits become time-consuming and frustrating. You must be able to answer these questions at any time:

  • How many assets do you have?
  • Where are they located?
  • Who is using them?

You should also have access to your assets' complete history. Asset-tracking software like RedBeam can help you efficiently track this information, ensuring you get the best ROI on your physical assets.

Prioritize Maintenance

To extend your asset life cycle, prioritize regular maintenance. This is vital for high-value or complex machinery that, if neglected, could pose safety risks. Regular upkeep maximizes asset value and prevents costly breakdowns. Although maintenance may seem expensive, neglecting it leads to higher long-term repair or replacement costs. 

Monitor Asset Performance and Condition

Monitoring your assets' condition and performance is essential for maintaining optimal efficiency and productivity. Identify key assets and establish accurate maintenance schedules to ensure peak performance. 

Track asset performance consistently and take action when assets underperform by maintaining, repairing, or replacing them. This proactive approach maximizes value and output over the asset's lifespan.

Train Employees on Maintenance and Safety Procedures

Implementing physical asset management in your organization is more effective when approached as a team effort. Training your team on usage, maintenance, and safe tracking to maximize asset value. Develop customized policies and best practices for your organization. 

Utilize asset tracking software to enable multiple users to input critical information, such as checking out company laptops or vehicles. This collaborative approach ensures efficient and accurate asset management.

Leverage Physical Asset Management Software

Getting a good ROI from your assets will be nearly impossible without the right technology. Leveraging asset management software is a crucial step for anyone looking to succeed in asset management — and a deal-breaker for anyone responsible for many assets. 

Asset management software is a centralized hub that brings all your asset data into one place. It helps you track your assets throughout their life cycle, from planning to disposal. You can instantly use the software to get key information, like where certain assets are located, who is using them, how they're being used, maintenance schedules, and more.

Review and Revise Processes

Most teams already use some form of physical asset management, often without realizing it. When teams haven't adopted the recommended processes, asset data is typically scattered across various departments, and outdated spreadsheets are used to manage assets. 

This reactive approach addresses issues only when an asset breaks or becomes outdated. Such businesses miss out on maximizing their assets' long-term value and should review their practices to implement a preventive management framework.

Even teams using advanced technology solutions like RedBeam should continuously use the data they collect to inform and improve their frameworks.

How RedBeam Can Optimize Your Physical Asset Management

Investing time into physical asset management can help you get the most out of your organization's physical assets, such as equipment, vehicles, buildings, and other tangible items. While physical asset management has advantages, such as improved productivity, reduced expenses, and a more significant bottom line, it’ll be an uphill battle if you try it manually.

If you’re ready to take control of your physical asset management to get the most value out of your assets, consider using RedBeam today. With our easy-to-use platform, you'll always know when assets were purchased, where they’re located, and how much they cost. Our leading asset management software can help you automate your asset management process to improve physical asset life cycles. 

Schedule a demo with RedBeam today to take your physical asset management to the next level.