7 Asset Optimization Best Practices (Quick-Start Guide)
Losing track of expensive equipment can be a company’s worst nightmare. Improperly managed assets can be a headache for management and lead to significant losses. Keeping valuable assets in storage or running them too hot can impact long-term performance. Neglecting regular maintenance can lead to hefty repairs or replacements. Unused or unnecessary assets may lead to reduced cash flow. The solution is asset optimization.The top businesses worldwide are catching on to the importance of asset management and optimization. In 2022, the global asset tracking market was valued at $15.4 billion. By 2028, it’s projected to grow to $33.5 billion. In this article, we’ll break down the benefits of asset optimization and several actionable best practices to help you keep a better eye on your assets and improve your bottom line.
What is asset optimization?
Asset optimization includes the practices to get the most value and performance from an organization’s assets while reducing costs.
Asset optimization seeks to maximize the value of a business’s assets, improve the value, and reduce costs (and risks). When it comes to organizational acquisitions, few are as expensive as fixed assets. These physical items play a significant role in a company’s operations and finances. They can include anything from vehicles to machinery to technology. While almost every business has its internal assets, they’re rarely being used or optimized in the best possible way to improve performance and profitability. Asset optimization seeks to improve your assets' use, value, and ROI by working on a few best practices.
Advantages of asset optimization
When an asset is being used optimally, it’s providing all of the value possible to an organization. This may mean adjusting usage to reflect market conditions; for example, reducing output when the price for a product is lower may be more optimal than simply producing as much as possible at all times.
Here are a few of the advantages of asset optimization:
Improved asset availability
Assets only provide value if they’re put to use properly. Many organizations have vehicles and equipment sitting dormant for days, weeks, or months without getting any value from them. Meanwhile, they’re collecting dust and costing the company maintenance and repairs. Asset availability is about ensuring your asset’s production potential is being maximized. This means keeping your assets in good condition so they’re reliable and can be used rather than sitting broken and underutilized.
Reduced maintenance and replacement costs
One crucial advantage of asset optimization is reduced costs. To get the most out of your assets, you need to set up regular maintenance and audits to keep machinery and equipment in good working order (and to increase their lifespan). You can reduce excess expenses like maintenance costs by closely monitoring your assets and scheduling maintenance consistently. And, since you’ll be able to increase the lifespan of your assets, you won’t need to replace them as often.
Another benefit of asset optimization is the reduced downtimes of your equipment and machinery. Since you’ll be better at managing your assets, the percentage of your assets in good working condition will be much higher. The result is reduced equipment downtimes to get the most value from the assets on hand.
Now that a high percentage of your assets are in good condition and your asset availability is improved, you can improve your organization’s productivity. Organizational productivity is greatly affected by a company’s available resources. If your team doesn’t have the tools, machinery, or vehicles they need to complete their work efficiently, operational performance will lag. Asset optimization can help organizations tighten up processes, get more done in less time, and operate consistently at a high level.
For many finance and IT managers, the most enticing benefit of asset optimization is the improved return on investment (ROI) and profitability. A business will see reduced maintenance and replacement costs, reduced downtimes, and improved performance upon implementing asset optimization strategies. The result is that the overall output from your assets will be far greater than their associated expenses, giving you a greater bottom line.
Improved foresight and decision-makingWith asset optimization, business owners and management will have more clarity on what’s going on with their equipment and machinery so they can better understand:
- How many assets are in good operational condition?
- How many assets need to be repaired?
- How many assets need to be replaced?
- How much cash flow is available to repair or replace assets?
- How much additional cash flow is projected to be available?
- How long will an asset be usable?
- How much is needed to invest in maintenance technicians?
- How quickly can replacement parts arrive if needed?
- Will the company need to buy additional assets?
- Will the company need to sell excess assets?
It is nearly impossible to be able to foresee the entire life cycle of an asset. However, with asset optimization, management can better understand what’s going on with their assets to make better decisions.
Enhanced customer happiness
Since asset optimization can help improve productivity and company performance, organizations won’t spend as much time playing catch-up. Whether an organization is B2B or B2C, improved performance means customers won’t be as delayed in receiving goods or services, product quality will improve due to better machinery, and with the extra cash flow, more resources can be invested into customer support to ensure higher customer satisfaction.
Asset optimization best practices
Now that you’re well-versed in the advantages of asset optimization, you can determine how to integrate best practices into your company. Improving how you manage your assets can seem complex and daunting. However, you can work on a few key areas to ensure the process is as streamlined as possible.
1. Set up a dedicated asset management team
Asset optimization can be quite an undertaking, especially if you manage a wide range of assets. It’s best to establish a dedicated asset management team to get everyone on the same page and ensure everything runs smoothly. If you don’t already have an asset management team, look for key individuals in your organization who are familiar with asset management. You may want to create a large team if you're in a larger organization. Or, if you’re in a smaller company, you could have 2-3 individuals or even a single dedicated asset management lead. Regardless of the size of your team, the important part is that a group of individuals make asset management decisions. With established asset optimization roles, your team can take ownership of the optimization, and you’ll have more accountability. This will ensure you’re much more likely to reach your optimization goals.
2. Leverage asset management software
Once you’ve got an established asset management team, it’s time to focus on technology. Asset management or asset tracking software is the best tool to help with asset optimization. Asset management software is a dedicated tool that records and tracks assets throughout their life cycle, from procurement to maintenance to disposal. This management platform gives organizations different sets of information like asset locations, who is using assets, how they’re being used, and other information like scheduled maintenance times. Asset management software like RedBeam manages fixed assets like machinery and vehicles, IT assets like software and hardware, and current assets like inventory. Here are some of the ways asset management software helps with asset optimization:
- Asset check-in and check-out
- Quick scans (QR codes, barcodes, etc.)
- Compliance audits
- Depreciation tracking
- Accounting integrations
Asset management platforms help you get the most dollar value out of your assets while improving your organization’s operational efficiency.
3. Understand asset life cycles
Your assets will come and go. But, how long they can remain working and usable in your organization depends on their life cycle. Asset life cycles will vary from industry to industry and business to business — there are no universals. To optimize your assets, you need to understand your assets' different life cycles clearly.
Assets typically go through five different stages within their life cycle:
Regardless of how complex or simple your asset life cycles are, it’s crucial for you to collect accurate data at each stage to keep track of availability, maintenance, repairs, and replacements. Asset lifecycle optimization is a major part of asset optimization. By understanding and working toward improving life cycles, you’ll be able to maximize the life of every asset through careful planning.
4. Conduct regular asset audits
Once you have a basic understanding of the different life cycles associated with your assets, you’ll want to conduct asset audits at predefined intervals. This will ensure you’re able to get an advanced view of your assets. The reality is that some scenarios won’t allow you to fully understand asset life cycles and how to optimize them until you are able to conduct a few audits.
In best practice, you should conduct minor audits once a month and deep-dive audits once every quarter. This will ensure your data is accurate and you’re able to utilize your assets to the best of your ability. Asset audits include a few steps to primarily assess the current and future value of your assets. Not only do they provide you with accurate, up-to-date information about the worth of your assets, but it’s also crucial for financial reporting and tax compliance. Some key components of an asset audit include identifying and recording:
- Whether or not the asset still exists
- Locations of physical assets
- Current asset conditions
- Preventative maintenance records
- Other information like purchase receipts and values after asset depreciation
5. Tighten up maintenance planning
With regular asset audits in place, the next step to optimize your organization’s assets is to improve your maintenance scheduling. While it sounds like a lot of work, you use asset-tracking software to improve maintenance scheduling. An asset management platform can do the heavy lifting for you, automating many crucial tasks to ensure your assets are repaired and maintained at the right times. Regular maintenance of your assets is one of the best ways to get the biggest ROI out of your machinery, equipment, and vehicles. To ensure you get the longest lifespan possible for your assets, you need to streamline and optimize your maintenance planning. You should ensure you have routine, preventative maintenance on all of your assets. Not only will this help improve their lifespan and use in your organization, but this will also mean you will avoid the headaches and steep costs associated with extensive repairs due to neglected equipment.6. Streamline financial reporting
Once you’ve got your assets on a regular maintenance schedule, you’ll have continual clarity on the numbers behind the assets. To get the most out of your assets, you need to know what they’re worth. Asset optimization will help you understand those numbers. One side effect is that your finance department will also have better clarity. Improved financial reporting is the final component of asset optimization. Your financial reporting should include key elements like:
- Maintenance expenses
- Asset depreciation rate
- Return on investment
- Budget tracking
- Revenue projections
- KPI performance
With up-to-date information on your assets through regular audits, you’ll have complete clarity on assets that are being underused, overused, or neglected. Plus, you’ll also have a better understanding of where and when you need to purchase additional (or replacement) assets. This information will help both you and your financial department have better foresight when it comes to upcoming expenses so you can plan purchases accordingly to maintain profitability and cash flow.
7. Remain flexible
The final component of a solid asset optimization plan is to remain flexible. Now that you have efficient and accurate financial reports being prepared regularly on your assets, you can evaluate the success (or shortcomings) of your asset optimization strategies. If needed, you can make adjustments to your optimization strategy to ensure you’re maintaining proper asset availability to keep your operations productive and cost-effective. With that in mind, it’s important to remember that asset optimization isn’t a one-and-done activity. You should always leave room to adapt your approach to asset management and optimization to work toward continual improvement so your business can continue growing.
How RedBeam helps with asset optimization
Asset optimization can help you predict downtimes, identify gaps in your asset use, improve cash flow, and improve performance. Without it, your business’ assets will be underutilized, racking up heavy repair and replacement fees, and you’ll struggle to maintain proper cash flow. If you want to ensure your asset optimization strategy is successful, you need to leverage the right technology. RedBeam believes in the importance of asset optimization through routine and preventive maintenance. With over 18 years of experience, we’ve helped thousands of businesses track and optimize their valuable assets. Our user-friendly platform makes it easy to know what assets you have, where they are, and how they impact your profitability and performance. Whether you're a small business or a Fortune 500 company, schedule a demo with RedBeam today and gain control of your assets.