Physical Asset Management (Definition and Best Practices)
How competitive is your business? In the modern marketplace, there’s more pressure for companies to remain competitive, and one of the best ways is to get the most out of the resources on hand. One of the most important resources you have is your physical assets. How you manage those assets will significantly impact your ability to improve operations, reduce costs, and optimize your ROI. From manufacturing warehouses to company smartphones to transportation fleets, every business relies on physical assets to keep its operations running smoothly. But, if your physical assets are being mismanaged or neglected, your resources will be underutilized and will likely hinder business growth. In this quick-start guide, we’ll break down what physical asset management is, the benefits, several examples, and a few best practices so you can get the most out of your organization’s assets and improve your business.
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:
Physical assets, otherwise known as tangible assets, inherently have value in themselves or produce value for the company. On the other hand, intangible assets have value but do not have a physical presence. Examples include software, trademarks, licenses, films, patents, and copyrights. You can see and touch physical assets like a manufacturing machine to create new products or a cargo van to deliver your products to customers. Regarding accounting, physical assets are a part of your business and make up the business’s total value. Over time, the value of physical assets declines primarily because they are tangible objects prone to breaking down over time. Because they reduce value over time, physical assets can be counted as a tax deduction through depreciation. To get the most out of your physical assets, both in terms of longevity and operational efficiency, you need to know how to manage them properly.
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 ensures that an organization’s physical assets are:
- 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)
Physical asset management aims to maintain an efficient upkeep through the entire asset lifecycle. By managing assets properly, an organization can get the most out of them. Great asset management results in a high percentage of assets leveraged to their maximum potential. Organizations that implement effective asset management will see a reduction in maintenance and replacement costs, improved productivity, and a more extensive bottom line. Physical asset management almost always includes leveraging asset management software. This type of software acts as a database for all of your assets. It contains vital information on your assets and allows you to track them, organize them, and optimize them to get the most out of them in the long term. With asset management software like RedBeam, you can see an asset’s complete history, operational status, regulated maintenance requirements, unplanned downtime, configuration, and what employee has it (i.e., vehicle, laptop, computer, tablet, smartphone).
Examples of physical assets
While there are a few different types of assets (i.e., physical, software, intangible), there are also various physical assets. A wide range of physical asset types can exist depending on the industry and the company’s operations. 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
Physical asset management includes planning, acquiring, utilizing, maintaining, and disposing of assets in the most cost-effective manner possible to align with an organization’s overall objectives. The processes and exact tactics to do this will vary depending on the type of physical asset listed above. For instance, acquiring property for your business to expand into a new location will be much more complex than acquiring new furniture like desks and chairs for the office.
Benefits of physical asset management
To understand the advantages of physical asset management, it’s essential first to understand and analyze how assets are used within a business. The primary goal of asset management is to optimize the usability of an organization’s assets, extracting the most value and output from them until they’re unusable or depreciated to have little or no value. Inventory should be audited regularly to ensure it doesn’t expire or lose consumer interest before it’s sold. Company vehicles must be regularly serviced and maintained so they don’t break down early and cause unnecessary downtimes and replacement costs. When asset management is properly deployed, you’ll gain a handful of long-term advantages that impact your productivity, processes, and bottom line. Here are the main benefits of physical asset management:
The first advantage of implementing physical asset management is better organization.
When you start tracking your physical assets in asset management software, you’ll immediately have a better handle on your assets. You’ll have improved clarity on where your assets are, their condition, and who’s operating them. Rather than being left in the dark about what’s happening, your assets will be in order so you can get the most out of them.
Improve operational performance
With better organization, you’ll have new insights into what’s going on with your assets to make better decisions. You won’t need to run in circles trying to figure out how your assets are doing, so you’ll have more time to focus on improving your operations. With better organization comes improved decision-making. You’ll have a better idea of what assets are being underutilized so you can get more value out of them and improve team efficiencies daily.
Keep track of high-value assets
Physical asset management will help you see what’s happening with your assets, which is crucial for your high-value assets. High-value assets like property, buildings, and expensive machinery must be considered for the most value. Since they take up a higher percentage of your company’s total assets, underutilizing them can lead to underperformance, with assets acting as dead weight and a hindrance to your cash flow.
Improve ROI on assets
Underutilized and under-maintained assets will always cost your company more over time. Whether from underutilization or high maintenance costs, if you’re not managing your assets effectively, you’ll pay more for them over time, which means a lower return on investment (ROI). You need to consider each asset like an investment, just as you would in the stock market. The difference is that you significantly influence the potential return on your physical asset investments. By tracking and managing your physical assets better, you can utilize them better to reduce downtimes and unnecessary replacement costs from neglected assets. The result will be an improved ROI on your physical assets, leading to more significant profit margins.
Improve company safety
One more benefit that’s often overlooked when it comes to physical asset management is the safety of your team. 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.
6 Physical asset management best practices
While physical asset management will differ from business to business (and industry to industry), you should follow a few standard best practices. Here are seven key strategies to ensure your physical asset management is a success:
1. Conduct regular audits
If you could only do one thing on this list, it’s to audit your physical assets regularly. This means taking time every month or every quarter to review your assets. Regular audits' key impact is showing you where you’re at. It gives you insights into the state of your assets so you can make better decisions to improve your asset management. By taking a deep dive into the state of your physical assets through regularly scheduled audits, you’ll be able to accurately track your assets, forecast maintenance and replacement costs, and identify errors in asset records.
2. Record and track asset information like maintenance history
Another key activity in the asset management realm is recording and tracking asset information. Your audits will be a major headache if you cannot keep accurate records of what’s going on with your assets, causing each audit to take way more time than necessary (and cause more frustration). You need to know how to answer these questions at any given time:
- How many assets do you have?
- Where are they located?
- Who is using them?
Additionally, you should be able to see the complete history of your assets. Tracking your assets and the information included is a crucial feature of asset-tracking software like RedBeam — an asset-tracking tool that helps you get the best ROI on your physical assets.
3. Prioritize maintenance
Next, if you want to extend your asset life cycle as long as possible, you’ll want to prioritize asset maintenance. This step is crucial if you have high-value assets or complicated machinery that, if neglected, could become a safety concern. Keeping your assets maintained is an integral part of asset management since it can help you get the most value out of your assets by simply doing upkeep on them. While this may be seen as a cost-intensive practice, it will cost you more, in the long run, to avoid regular maintenance since your assets will break down quicker, leading to extensive repair or replacement costs.
4. Monitor asset performance and condition
In addition to prioritizing maintenance, you should monitor your assets' condition and performance. This will help you identify key assets to establish accurate maintenance schedules. Additionally, you should also be tracking the performance of your assets. This step is important since it directly impacts your organization’s efficiency and productivity. The main advantage of managing your assets is getting the most value and output from your assets over their lifespan. If your assets aren’t performing properly, it may be time to maintain, repair, or replace them.
5. Train employees on maintenance and safety procedures
When implementing physical asset management in your organization, it can be a real challenge if you take it all by yourself. You must also get your team on board to guarantee you get the most out of your assets. This means training on using, maintaining, and safely tracking your assets. This may mean creating policies or best practices customized to your organization for your employees to follow. Since asset tracking software typically allows for multiple users, your employees will likely be working within the software to input key information, like when they check out a company laptop or vehicle.
6. Leverage 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 to bring 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.
How RedBeam can optimize your physical asset management
Investing time into physical asset management can help you get the most out of the physical assets within your organization, 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 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 tracking software can help you automate your asset management process to improve physical asset life cycles. Schedule a free demo with RedBeam today to take your physical asset management to the next level.