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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
- 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.
2. 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 $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.
Improved Inventory Management
Applying physical asset management strategies streamlines your inventory management by enabling you to automate tracking of your assets. Technology such as RFID tags and barcodes let you scan your inventory into cloud-based asset tracking software. This saves you hours of labor, reduces manual data entry errors, provides you with analytics insights for predictive supply chain and maintenance management, and allows you to conveniently manage your assets from anywhere.
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.
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: Steps & Best Practices
Here are the key steps and best practices for establishing a robust system that ensures efficiency, cost-effectiveness, and compliance throughout the asset lifecycle.
Leverage Physical Asset Management Software
The right physical asset management software can automate and streamline various asset management tasks, ensuring that you maintain accurate records and optimize the use of each asset.
Here are some key benefits of employing physical asset management software:
- Automated Tracking: With automated tracking, you can easily monitor where each asset is located and when it is being used. This helps in reducing instances of lost or misplaced items.
- Maintenance Scheduling: Proper maintenance is crucial for the longevity and performance of your assets. Asset management software can schedule regular maintenance activities and send notifications and reminders to ensure they are completed on time.
- Enhanced Reporting: The best software solutions offer robust reporting capabilities, allowing you to generate detailed reports on asset utilization, lifecycle, and costs. This assists in making well-informed decisions related to asset acquisitions and disposals.
- User Permissions and Controls: Establishing user permissions helps maintain security and accountability. You can control who has access to specific assets and who can update asset information, thereby minimizing errors and unauthorized usage.
- Integration Capabilities: To maximize efficiency, asset management software should easily integrate with other systems you are using, like ERP, finance, and HR systems. This ensures consolidated data management and better resource planning.
- Customized Alerts: Customized alerts keep you informed about important events related to your assets, such as maintenance due dates, asset movements, and contract expirations. This proactive approach helps avoid unexpected downtime and financial losses.
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.
Use a Maintenance Management System (MMS)
Deploying a maintenance management system lets you automate the maintenance phase of your assets' lifecycles. You can optimize tasks such as recording maintenance logs, predicting part replacement schedules, placing work orders, and tracking costs. Using an MMS can extend the lifetime of your assets, reduce the cost of repairs and replacements, and save time scheduling routine maintenance tasks.
Document and Review Asset Lifecycle
Effectively managing physical assets means keeping a detailed record of their lifecycle—from acquisition to disposal. This process empowers you to effectively track asset performance, monitor usage, and plan for future needs.
Here's how you can go about documenting your assets through different phases:
- Acquisition: Record all details of asset purchases, including vendor information, cost, warranty terms, and expected life span. This information helps in budget planning and warranty claims.
- Deployment: Track which department or individual the asset has been assigned to. Knowing where your assets are deployed mitigates the risk of loss and helps reallocate resources efficiently.
- Maintenance: Log routine and emergency maintenance activities to ensure assets operate at peak efficiency. Regular maintenance prolongs asset life and can prevent costly breakdowns.
- Usage: Monitor how and how often assets are used. This data can inform decisions on future purchases and help identify underutilized or overworked assets.
- Retirement: Document the disposal or retirement of assets to maintain an up-to-date inventory. Ensure that disposal methods meet legal and environmental guidelines. You can use this information to develop better asset management strategies and make informed decisions.
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 Preventive 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 to preventive maintenance maximizes value and output over the asset's lifespan.
Train Authorized Personnel 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.
Establish Clear Policies for Asset Tracking & Management
Well-defined policies provide guidelines that help your team handle assets consistently and efficiently. These protocols ensure that everyone understands their responsibilities, reducing the risk of loss or misuse of physical assets.
Here are some key areas where clear policies can make a significant impact:
- Asset Acquisition: Define the criteria and procedures for purchasing new assets. This ensures that all new acquisitions meet the organization’s standards and are necessary for operations.
- Asset Usage: Set guidelines on how and when assets should be used. This minimizes wear and tear and ensures that assets are only used for their intended purposes.
- Asset Security: Develop procedures to protect assets from theft or damage. This could include measures like secure storage, restricted access, and using tracking devices.
- Asset Tracking: Implement methods for keeping records of where assets are and who is using them. This will facilitate quick retrieval and prevent loss.
- Disposal Policies: Establish guidelines for the disposal of assets that are no longer useful. This includes processes for recycling, selling, or discarding items in a way that complies with regulations.
- Training Programs: Create training programs to ensure that all employees are aware of the policies and know how to follow them. This standardizes practices and reduces errors.
Effectively Manage Your Company's Physical Assets with RedBeam
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.
FAQs
What Is an Example of a Physical Asset?
Physical assets include tools, equipment, machinery, raw materials, land buildings, vehicles, and inventory goods.
What Is Enterprise Asset Management?
Enterprise asset management (EAM) is a strategy for optimizing the value of your company's fixed and current assets throughout their lifecycle, from acquisition to disposal.
What Is the Goal of Physical Asset Management?
Physical asset management strategies aim to maximize asset value, minimize costs and risks, and ensure reliability, safety, and compliance.
