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Your assets won’t live forever. They’ll serve their purpose, but they’ll eventually need to be replaced.
The question is, how long are your assets living?
Effective asset life cycle management is crucial to ensuring your business is performing at its best. By carefully considering the different stages of an asset life cycle, you can begin optimizing your asset management to extend lifespans, save on asset expenses, and improve your bottom line.
In this article, you’ll learn what an asset life cycle is, the stages involved, and how to keep track of which assets are in different stages with asset tracking. Plus, you’ll learn a few best practices to better manage your assets so you can optimize your profit margins.
What is an asset life cycle?
An asset life cycle is a process in which a business’ assets are planned for, acquired, used, maintained, and disposed of.
The main goal for businesses is to improve the lifecycles of valuable assets and improve their reliability to ensure the company is running smoothly and the finances associated with the assets are in good health.
Asset lifecycle management is a major part of asset management. It’s about maximizing the life out of every asset through careful planning and a few different asset life cycle stages. With proactive asset purchasing and maintenance, a company can cut major costs while improving productivity.
The best asset managers will seek out an analytical and strategic approach to ensure employees are operating at peak performance while maximizing the return on investment for every single asset.
Why asset life cycle management is important?
There are dozens of reasons why asset life cycle management is crucial in business. Managing, tracking, and optimizing your assets’ lifespan is all about improving your business’ financial health and productivity.
Extend the lifespan of your assets
The most obvious benefit to putting time and energy into asset life cycle management is simple: the better you manage your assets, the longer they’ll live. Tracking your asset’s life cycle gives you key insights into how an asset works and how to best maintain it. You can use key information from your asset tracking system to plan out proper maintenance scheduling to allow the asset to operate at peak performance.
By enabling preventative maintenance at crucial times, you can extend the lifespan of your asset, enabling you to get more out of every asset you purchase.
Decrease asset downtimes
Asset lifecycle management isn’t just about allowing your assets to live longer. It’s also about making sure you get the most out of them while they’re ingrained in your business. The reality is that assets can temporarily break down, leaving them out of commission for periods of time until they’re back to normal.
Without proper asset life cycle management, your assets are more likely to break down, meaning your assets will spend unnecessary amounts of time in an unusable state. The result is reduced productivity, more pressure on your workforce, and more money spent on new assets to replace the broken ones.
Proper asset management means care and attention is given to assets to ensure they’re properly maintained to reduce overall downtime.
Better efficiency
Great asset management means great asset conditions. When conditions are good, that means your assets are able to perform at their best the majority of the time. This means you’ll be able to operate at a high level in your facility since you won’t have to deal with equipment issues, improving performance and productivity.
Bigger bottom line
With productivity up, expenses down, and assets performing at their best, the end result is improved cash flow.
Great asset management means you’re taking care of your assets to prevent breakdowns, early replacements, and productivity hiccups. In the end, this means you’ll be spending less on equipment, less on repairs, and less on labor to make up for faulty assets.
Ultimately, the greatest business benefit to asset lifecycle management is that your profit margins will be bigger.
5 stages of asset lifecycle management
Every life form goes through a lifecycle. Whether it’s a bird, caterpillar, tree, or human.
But, did you know that non-living entities have life cycles as well? At least, that’s the case with business assets. While your equipment, inventory, software, and other assets will come and go, by understanding their life cycle, you can extend their lifespans.
Here are the five stages of asset lifecycle management:
1. Planning stage
The first stage of asset lifecycle management is a preparation stage. It’s all about planning out your asset road map.
The planning stage is for new business owners looking to purchase their first assets and for experienced executives looking to bring in new assets to replace old assets.
In the planning stage, managers and executives may collaborate with different departments to figure out the needs of the business to determine which and how many assets to acquire. A major part of this stage is finding a balance between current and future needs and budgetary restrictions.
Before acquiring new assets, teams should focus on asset planning to establish the requirements of different assets by auditing current assets and various data points. In this stage, decision-makers should be exploring the following questions:
- What assets do we have?
- What condition are they in?
- What assets are needed now?
- How will the new assets improve operations?
- How will the new assets reduce expenses long term?
- What assets are needed in the future?
- How much budget do we have available for new assets?
- What is the estimated depreciation of each asset?
This first stage is the most important, as it'll set you on the course to either improve your performance and your books or set you back. You should spend plenty of time at this stage to help make the right decisions to improve operations and improve profit margins.
2. Acquisition stage
After you’ve made an asset plan, it’s time to acquire the new assets you’ve decided on.
Once you’ve identified your list of assets, you’ll need to do some research to figure out the best places to acquire them. This means doing your due diligence to identify potential suppliers, and comparing and contrasting their products and prices so you can get the best assets at the most affordable price.
Once you’ve identified suppliers you want to partner with and you’ve actually purchased the assets, this stage isn’t over yet. You’ll want to assemble your assets and begin testing for potential issues or flaws. After you’ve finished installing the assets, it’s time to get proactive. You need to get your maintenance team to determine whether any assets will need replacement parts in the future.
With RedBeam asset tracking software, you can see exactly when each asset was acquired to help design a maintenance and replacement plan.
3. Utilization stage
Now that you’ve got your assets fully set up and ready for use, it’s time to begin operating them. While the acquisition stage involves initial testing, you’ll want to continue testing your equipment regularly to ensure it’s operating at the highest level without any performance issues.Remember step one? Even though you’ve gone through your initial planning stage, it’s a stage you should technically always be in since you’ll be continuously adjusting and optimizing your asset life cycle management as you go.
Different assets will operate for different periods of time. While you will have a rough idea of how long an asset will work until needing maintenance, estimates from manufacturers may be altered based on a number of factors such as:
- Asset type
- Frequency of use
- Facility conditions
- Complexity
- Regular upkeep by asset users
4. Maintenance stage
Once you’ve begun using your assets, it’s time to shift your focus into the maintenance stage. While this may not be the most exhilarating part of asset management, it’s the second most important next to the planning stage.
Your planning stage sets the trajectory for your overall asset health, but your maintenance is what determines how long each asset will actually live.
Once an asset needs its first maintenance task, it officially enters into the maintenance stage. There are two main maintenance types you need to consider: preventative maintenance and reactive maintenance.
The key with maintenance is to spend enough time and resources on preventative maintenance so you don’t have to spend unnecessary amounts of time and money on reactive maintenance.
While the type of preventative maintenance you do depends entirely on the asset type, some examples include:
- Changing the oil in a service vehicle
- Lubricating machinery
- Cleaning equipment
- Replacing furnace filters
- Painting a wall
- Updating software and hardware
Reactive maintenance is any maintenance you have to do due to a broken down part or an asset that isn’t functioning properly. One important consideration with reactive maintenance is to always plan for potential emergency maintenance. You should have a team available 24/7 to be on call for any emergencies. This could be a critical piece of equipment that is essential to business operations or a damaged asset that poses a safety threat in your facility.
The RedBeam asset tracking platform allows you to see the full maintenance history of your assets so you know how much you’ve invested in maintenance and when you should set your next scheduled maintenance date.
5. Disposal stage
The final asset life cycle stage is the disposal stage. It’s the place where every asset eventually lands. But, how long it takes to get there depends on your ability to optimize the previous four stages.
Once an asset reaches the end of its life, the natural progression is to dispose of it. You don’t want to keep unusable or useless assets as they’ll likely be taking up space in your facilities or may even be a safety concern if left around.Depending on the type of asset and what it’s made of, how you dispose of it will be different. You may be able to recycle or reuse it based on its components. However, in many cases, you will simply need to discard it whether by selling it, demolishing it, or taking it to a landfill.
The disposal stage isn’t always when an asset becomes completely unusable or breaks down without any hope of repairs. Many businesses determine a disposal stage based on how effectively an asset is operating. Your disposal stage should be determined in your planning stage. For example, if you have a fleet of 20-year-old cars for your employees, but they’re starting to break down regularly, you may decide to sell them off for a new fleet to save on extensive repair costs in the long run.
Asset life cycle best practices
Here are some of the best practices you can follow to get the most out of your assets, optimize productivity, and optimize your bottom line:
1. Audit your assets
You should focus on your physical and digital assets like you would your business finances. Everything should be accounted for. This means conducting regular internal audits of your hardware, software, and fixed assets.
By keeping an eye on your assets through consistent audits, you can help identify errors in asset records, accurately track your assets, and forecast maintenance and replacement costs.
2. Set up clear policies
Without a road map, you won’t be able to reach your asset management goals. You should establish a comprehensive set of policies and operational procedures that outline your asset life cycle processes. This means documenting every step of your asset life cycle strategy, from planning to disposal.
By setting up policies and procedures, you’ll be able to maintain consistency throughout your organization, which will improve your asset management.
3. Leverage asset technology
Your ability to optimize asset life cycles in your business isn’t just dependent on your ability to plan and strategize. You also need to rely on the right asset technology to keep productivity high and errors low. Asset tracking software like RedBeam can help you monitor all of your assets in real-time throughout their entire lifecycle.
4. Optimize your process
One of the most important practices you should follow if you want to improve your asset life cycle management is optimization.
You should have a plan in place to focus on improving your asset management processes. This means working on different asset life cycle management areas like:
- License management
- Asset prioritization
- Asset tags
- Automating and outsourcing asset management
- Tracking asset metrics (i.e. average cost of maintenance, depreciation, compliance failures)
Asset life cycle management starts with asset tracking software
Asset life cycles affect every part of your business, whether you know it or not. If properly maintained throughout their time in your business, assets can be a great source of profitability. But, when poorly managed, assets can be a hindrance to productivity, squeezing the life out of company resources and employee time.
If you’re serious about improving the life cycles of your assets and optimizing your asset management, then you need to get started on the right foot with asset tracking software.
With RedBeam, you can have full clarity in your asset management. The leading asset tracking software can show you which asset is in which stage of its life cycle.
Schedule a free demo with RedBeam today to take your asset management to the next level. Our leading asset tracking software can help you automate and simplify your asset management process so you can improve asset life cycles, optimize productivity, and increase your profit margins. Get started today!
