These days, businesses are rapidly adopting better and more modern asset management principles to improve their operational performance. Strong principles serve as the foundational pillar of improved asset-related workflows and help optimize every day operations as per organizational needs.
These principles shape company-wide strategies for easier and faster asset tracking. This means most of the principles are holistic and so, common to the entire operational framework of businesses. Mostly, businesses adopt cloud-based solutions to efficiently apply these principles to reduce complications while managing assets.
This blog takes you through the fundamentals of asset management principles, and how you can successfully apply them to your business using advanced asset tracking solutions.
What are asset management principles?
Asset management principles are the fundamental values on whose basis asset management is carried out. Whereas, asset management is the strategic and systematic coordination of activities aimed at optimizing and improving the way assets are managed in an organization. The aim of both is to sustainably manage assets to generate maximum revenue while avoiding risks and extensive costs.
Asset management principles are designed to support the process of asset management, and the overarching organizational objectives. They are usually value-centric to give direction to the business stakeholders and achieve a higher level of transparency.
Organizations typically use automated asset systems to put asset management principles into practice and systematize and consolidate asset information to achieve a higher organizational efficiency.
5 key principles of asset management
Asset management principles require putting strategic plans into place. The plan includes devising a strategy to build and direct the organizational activities. Setting achievable goals to implement these activities is a defining foundation for any asset management plan.
Asset management principles usually change as per the changing standards and operational framework, however, there are a few principles that apply to all asset management activities, including:
1. Holistic
The basic principle to ensure consistency in asset management is keeping the strategy holistic. Holistic principles cover broader aspects as they extend beyond departmental goals – including organizational goals. This alignment with the broader goals is critical to ensure the long-term success of your organization.
Holistic values involve taking a myriad of decisions, from departmental and operational decisions to long-term business planning. With a holistic approach, organizations can better align their daily activities across all organizational divisions. This helps foster sustainability in operations.
It also enables organizations to analyze gaps in their strategies and operations over time. This allows them to continuously improve their performance, and revisit and revise goals set in the past when required.
For instance, some holistic goals for a healthcare facility align with the way facilities manage their equipment daily. These goals can encompass:
- Assigning custodians
- Tracking medicine supply
- Implementing newer strategies
- Carrying timely maintenance
- Retrieving used equipment
- Training employees
The following infographic explains these principles in detail:
2. Systematic
Implementing asset management principles involves following a structured approach to designing and analyzing them per business needs. Your principles must be systematic – meaning, they must be designed keeping in mind their feasibility, viability, and sustainability. They should be in line with the departmental needs and the set targets.
Asset management principles that are systematic are:
S: Specific
M: Measurable
A: Achievable
R: Realistic
T: Time-bound
This means they address the major aspects of your asset management and help regulate the activities in a nuanced manner. Such principles form the foundation of decisions in handling assets. Simply make your practices for implementing the principle more structured and protocol-based. Don’t miss out on crucial steps and set a straightforward principle.
For instance, the following example explains how asset management principles in asset tagging can be applied to your organization with several branches. The principle is that every asset must be uniquely identified, cataloged, and tagged using a viable asset tracking method to seamlessly track the asset located in various locations.
| Practice | Benefit |
| Standardization | Adopt one suitable asset tracking system and tool across all locations to match the asset IDs. |
| Tagging Method | Select a QR code, barcode, or RFID tag based on your requirements and ease. |
| Maintain an Asset Register | Keep all data consolidated to draft relevant and suitable codes using the system. |
| Easily Track | Simply scan the codes and track your critical assets. Update their information when needed. |
By making your principles more systematic, you can easily enhance your efficiency and also make it easier to implement collaborative principles across the organization.
3. Risk management
Make sure your principles are designed in a way that they help avoid and handle risks better. This leads us to risk-based asset management i.e., striking a balance between an asset’s operational performance and its life-cycle cost.
Based on a survey conducted on organizations in the asset-intensive energy sector, 95% of organizations have already incorporated risk management into their asset management while 5% are in the process of doing so. Isn’t that incredible? It shows how the benefits of risk-based asset management aid organizations in avoiding extensive costs and unfortunate occurrences.
Based on this, your principles should be able to incorporate factors that help avoid risk. For instance, adapting an enterprise asset management (EAM) system for documenting asset-related risks, and tracking them. An example of a risk could be flawed asset maintenance that can be avoided by attaching checklists in the EAM system. The survey also indicates that 62% of respondents find mechanical breakdowns or aging assets to be a major risk in their asset handling – meaning avoiding risks induced by lack of maintenance is inevitable.
To counter these issues, your asset management strategy – based on your principles – must dictate how to avoid such risks. For instance, using a preventive maintenance model to conduct regular maintenance checks on the equipment. Asset risks like these can be easily avoided by simply adopting a more proactive approach toward asset planning and maintenance. Timely decisions for better asset optimization and performance.
4. Sustainability
If you set a particular asset management principle in the past and it did not yield the same results as you were expecting, then you need to conduct a gap analysis. A gap analysis assesses the difference between the current principles and the desired principles you aim to implement. The goal is to highlight any anomalies in the asset management process and take corrective actions accordingly.
To implement sustainable principles, it is critical to take the relevant stakeholders on board. This is to ensure that the principle aligns with the asset management practices. These principles can be applied to implementing practices that not only optimize daily operations but are also environmentally friendly.
For instance, organizations can adopt more sustainable IT equipment, so when utilized fully, the assets can be disposed of more healthily. You can also identify underused assets and retire them to free up both space and capital. These activities help fully utilize an asset through its useful life.
Following are some ways you can achieve a higher sustainability in asset management:
- Sourcing: Organizations can have a policy to source resources from more sustainable channels, e.g. using materials that are likely to last a longer time and do not harm the environment.
- Usage: Utilize the assets to their fullest potential rather than purchasing new items unnecessarily. Try extending the useful life of assets but employing efficient asset management strategies.
- Disposal: Dispose of assets in an environmentally friendly manner so the used items can be recycled appropriately.
Sustainable practices not only help organizations smoothly conduct quality operations but also achieve asset management compliance for transparency and accountability.
5. Lifecycle optimization
Lifecycle optimization as a principle focuses on extending the life of an asset and optimizing its performance through all its stages – from acquisition to disposal. The principle helps reduce costs and risks and deliver the highest value to the organization. Here are the five main stages that serve as the foundation for the lifecycle optimization principle:
| Stage | How it works? |
| Planning and acquisition | Identify the need for a new asset and acquire the asset for a dedicated purpose. |
| Asset deployment and assessment | Identify where the asset is to be used and check it out. Assess its performance from time to time for tracking. |
| Maintenance | Schedule asset maintenance beforehand to avoid clashes and conduct regular checks to ensure the equipment functions safely. |
| Upgrade | Analyze your asset performance, and replace it with a new asset if needed. Upgrade outdated equipment or acquire a new version to avoid the cost of frequent maintenance. |
| Disposal | Dispose of the asset off if it has passed through its useful years. Recover its salvage value for maximum efficiency. |
Lifecycle optimization as an asset management principle ensures that all the asset-related decisions taken are strategic and relevant. It helps execute efficient asset lifecycle management for enhanced business activity. Successful lifecycle optimization helps manage a myriad of factors including cost control, performance monitoring, risk mitigation, and maintenance management.
These factors help optimize the overall organizational performance and help direct operations toward organizational goals and strategic asset management.
Top 3 asset management practices
Asset management principles can be best implemented with some asset management best practices. These help ensure that your organization is on the way to enhancing asset reliability and standardizing particular activities. Some best practices include:
1. Strategic asset management plan
Devising a plan to manage assets regularly is a wise way to avoid inconsistencies and achieve targeted growth. An asset management plan (AMP) is a strategic plan for managing an organization’s internal resources for an agreed level of service. This is particularly important when all resources and departments are interdependent upon each other to execute tasks.
Set your organizational goals so you know your end-goal of devising a principle. A plan makes it possible for you to cross-check your objectives with the current performance so you know if you are implementing your principle right and achieving the desired results or not.
Asset planning includes planning for alternatives to acquire a new asset or replace it. For instance, it includes an acquisition plan that highlights all the policies and steps to be considered when making a new purchase. Like, budget, and acquisition time.
2. Asset information management (AIM)
As per a report, organizations spend almost 30% of their engineering time looking for information across multiple sources and documents. The information is of various types and involves complex information management. Some common types of asset information include:
- Location data
- Financial details, like procurement cost
- Asset identification number
- Maintenance data
- Technical specifications
- Asset count
Consolidated asset information is a direct way to better manage asset information and utilize it to conduct various actions. Asset registers are typically used by organizations to bring all asset information into one place and avoid data fragmentation or duplication.
Organizations can leverage information vital to their internal processes from one place – making it convenient for them to take preventive measures. This information guides important decisions to enhance operations.
Smooth AIM supports smart asset management by allowing organizations to collaborate and bring together information from various sources. A business managing rental trailers highlights how data fragmentation can be a huge challenge as it leads to duplicate and missing records – creating redundancies. Using a smart asset management solution structures asset data so they can be managed and tracked better.
3. Performance measurement
Tracking and measuring your performance periodically helps analyze if you have achieved particular goals or not. It helps analyze your asset management goals and the set targets to see if you have achieved them over time or not. This analysis provides valuable insights into how effectively your assets are supporting your asset management principles and practices.
Detailed reports, charts and graphs, and statistical performance metrics are the most viable means to assess your performance over time. For instance, a line graph can adequately display asset depreciation over time and any noticeable trend in the decline.
Performance metrics help businesses make data-driven decisions and make optimal financial decisions. For instance, you can decide based on an asset’s maintenance history when to dispose it of or replace it with a newer one.
Components of asset management as per ISO 55000
ISO 55000 provides an overview of asset management, the terminology, asset management systems, and associated principles to reinforce its deployment in the best possible manner. It provides a set of standards and rules needed to provide maximum protection to organizations engaging in asset management. It details how particular rules are to be applied specific to assets and sectors.
It is important to take ISO 55000 standards into account with your daily asset management activities because they help develop a strong foundation to achieve your asset management principles. Some important components of ISO standards include:
- Scope: Guides how physical assets are to be managed but extend to other types of assets too. Includes assessing the viability of an asset management system you are using and whether it is fulfilling all your business objectives and requirements.
- Objectives: Setting clear objectives to ensure all asset management activities are in line with your business goals. Incorporating these goals into your daily operations for enhanced performance.
- Stakeholders: Identifying stakeholders so you shape your business activities to meet their needs and requirements. Know what their roles and responsibilities are to know who to consult to handle risks.
- Planning: Plan in advance to timely identify and address risks and opportunities in managing assets. It is critical to have a structured and systematic approach to managing assets and achieving the best possible value out of assets.
- Operations: Coordinate your operational activities to achieve consistency and transparency through enhanced asset control. Having an effective internal control system helps develop better control over operations.
By taking these simple aspects of ISO 55000 into account, you can avoid hefty costs and achieve your asset management principles in a timely fashion.
Role of asset management systems in achieving asset management principles
Modern-day asset management systems offer a unique solution to all your asset-related needs! They provide a consolidated platform to not only conduct actions on assets but also develop a higher visibility into your daily asset operations. These capabilities make them a perfect fit for organizations seeking to minimize costs while looking to manage a variety of assets from one place.
Use smart systems today to optimize your operations and sustainably manage your future growth.
