7 Asset Management Performance Metrics You Need To Track

A business’s success depends on how well it uses its assets. Efficiently managing assets drives value and leads to higher productivity necessary for growth. To achieve a consistent pathway to operational efficiency, businesses can set the right asset management performance metrics. Such metrics help organizations improve an asset’s useful life while lowering downtime. This strategy is not limited to basic upkeep but offers valuable insight to increase efficiency levels, identify asset usage patterns, and make operations more cost-effective. 

This will discuss the most critical asset management key performance indicators, their benefits, and how to set asset performance metrics for your business. 

What are asset management performance metrics

Asset management performance metrics are measurable indicators that evaluate assets’ overall health, outcome, and condition. They can be used to assess asset management policies and implement improvements. Organizations can use metrics to revise goals and redirect money elsewhere if an asset is not delivering its assigned targets.

Performance metrics must follow a set of criteria for them to be effective. Here are some factors to consider while deciding on performance indicators for your business:

1. Aligned with goals

All metrics should be designed with the ultimate business goals in sight. For example, if the overall business target is to cut costs, your asset management metrics can include asset lifecycle costs, overall efficiency, and inventory turnover rate. Every metric should be able to capture the total costs incurred during the whole process to be compared over time to mark progress. 

2. Practical and attainable 

Asset management KPIs are only helpful if they can be achieved. While it is true to stretch out business opportunities, they should be possible. A 50% reduction in costs may be attainable for a business implementing some robust new policies, while it may seem too far-fetched for a small firm stretched thin for savings. To develop relevant metrics, conduct research based on historical trends, and propose the final KPIs. 

3. Time-bound and consistent 

Constantly changing metrics is no good because it becomes doubtful to achieve a solid target in just one go. You may get lucky once or twice, but that may not always happen. Setting a metric means following it closely and adjusting it based on current performance. For this, assigning a time limit to metrics is also important. With a time limit, measuring it in the long run becomes easier. 

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Benefits of setting asset management metrics 

Measuring Key Performance Indicators (KPIs) is of little help if you need the right processes in place to react to the nuances in your results. In addition, consistency in KPI measurement is often the most important aspect of data analysis if gathering information is abandoned at some point or needs to be done regularly. The data can have very little real value to say. Some of the major benefits of setting asset metrics

1. Improved asset utilization 

Inventory turnover is an extremely valuable metric for your SMB. It can help you determine how often you need to restock inventory levels throughout a specific period, allowing insight into stock consumption, wastage, and the associated overheads. This is particularly helpful when you can see the ‘actions’ taken on a specific set of inventory items or even on items managed by a specific employee. 

This is because it provides a deeper understanding of where extraneous orders are being placed and can also lead you to re-evaluate low stock thresholds to ensure shortages are a thing of the past!

2. Lower inventory turnover 

All equipment used needs to be in the best shape possible for seamless and efficient business workflows. This makes operations more productive and improves asset longevity, ensuring that long-term costs are brought down. 

A great way to see how reliable equipment is in terms of fulfilling business processes is to see its usage history. You might find that some items are being consumed as consistently as it should, or even worse, there is too much usage for a single item. Reports that help you understand the nuances in stock management can help lower costs. As backed by research it shows that stock management reduces costs by 10%.

3. Risk Mitigation

Setting asset management KPIs mitigates risk by ensuring compliance with regulatory standards. Tracking the metrics, such as compliance and rate, helps assess the organization’s adherence to legal requirements and regulations. This proactive approach can easily minimize risks, allow you to avoid penalties, and build a good reputation in the industry. 

4. Customer-centric strategies 

Customer satisfaction is of the utmost importance, and asset management practices from a user perspective can enhance their overall experience. A more customer-focused approach will help strengthen the relationship, boost sales, and improve brand loyalty. By leveraging the right set of inventory management KPIs, you can reduce operational costs, optimize asset performance, and maximize asset utilization. 

How to set your asset management performance (AMP) metrics

The majority of organizations use top-performing asset management software for a data-driven approach toward metrics. Setting performance metrics in an automated system helps them achieve digital transformation to reduce the risks of data inaccuracy. Here are four easy steps to set effective asset management performance metrics:

1. Identify critical assets

Before an asset is acquired, stakeholders should clearly know how to use and maintain it to fit their daily operations. Assessing an asset’s value is critical at this stage as it varies between organizations and industries. For instance, in the food delivery business, a vehicle’s health and performance are valuable so that they do not delay daily business operations.

Another way is to create a digital twin, a virtual asset representation, allowing operators to run and predict the asset’s performance based on simulations. Decision-makers then have insight into an asset’s performance.  

2. Deploy asset performance management software

Using asset management software makes it easier to monitor asset performance with automated workflows. Software allows you to maintain, control, and optimize asset use with a large amount of data generated. AI-enhanced data analysis plays a vital role in helping managers document data and keep track of assets and their performance. The software also records live asset locations, how and when they are being deployed, and the frequency of repairs required. 

3. Scheduling maintenance 

The most successful asset performance management strategies used today depend on the capacity to continually evaluate performance in real-time and plan maintenance regularly to avoid equipment failure. The success of many AMP projects depends on  two tactics: predictive and preventative maintenance.

Preventive maintenance lowers the likelihood of asset failure by using routinely planned maintenance tasks. Best practices and historical statistics, including mean time between failures (MTBF), are used to schedule downtime. Whereas predictive maintenance assesses and reassesses the condition of the asset using sensors to collect data in real-time. The use of RFID tags is common. 

3. Measure the success of AMP system

To evaluate whether your strategy for asset management performance is working or not, it is important to evaluate the metrics. Wrong metrics can draw an inadequate picture of the asset performance and cause loss to the organization. Choose the metrics that impact your company size, industry, the type of assets you are using, and its priority for your business. Regularly run reports whether you are getting the desired results from the set metrics, if not then it may be best to reassess and update. 

7 key performance indicators for asset management

Here are some proven KPIs that are tried and tested by organizations to measure the success of their asset performance: 

1. Mean time to repair (MTTR)

The mean time to repair indicates the amount of time needed to fix an asset. Either the asset itself or the repair procedure can be comprehended using this KPI. A significant rise in repair times relative to historical levels may indicate that a product needs to be replaced. If maintenance teams lack the right tools or training, it can also indicate that the company needs to look into its hiring or inventory management procedures. 

2. Mean time between failures (MTBF)

It is arguably the most commonly utilized metric for assessing the effectiveness of any maintenance program. MTBF is a straightforward formula that divides the entire duration of operation by the number of failures during that time to get the average interval between repairs that are required for a piece of equipment. A maintenance department is typically rated as “strong” if its assets have a high MTBF.  

3. Asset lifecycle cost 

Asset lifecycle management measures the proportion of maintenance activities in advance to aid proactive planning and reduce unplanned asset downtime. The total cost of the asset throughout the lifecycle is evaluated including acquisition, operation, maintenance, and disposal. These metrics also help to optimize asset investment and enable you to identify cost-effective asset management strategies. 

4. Return on assets 

It evaluates the profitability of assets relative to their investment, revealing the efficiency of asset use and financial results. ROA helps organizations to evaluate asset performance and gives insightful information to make the right investment decisions. 

5. Compliance rate

Maintaining a high licensing compliance rate is crucial for your company to stay out of trouble with the law and avoid fines. It is possible to find gaps and areas for improvement by keeping an eye on the proportion of software licenses that are being used as opposed to the total number of licenses purchased.

6. Overall equipment effectiveness (OEE)

The productivity of an asset during a specified period is measured by overall equipment effectiveness. It is the standard measurement metric in production because it helps increase the productivity of industrial equipment, compares progress, and identifies losses. A 100% score indicates that a plant is producing only high-quality parts as quickly as feasible without any downtime. 

7. Inventory turnover ratio (ITR)

The frequency with which a business sells and replenishes its stock over a given period is known as the inventory turnover ratio. It gauges how effectively a business turns its inventory into sales. Since a high ratio indicates strong sales, a greater ratio is preferred over a low one. 

Maximize returns with asset performance monitoring 

Monitoring asset performance is important for business growth.. A manual approach is difficult to  scale and is associated with high costs and suboptimal asset reliability. Therefore, using asset management software that gives you real-time insight into an asset’s performance is crucial for a modern approach. Using a powerful tool like EZOfficeInventory gives you real-time insights into how well or poorly an asset is performing. Organizations can leverage the information with an effective predictive solution to transform their assets, making them more reliable and available in their time of need.