Physical assets are an organization’s fundamental investment. Whether a hospital uses expensive equipment, like MRI machines or an IT software house owns laptops, these assets are the behind-the-scenes heroes. They help you complete tasks, track inventory, and streamline major operations. Managing these assets is crucial to fixing problems in daily processes that can otherwise amount to significant pitfalls in the long run.
This blog will teach you about physical asset management, its importance, and best practices for increasing the longevity of your assets. Whether you are interested in finding an effective solution to manage your assets or maximizing their efficiency, this blog will help you do both.
What are physical assets
Physical assets are tangible items used and owned by an organization to generate value. Some common examples include infrastructure, equipment, machinery, and vehicles. These assets are important for running business operations and require robust management to ensure they are used to their maximum capacity. Depending on the type of industry, businesses can own different types of physical assets. Here are a few common examples:
Manufacturing and construction: Heavy machinery, tools and equipment
Higher education: Chromebooks, projectors, and lab equipment
Clinics and rehabs: Ultrasound machines, anaesthesia machines, and patient monitors
What is physical asset management
Physical asset management is the process of managing a business’s tangible assets to maximize their value and minimize associated risks. This process involves planning, acquiring, maintaining, operating, and disposing of assets in a cost-effective way to ensure the company’s objectives are met.
Businesses deploy physical asset management to improve equipment longevity and functionality.
Why is physical asset management important
To oversee the assets in real-time, physical asset management is vital, ensuring efficiency and maintenance. Some of the critical aspects are:
1. Minimized downtime
Did you know that an average automotive manufacturer loses $22,000 per minute when a production line is disrupted? Any unplanned downtime will add up costs for the business. However, efficient physical asset management reduces downtime and ensures timely delivery, maintenance, and repairs of assets to eliminate similar disruptions. This can be done by setting up regular asset maintenance sessions to avoid unplanned downtime.
2. Extended asset lifespan
A proper maintenance check can increase the lifespan of equipment by up to 30%! This means that companies can avoid costly replacements with the help of asset management and save a significant amount of capital expenditure.
3. Informed decision making
From real-time asset tracking to creating customized reports, proper management of assets reveals insights that allow organizations to better allocate their resources. It helps them to prioritize investments in a strategic manner dependent on the asset performance, maintenance record, and asset lifecycle data.
4. Improved operations
A physical asset management system allows you to control daily workflows, boosting asset performance to meet organizational goals. With improved operations, you can better utilize assets to achieve a fast turnaround.
5. Better risk management
Tracking is one of the crucial aspects of asset management. By using asset management software, organizations can conduct asset audits, and make informed decisions about when to buy equipment, sell depreciating assets, and even repair machinery. Companies can keep tabs on the asset location by using RFID tags, and barcodes to minimize the risk of losing track of assets.
6. Cost reduction
The efficient use of fixed assets is guaranteed by asset management software. Scheduled condition inspections ensure timely maintenance, maintaining the value of each asset, and ensuring that the right, functional assets are always available. Real-time tracking also ensures that assets are always under control, minimizing the risk of losing out on items.
7. Supports business growth
The physical asset management system encourages collaborative workflows and strengthens ties between business divisions by spanning the entire enterprise. This alignment successfully connects corporate objectives with organizational activities.
8. Encourages accountability
When employees are properly trained to use and take care of assets, it cultivates a broader culture of handling assets with responsibility and accountability within the company as well.
Two types of physical asset management
Understanding the types of asset management is an effective way to plan a comprehensive asset management. Let’s explore these types:
1. Reactive asset management
Reactive asset management, also known as breakdown maintenance or run-to-failure maintenance, merely deals with issues and dangers as they arise, requiring minimal planning or forethought. It results in risks, unscheduled downtime, lost income, and non-compliance. An astounding 60% of industrial enterprises still employ reactive maintenance, even though just 3% of organizations believe it to be effective.
2. Proactive asset management
Proactive asset management is the opposite of reactive management. This framework makes use of some tactics, such as asset tracking and monitoring, equipment failure prediction, and preventative maintenance. Proactive management maximizes the value of physical assets throughout time and space by lowering risks, improving compliance, and lowering the chance of asset loss and theft. Businesses are realizing the benefits of this framework, as the predictive asset management market is predicted to reach USD 16,761 million by 2028.
Physical asset management lifecycle
To manage assets effectively, you need to understand the entire asset lifecycle, as it is a crucial part of enhancing operational efficiency. A lack of understanding of asset use or lifecycle can risk an accelerated asset depreciation. Let’s take a look at the asset management lifecycle:Â
1. Planning
The asset lifecycle starts when your team determines a new asset is required. , The asset manager and procurement team work with multiple departments throughout the planning phase to ascertain the following:
- The particular asset needed
- The function it will fulfill
- How it will enhance operations
- Budget available
- Forecasting asset health
- Estimating depreciation over time
It is critical at this point to evaluate the asset’s alignment with overarching corporate objectives as well as its potential to improve revenue generation and operational efficiency.
2. Procurement
Once you have identified the required asset in the planning phase, you can purchase it now. This process will include finalizing:
- Asset specifications
- Market research to shortlist assets
- Negotiate the price and delivery options
- Making the purchase
3. Operation and maintenance
After procurement, the asset is deployed and starts operating. Businesses can start monitoring asset performance through productive outcomes. This practice helps increase the longevity of assets and decrease repair costs and downtime with the help of efficient maintenance planning. Asset performance and dependability are likely to improve in businesses with a maintenance plan.
4. Disposal
Once an asset is used to its maximum capacity, it is removed or disposed of by selling, repurposing, recycling, or simply discarding. The asset manager will determine the most effective time to dispose of the asset, keeping the regulations and data security concerns in focus. If an asset needs to be replaced, the lifecycle returns to the planning stage.
Physical asset management best practices
Physical asset management doesn’t have to be difficult; by implementing the best practice and using the asset management software, you can easily follow the necessary guidelines as discussed:
1. Asset inventory and classification
The asset type you want will depend on your business niche. It could consist of machinery and vehicles or hardware and software. Asset management software will enable you to automate asset discovery, tracking, and monitoring of your IT inventory regardless of location.
You can categorize the assets based on their reference, value, and importance to the organization and allocate resources accordingly.
2. Tracking and documentation
It’s best to assign unique asset identifiers like asset tags, or barcodes, to track each one of them. It also simplifies inventory tracking and the real-time location of the asset throughout the lifecycle. You can maintain a detailed record of specifications, maintenance history, warranty information, repair history, and more.
3. Regular audits
Companies should perform regular asset audits to verify the accuracy of their records, identify discrepancies, and ensure compliance with licensing agreements. This will help them eliminate ghost asset resources (that do not actually exist physically but are mentioned in the record).
4. Cost Effective Management
Physical assets are valuable investments that require regular maintenance and repairs. Here it is important to adopt cost effective management techniques that focus on proactive rather than reactive maintenance. If you wait for your office buildings to get damp spots after a hurricane, then the entire process will take much longer. With preventive maintenance you can take the necessary precautions before the predicted hurricane to save unnecessary costs.
5. Safe asset disposal
In some industries, such as construction, asset disposal is not an easy task. You need to figure out what to do with the heavy-duty equipment that has reached the end of its useful life and lifecycle. It can be a great challenge for the company. You need to follow a secure and environmentally responsible procedure to ensure assets are disposed of properly.
6. Daily reporting
Asset management software lets you generate reports on asset utilization, costs, and maintenance. You can check the history of maintenance to identify any hidden or surcharge costs. Accordingly, you can make an informed decision on how to best utilize the assets via optimization, procurement, or retirement.
Optimize your assets to full capacity with physical asset management
Physical asset management is critical to maximizing assets’ value and decreasing risks. A smart asset management strategy helps companies ensure their assets are available when needed, reliable, long-lasting, cost-effective, and compliant with regulations. You can conduct regular inspections and assessments, identify potential risks, and execute preventative maintenance.
With the help of EZOfficeInventory, you can easily implement a cost-effective asset management strategy by monitoring your assets, creating custom reports, and training employees to acquire the necessary skills to make the strategy most effective.
