Improving the accessibility and management of assets is an important factor in a business’s goal to generate revenue, paving the way for digital tools to better enhance the asset life cycle management process.
Through solutions such as Asset Management Software, businesses are able to understand and analyse the life cycle of each asset. Eventually assisting owners to make better procurement decisions, maximize the efficiency of equipment, and reduce needless spending costs and maintenance.
What Is the Asset Life Cycle?
An asset life cycle is a strategic and analytical approach to the management of a business’s assets. Most commonly performed with an accurate data collection system, such as Asset Management Software, an asset life cycle is broken down into multiple stages.
Although procurement of an asset is most commonly seen as the first stage of the asset life cycle, it actually begins with planning. From first identifying the need for an asset, the process then continues through an asset’s useful life through to disposal.
Each asset has a life cycle that can be digested into four key stages:
- Operation and Maintenance
Whether it’s an espresso machine in a coffee shop or a CNC lathe in a manufacturing warehouse, it’s important to understand the life cycle of your revenue-citric assets. By successfully managing this, businesses can then determine the importance of an asset by various factors such as cost, reliability, and efficiency.
Why Asset Life Cycle Management Is Important
No matter what the industry or size of operations, all businesses are reliant on their fixed assets. Each asset has its own life cycle, including a period of useful life where it runs at peak performance. But, after inevitable wear and tear, an asset’s optimal operating life decreases and requires maintenance. Until repair costs eventually outweigh the price of replacement.
The disposal of an asset can be for various reasons including the amount of usage by a production team, the way it had been used by operators, or even the effectiveness of a maintenance plan.
With the deployment of a successful asset life cycle management, or LCAM (Life Cycle Asset Management), strategy businesses can gauge when an asset will reach its optimal peak performance and analyse how long of a useful life it has left. Before eventually planning for maintenance work or its replacement.
This detailed data-driven approach to asset life cycle management also ensures businesses are keeping their assets operating for as long as possible. Among other capabilities such as:
- Calculating asset depreciation value
- Building preventive maintenance strategies
- Specifying asset roles in operations
- Ensuring compliance with regulatory standards
- Calculating the cost of procurement and replacement
- Integrating assets into asset tracking systems
The Four Stages of an Asset Life Cycle
Although the organisation and structure of an asset life cycle may differ between different businesses, there are some stages that are more predominant than others. An asset life cycle can be broken down into four key stages:
Planning helps to establish the requirement of an asset, based on the evaluation of existing assets. This is done by introducing a management system that can analyse trends and data. Allowing the decision-makers to identify the need for the asset and what value it can add to operations.
This first stage of an asset life cycle is crucial for all stakeholders, from financial teams to operators. The decision to purchase an asset relies on this asset fitting a business’s needs. As well as contributing to its operations and generating revenue.
Once an asset has been identified, the next stage is to purchase it. This means that an asset has been properly analysed and identified as a much-needed resource to improve business operations.
This stage will also focus on the financial side of acquiring an asset that is within a specific budget that has been set within the planning stage.
When the asset is eventually acquired and deployed, it can then be tracked throughout its entire life cycle by using an asset management system.
3. Operation and Maintenance
With the asset now installed, the next stage is operation and maintenance; the longest phase of an asset life cycle. This stage indicates the application and management of the asset, including any maintenance and repair that may be needed.
As the asset is finally put to its intended use within the business, it is now improving operations and helping to generate revenue. As well as reacting to upgrades, patch fixes, licenses, and audits.
During operation, an asset will be regularly monitored and checked for any performance issues that could unexpectedly develop. This is when maintenance and repairs start to become a common occurrence.
As an asset ages and wear and tear increases, regular maintenance is needed to help prolong the life and value of the asset. Not only does this mean repairs, but modifications and upgrades are also required to keep assets in sync with an ever-changing workplace.
Maintenance strategies can differ between businesses. Some prefer a reactive approach, whereas others opt for a predictive or preventive maintenance strategy. But, each maintenance strategy works towards, including:
- Reducing downtime
- Minimizing emergency repair costs
- Increasing equipment uptime
- Prolonging asset life expectancy
By targeting potential improvement areas, maintenance can even help an asset perform better than it originally was.
Finally, at the end of an asset’s useful life, it is removed from service and either sold, re-purposed, thrown away, or recycled.
Although at this stage an asset has no business value, it may still need to be disposed of efficiently to ensure it does not harm the environment. This process could even involve dismantling the asset piece by piece or wiping it clear of data.
However, if there is still an operational need for this type of asset, a replacement is planned for and the asset life cycle can begin again.