Asset lifecycle management is a strategic and analytical approach used to determine each stage of an asset’s life cycle to maximise operational efficiency and generate a greater overall return on investment.
Through extensive planning and utilising asset lifecycle management best practices, asset managers can better understand how a business’s most critical assets perform and what value they provide. Whether it’s an espresso machine in a coffee shop or a CNC lathe in a manufacturing plant.
Without a general understanding of the asset lifecycle, businesses face multiple challenges. Such as ageing assets, high maintenance costs, and decreasing asset values.
The asset lifecycle can be broken down into four stages:
- Operation and Maintenance
Take Your Asset Lifecycle Management to the Next Level With Asset Management Software
What Type of Assets Are You Looking to Manage?
The Stages of Asset Lifecycle Management
Stage 1: Planning
Before purchasing an asset, a plan needs to be in place. Asset 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.
It is then up to the asset manager and other decision-makers to understand aspects such as:
- What asset is needed
- What is its purpose
- Will it improve operations
- How much budget is available
- What is the estimated depreciation value
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 it fitting a business’s needs. As well as contributing to its operations and ultimately generating revenue.
Stage 2: Procurement/Acquisition
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 which is within a specific budget that has been set at the planning stage.
As procurement is vital, it can be dissected into a procurement lifecycle which is suited to businesses purchasing goods and services. Successful procurement lifecycle management can improve both speed of purchasing and the cost of purchases.
Typically, the procurement lifecycle will look like this:
- Identify goods or services
- Shortlist suppliers
- Negotiate costs and delivery
- Finalise purchases
Stage 3: Operation and Maintenance
Next is the longest stage of an asset’s life cycle; operation and maintenance. As an asset is put to its intended use, it is now improving operations and helping to generate revenue. As well as reacting to upgrades, patch fixes, licenses, and audits.
During operations, an asset will be regularly monitored and checked for any performance issues that unexpectedly develop. This is where an asset maintenance plan will be key to prolonging reliability and performance.
Without a maintenance plan, businesses will most likely encounter unplanned downtime and high repair costs. Over 80% of companies experience unplanned downtime of critical assets at least once every three years.
Asset maintenance strategies differ depending on a business’s budget and asset type. Some take a more reactive approach, whereas others opt for a predictive or preventive strategy. Ideally, a chosen maintenance plan will work to:
- Reduce downtime
- Minimise emergency repair costs
- Increase equipment uptime
- Prolong an asset’s life expectancy
By targeting potential improvement areas, maintenance can even help an asset perform better than originally intended.
Stage 4: Disposal
At the end of an asset’s useful life, it is removed from service and either sold, re-purposed, thrown away, or recycled. The final stage of an asset’s life cycle can come at any point after purchase. For instance, an asset manager may determine an ideal disposal point for a particular asset based on its current value.
Even though an asset has no business value at this stage, it may still need to be disposed of efficiently to ensure it does not harm the environment. Particularly if it has been operating in industries such as oil and gas or chemicals. This process could involve dismantling the asset piece by piece or wiping it clear of data if it has operated in an IT hardware asset lifecycle.
If there is still an operational need for this type of asset, a replacement is planned for and the asset life cycle begins again.
Why Asset Life Cycle Management Is Important
No matter what the industry or size of operation, all businesses are reliant on their revenue-generating assets. Each asset has a 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 asset life cycle management, or LCAM (Life Cycle Asset Management), 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
Utilising Asset Lifecycle Management Software Best Practices
For asset lifecycle management to be successful, stakeholders need access to relevant and accurate information. That includes purchase, condition, location, value, and maintenance data. This can be captured and shared on manual asset management tools such as Excel spreadsheets. But spreadsheets are notorious for errors when it comes to large pools of data.
Instead, businesses can achieve greater efficiency and accuracy by using Asset Management Software. With an asset management system, asset managers can improve their lifecycle management tasks with access to:
- A searchable asset register
- Continuous real-time tracking
- Updated asset value figures
- Warranty, license, and lease information
- Maintenance and repair analytics
As an example, an asset manager can utilise Asset Management Software for lifecycle management in 5 steps:
- Identify, locate and prioritise assets
- Understand an asset’s importance to operations
- Track performance and output
- View historical and planned maintenance data including costs and downtime
- Determine and plan for disposal
Use Our Asset Management Software Finder to Identify the Best Tool For You
What Type of Assets Are You Looking to Manage?
Types of Asset Lifecycles to Consider
Although synonymous with the management of fixed and physical assets, asset lifecycle management is relevant to various types of different assets. This allows businesses to implement their own LCAM protocols.
- IT Asset Lifecycle Management: This is focused on incorporating both software and hardware assets.
- Software Asset Management Lifecycle: This is designed to determine the lifecycle of software licenses and usage, which helps to reduce the risks of using outdated software and improve employee offboarding processes.
- Fleet Lifecycle Management: Similar to equipment and machinery, a fleet lifecycle will focus on maintenance for the safety of fleet vehicles during their operation as well as fluctuating values.
- Digital Asset Lifecycle Management: This helps to better understand the digital asset lifecycle from creation and management to distribution and archiving.
What Is the Asset Life Cycle?
The asset lifecycle refers to the entirety of an asset’s life that is under business ownership. Although procurement of an asset is most commonly seen as the first stage of the asset life cycle, it begins with planning. From first identifying the need for an asset, the process then continues through its useful life to disposal.
What Is Asset Lifecycle Management?
Asset lifecycle management is the process of understanding, improving, and learning from the asset life cycle. It is a set of rules put in place from the collection and analysis of asset data to help improve the way a business purchases, uses, and disposes of its assets.
What Are the Stages of Asset Lifecycle Management?
The asset lifecycle has four stages, they are:
- Operation and Maintenance