How Asset Lifecycle Management Plays a Vital Role in Asset Management
If you want to optimize your assets’ ROI, you need to look at them from a holistic perspective and manage them throughout their lifecycle. This is when asset lifecycle management comes into play.
What is asset lifecycle management?
Asset lifecycle management is a business approach that aims to maximize the efficiency and cost-effectiveness of the assets throughout their lifespan. This includes the conceptual design phase through the regular usage to the eventual decommission and replacement. Successful implementation of asset lifecycle management is crucial for getting the most out of an organization’s asset register.
The need for planning out an asset lifecycle process
The average mid-sized business usually has a high number of assets. This includes fixed assets such as company vehicles and IT hardware to less tangible ones such as intellectual property or software licenses. Naturally, the costs associated with the purchase and the ongoing asset management and maintenance of complex asset registers can consume a significant portion of a company’s budget. Therefore, it is key for a business to have access to tools to evaluate the cost-effectiveness and efficiency of the assets on its register.
An asset lifecycle process seeks to break down the various stages in the life of an asset to enable a business to analyze how it is being used, opportunities for cost or efficiency savings, and when and how to replace it when business needs arise.
Different stages of the asset lifecycle management process and how it works
Generally speaking, there are four stages of an asset’s life cycle, as follows:
1. Planning stage
In this stage, a business case is made in relation to the purchase of a new asset on the register. The case includes why it is required, what it will be used for, what the proposed costs are, etc. It is critical that this stage is carried out carefully to ensure that each purchase of assets fits business needs, is an appropriate addition, and is, therefore, contributing positively towards business success.
2. Purchase stage
The process of acquiring an asset should only be undertaken after a robust and thorough planning stage, as mentioned above. Acquiring an asset has a number of steps, including researching options available on the market and making comparisons, undertaking demos or trials, and then purchasing said asset and adding it to the organization’s fixed asset register.
3. Operation and maintenance stage
This is generally the longest stage of an asset life cycle. It is the stage that the other three parts are actively contributing to in order to ensure maximum success. Smart organizations recognize the importance of asset maintenance within this stage. Properly maintaining assets allows maximum opportunity to provide value for money and remain in useful operation for an appropriate period of time. This is particularly the case for high-value assets, such as buildings.
4. Decommission and disposal stage
Inevitably, there comes a point when the asset is either too old or not optimally functioning to be of continued effective use to the business. At this point, the organization must make decisions relating to how to dispose of it and how to replace it.
Benefits of planning an asset lifecycle management
There are a number of advantages associated with employing a clear and coherent asset lifecycle management process. First, it is imperative that an organization has the capability to clearly define its assets, along with the condition, usefulness, and cost-effectiveness of each one in order to assist with future planning. For example, if committing to a new project, the team will need to know what tools are at its disposal and how they can be used to leverage success.
As importantly, asset lifecycle management helps a business to approach its register in a proactive, rather than reactive, manner. This enables the company to predict likely future scenarios in relation to how its assets are aging, allowing them to take positive and well-planned steps relating to maintenance and eventual replacement. This is certainly a contributor to lowering asset register costs.
In addition, asset lifecycle management is a great tool to ensure regulatory compliance of an organization’s asset register.
How asset lifecycle management tools can work to your advantage
Companies with lengthy or complex asset registers often find that attempting to manage their asset life cycles manually is a headache at best and ineffective and costly at worse.
Although it might seem smart to invest in a standalone asset management module rather than purchasing an all-in-one finance suite, in the long run, it is counterproductive.
Instead of jumping between multiple interfaces to manage finance processes, it would be wise to choose a unified finance software solution like Kissflow FinOps Cloud. Its omni-channel functionality coupled with seamless API integration enables rapid data exchange and complete transparency.
Looking for an asset management software that strengthens the asset lifecycle while eliminating errors and minimizing risks? Give Kissflow FinOps Cloud a try for free and see how easy it is to enforce compliance without impacting the usability.