Does your company spend way too much money on replacing assets due to premature asset failure or inefficient use of assets? Or are there many workplace fatalities in your company due to poor or unmaintained asset quality? You may want to take it as a sign that your company has poor Asset Lifecycle Management.
But, what exactly is Asset Lifecycle Management? How does it work and what would happen if you don’t implement it in your business process?
Through this article, we would like to convince you why you should pay more attention and start to implement a proper Asset Lifecycle Management (ALM) system. But before that, let’s get to know more about what ALM is.
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Key Takeaways
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Understanding the 4 Stages of Asset Lifecycle Management
Asset Lifecycle Management (ALM) is the process or the way how you or your company manage your assets from its initial acquisition to its disposal. In its implementation, organizations often utilize software and other technologies in their Asset Lifecycle Management process.
The main goal of ALM is to maximize the value of assets while minimizing the costs and risks associated with owning them. This includes managing the asset’s performance, ensuring it is used efficiently, and keeping it in good repair to avoid unexpected breakdowns that might cause downtime.
To achieve that goal, a company should pay attention to ALM’s four key stages. What are those stages?
1. Planning stage
During the planning stage, businesses assess the need for new assets, considering factors like budget, business growth, and asset replacement. For example, when a company decides to invest in new technology to improve efficiency, they would analyze the cost, potential return on investment (ROI), and how the new asset aligns with their strategic goals.
When a company fails during the planning stage, the company might misallocate resources, lose budget and cost, experience operational inefficiencies, and have to replace assets earlier than what the forecast said. Usually, the causes are inadequate demand analysis, poor risk management, insufficient budget planning, and lack of performance metrics.
2. Procurement/acquisition stage
The next stage is the procurement stage which involves selecting and purchasing the asset. In this step, a company is choosing a supplier for new machinery or other types of assets. They would negotiate costs, and delivery terms, and ensure the assets meet their specifications.
Without a proper ALM, during this stage, the company could make mistakes such as a lack of clear specifications of the requested assets, not research properly about suppliers and market conditions, poor supplier management, and failure to assess risks.
Those mistakes could result in suboptimal asset selection, budget overruns, supply-chain disruptions, contractual issues, and asset downtime.
3. Operation and maintenance stage
In the operation stage, the asset is put to use in the business’s daily activities. For example, the car that has been bought is being used by a salesperson to meet a client or a motorcycle is being used by a deliveryman to ship packages to customers.
On the other hand, maintenance is crucial for keeping the asset in good working condition. Back to the previous example, the assets (the car and the motorcycle) should be maintained (bring it to the workshop every few months) so the company can maximize efficiency and output.
4. Disposal stage
Finally, the disposal stage deals with retiring the asset when it’s no longer beneficial or cost-effective to maintain. A business might consider the asset’s residual value, potential recycling options, or selling it as a second-hand item.
When a company fails during this stage, the company might suffer financial loss, and face legal and compliance risks, reputational damage, and operational inefficiency. The main causes usually are lack of planning, inadequate processes, poor documentation of the process, and neglecting asset residual value.
Why Asset Lifecycle Management Is Important
After learning about the four key stages of ALM, now we have to discuss deeper about the urgency of having a proper ALM and what might happen if a company ignores it.
So, here are several reasons why your company should implement a proper ALM.
Cost-effectiveness
ALM helps organizations minimize operational costs by extending the lifespan of assets through proactive maintenance and comprehensive monitoring, thus preventing premature replacements. Studies have shown that predictive maintenance, a key component of ALM, can reduce maintenance costs by 15 to 30 percent.
Understanding an asset’s expected lifecycle and maintenance needs can help save budget and resources on unnecessary repairs or early replacement, thereby extending the production and lifecycle of an asset without increasing risk.
Enhanced asset performance
ALM involves regular and predictive maintenance, which helps prevent unexpected breakdowns. Also, by leveraging data from sensors and IoT devices, ALM can provide real-time insights into asset health and performance. This allows for timely interventions that improve asset reliability and availability.
According to Deloitte, asset performance management, one of ALM’s key components, can optimize operations and safety, driving financial results beyond predictive maintenance.
In conclusion, by ensuring assets are well-maintained and updated, ALM improves their reliability and performance, leading to increased productivity and efficiency.
Risk management
Proper ALM helps in identifying potential risks in the asset lifecycle, including assessing risks related to asset acquisition, operational usage, maintenance treatment, and disposal process. For example, the risk of equipment breakdowns during usage, security breaches, and bad impact from using the assets on the environment.
Once the company identifies all the potential risks, the company should implement risk mitigation strategies. Some strategies that can be applied are holding regular maintenance and inspections, enhanced security controls, and creating data backups plus disaster recovery plans. Those strategies could minimize the likelihood of the potential risks from happening.
Ensuring regulatory compliance
Effective compliance is crucial for sustainable operations in regard to asset lifecycle. Compliance means adherence to rules, laws, and requirements related to the asset lifecycle. It helps protect the interests of stakeholders involved within the company, including employees, customers, and even the community.
To achieve compliance, a company should have a comprehensive compliance framework. The framework should be able to define policies, procedures, and controls clearly to ensure adherence to regulations. It should address issues such as asset maintenance, data security, environmental impact, and work safety.
Then, what might happen if your company insists on not applying proper Asset Lifecycle Management? Here are some important examples.
- Increase in maintenance costs
Most of the time, companies who have poor ALM often go with reactive maintenance strategies which means the company only addresses the issues only after the asset has failed. As a result, the company would spend more money on emergency repairs, expedited shipping for parts, and overtime labor.
This method also makes the company prone to experiencing breakdowns, leading to increased downtime. Imagine the machinery in a manufacturing company breaks down during peak season. Not only would the company lose the cost to repair the damage but they also lose potential profit due to shortage of stocks.
- Workplace fatalities risk
Without a proper ALM, assets are not going to be properly maintained and inspected, let alone do it regularly. Sooner or later, the assets can become hazardous, leading to accidents and potential fatalities in the work environment. How so?
Assets that are not being replaced or updated right away would not operate efficiently and might miss some safety measurements. It might be running as usual but the operators or employees who are in touch directly with the assets might be seconds away from potential danger due to a malfunction that is about to happen.
- Regulatory non-compliance issues
Not only dangerous, but assets that are not updated or well-maintained are also most likely to fail to meet current safety and environmental standards. Things could get worse if the company doesn’t have proper and complete documentation about the assets. This condition could lead to violations and damage the company’s reputation.
For example, a pharmaceutical company has neglected its asset lifecycle management. Due to this oversight, a critical manufacturing machine has not been calibrated according to the latest guidelines. As a result, the medication’s dosage produced using this machine is slightly off which goes unnoticed for months.
Eventually, after getting audited, the company has to recall all the medication, face hefty fines, and tarnished reputation. And this situation happens all because the company doesn’t have a proper ALM.
Asset Lifecycle Management: Best Practices in Software Utilization
One solution you might want to take is using Asset Lifecycle Management software. ALM software is essential for managing the various stages of an asset’s life, from acquisition to disposal.
To help you understand more, here are some best practices for ALM software.
Real-Time Tracking
Using ALM software enables you to get real-time tracking data. Real-time tracking allows organizations to monitor their assets continuously with high accuracy and efficiency, ensuring they know the location and status of each asset at any given time.
Let’s say there’s a company that specializes in international shipping. They implement ALM software with real-time tracking by attaching sensors on each of their cargo ships. The sensors provide live data such as location, speed, and cargo status. This feature enables the operation team to monitor and optimize routes, respond to incidents, and ensure timely delivery.
If one day the ship deviates from its course due to a navigational error, the ALM system will immediately alert the operation center. Because of this, the operational team will be able to take corrective action and prevent delays or accidents.
Asset Value Updates
Another benefit of using ALM software is getting real-time and integrated asset value updates. Keeping asset values up-to-date is crucial for accurate financial reporting and informed decision-making. So, how does the system do it?
The software would calculate the current value of an asset based on its initial cost, depreciation rate, and useful life. It tracks depreciation over time, adjusting the asset’s book value accordingly. The system may also adjust the asset’s value based on market condition or resale value. It also generates reports that reflect the updated values of assets for financial analysis and auditing purposes.
Maintenance Analytics
ALM software provides accurate maintenance analytics. Maintenance analytics help predict when an asset will require maintenance, thereby reducing downtime and extending asset lifespan. The data analytics algorithms can recognize deviations from normal behavior. When the system notices those irregular behaviors, the system will trigger alerts for early intervention.
Let’s say there’s an airline company that uses ALM software with advanced maintenance analytics. The software would continuously monitor the engine performance data and predict when the aircraft’s engine is showing signs of wear that could lead to failure. Before any issues arise, the system schedules maintenance, and the engine is serviced proactively. This example illustrates the value of maintenance analytics in preventing disruptions and ensuring safety.
Planning for Disposal
Through ALM software, you could make a plan for disposal. Planning for disposal involves determining the end-of-life of assets and strategizing their decommissioning or replacement. This includes assessing the residual value of assets and considering recycling or selling options. A strategic approach to disposal helps minimize environmental impact and recover value.
For example, a company uses ALM software to manage its IT equipment. The software has flagged several old servers that are no longer efficient and are consuming excessive energy. Thus, the planning for disposal feature is activated, and the best time to decommission these servers is based on their usage patterns and maintenance costs.
Or, it could also give a recommendation to potential buyers who are interested in refurbished tech or recycling services that can salvage valuable components.
All these best practices ensure that assets are managed efficiently throughout their lifecycle, contributing to the overall productivity and profitability of an organization.
Types of Asset Lifecycles to Consider
Asset lifecycle management encompasses various types of assets, each with its own lifecycle considerations. Here are four main types of asset lifecycle you should know:
- Software Asset Management Lifecycle: This involves managing the acquisition, deployment, maintenance, and decommissioning of software licenses. Effective administration is very important to ensure good cost management, compliance, and security.
- Fleet Lifecycle Management: Focuses on vehicles, equipment, or machinery fleets. Fleet Management System includes tracking and managing the procurement, operation, maintenance, and disposal of fleet assets.
- IT Asset Lifecycle Management: IT assets such as hardware, software, and networking equipment require careful tracking from procurement to disposal to ensure they support business operations effectively.
- Digital Asset Lifecycle Management: This pertains to digital content and media assets. It involves managing the creation, storage, distribution, and archiving of digital assets to maximize their value and usability.
Each type of asset lifecycle involves planning, acquiring, deploying, operating, maintaining, and eventually disposing of or renewing the assets. The goal is to optimize asset performance, reduce costs, and ensure assets contribute positively to the organization’s objectives.
Conclusion
In today’s fast-paced business environment, effective ALM is not just a necessity; it’s a competitive advantage. HashMicro’s smart asset management system stands out as the premier solution for companies looking to streamline their asset management processes.
HashMicro enables you to track your assets’ state in real-time which is automatically updated by the system. The system also provides maintenance analytics so you can gain insight into how well-maintained your assets are and ensure compliance.
In conclusion, HashMicro’s smart asset management system is the best-in-class solution that empowers companies to achieve optimal asset lifecycle management. Explore HashMicro’s offerings and take the first step towards transforming your asset management strategy.
