Need for Planning Life Cycle Management for Business Assets

Managing all the assets and accounting them is a great objective of business that goes through various stages.

Often, the asset management system is the last option that business people choose in order to save expenses.

Asset life-cycle plays a significant role in managing & monitoring.

As the life-cycle of an asset includes depreciation adjustments, its repair and the upgrades performed on it.

Many accounting issues arise throughout the life of an asset, based on the requirement of the accountant to make decisions regarding financial reporting or the asset's value.

Therefore, the assets' life-cycle plays a key role in the process of asset management. It starts from the time when the company acquires an asset and ends with its disposal.

Asset Lifecycle Management

Asset life-cycle management is the process that allows the optimization of profit generated by business assets to be kept by the organization throughout their life-cycle.

In their life-cycle, assets go through many stages and generate a lot of data from their operations, maintenance, and condition monitoring systems.

This asset information and detail are systemized and analyzed with the use of various techniques to get aware of its overall performance.

The Need for Asset Life-cycle Management

Businesses nowadays have several physical assets despite their industry type (mid-size and large-scale businesses especially).

It is the company's responsibility to have held on the access of cost-effectiveness and efficiency of assets in use. As the cost of assets is associated with the assets' purchase, management, and maintenance.

Whatever were the earlier techniques and methods for economic and financial development will not be satisfactory for the future.

The business assets for any company or organization can be defined as  “an item, thing or entity that has the potential to provide value to an organization.”

The process of asset management includes the duties of optimizing the delivery of value and making an appropriate decision about the assets.

The main objective of asset tracking and management is producing the least overall life cost of assets which can be affected by other parameters such as business continuity or risk during the decision-making process.

It also comprises the opportunities, balancing the costs, and the threats against the level of performance of assets, which makes it essential for the greatest return on the investment and to maintain the objectives of the organization.

Understanding the life-cycle of an Asset is very important for the business. It is useful from the stage procuring until it disposed of.  E.g. a building has lots of valuable items which require maintenance such as elevator, furniture, etc.

The facility manager manages the assets. Sometimes they need to be replaced and that is the responsibility of the manager. But Maintenace & repairing can increase the life & efficiency of an asset.

Also Read: How Important Is It to Track Business Assets in Different Industries?

Key Stages of Asset Life-cycle Management Process

The asset life-cycle is the key process to understand in asset management software. The team involved with asset management manages the organization's assets. Their aim is to assist the organization in tracking the changes in their asset, how they are configured, and their location.

There are majorly 4 stages involved in asset life cycle management, classified and described below:

1. Planning

As the first step of the asset life-cycle management, this is the stage where all the planning i.e., strategy and verification of the asset requirement takes place.

For asset determination, evaluation of already existing assets, and their potential to meet services are needed. Moreover, there is a need for identifying the management and maintenance strategies for including and analyzing the requirement of the asset.

Through the planning stage, it becomes important for an organization to add value from the currently going on development processes.

Following are the ways in which planning stage will assist your asset life-cycle management:

• Evaluate the quality or condition of existing assets
• Make sure of resources' availability whenever required
• Helps to find assets that are under-utilized, under-perform, or in excess
• Make sure of proper asset maintenance
• Evaluate options for asset supply and funds for their acquisition

2. Acquisition

The acquisition is the second stage of asset life-cycle management. Every organization has different strategies to acquire assets, for that planning is mandatory.

Some organizations construct or build their assets such as using internal workers, as how many parts of the salary should be considered as an asset, that is the problem.

Here is another example, suppose you have a car manufacturing business; a luxury car would be more expensive than the basic car. Moreover, the maintenance and other charges would also be costly compare to a basic car maintenance expense. The goal of the acquisition is to make purchasing of an asset is cost-efficient as possible.

However, once the asset is procured, and installed as per the requirement, it is placed in the RPI (Real Property Inventory). Then, it is tracked through its useful life.

Also Read: Enterprise Asset Management: Complete Overview and Benefits

3. Operation & Maintenance

After that asset is used for some time then the asset requires maintenance to work efficiently. As we all know assets need maintenance at regular intervals otherwise it will not only burn a hole into your pocket, but your daily activities may also suffer.

If maintenance takes place regularly, your asset's lifespan will increase. Meanwhile, the asset manager should be focusing on how to improve or make adjustments in the operational requirement to enhance the potential.

The continuous use will put the asset in wear and tear situations due to which maintenance becomes a common occurrence.

With the growing age of the asset, maintenance help to increase its productive life. Modifications and upgrades are done to make the asset more in sync with the times, making them faster and better. This will only improve the quality of the work.

4. Disposal

When the asset useful productive life is finished, it must be disposed of.

The decision for asset disposal should be based on the service deliverables. Before disposing of the asset, everything is checked, treated, and processed to ensure that it should not harm nature or society.

For this, all the data must be wiped from the asset. It is then dismantled piece by piece, all the parts which can be used further are stored and those with no use are sent in scrap.

If the asset consists of any part that can cause an environmental hazard, they are supposed to be eliminated and disposed of, as dictated by the environmental laws of that geographical area.

Benefits of Asset life-cycle management

Here are some of the benefits which you will get from asset life-cycle management:

• Ensures and clearly defines the assets of an organization with its condition, usefulness, and cost-effectiveness.
  
  
• Management of the life-cycle of an asset will calculate your needs in a better way.
  
  
• The proper system will assist you in making informed purchase order decisions.
  
  
• It will improve your dynamic when it comes to the restoration of resources.
  
  
• The management will improve the quality of IT services in your organization.
  
  
• You will be knowing the total cost of ownership of an asset every time.
  
  
• Asset life-cycle management proves to be a great tool to ensure regulatory compliance of an organization.

Also Read: Everything you need to know about Equipment Maintenance

EndNote

Asset life-cycle management helps the organization to optimize the performance of the asset throughout its useful life.

The life-cycle management starts from the point of the planning stage and moves along in a sequential manner until the product is no longer useful and must be disposed of.

The asset management system would allow an organization to know the operational costs, usage frequency, and performance associated with an asset throughout its lifetime.