Understanding the life cycle of your assets allows you to better plan for their role in your organization and saves your time, energy, and resources.
When you’re ready for each phase of an asset’s life, you can better manage them and ease each transition for operators, managers, and owners.
Actionable knowledge of asset life cycle management is useful for managers, employees, and financial officers. It applies to those in the military and civilian world, as well as people working with nonprofit organizations.
This post will describe what the asset life cycle is and thoroughly explain every stage.
Explaining Asset Life Cycle
The life cycle of an asset is the aging process of a physical resource, starting with a projected purchase and ending with a discard.
When talking about the asset life cycle, we take into account the following aspects:
- initial cost
- repair expenses
- usefulness regarding advances in technology and changing needs
Asset life cycle management differs from resource to resource, and it’s affected by the type of asset, amount of preventative maintenance it needs, the conditions it endures, as well as its complexity and the length of its service.
Asset tracking is an easy way to study each phase of an asset’s life cycle. By gathering data points every day to evaluate run time, efficiency, and reliability, you get the ability to predict an asset’s length of service, arrange for regular maintenance, and predict the need for part replacement or upgrading.
What is Asset Life Cycle Management?
Asset life cycle management means overseeing each aspect of a resource in every phase of its existence with an organization.
It begins with determining what form the asset will take, how much it will cost, and how long its lifespan should be. If the company doesn’t build and integrate the asset on its own, outside contractors may become a part of asset life cycle management.
Managing the life cycle of your assets helps to expand their ability to serve for as long as possible. It also provides vital information about the resource’s usability in real-time, which increases its efficiency and service potential for your organization.
Asset lifecycle management can include the following actions:
- specifying what is the asset’s role in the organization
- including the asset in the organization’s budget
- approving the purchase or creation of the asset
- integrating the item into an asset tracking system
- scanning the item for regular tracing and information
- checking for depreciation
- seeking and installing software updates
- initiating preventative maintenance
- ensuring regulatory compliance
Now that you understand the basics of asset lifecycle management, we’ll dive deeper into each specific stage and explain it.
6 Stages of Asset Life Cycle
The asset life cycle consists of six stages:
- procurement or acquisition
- deployment or installation
Depending on your business and how you use the asset, these might manifest in a different order.
An asset’s life cycle typically begins here. It demands careful thought and detailed analysis of current and future needs.
The asset planning stage requires a thorough evaluation of what the organization needs from the asset, and for how long.
Those needs change depending on what the asset is and the nature of its work. For example, a laptop that often travels between user to user might become obsolete long before a well-constructed and carefully maintained wrench will.
Assessment during the planning phase should include familiarity with the other four stages.
Consideration should include:
- the environment in which the asset works
- focus on inefficient aspects in the system
- an informed projection of the funding required to bring the asset on board
- how much it might cost to maintain it throughout its life cycle
- how can that asset be recycled or disposed
When you plan for a new asset for your business, think about how the asset will fit into your organization and how employees might benefit from it.
In this sense, the phase could include a discussion with those workers most closely identified with using it. Seeking their input strengthens a sense of team investment while increasing a range of factors for management to consider.
In some ways, the planning stage of asset life cycle management is the most important.
Underestimating the length of the asset’s life span could wreak havoc with a long term budget if the item requires early replacement or constant repairs.
The core of the procurement and acquisition phase of asset management acts on the data gathered in the planning stage.
In this phase, attention to budget becomes a more significant factor than it was during planning. Those in a position to negotiate have the task of finding a supplier who can deliver a quality asset at a workable cost.
It can be tempting to aim for the lowest cost possible. However, purchasing an asset at a rock-bottom price might result in outdated or low-quality equipment that breaks easily, requires constant repair and affects project completion schedules.
Besides, outdated equipment, which is significantly different from current needs, might require quick replacement anyway.
At the same time, splurging on a luxury item with a premium name might not necessarily mean better performance.
Finding the most efficient way of meeting the goals of your organization is the primary goal of the procurement/acquisition phase.
An organization might choose to design and build the asset on its own. This carries the benefit of exerting control over every aspect of creating it. It also ensures that the asset is a precise fit for your needs, down to its physical measurements.
While this option can require more time than purchasing a ready-made solution, working with a subcontractor invites an outside, potentially valuable perspective, which might positively affect the performance and lifespan of the asset.
This phase is usually the briefest part of the asset life cycle.
The asset is now completed or delivered and can be physically integrated within an organization. It is presented to operators and employees through familiarization, practice, and training.
Although short, this phase is critical, particularly regarding its introduction to employees and operators.
Realistic expectations are key here. Advertising the new asset as a universal problem-solver can cause frustration from management as well as employees using it.
Besides expectations, you’ll need to invest in training the operators. Improper training can quickly result in resentment, downtime or even employee injury. It’s essential to count on a learning curve to allow human interaction with the asset to become natural, integrated, and intuitive.
We can say that asset deployment is all about information and knowledge.
Bringing an asset to the company’s ecosystem might include:
- separate paid training sessions
- creation of employee manuals regarding the asset
- instructional videos and interactive displays
- communicating the importance of safety
- ongoing question and answer sessions
- understanding and learning manufacturer’s guidance and limitations
- online material employees can re-access
- discussion of the importance of regular asset tagging
- encouragement of sharing data
- regular data analysis to better understand asset performance and input
Once you successfully put the new equipment into action, it truly becomes a valuable asset to your business.
Ideally, this phase is the longest one. An asset is now being used within an organization, performing its intended tasks.
It has hopefully settled into its role. Decision-makers are learning from its data while observing its regular performance, and operators have become used to it. The asset has become an extension of their intent and training.
This is the point at which the planning, original investment in the asset, and employee training begin to show.
To maximize your return of investment, aim to extend the asset’s operational phase for as long as possible. This is where asset tagging, detailed observation, and using the asset within manufacturer’s guidelines help.
Keeping the asset in this phase for the maximum amount of time requires the following:
- Immediate attention to emergency repairs
- Regular asset scanning
- Ensuring employees are well-trained and supervised
- Proper cleaning procedures
- Preventative maintenance according to manufacturer’s or creator’s suggestions
- Updating licenses
- Avoiding overwork
- Remaining in regulatory compliance
- Software updating and installation
Depending on the projected life span of the asset, it might last a few months or several decades. Calculation of this time frame should be discussed in the planning stage, then realistically adjusted throughout the utilization and operation phase.
At times, either due to an emergency or because of regularly scheduled preventative maintenance, the asset occasionally moves into the fifth phase.
Every asset will spend at least part of its life in maintenance.
Asset maintenance refers to regularly scheduled preventative maintenance, as well as emergency downtime or temporary removal from the work cycle for upgrading.
During regular use, an asset should enter into the maintenance phase as little as possible, only as part of its natural wear and tear.
With careful planning and proper use, asset maintenance will not come as a surprise.
Maintenance works in synchronization with asset utilization. If an asset is regularly scanned, the maintenance phase reaps this information. Technicians can reach into an asset’s data to ensure the item is operating within requirements, search for anomalies, and seek ways to fine-tune the asset for maximum efficiency.
Sometimes an item’s downtime might include:
- updating parts
- modernizing certain items (such as adding Bluetooth connectivity)
- deep cleaning
- data backup
- changing filters, sharpening blades, and rotating tires
- repairs due to natural disaster, vandalization, and misuse
Paying attention to proper maintenance and relying upon skilled operators to work on custom parts helps to keep the asset in the operation phase as long as necessary.
Even if an asset has surpassed its expected lifecycle, it might remain in service—as long as it’s still operating safely and correctly.
Modification might be necessary to keep the asset in good repair, but these should only take place with the designer or manufacturer’s intent in mind.
Adapting an asset from its original intent might void a warranty, wreak havoc with routine maintenance, expose an organization to legal liability, and force unintentional wear and tear.
When it becomes clear that repairing the asset is more expensive than replacing it, an asset reaches the end of the life cycle—disposal.
While some might be emotionally attached to an asset, if it doesn’t make financial sense to keep it in operation, move on to a more efficient replacement.
However, try not to act too quickly to dispose of a serviceable asset simply because a new model has appeared, a minor upgrade is presented, or a competitor has introduced a similar product.
Rushing into asset acquisition leaps over the last phase of the older asset’s natural life.
Doing so could erase the time, savings, resources, and employee confidence that was invested in the original asset.
Once you’ve decided to move forward with disposal, it’s time to research again. There are many routes to take in disposing of an item. Depending on the materials, some might pose an environmental hazard and are therefore subject to the federal Environmental Protection Agency (EPA) or local regulations. If this is the case, you might need specialized removal processes.
Here are other aspects of disposal to consider when deciding how to eliminate an out of date asset:
- wiping all data
- destroying items from which data might be retrieved even after wiping
- disassembly to smaller parts for physical removal
- careful cleaning so that removal does not soil other equipment
The item does not necessarily have to move directly to a landfill. Some items which have outlived their usefulness in one organization might find use in another, perhaps in a different role. The donation might be a possibility.
It’s also a good idea to search for ways to recycle assets. Not only can this help your organization meet its environmental goals, but it can also make for excellent publicity and social media fodder.
Fitting asset disposal provides a satisfying closure for its lifecycle. If you have attended to all stages of the asset’s life, then it has met or surpassed its usefulness. Your business can now apply the things learned in the previous stages to procuring the asset’s replacement.
Benefits of Asset Life Cycle Management
Asset life cycle management might sound like a great deal of work. Still, once it becomes integrated into a business, it becomes a natural extension of asset tagging, budgeting, and decision making.
Paying attention to asset life cycle management can benefit a company in several ways:
- increased organization of preventive maintenance
- improved and more substantive contact with employees across the organization
- enhancement of IT services
- more informed decision-making
- better control over budgetary projections
- increased supply chain efficiency
- strong understanding of regulatory compliance
- awareness of part replacement schedules
- the expectation of regular downtime
- minimization of catastrophic downtime
Many organizations include asset life cycle management in its internal structure, just not in a defined or formal process.
Doing so can help to clarify and streamline each aspect of asset life cycle management, passing it on to employees and allowing new team members to familiarize themselves with the process.
Staying with a workable and proven asset life cycle management optimizes staffing requirements and increases return on investment. It better leverages data and intensifies employee involvement in day to day operations.
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Different Assets have Different Life Cycles
When you decide to manage assets before even acquiring them, you conserve resources and better manage your equipment, rather than waiting for “life to happen.”
Becoming involved with the asset in every stage and paying attention to the data it provides will help to ensure it has a long and beneficial service life.
Whether an asset is recycled, sold, or scrapped at the end of its lifecycle, it will have served its purpose as efficiently as possible. Use the information provided in this article to manage your company’s assets from start to finish, and make the most of your investments.
And if you want to streamline your asset management and prolong the life cycle of your assets, sign up for a free trial here and test our software.