What Are the 5 Key Stages of Asset Life Cycle Management?

Sinking with the technology, the methods we have been using for asset life cycle management are old and no longer can be used in a satisfactory position.

For economic and financial development, we should consider the methods of recent times to get appropriate results.

In the present technology-growing world, advanced methods with enhanced abilities to manage physical assets have increased over the past several years. In addition, such techniques have been gradually incorporated into a management framework.

What is Asset?

An asset can be defined as an item, thing, or entity that has the potential to give actual value to an organization.

Asset Management can be described as a coordinated activity of an organization to realize value from assets.

Assets have always been managed by the officials professionally and also, they were maintained simultaneously from past decades.

Why is Asset Management necessary?

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

If the asset is not taken care of then its chances of failure will increase, this is why scheduled maintenance is important. Giving maintenance is a significant part of asset management.

The main objective of asset 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.

Also Read: How is Asset Tracking Using NFC Different from Other Technologies?

This makes the condition possible for an organization to study and observe the performance of assets in different stages.  

The 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.

What is Asset Life Cycle?

A key process of asset management is the understanding of an asset's life cycle. There are some key stages for maintaining the asset's lifecycle.  

The fixed asset life cycle begins from the time when the company acquires any asset and it ends when the company disposes of the same asset.  

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

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.

What is Asset Life Cycle Management?

Assets are the items that hold the strength of the company. You should know what assets your organization has, where are they, and their condition, it will help in planning for future assignments and meeting business requirements.  

Asset life cycle management is the process by which the optimization of profit generated by the assets is kept by the organization throughout its life cycle.  

The services offered by the organization tend to address all the stages of an asset's life cycle nevertheless of their scope, opportunity, scale, or industry.

Also Read: Understanding of Asset Lifecycle Management in the Supply Chain Industry

What are the Stages of Asset Life cycle Management?

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

The asset of any size big or small, cheap or valuable goes through 5 key stages of the asset management life cycle. The stages are:

1. Procurement:

Procurement is the first process or stage of maintaining the asset life cycle which holds the actual purchasing of the asset.

With the options available, the best decision will be taken to fulfill the organization's requirements without exceeding the budget.

Usually, the purchase is made by planning with the needs which are identified from the gathered data, and then the forecasts are made to justify the actual purchase.

Once the asset is purchased it belongs to the company and can be used as it is considered fit and profitable.

• Create Purchase Orders
• Purchase Order Workflow
• Link to Cost Budgets
• Purchase Order Approval
• Purchase added to the inventory

2. Deployment

The deployment stage is the state where all the action takes place before the asset is finally used.

The asset is assembled, and preliminary checks are conducted on it. The inspection is done to check for physical defects as well as design and engineering problems, whether the asset is installed correctly and safely or not.

Also, tests are performed to confirm any kind of issues, with installed barcode tags for tracking purposes.

• Asset deployed, transferred from inventory to in-use.
• Discover the assets for software and hardware inventory.
• Issue software for a hardware asset.

3. Utilization

Utilization is the longest stage of asset life cycle management. The asset is finally put to good use for which it was purchased.

The revenue and returns earned on its capital are seen. Any kind of upgrades, patch fixes, purchasing of new licenses, compliance audits, and cost-benefit analysis are part of the utilization stage.

The performance of an asset is continuously checked for issues that might arise unexpectedly during its presence on the production floor. The prime area of focus during the utilization stage is to get the most output from the asset.

• Scheduled scans
• Complete Ownership Tracking
• Software Compliance and License Management
• Asset Depreciation Calculations

Also Read: What is the next trend for Asset Tracking to consider?

4. Maintenance

The continuous use will put the asset in a wear and tear situation 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.

• Maintenance of assets
• Notification of expiry dates
• Software License Agreements linked to the Software

5. Disposal

Till the end of an asset's useful productive life, it must be disposed of.  

The decision to dispose of an asset 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 to be eliminated and disposed of as dictated by the environmental laws of that geographical area.

• State changed from in-use to expired or disposed
• All the software issued to the disposed asset will get un-issued

What Are the Benefits of Asset Life Cycle Management?

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

• 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 know the total cost of ownership of an asset every time.
• Managers can look at the lifecycle of each asset that will help in making informed decisions such as when assets need to be retired or either to sell or not.

Also Read: Why is Requisition Management Important for an Organization?

Conclusion:

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.

Asset life cycle also helps organizations in keeping their assets well maintained by providing preventive maintenance.

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

This will allow comparison against business numeric to know how your assets fare as compared to the business standards. To maintain a competitive edge in the market it is necessary to have accurate asset lifecycle management.

Frequently Asked Questions (FAQs)

1. Which phase of asset life cycle management is most important?‍

All phases of asset life are important but if you have to pick one most important phase that is maintenance. If maintenance is done at the right time and effectively. Then the life of the asset can be extended along with that maintenance expenses will be decreased as well.

2. Why is asset management software important for asset life cycle management?‍

Asset management software is important because it is built for this purpose as it automates the process and simplifies asset life cycle management. Moreover, there are so many factors that one cannot keep up while deciding and this software provides assistance in making a decision.

3. Which industries can utilize asset management software?‍

All those industries which are having difficulty in managing their assets & those organization which have assets in abundance can use this software. Those organizations who want to eliminate the manual process and want to shift to automated processes can utilize this software.