Any organisation that wishes to maximise its results – on a day-to-day basis, as well as in the longer term – simply must take seriously the strategic management of its assets.
But how can the term ‘strategic asset management’ be defined, what advantages could await your business when you optimise your approach in this area, and how exactly can you do that?
Introducing strategic asset management – and why it is so important
It might seem obvious to many people reading this what ‘strategic asset management’ is – it surely refers to being strategic in how an organisation manages its assets over time.
This may be so, but it is also striking how few organisations truly plan out the management of their assets for not just months, but years ahead. In terms of a timeframe, you may put in place a strategic asset management plan for the next five years, or the next decade, or even the next 15 years; the most imperative thing is to ensure your organisation has such a plan, in order to get the best out of its assets.
Your plan for strategic asset management should address how your organisation will operate and maintain its assets over time. A great asset management plan will help your company anticipate the challenges that will arise in relation to its assets, which is why it will need to be well-aligned with your organisation’s broader objectives for the years to come.
If you get your business’s strategic asset management right, you can expect to reap the productivity, efficiency and cashflow benefits that come with the more streamlined management of company assets.
What are the benefits of strategic asset management?
The well-informed and wisely implemented strategic management of your organisation’s assets can deliver various benefits, including the following:
Optimisation of the asset lifecycle
Any organisation will only wish to replace a given asset when it has reached the end of its useful lifecycle. However, all too often, many businesses fail to manage their assets properly from a lifecycle perspective, such as through insufficient or inappropriate maintenance.
A strategic asset management plan can support your business’s efforts to manage its assets properly and gain the maximum possible benefits and lifecycle from every single asset, so that none of your expenditure on maintenance, repair or replacement is misspent.
One of the biggest avoidable wastes of time for many organisations, is undoubtedly maintenance – or more specifically, reacting to maintenance issues that could have conceivably been prevented.
This distinction between reactive maintenance and preventative maintenance is crucial for any organisation that wishes to manage its assets more strategically and effectively. Maintenance in and of itself is vital, but your business’s approach to it should place a strong emphasis on maximising asset uptime and minimising asset downtime.
Your company being proactive with its maintenance approach won’t just help to prevent sudden events that could stop critical operations in their tracks. That’s because it can also be invaluable for reducing your organisation’s long-term maintenance costs, while heightening the all-round reliability of its assets.
Increasing return on asset (ROA)
The term ‘return on asset’ refers to the profitability ratio indicating how much profit an organisation is able to generate from its assets. The higher a given company’s ROA is, the more efficient that company’s management is in its generation of earnings from its assets.
By decreasing the amount of maintenance that a particular asset requires over time, and getting greater productivity out of that asset, you will be helping to drive up your own organisation’s ROA.
You can probably see the link here to maintenance – providing crucial maintenance to your assets in good time, such as by replacing components that are approaching the end of their lifecycle before they have the chance to fail, will help optimise long-term asset performance. That, in turn, will boost ROA.
Big areas of focus for your strategic asset management plan should therefore be on the current condition of your assets, and how long you will need those assets to be operational for, so that you can assess and make informed interventions on maintenance and/or replacement.
The removal of ghost assets
‘Ghost’ assets are defined as assets that may be mentioned and shown as active on your organisation’s fixed asset register, but which aren’t physically available – perhaps due to having been lost or stolen, or no longer being usable.
On a certain level, ghost assets may seem a mere inconvenience, but they can actually pose several major problems to your business. Firstly, they can have a significant operating impact, given that assets that only exist on paper will not be very helpful when employees need to be able to access them. That, as a knock-on effect, will contribute to decreased productivity at your organisation.
Moreover, ghost assets can be a worrisome issue in that they may result in your company’s insurance premiums and tax liability being unnecessarily inflated. The inaccurate reporting of your organisation’s fixed assets can also hamper regulatory compliance efforts.
Effective strategic asset management with regard to ghost assets is typically geared towards two goals: firstly, identifying ghost assets and removing them from the asset register, and secondly, putting in place arrangements to guard against ghost assets reappearing.
We are picking back up the matter of regulatory compliance for this separate point, because this is its own major issue for strategic asset management. Any failure by your organisation to comply with the rules, regulations and policies that apply in its industry run the risk of legal action being taken against your company, and heavy fines being imposed.
There are two broad categories of compliance: internal and external. The former of these concerns rules that your organisation devises for itself internally, while the latter relates to rules that government authorities might put in place and that your business must comply with.
Effective strategic asset management can greatly support your organisation’s efforts to comply with both internal and external rules, to minimise the likelihood of violating them – with the reputational, financial and legal damage that such wrongdoing could bring.
The use of software for your asset management
Appropriate dedicated technology for the management of your company’s assets is likely to be integral to an effective strategic asset management plan in the 2020s.
By adopting a platform like the Vision Pro software, you can help ensure that your business does not leave any aspect of the management of its assets to chance. Our own software provides an intuitive-to-use interface, through which you and your employees can keep a close eye on your organisation’s assets and make the right decisions on how to manage them.
Would you like to find out more about exactly how Vision Pro could serve your organisation’s day-to-day processes, in addition to supporting the fulfilment of its broader objectives in the months and years ahead? If so, you are welcome to call one of our specialist advisors today for a more detailed conversation.