A “money pit” is any investment or project that goes awry, consuming an excessive amount of money. Without proper asset lifecycle management, any major asset can turn into a nightmarish money pit. This is especially true in the industrial environment, where businesses use expensive machinery that depreciates with constant use.
In this blog post, we will show you how to maximize asset value by having the right processes in place from start to finish – from planning asset acquisition to disposal.
Before that, we need to explain the basics, starting with the asset lifecycle.
What is asset lifecycle?
The life of a human being can be divided into several distinct stages in chronological order – birth, infancy, childhood, adolescence, early adulthood, and so on. Similarly, assets owned by businesses have different stages throughout their existence.
The lifecycle of all physical assets can be broadly classified into these major stages:
As you can see from the image above, the lifecycle of an asset does not begin on the day it is acquired. Acquisition of assets is a major business decision, to be taken only after careful planning.
Purchasing inadequate assets can have major long-term repercussions. For instance, a costly machine that is not compatible with the existing plant facilities and business processes will quickly become a liability.
The cost of an asset, its role in the business, and other unique features will play a crucial role in deciding on the importance of its lifecycle to that business. This will impact how the business opts to track the lifecycle of an asset, and how detailed/exhaustive the said tracking process will be.
Checklist for Creating a Preventive Maintenance Plan
Following a consistent Preventive Maintenance Plan can make life easier. Use this checklist to create your own!
What is asset lifecycle management (ALM)?
By keeping constant tabs on the asset throughout its lifecycle, a business will gain a lot of data and insights. This includes the physical condition of the asset, the contribution of the asset to overall productivity and revenue generation, its reliability and ongoing maintenance costs, and so on.
Using this data in conjunction with information from other departments, a business can create plans to achieve a mix of several different objectives – all aiming to optimize the asset’s useful life.
Let’s take a look at the possible objectives, using the example of acquiring a new CNC machine:
- Maximizing profit and revenue. Can a new CNC machine handle faster production cycles? Is the machine a perfect fit for the production facilities and requirements? Does it require more trained operators to achieve new targets? With proper asset management lifecycle processes in place, a business can find answers to all these questions, efficiently increasing productivity and revenue.
- Minimizing the cost of ownership. What is the total cost of ownership of the CNC machine? Which type of fuel/power source does it use? Is it flexible enough to adapt to future production demands with minimal additional investments/retrofits? Is the vendor service affordable? Clear answers to these questions will help the business save a lot of money throughout the operating life of the asset.
- Extending the operational life of the asset. Is the machine capable of taking extra workloads? Does it have any significant degradation to key parts? What is the optimal repair/maintenance schedule for the machine? With answers to these questions, the business can optimize processes to keep the asset in running condition for as long as possible. This will help squeeze out maximum value from the asset and make up for the initial cost and other expenses, improving the return on investment.
Asset lifecycle management comes with many additional benefits:
- useful for financial planning through calculation of acquisition cost
- essential to building effective preventive maintenance strategies
- reduces depreciation, improving the resale value of an asset
- improves productive efficiency
- essential for safety and regulatory compliance
Without adequate lifecycle management, most assets will cause increased expenses, reduce productivity, and result in overall inefficient utilization of resources across the firm.
Asset lifecycle management process
Success in asset lifecycle management hinges on the easy availability of information. For maximum impact, ALM planners need data inputs from virtually every aspect of the organization. This demands a level of visibility that is hard to acquire in legacy systems (non-digital, or non-connected, involving manual data recording).
Modern CMMS/EAM – short for Computerized Maintenance Management System/Enterprise Asset Management software – are sophisticated digital platforms that combine software, online systems, and on-site tools (IoT integration). A CMMS/EAM platform gives businesses unprecedented control and visibility over all their operational assets, equipment, and departments.
A customizable CMMS solution gives businesses a critical edge in all stages of asset lifecycle management. Let’s take a look at how CMMS offers support at each stage.
1. Planning
This is the stage where managers have to make the case for the acquisition of a new asset. Many situations call for an asset investment:
- to replace outdated equipment
- to improve efficiency/productivity
- to ensure safety and environmental compliance
- to scale up the production
- …
Planning requires a thorough review of the technical aspects and cost of acquisition, as well as other critical inputs from all stakeholders – operators, on-site managers, financial/accounting, procurement, engineering, mid and high-level management, etc.
The asset is chosen after extensive research of available options in the market, trialing and comparing them, and finally purchasing one that fits the business needs best.
The CMMS impact
To make a clear case for new asset acquisitions, management will need to review existing equipment and capital assets. With a mobile CMMS platform, all the relevant data is at your fingertips at all times.
Using custom KPIs, you can generate a wide range of reports on asset performance and share them with all major stakeholders across the organization, which can streamline the decision making process.
2. Acquisition & deployment
At this stage of the asset management process, the business will zero in on a specific product, based on the insights acquired during the planning stage – with the procurement department handling their part of the work.
Deployment involves essential tasks like asset delivery, on-site installation, and the training of operators (for equipment/machines/vehicles). This stage usually involves a high level of coordination between the business and the vendor of the product purchased.
The CMMS impact
The arrival of a new asset brings a whole set of essential tasks. Maintenance managers can use CMMS to allocate resources and schedule both the preparation work and the installation of the newly acquired asset.
While that is in process, they can enter the asset details into the CMMS database and create the initial preventive maintenance plan based on OEM recommendations and professional work experience. Depending on the type of asset and its importance, the organization might want to use maintenance software to set up asset tracking.
3. Operation & maintenance
This will be the longest stage in the life cycle of most assets. The primary focus of asset maintenance will be to extend it for as long as possible, while keeping the operational cost increases to a minimum.
Operation schedules should be created with the utmost care, based on vendor instructions and safety thresholds. Regular monitoring of the assets during operation is essential to detect any performance issues or parts wear and tear.
Proper maintenance schedules will reduce the risk of unexpected failures, emergency repairs, and unwanted downtimes. It will also contribute massively to increased uptimes and prolonged operational life of the asset, optimizing its functionality.
In this stage, businesses may also opt for modifications and upgrades to the asset. This is usually done in response to changes in production, compliance requirements, and other workplace conditions. Some upgrades can also help increase the longevity of the asset.
The CMMS impact
Modern CMMS/EAM software is crucial for keeping physical assets in good operating condition. They offer a variety of useful features that help maintenance teams organize all repair and maintenance work and stay on top of MRO inventory.
On top of that, a CMMS can link with cutting-edge IoT sensors connected to machines and equipment on the plant floor. These sensors can monitor asset status 24/7, detecting the potential for equipment failure well in advance. This is the foundation for running advanced maintenance strategies, such as prescriptive and predictive maintenance.
In other words, CMMS helps you plan for and execute any proactive maintenance strategy you want to use for your new assets. As an added bonus, you can use the asset data CMMS stores and generates to infer valuable insights for calculating asset productivity and its revenue generation potential. These can be leveraged to make further improvements in asset utilization.
4. Decommission & disposal
There comes a stage in the life of every asset where it is either obsolete, broken down, or just too inefficient to be profitable. At this point, the operational costs overrun the productivity gains from the asset – it is time to decommission the asset, dispose of it, and replace it.
After removal from service, the next step will be determined by the type of asset, its overall condition, and demand (if any) in the second-hand market. The business may opt to either sell/auction the asset, donate it, or just abandon it to a junkyard/recycling facility.
With due diligence and effective lifecycle management in the previous stages, a business can recoup a significant portion of its sunken costs in the asset. If the equipment or facility is in decent condition, it might fetch a high price through auction/resale.
The CMMS impact
Timely identification of the need for decommissioning and replacement of an asset is critical – it can reduce production inefficiencies and remove potential safety risks. By looking at maintenance history and reports, managers will have an easier time deciding if an asset should be repaired or replaced.
Furthermore, the disposal stage is also the time to reap the rewards of smart maintenance logs and digital record keeping – these can significantly improve the resale value of an asset.
Maximizing asset value
Businesses face a challenging future, with increasing effects of climate change, economic recession, and wider systemic shocks from the global pandemic. Financial discipline will be more important than ever in the coming years.
With less budgetary allocation for asset acquisition, firms will have to eke out more dollar value from existing asset inventories and try their best to prolong asset lifecycles. A modern, feature-packed, mobile CMMS solution like Limble will help you maximize asset value by guiding your actions at every stage of the asset lifecycle management process.
