Building an Effective Asset Management Strategy

What is an asset management strategy?

An asset management strategy is a carefully planned approach to how an organization acquires, maintains, disposes of, and otherwise leverages its assets to help it achieve business goals. It provides the framework or logic an organization uses to make all business decisions that pertain to assets, and where it applies its limited resources.

An asset management strategy is the result of careful evaluation and monitoring of the current state of the organization’s facilities, equipment, and other assets. This information informs decisions and plans for how the organization uses assets to fulfill its mission and vision for success. 

When done well, an asset management strategy can:

• Articulate an operational vision by defining clear production goals for the business such as reducing maintenance costs or improving production capacity.
• Define high-level actions by identifying the broad practices an organization must change or implement to achieve its goals.

How does it differ from strategic asset management or (SAM)?

It doesn’t! The term “strategic asset management” or SAM simply refers to the process of carrying out an organization’s asset management strategy. To execute strategic asset management is to perform all the tasks involved in planning, acquiring, operating, upgrading, maintaining, and replacing or decommissioning an asset. Both connect asset management and maintenance activities with larger organizational goals, giving direction to maintenance and production teams. 

Why is an asset management strategy important?

Asset management strategies are important for aligning asset management activities with larger organizational goals. Maintenance and operations teams often operate with limited resources. Budget cuts and a dwindling labor pool often limit how much a maintenance team can achieve. Teams can be more successful if they make careful decisions and plan their work according to an established strategy supported by all areas of the organization and based on shared assumptions, data, and goals. 

Benefits of an asset management strategy

An asset management strategy helps provide the direction needed for prioritizing and planning a team’s work. In the end, that sort of strategic thinking can earn numerous benefits for an organization. Here are just a few 

Improved decision-making

An asset management strategy equips you with critical asset information and a clear direction for how to use it to inform decisions and processes like asset shutdown, turnaround, and outage (STO) to repair or replacement to operating expense (OpEx) prioritization. Asset management strategies rely on data to determine where assets should reside physically within a facility, what they are used for, and how they are maintained. 

Reduced costs

An asset management strategy also establishes oversight of asset usage to identify under-used, duplicate, or overused assets that will drive your understanding of equipment health.

For example, overused assets are more likely to experience breakdowns at frequent intervals and go through costly repairs. An organization that is managing assets strategically may apply improved preventive maintenance to overused assets to help reduce breakdowns, save on costs, and reduce the total cost of ownership (TCO).

Better resource allocation

An asset management strategy helps you identify which assets cause bottlenecks, require upgrades or replacements, and suck up maintenance resources. It also helps organizations determine how to better use the assets at their disposal to reach goals and objectives with maximum efficiency.

More efficient use of resources and assets

Strategic asset management helps companies use resources more efficiently by making sure asset use aligns with business goals. By checking how well assets are performing and planning maintenance only when it is needed and likely to provide value, companies can reduce costs while avoiding downtime. This helps companies achieve more from their maintenance programs while using fewer resources. 

By understanding the strengths and weaknesses of their assets, businesses can make smarter decisions about where to invest time and energy. Investing in advanced maintenance methodologies for the most critical assets and right-sizing investments in other assets improves productivity and profitability. 

Reduced safety and legal risk

Regular inspections and proactive maintenance informed by a thoughtful asset management strategy help identify an organization’s biggest risks and hazards before they lead to incidents. By elevating the importance of adherence to safety standards and keeping thorough records, companies can demonstrate compliance and protect themselves from litigation. Additionally, performing regular risk assessments as part of an asset management strategy helps organizations hone processes and safety protocols so that they are as effective as possible. 

The elements of an asset management strategy

Strategic asset management may sound like a broad idea, but determining an asset management strategy requires systematically considering a handful of specific components of your company’s approach to asset management. 

1. 1. Asset inventory and prioritization: A complete accounting of all assets and their notable details such as location, condition, manufacturer, criticality, and more, providing the foundation for any asset management strategy.
   2. Maintenance plans: The schedules, intervals, and protocols involved in maintaining all company assets to ensure reliability, maximize asset value, and ensure uptime that typically includes a combination of reactive, preventive, and predictive maintenance. 
   3. Asset lifecycle management: The understanding and management of assets through the full lifecycle from acquisition to decommissioning and disposal. 
   4. Performance monitoring and metrics: The identification of key performance indicators (KPI) that will be used for benchmarking and proactive measurement of asset performance and condition. 
   5. Risk assessment and management: A thorough evaluation of potential risks for failure or safety incidents to identify ways to minimize their likelihood or mitigate the negative downstream effects should an incident occur. 
   6. Regulatory compliance: Ensuring adherence to any legal or regulatory requirements in the way assets are used and maintained, and plans for demonstrating that compliance during audits. 
   7. Data management: The use of technology and software such as an enterprise asset management system (ERP) to track asset data and ensure the accessibility of important asset information for maintenance personnel and machine operators. 
   8. Budgets and financial planning: A plan to ensure sufficient financial resources to support asset investments such as maintenance, repair, and replacement and the supplies and workforce required to perform such activities. 
   9. Stakeholder buy-in: The input, expertise, and support of leadership across departments impacted by asset management activities. 
   10. Continuous improvement: The process of regularly reviewing outcomes and performance to identify ways to optimize asset management strategies.

5 steps to develop a strategic asset management plan

Much like any other strategic initiative, in order to define and implement an asset management strategy, it is helpful to follow a few critical steps to ensure an approach that is right for your organization and has the buy-in of stakeholders on your leadership team. 

Step 1: Align on objectives

Assemble your team of internal subject matter experts and stakeholders who will help inform your strategy. Review your organization’s annual or ongoing goals to ensure that your asset management objectives are aligned and designed to support those goals. 

Step 2: Conduct a thorough asset inventory and condition assessment

Create a comprehensive inventory of all assets, detailing their condition, location, and value. Perform a criticality analysis to help prioritize and categorize assets for more strategic application of maintenance activities and resources. Use whatever data is available to identify asset performance and condition in order to highlight areas where changes to asset management practices are necessary. 

Step 3: Build asset management plans

Establish schedules, frameworks, and protocols for the management of all physical assets. To ensure your plan is cost-effective, use the information gathered in step two to make data-informed decisions about how to apply maintenance resources and schedules. Develop clear protocols, checklists, and plans to help streamline task completion and support risk management objectives. 

Before moving on to the implementation step, ensure that all stakeholders have had an opportunity to provide input and feedback. This will ensure buy-in from all areas of the organization, and help with adoption across all team members once it is time to implement the plan.

Step 4: Implement the new asset management strategy

Develop a detailed plan for rolling out the asset management strategy, including timelines and responsibilities. Ensure proper training that is tailored to each stakeholder’s role in executing the strategy. Reflect the new strategy in updates to any impacted asset management policy that already exists. 

Step 5: Monitor and improve

Assess the strategy’s effectiveness regularly, making adjustments based on performance data and changing conditions. Compare reporting on KPIs to baselines to evaluate the effectiveness of different aspects of your asset management strategy. Adjust your plans as business needs and goals evolve. 

Common pitfalls and challenges of strategic asset management

In spite of all the benefits a strategic asset management plan can offer, it is possible for the project to fall flat and end up costing more than it earns. To ensure your asset management strategy is a success, avoid these common pitfalls and challenges. 

1. Lack of alignment or clarity of purpose: Failing to define specific objectives or align them with larger company goals can lead to wasted resources.
2. Insufficient asset information or use of real data: Relying on anecdotal information, incomplete information, or outdated assumptions can hinder effective decision-making and make it impossible to instigate meaningful change and goal attainment.
3. Resistance to change: Employees may be reluctant to adopt new practices or technologies, which can impact implementation, especially if team or department leaders are not on board.
4. Lack of stakeholder engagement: Not involving key stakeholders can result in blind spots or a lack of buy-in and support for the strategy.
5. Overlooking compliance and risk: Ignoring regulatory requirements and potential maintenance risks can lead to legal issues and safety hazards that are hard to overcome once processes have been implemented.
6. Poor communication: Inadequate communication about the strategy can lead to misunderstandings and confusion among staff.
7. Limited resources: The strategy cannot be successfully implemented without adequate resources or funding. 
8. Failure to monitor and adapt: Not regularly reviewing and updating the strategy as your company evolves and shifts can render it ineffective.
9. Overcomplicating processes: Creating overly complex procedures can discourage adherence and reduce efficiency.
10. Neglecting training and support: Failing to provide adequate training can hinder staff’s ability to effectively implement the strategy.

The key to a successful asset management strategy

An asset management strategy can be well thought out, informed by the most accurate data, and created for the most skilled team. But without the right tools in place to connect all of those elements, it will be difficult for any strategy to succeed. By building your strategy into an asset management software like a Computerized Maintenance Management System or CMMS, you will have the foundation you need to turn your plan into action.