Asset management, the systematic dealing with physical and financial assets and the grid by their exercise, maximises the value and cost-effectiveness of the assets over their lives. Managing the acquisition until dealing with disposal is part of this. In this article, We will explain life cycle management in simple terms in detail. Asset management Life cycle is divided into four different stages which include the planning, acquisition, operation, and disposal. Enroll now in an asset classification course to enhance your skills in resolving disputes and fostering stronger collaborations.
The first and most important step in asset management life cycle is planning. This phase is important because it allows organisations to better assess their current and future needs. Appropriately planned, organisations can be efficient in the allocation of resources and decision making regarding the processes of acquiring, maintaining and disposing of assets.
The main activities involved in the planning stage are as follows;
The organisation would first define the objectives clearly prior to acquisition of any asset. What is it for? How will it contribute to the overall goals of the organisation? These should be smart: specific, measurable, attainable, relevant, and time-bound. Understanding the need of an asset assists significantly in making proper decisions regarding which assets will be required and how it will be used.
The organisation must make the necessary budget provisions for the purchase, operation, and maintenance of an asset. Financial planning is the cost estimation for the complete lifecycle of the asset; cost for acquiring the asset, operational costs, energy consumption and eventual disposal costs. A good financial plan would be for the organization to prevent going beyond the budget and strike a proper balance between the cost and the value.
Risk management in asset planning focuses very well on identifying the uncertain risk conditions in acquiring and processes relating to assets. The risks could usually be financial, operational, or environmental. For example, an asset might turn out to be obsolete or entail unexpected maintenance costs. Planning for these risks includes identification of the probability and the assessment of the impact of considering to plan the risk mitigation strategy.
This stage is also very important as right asset selection has to be done in this stage. This phase involves ensuring that the assets are aligned with the needs of the organisation
The main activities involved in the acquisition phase are as follows;
At this point, the organisation has to decide which particular asset should be acquired. The process is supposed to follow objectives and criteria set in the planning phase. For instance, if an organisation needs to procure a new machine, it should procure an efficient, reliable, and cost-efficient one. This stage also provides for ensuring that the asset meets the necessary legal and regulatory standards.
Oftentimes, acquisitions include a supplier or vendor. The organization has to evaluate prospective vendors according to such criteria as their reputation and reliability, cost, and customer service. This assessment guarantees that the organization has not just acquired the asset at the right price but also through a supplier that has great support and warranties.
The organisation sets on negotiations after selecting the asset and vendor. This would mean negotiating the best terms when it comes to sale, warranty, and payment. It should also state the total cost, delivery time, payment terms, and any post-purchase assistance provided by the supplier.
This is the longest phase of asset management life cycle and it is the phase where assets are put into use and value creation for the organisation begins. Assets in this stage remain in service for several years
The main activities involved in the operation stage are as follows;
Use of the asset in the operations of the organisation once acquired. This may mean installing machinery, implementing a software system or deploying vehicles. It is very essential for deployment because if something is not properly deployed, the resulting asset cannot be utilised to its full potential.
Regular maintenance must be carried out to keep the assets functioning efficiently and prevent an expensive breakdown. Preventive maintenance includes cleaning, lubrication, inspecting parts, and corrective maintenance involves the repairing of the parts that have broken down or are not functioning. Establishing a maintenance programme and resource allocation for schedule and faithful availability of tools, parts, and manpower would suffice in ensuring maintenance.
It is the stage of an asset management life cycle when at the end of an asset's life cycle it is either removed or sold or used or thrown away.
The main activities involved in the disposal stage are as follows;
Before disposal, the organisation’s assets need to be assessed for its current condition and the value remaining in them. This exercise will determine whether the asset can still be used, sold, or recycled. For example, the vehicle may have useful parts, or a machine may go for refurbishment and resale. In certain instances, it can also be reused internally or donated.
Assets generally depreciate, losing their value as time passes. When an asset sells or disposes of the asset, the remaining value must also be accounted for. The organization should examine its financial records to ensure that depreciation tracking has been executed properly, and tax implications concerning the sale or disposal also need to be considered.
Asset management life cycles are really important for organisations in an efficient manner of managing assets across the entire life cycle, allowing them to achieve maximum performance, cost-effectiveness, and value during the entire asset management life cycle. The stages include proper planning, thoughtful acquisition, effective operation, and responsible disposal. At this time, organizations can minimise risk, control costs, and maximise their assets. The British Academy for Training and Development offers courses on the asset management lifecycle for those who wish to develop their skills in asset management So that he can manage his assets effectively.