Before diving into the asset lifecycle and its management, it’s important to first define the term asset.
Asset is anything of value or a resource that can be owned or controlled by an individual or entity that is expected to provide future positive economic value. There are several types of assets:
- Physical assets: are tangible items that have a physical presence and are use to generate
economic value and facilitate operations. It includes real estate, machinery and equipment, vehicles, inventory, and technology hardware. - Financial assets: are non-physical assets that get its value from contractual agreements that can be converted into cash to generate future cash flows. It includes stocks, bonds, and bank accounts.
- Intangible assets: are a non-physical asset that provides long-term value and often involve legal or intellectual property rights. It includes patents, copyright, franchises, goodwill, trademarks, and trade names.
- Human assets: are intangible assets that accumulated skills, knowledge, experience, and abilities of individuals within an organization that contribute to a productive and successful workforce.
An Asset lifecycle can be defined as the stage process encompasses activities involved in managing an asset from its initial acquisition to its eventual disposal. This lifecycle helps the individual or organization to optimize asset performance, ensure cost efficiency, and maximize value. There are 4 key stages of asset life cycles:
- Planning stage
This stage involves defining the goals and requirements for the asset. Key activities include setting objectives, assessing financial and operational needs, devising a procurement strategy to guide the acquisition process, and preparing for the various phases an asset will go through from acquisition to disposal. - Procurement and acquisition stage
The focus of this stage involves sourcing suppliers or vendors, negotiating contracts, and finalizing the purchase or lease. It continues to the installation and initial setup, ensuring the asset is integrated into existing systems and ready for use. - Operation and maintenance stage
This stage focuses on its day-to-day operation and maintenance management. This includes monitoring performance, performing routine maintenance, and addressing any issues that arise. The goal is to ensure the asset operates efficiently and remains in good condition through its useful life. - Disposal stage
This stage involves safely decommissioning the asset and managing its end-of-life. This includes removing the asset from service, handling disposal or recycling, and addressing any regulatory or environmental concerns. Documentation of the asset’s life cycle is completed to finalize records and inform future asset management decisions.
Asset Lifecycle Management refers to the systematic approach to manage an asset through its entire lifecycle to maximize its value, performance, lifespan, and cost-effectiveness. It helps the organization in controlling the cost, performance, and lifespan of the assets. The management of asset lifecycle is usually done by asset manager, maintenance manager, or the finance manager in an organization.
Any asset purchase is a significant business decision that should only be made after extensive planning. To maximize the value and performance of the assets, operation and maintenance are also essential to the business. Effective asset lifecycle management is essential for every business, as it may prevent a number of problems that could negatively impact operations, finances, and overall profitability.
