Asset lifecycle management can improve your operational productivity, efficiency and profitability
But what steps do you need to take to achieve this?
Replacing vehicles and equipment at the optimum time helps support your company’s overall productivity, efficiency and profitability. And effective asset lifecycle programs can go a long way towards managing the overall costs of doing business.
However, vehicle and equipment lifecycle decisions are rarely as simple or straightforward as buying or leasing equipment for a standard set period. Such decisions require the ability to analyze where an asset is in the lifecycle and the consider the necessary actions that need to be taken to manage costs and reduce risk.
What is asset lifecycle management?
Effective asset lifecycle management involves being both aware and accountable towards everything associated with vehicles within your fleet – from deployment through to replacement. All costs associated with an asset need to be factored in to determine the total cost of ownership for each vehicle. This information can then be used as a benchmarking tool to determine which are the most cost-effective and suitable assets for your fleet.
Which costs should be included?
To provide an accurate and realistic comparison between vehicles in your fleet – include everything! Every expense and revenue stream attributed towards a particular asset needs to be included to generate a fair representation of the lifetime costs. These should include procurement costs, tax, insurance, fuel, maintenance, repair, accidents, downtime, parts and all other associated costs. Consider the depreciation rates for your assets too and be sure to include them in your calculations.
All too often, companies ignore the increase in costs that can be attributed to an asset moving towards the end of its lifecycle. Any loss of productivity should be taken into consideration too as it will have an impact on income. There can be a tendency to continue to spend on repairs and maintenance as a short-term fix when the most cost-effective solution is to decommission an asset and replace it with a newer model.
Why is asset lifecycle management important?
Every asset, such as a vehicle, has an optimum operating life where performance is at a peak. After a period of use, wear and tear will reduce this. And once an asset is at this stage, maintenance and repairs costs can soon out way the cost of a replacement.
The end of an asset lifecycle can vary for several reasons – amount of usage, the way it has been utilized by a driver or an operator, the robustness of the maintenance plan and even the conditions that it has been operating under. An asset that performs harder than a similar asset may reach the end of the lifecycle sooner and need to be replaced at more regular intervals.
How does an asset management plan optimize asset lifecycles?
Determining asset lifecycles is an important business process and one of the fundamental challenges of an effective asset management process. And developing a systematic and strategic asset management plan with an understanding of everything from acquisition needs to vehicle and equipment disposal or re-marketing choices is a great place to start.
Asset management plan considerations and the impact on lifecycles should include:
- Understanding the needs of department executives, operations managers, drivers and operators of vehicles and equipment.
- Having a thorough understanding of how vehicles are used.
- Knowledge of the operating territory such as high-speed highway routes verses stop/ start journeys.
- Knowledge of your asset features and capabilities.
Once a vehicle or piece of equipment is in service, the inspection and maintenance programs that are in place are key to measuring durability, reliability, and ultimately the asset’s value throughout its lifecycle.
What are the challenges to fixed asset lifecycle policies?
Replacement plans for vehicles and equipment can be established based on factors such as projected use, anticipated resale value, depreciation schedules and financing rates.
As business needs change, then so too does your asset lifecycle policy. New or different types of assets may need to be procured, forcing existing units to be decommissioned earlier than planned.
External factors can influence the asset lifecycle too such as changes to legislation, availability of replacements and even fuel choice. As an example, a business that plans on reducing carbon emissions through the introduction of electric vehicles into a fleet will have an impact on the existing asset lifecycle plans that are in place.
How do you make effective asset lifecycle choices?
All those possibilities are among the reasons to consider flexible asset lifecycle policies that incorporate the ability to extend or reduce trade cycles. Alternatives could also include reallocating assets to other parts of your operation or using rentals, without having to invest in vehicles or equipment, for short-term or job-specific needs.
Where does technology play a role in asset lifecycle decisions?
Effective asset lifecycle programs require fact-based decisions based on accurate and actionable information. Advanced asset management software is designed to provide a means of considering all the factors about operations and costs that are needed to be part of any asset lifecycle choice.
Such solutions provide reports that allow you the visibility into operations and the insights needed to effectively determine the asset lifecycles that work best for your operation. Its real value is in its role as a repository of information and in its analytics capabilities for benchmarking asset lifecycle decisions against industry metrics and internal past performance.
Asset management software covers the complete lifecycle of assets, from acquisition to disposal. Regardless of the asset lifecycle choices you are making, it’s an essential element in any effective replacement program and ultimately has an influence on your operation’s productivity, efficiency and profitability.