Even dependable tools can break down from regular use. This degradation process makes maintenance a regular step in asset management. Maintenance helps increase the longevity of your equipment — and protects the employees using them. Asset management means managing these tools throughout their complete life cycle.
Understanding the life cycle of business assets
Every business asset has a life cycle. As employees use resources, they can break down and require maintenance. When that asset is no longer useful, it has reached the end of its life cycle. You can choose to repair the asset — renewing its life cycle — or you can replace it with a new tool.
Here are the common stages of the asset life cycle:
- Acquisition: A company purchases or receives an asset for a specific purpose.
- Operation and maintenance: A company uses the asset, which can require maintenance over time.
- Repair or replacement: When an asset declines, companies can decide to repair or replace them.
- Disposal: Once an asset has reached the end of its life cycle, a company should safely dispose of it.
Understanding the asset life cycle helps you make informed decisions at every stage. It also allows you to anticipate when a particular asset might need maintenance.
Cost considerations: repair vs. replacement
Many businesses are dealt the dilemma of repairing versus replacing an asset entirely. There are many factors behind this decision. First, consider the total cost of a repair. Determine the cost of acquiring new parts and installing them. Make sure to account for other costs like shipping and future preventative maintenance for any new parts. Once you know the full cost of repairing an asset, you can make important decisions about its future.
It’s also important to consider how the value of an asset will change over time. For example, depreciation can reduce the value of tools and equipment. This creates a lower resale value. If your asset has already depreciated, maintenance costs might be too high to justify. If you’re replacing a legacy asset, for example, the cost for new parts might be higher than the item’s entire resale value.
Estimating the cost of repairs
The total cost of repairs should include labor, inspections, parts, and future repairs. Since you cannot use an asset during the repair process, you need to consider the cost of downtime as well. This can include renting a new asset, finding a new internal solution, or proceeding without the asset temporarily. Without that asset, though, you might miss opportunities to complete projects and generate revenue.
Estimating the cost of a new asset
Purchasing a new asset is often more expensive than repairing a used one. You’ll need to pay the full purchase price, plus any fees and taxes. These fees typically include delivery, installation, and setup expenses.
Despite a high price for some equipment, you can sometimes write off the purchase as a business expense. Work with an accountant to find depreciation write-offs, tax credits, and deductions for other eligible expenses.
It’s also important to consider how a new asset will affect company performance. Even though a new asset might be more expensive, it can sometimes help improve productivity. Buying a new asset also helps you avoid the downtime associated with repairs.
The role of technology in asset management decisions
Asset management can be a complicated process. Between managing equipment and estimating costs, it can quickly become a full-time job. That’s why many companies use different forms of asset management software to handle these responsibilities.
Here are a few modern tools companies use to manage assets:
- Enterprise asset management (EAM) software: One solution tracks assets and monitors maintenance schedules, downtime, and performance.
- Computerized maintenance management systems (CMMS): These programs provide quick access to resources like work orders, inventory numbers, and equipment output.
- Internet of Things (IoT) sensors: Sensors collect real-time performance data like temperature, pressure, and usage for analysis.
Technology can help enhance every stage of an asset’s life cycle. It can estimate costs, forecast downtime, and make other important calculations that save companies time and money.
Utilizing data analytics in asset management
Data analytics can help you better understand how each asset is performing. They can monitor asset performance and detect patterns that might signal the need for repairs. Some data analytics platforms also offer root cause analysis, which identifies why particular issues might occur.
While data analytics helps manage one asset, it typically works best when you work with a range of equipment. These platforms can help you track assets in ways that keep team members safe. Using data analytics, you can make informed decisions about whether to repair or replace your assets — one tool at a time.
Environmental and regulatory factors
Try to account for sustainability factors when deciding whether to replace or repair your assets. When possible, repairing an asset can help conserve resources and reduce your carbon footprint. However, there may also be ways to salvage or dispose of old assets in sustainable ways.
When you manage assets effectively, you support global sustainability efforts. Repairing assets when possible helps extend asset life cycles. Disposing of assets sustainably, and recycling electronics keeps assets out of landfills and in consumer hands as long as possible.
Making the final decision
Choosing whether to repair or replace an asset isn’t a one-step process. You’ll need to examine all aspects of your business, and proceed through the following steps:
- Evaluate asset performance: Determine how well an asset performs now, and how well it could perform with routine maintenance.
- Conduct a cost-benefit analysis: Calculate repair and replacement costs to determine if the downtime is worth the investment.
- Consider operations: Evaluate how your company might perform without the asset during repair downtime.
- Ask stakeholders: Consult company leaders for their advice, and experience, in asset maintenance.
In addition, consider how repairing or replacing an asset aligns with your company’s mission. For example, many companies prioritize sustainability as a value. If your company does as well, commit to repairing an asset over replacing it. Once that asset reaches the end of its life cycle, find alternatives to the landfill. Consider recycling its parts or donating the asset so another company, or person, can use it.
When to repair: key indicators
In some cases, repairing an asset might be a better choice. For example, some equipment malfunctions only require a new part to run smoothly again. This simple parts replacement helps save money, expanding the tool’s life cycle.
Here are a few more indications that repair is a better option:
- The asset is fairly new in age, but still within its expected lifespan.
- Labor and repair costs are reasonably low.
- Replacement parts for your equipment are easily available.
- Any damage to the asset is minimal and will not affect performance after repair.
In scenarios where you can replace an asset, your company can save both time and money. Asset repair is sometimes faster than replacement, which means your team won’t go without the equipment they need.
When to replace: signs it’s time for a new asset
In other cases, replacing an asset might be the better idea. For example, replacement parts might be expensive or difficult to find.
Here are a few more signs that replacement is a better choice:
- The technology is obsolete or no longer supported by the manufacturer.
- Even with repair, the asset will create safety concerns.
- The item will require frequent repairs.
- Your business requires a different kind of asset.
- The asset represents a safety or compliance issue.
While purchasing a new asset can be expensive, it can also increase workforce productivity. Replacing an asset also shows employees you’re invested in their success. New assets that satisfy safety and compliance concerns help restore full functionality across the team.
