Asset lifecycle management (ALM) is an analytical and strategic process that is used to determine the key stages of a particular asset’s lifecycle. ALM applies different strategies to increase an asset’s lifespan and efficiency.
Regardless of the industry or how big it is, every business depends on revenue-generating assets. Failure to understand the asset lifecycle can pose challenges to businesses, such as higher maintenance costs and depreciating asset value. In this blog, we consider all four main stages in ALM: planning, acquisition, operation and maintenance, and disposal.
Planning
Asset managers use extensive planning to better understand how critical assets perform and to assess what value they bring. Before assets are acquired, detailed plans are drawn up, relying on information about existing assets, performance and demand for new assets. They can achieve this goal efficiently through use of an Asset Management Software tool. An asset management team will then formulate a proposal, which will also consider the asset’s purpose, technological progress, timeframe for return on investment (ROI) and anticipated operational life.
Acquisition
The acquisition stage takes place after the asset has been properly scrutinised, and after a budget has been set during the planning stage. The procurement lifecycle sequence works by identifying goods or services, shortlisting suppliers, negotiating costs and delivery, and then finalising purchases. It is important to consider how the new asset fits in with the overall larger organisation. How compatible is it with other assets? How does it fit in with existing inventory management plans? How will data be shared?
Operation
The longest stage of ALM is operation and maintenance. During this phase, it will be continually monitored for performance issues or unexpected incidents, to ensure it is able to improve operations and generate revenue as desired.
An asset maintenance plan is crucial to extending performance and reliability. Otherwise, there is a risk of unscheduled downtime and elevated repair costs.
Disposal
When an asset’s life cycle terminates, an asset manager will decide whether to sell it, repurpose or replace it, depending on its disposability or re-sale value, and its depreciation over time. With markets continually evolving, it is important to assess the ROI as the asset reaches the end of its life.
For further advice on asset management in Cheshire, call our specialist team at Hartey Wealth Management today to set up a consultation.
