The first step in asset planning is, of course, to create the plan. An asset management plan will serve as a road map for you and your company to carry out your asset management strategy. Not sure how to get started?
In this article, we will lay out five essential steps to building an asset management plan for your organization.
What is an Asset Management Plan (AMP)?
But first, what exactly is an asset management plan (AMP)? An AMP is an organizational plan that defines the actions that will be taken to develop, operate, maintain, upgrade, and dispose of company assets. It will also define what resources will be applied to carry out these objectives.
All of this will be done most cost-effectively through the analysis of all the costs, risks, and performance attributes associated with the assets. An AMP can be created for an individual asset, a portfolio of assets, a group of assets, or a class of assets.
It should keep in mind all timelines of each asset to extract as much value from each. In simple terms, with an AMP, you will summarize the goals of each asset’s life cycle, then break down weekly, monthly, and yearly tasks to help achieve those goals.
So why should you create an AMP? Well, not only does it act as a guide for important decision-making processes, but you will also find there are many benefits to your business.
Benefits of Asset Management
Here are some of the most common benefits companies will experience when undergoing asset management processes:
- Reduction of customer complaints
- Increases customer value
- Improves efficiency
- Helps create a budget for the future
- Ensures compliance with regulations and industry standards
- Assets are well-maintained
- Reduces loss
- Prevents theft
Sounds good? Great! But what if you don’t have the organizational skills to come up with an AMP? You can consult an asset management firm to help you. These experts can provide you with more information to help organize and manage your assets.
But if you are ready to dive in yourself, check out the following 5 steps to building an asset management plan for your business.
1. Come Up With A Strategy
If your organization does not already have one in place, you will first want to come up with an asset management strategy. To do so, you will need to:
- Assess stakeholder needs: Identify and prioritize the people who will be affected by your AMP. Then do a stakeholder analysis to assess how stakeholder interests should be addressed in your plan.
- Do a SWOT analysis/risk assessment: Analyze SWOT (strengths, weaknesses, opportunities, and threats) in your organization. This will help you identify and analyze the factors that can shape current and future operations.
After these assessments, you can go about creating the following:
- Policy and Objectives: These should outline how your company will value, support, use, and implement asset management activities. Make sure the owner/most senior staff member signs off on this document!
- Strategic Asset Management Plan (SAMP): This organizational strategy document will highlight the objectives you want to achieve in your asset management strategy. Outline the tactics your organization will take to convert organizational objectives into asset management objectives. In the SAMP, focus on identifying your assets, defining stakeholders’ needs, and connecting these things to other plans or standards.
2. Analyze and Record Current Assets
As you are completing your SAMP, you will also want to do a complete asset inventory of your current assets. This will bring an awareness of what exactly you’ll be managing. Your asset inventory should include the following information:
- Asset description
- Asset location
- Current asset value
- Purchase date
- Estimated useful life
Complete an asset register recording all your current assets. The asset register should outline how and what asset data should be collected throughout its lifecycle. It is most helpful to input the register into an Enterprise Asset Management (EAM) system, or a Computerized Maintenance Management System (CMMS).
Having asset management software to keep track of your assets will save lots of time, keep you organized, and prevent errors from occurring. As you record your assets, make sure to assess the condition of each item and how critical they are in implementing the company’s needs.
Having a grasp on the current state of your assets will allow you to schedule maintenance as needed. It can also help you specify how much you want to invest in each asset for the needs of your organization. For instance, ask yourself how long you will allow the depreciation of your equipment until you renew or replace it.
If possible, circle back on an annual basis to best optimize each critical asset’s maintenance plan. This will help ensure the asset is getting the exact care and maintenance it needs to reach organizational objectives. And you’ll save some money in the long run.
It is also helpful to be aware of how important each asset is. What would happen if it failed to perform its function? If it would upset the workflow of the whole business, you will need to prioritize it above other less important assets.
3. Calculate Asset Costs
To figure out an asset’s value, not only will you need the asset’s purchase price, but you will also need to assess other asset life-cycle costs. This is a part of lifecycle management. Getting as accurate as possible with your asset costs will directly relate to an effective and efficient AMP.
To calculate total asset costs, you will need to know things like:
- Maintenance costs
- If the asset is a capital asset or an expense
- Condition and performance modeling
- Disposal costs
From there, you can determine the cost, quality, quantity, efficiency, reliability, function, capacity, and safety of the services you will provide your assets. It is important that your AMP is able to match the level of service that assets provide to the customers’ expectations. You will need to find the balance between the cost to deliver the asset and the level required.
Think about the following:
- How do the business’s goals impact the asset’s service levels?
- How do regulatory requirements impact service levels?
- What level of service is the asset currently getting?
- Does the service level meet the needs and expectations of the asset’s users?
- If that level of service could change, how, and if there is enough funding for it?
- How much does it cost to service the asset annually?
Once you’ve determined the levels of service you want to achieve, use a lifecycle modeling tool to help you come up with a financial plan for maintenance, renewal, or replacement for each asset. Factor in any forecasted growth.
Is the demand for the assets expected to increase or decrease? What investments will you need in the future to reach the expected demand? Also, prepare for any possible contingencies. With all of this information, create a five-year plan, a 10-year plan, or even a 20-year plan.
Include the following:
- Background information: Include the asset’s age, size, capacity, condition, performance, current value, and previous management summaries.
- Risk management plan: List any possible risks that can affect the service delivered by the asset. Do the risks threaten any of the business’s objectives? How will the risk be identified and evaluated? What measures will be taken to mitigate those risks?
- Operating plan: Define the strategies to maintain the required service levels, determine which operational tasks will be a priority, and summarize any possible future costs of operation.
- Asset maintenance plans: Define the maintenance strategies necessary to maintain the required service levels, determine which maintenance tasks are a priority, and summarize any possible future costs of planned maintenance. Include any expenditures that will be for the restoration, replacement, or renewal of an existing to be restored to its original capacity.
- Capital planning: Name any possible new investments that will create a new asset or upgrade or improve an existing one to a higher potential. If you need help with this section, you may want to consult an investment advisory service with registered investment advisors on staff.
- Disposal plan: Figure out in which ways you will want to dispose of an asset that has reached the end of its useful life. Will it be sold, demolished, or relocated? Consider when you will be disposing of these assets and how much it will cost to dispose of them.
Make sure to keep this data up-to-date by reviewing and updating it quarterly. Then track any changes that have occurred every year.
4. Implement Proactive Asset Management
Using the data collected from the previous steps, come up with an asset management plan that is the most cost-effective and proactive. Plan when to do preventative maintenance or repairs for each critical asset. Also, plan when to dispose of and replace the asset after its estimated life cycle is over.
Having a plan in place will inevitably increase asset performance long term.The Annual Works Plan will give you a short-term plan for those assets that need preventative maintenance. Make sure that you are following the guidelines of the manufacturer to ensure you follow the timeline of expected repairs.
There may also be some statutory requirements for the asset that you must follow. You can, however, modify the expected plans in case it benefits your business in some way. Once your Annual Works Plan is completed, you can establish work orders to carry out the scheduled maintenance.
This can be done on a daily or weekly basis, or as needed. It will be helpful to have some kind of planner or scheduler or staff member to keep up with these work orders. After implementing your plan, take a step back to see if it is helping you achieve the outcomes you were looking for from your AMP.
Look closely to see if the plan helped shaved off any extra costs or avoided any risk. Are you getting the most efficiency and effectiveness possible out of your resources? It can help if you can establish a good working relationship with your contractor and procurement teams.
Ensure you are getting the best resources for each maintenance job. Be communicative about the work being done to improve the chances of it being done most effectively and efficiently. To increase the ability of workers and staff to plan, assign, and carry out maintenance, use a mobile work order application.
If all members have the same application, this will be a far less hassle than sourcing data from completed jobs, then manually entering them into your current system.
5. Make A Long-term Financial Plan
Having your asset management systems in place will help you plan your business’s finances long-term. With all the information accurate and organized, now is the time to look further down the line.
With a long-term financial plan, you will be able to speculate whether your current asset management objectives are feasible. Then you can make adjustments as needed.
In your long-term financial plan:
- Include and summarize all the financial requirements to manage assets
- Include cash flow forecasts for the next one to five years
- Provide in detail how assets should be treated in the long-term scenario (as capital or expense)
- Determine the best funding strategies and when to implement them
If necessary, contact a financial advisor to help determine when and if you may need additional funding. They can also help you tweak your plan to have a more accessible financial flow. Need more financing? Here at Coastal Kapital, we can help.
Road Map to Success
Asset planning may sound complicated. But if you break down the five steps we’ve laid out, you will find that once you’ve got a process in place, your company will turn into a well-oiled machine. Having a strategy will allow a unified vision for your staff to work from.
Then defining your assets in detail, calculating their life-cycle costs, and planning proactive management will ensure each asset is getting the level of care to perform at its best. And finally, completing the long-term financial plan will give you an idea of any roadblocks you may encounter along the way, allowing a clear road map to success (and profit!).