Are you (mis)managing your assets?

First, what is asset management, and why does it matter?

Sorry if this is old ground for you (and we’re teaching you to suck eggs), but if you’re keen to learn about asset management, here’s a ‘what you need to know’ overview to set the scene.

Asset management takes into account the entire lifecycle of your assets. These are the machines, parts, production lines, vehicles, and buildings that you use in your everyday operations to generate income. They’re long-term (permanent) assets, unlike the actual products you make and sell on an ongoing basis. If you’re a manufacturer, your assets are the machines that make your goods. Or, if you’re a hire business, it could be the scaffolding and tools you rent out to the construction industry.

Regardless of what these assets are, you need to manage, account for, maintain, and understand their ROI throughout their lifecycle.

Managing assets includes making decisions about their use and maintenance, and – as they age or show signs of becoming problem children – your asset investment and disinvestment policies, and management of your overall asset portfolio. It also covers keeping track of where each asset is at any given time. While a massive printing press may be hard to misplace, a delivery vehicle may not be – so having visibility of every asset is essential.

In summary, effective asset management is critical to your financial stability and operational efficiency. It improves your ability to budget for future purchases, build and budget for effective maintenance schedules and parts, and prolong their operational life – and, therefore, value. It’s also vital to have an accurate asset register in case of claims or audits by regulatory bodies.

What does poor asset management look like?

Inaccurate tracking can cost your business dearly. When that delivery vehicle can’t be found, has it been stolen, sold, stopped running, or written off after an accident? Or is it simply parked behind a pile of pallets in the warehouse while awaiting new parts?

Some of these outcomes can compromise your business financially, so it’s important that your asset register records where all assets are (and in what state they are in) at all times.

The life and times of an asset

Let’s say you manufacture confectionery for a range of major brands using special machines that make and extrude chocolate bars. Business is going through a sweet spot, and orders are rising, so you need the ability to make more bars. However, all your current machines are running around the clock, and when they’re not, they’re being serviced or repaired.

Therefore, you shop around, identify a new machine from Sweden that will do the job, and requisition it. As part of the purchase process, you register the new machine as a fixed asset in your general ledger for, say, $100,000 (and yes, that’s a price randomly plucked out of the air).

But you know that as well as buying or financing the new machine, you also have to allow for regular maintenance as laid out by the machine vendor to keep it performing to expectation. If left unmaintained, its ability to make 1,000 chocolate bars an hour will decline, or it may even sit ‘broken’ on the shop floor, resulting in lost wages and production time. You also need to hold some spare parts in stock, so you don’t have to sit and twiddle your thumbs anxiously (i.e. costly downtime and reduced output) while you wait for them to arrive. 

Sadly, all machinery has a limited lifespan. Parts perish and wear out, and after 5, 10 or 15 years, even the best engineer can’t jolly it back to life or to its initial high-performance level. The time has come when it’s significantly depreciated in value, and you’ve overspending on maintenance. It’s no longer delivering an ROI, as it can barely spit out 100 chocolate bars an hour – it’s time to dispose of it.

The purpose of asset management is to track your machine through its lifecycle – from purchase to sale or decommissioning – ensuring it’s accounted for operationally and financially.

Keeping track of your assets (the hard way)

When it comes to technology, the old ways are rarely the best. And that includes using a spreadsheet to manage your assets.  

Yes, it can be done after a fashion. But spreadsheets come with their own problems – like inaccuracy and inefficiency. Additionally, they require manual data input to share information with your ERP and a scheduling tool for proactive and regular asset checks and maintenance.

Other challenges include scalability and accuracy. Spreadsheets become impractical when managing large volumes of asset data, so as your business grows, they’re increasingly hard to work with and error-prone. With data spread across multiple files or tabs rather than in a centralised repository, it’s tricky and time-consuming to maintain consistent and correct data, let alone easily find, access, or share it. To boot, inaccurate or outdated data can impact the integrity of your financial reporting, and result in compliance issues and operational inefficiencies.

Spreadsheets are not designed to fully enable asset management tasks such as depreciation calculations, maintenance scheduling, and reporting, so you’ll likely struggle with advanced analysis or automating those repetitive tasks. And while they may be great for individual use, collaboration and sharing aren’t strong points. If you can’t bridge the communication gaps they cause, your team can end up working on different agendas regarding your asset management efforts and slow down the decision-making processes. Should an asset management spreadsheet be shared, version control is always a significant risk. Equally worrying is that if it’s not shared, you’re at risk when the ‘owner’ leaves. No one else can use, understand, repair or alter the file setup.

Keeping asset maintenance schedules in a spreadsheet can also have a significant knock-on effect. For example, if your production planner doesn’t have access, they have no visibility of planned downtime, which means they have no clue that they need to factor it in when it comes to production scheduling. And there are certainly no handy alerts or dashboards to forewarn them of the impending interruption to BAU.

The art of asset management (the easy way)

Microsoft Dynamics 365 Finance and Operations offers a full range of Asset Management (AM) capabilities. By collecting data on your assets, AM schedules proactive maintenance, tracks your budget, and ensures resource alignment to optimise usage and prevent downtime.

While we’ll cover a range of the challenges that AM addresses in later blogs, for now, we’ll discuss how it streamlines asset management in three specific areas.

1. Real-time asset tracking and reporting.

Identifying what assets you own in your environment – especially if they are spread across multiple locations – can pose a fundamental challenge. It’s critical to know where everything is at any given time to establish ownership and identify where a technician needs to go to service the asset.

AM provides a visual asset management interface that allows you to identify and manage your assets and see where they are located in real-time , as well as any parent-child relationships.

In addition, AM offers robust analytics and insights capabilities. So, your users can gain valuable insights into how all or any assets are performing and their utilisation. Users can also generate detailed analytics on maintenance requests, work orders, asset repairs, and unplanned maintenance events.

2. Predictive maintenance using AI and IoT

With Artificial Intelligence (AI) surging in popularity for organisations looking for smarter ways to work and an increasing number of IoT-enabled assets, predictive maintenance offers significant benefits for asset optimisation.

Today, there are over 15 billion connected IoT devices worldwide, and that’s expected to double by 2030. And the most popular use case? Remote asset monitoring.

 
AM enables scheduled, preventative, and predictive maintenance. In the case of scheduled maintenance, the technician can view the asset history (maintenance history, upcoming scheduled service/inspection, review past or newly logged issues, etc) and also see what spare parts are in stock. The notes can be updated in the app, and costs can be captured against it. Unlike a spreadsheet, recurring proactive inspections can be scheduled according to the machine vendor’s recommendations to keep it in tip-top running condition – minimising downtime.

As inspection results can be easily fed back into D365, it’s easy to identify and analyse trends. With this knowledge, you can act proactively and identify maintenance issues early, reducing potential downtime.

As for predictive maintenance? The convergence of IoT and enterprise asset management means the ability to anticipate potential failures before they occur, preventing costly downtime and repairs. Using sensor data intelligence, D365 AM leverages data from IoT sensors to gain deeper insights into equipment health (for example, temperature, unexpected levels of vibration, etc.) and optimise your maintenance schedules and let you know that you may need to order parts. And, of course, as long as there’s connectivity, it can tell you where that asset is at any time.

3. Integration with financial management for accurate asset valuation

You add another layer of complexity to asset management when you want to record financial aspects, such as depreciation and any modifications or upgrades.

So, the good news is that D365 Finance & Operations seamlessly integrates financial perspectives into your asset management processes. Users can seamlessly track financial impacts, generate purchase orders, and manage asset-related costs (like parts and external servicing) without moving out of the F&O environment. This makes it easy to evaluate an asset’s value (or cost) to the business if it’s beset by ongoing repair issues or falling productivity levels and see depreciation at a glance.

The old ways and the good ways

When it comes to using technology in business, the key is to ensure that it not only does what’s needed but improves your ability to do so.

Using Microsoft Dynamics 365 Finance & Operations for asset management streamlines and simplifies the often arduous and complex task of asset management – for good.