In the dynamic world of manufacturing, where equipment and machinery are the backbone of production, efficiently managing and tracking fixed assets is imperative.
Fixed asset management incorporates a set of systematic processes for acquiring, utilizing, maintaining, tracking, and eventually disposing of fixed assets in an efficient and organized manner. Detailed asset records are recorded, maintained, and routinely audited through physical inventory verifications and reconciliations.
While there are significant challenges, there are also remarkable benefits to gain from mastering these tasks. In this blog post, we delve into the some of the challenges, solutions, and benefits of efficiently managing and tracking fixed assets in manufacturing plants.
Challenge: Complexity of the asset ecosystem
Manufacturing plants use of a diverse range of fixed assets in support of production as well as administrative business activities. From machinery to tools and vehicles, manufacturers face complexities in tracking and managing these varied assets accurately. Managing a diverse mix of assets, each with unique maintenance requirements, depreciation schedules, and utilization patterns can lead to confusion and inefficiencies.
To further complicate things, large machinery and equipment lines often require the use of expensive, interchangeable components. Depending on where and how they are installed, parts and components that exceed capitalization thresholds can pose their own unique set of challenges.
Solution: Develop a robust fixed asset classification system
Implement a standardized classification system to categorize assets based on type, location, usage, criticality, and any other data points that are specific to your needs. Classifications should be developed based on specific objectives and goals, such as financial reporting, asset management, compliance, or a combination of these. Group similar assets together to simplify management and tracking.
The classification system will help to provide a clear structure for tracking and locating fixed assets, as well as establishing appropriate maintenance and depreciation schedules. Proper classification of fixed assets will bring clarity to your asset management program and make it easier to manage a diverse set of assets.
Challenge: Data accuracy and integrity
Maintaining accurate and up-to-date fixed asset data can be a challenge due to human errors, data entry mistakes, and frequent environmental changes. This further can be complicated with the need to reconcile asset data across multiple systems.
Solution: Deploy a comprehensive asset management software system
Asset management software is the backbone of an effective asset management program. In the age of hosted, cloud-based software, asset management systems have become highly affordable and easy to implement. There are a lot of factors in selecting an asset management system that will best suit your objectives.
Beyond finding a reputable software developer, some considerations that are specific to your needs should include;
- System scalability
- Compatibility and integration with existing systems
- Data migration
- Configuration and customizations
- Mobile functionality
Asset management software can be a powerful tool that can help to automate data entry processes, depreciation calculations, and maintenance schedules. System users must accurately and consistently input fixed asset data, adhering to established standards, including naming conventions, depreciation methods, and location codes. The system will need to be updated regularly to account for asset additions, moves, and retirements.
When properly maintained, it will serve as a centralized database and provide valuable insight into your fixed assets, such as location, status, maintenance needs, value. Additional technologies, such as bar coding and RFID should also be considered and implement to compliment the system and further improve automation. System data should be regularly audited through cyclical fixed asset inventory verification and reconciliation to ensure accuracy.
Challenge: Tracking and Locating Mobile Fixed Assets
Mobile assets frequently move throughout manufacturing plants and distribution centers, making them difficult to track and locate. This leaves them prone to loss, theft, and misplacement.
Solution: Utilize RFID (Radio Frequency Identification) Technology
Passive RFID is a wireless technology utilizing electromagnetic energy that is transmitted from an RFID reader to RFID tags that are within its established range. The tags then emits a signal back to the reader, signifying that it has been located. RFID readers can be strategically installed throughout manufacturing plants and distribution centers to read RFID tags that are affixed to mobile equipment.
As an RFID tagged asset comes within range of the reader, its location can be recorded into the asset management system, or further escalated based on user-defined criteria. This automated process can provide valuable insight into the location and status of your fixed assets. Handheld RFID readers can be used to quickly perform fixed asset inventory audits and cycle counts, as well as locate fixed assets.
When properly implemented, RFID technology offers enhanced visibility and security of fixed assets and can significantly streamline asset management processes, improving operational efficiency and productivity.
Challenge: Regulatory Compliance
Manufacturing plants must adhere to various industry-specific regulations, accounting standards, tax codes, and environmental laws. Ensuring fixed assets are compliant with these varying regulations can be time-consuming and demanding.
Solution: Establish a compliance team and conduct regular audits
Create a dedicated team responsible for monitoring and ensuring compliance with industry regulations. Regularly update compliance guidelines and conduct audits to identify and address compliance gaps.
Cyclical physical inventory verifications and reconciliation of fixed assets will ensure that asset records are current and accurate, enabling informed decision making, including proper financial reporting and asset maintenance.
Challenge: Lack of standardization
Standardization and consistency in the management of fixed assets can be challenging across multiple departments due to varying processes, responsibilities, and priorities.
Solution: Establish formal fixed asset management policies and procedures
Formally documented policies and procedures should establish standardized procedures for managing fixed assets across the asset lifecycle, including acquisition, tracking, depreciation, maintenance, and disposal. Asset management procedures should consider the specific needs of each department while maintaining consistency in core processes.
Efficient management of fixed assets plays a vital role in optimizing asset utilization, maintaining productivity and ensuring that assets are used to their maximum potential. Accurate fixed asset data empowers management to make informed decisions about repairs, replacements, and upgrades based on the real-time condition and value of assets.
Knowing the exact location and condition of assets allows for better resource allocation, reducing unnecessary purchases and rentals. Manufacturers can achieve significant cost savings through preventing loss of assets, minimizing downtime due to maintenance issues, and accurately tracking asset values.
Despite many challenges, the benefits of accurate tracking, streamlined processes, and improved decision-making make the journey towards proficient fixed asset management in manufacturing plants highly rewarding. By addressing these challenges head-on, manufacturing plants can unlock a multitude of benefits that pave the way for sustainable growth and success.