How to Conduct an Asset Management Assessment and Why It’s Important
You know how important it is to accurately track your business’s product inventory (very!). But when was the last time you conducted an asset management assessment? If the answer is “never” or “it’s been a while,” put it on your to-do list ASAP. An asset management assessment and subsequent asset registry can give you a better understanding of your company’s value—not just in monetary terms but in terms of how you may be able to leverage your assets to further enhance your business, reduce costs and increase profitability.
How are assets different than inventory?
First, let’s delve into the meaning of assets versus inventory. It’s tempting to use the terms interchangeably, but they do have different meanings, and each is important to understand. Inventory is easier to define. Inventory, or stock, includes all of the product a business has on hand—in stores, on trucks, at the warehouse, in production, etc. It can include products that are fully built and ready to sell as well as the individual components that make up the final product, including parts and packaging. Inventory is largely physical.
Assets are everything a business owns that has value. That includes the physical, such as inventory, as well as the non-physical. Here is a list of assets your company may have:
- Owned office or warehouse space
- Manufacturing and office equipment
- Product inventory
- Office furniture
- Owned vehicles and other machinery
- Intellectual property and know-how
- Proprietary systems and processes
- Insurance policies
- Certifications and awards
One way to think about assets is to imagine selling the business. What all would you factor into the sales price? The value of your inventory, for sure, but also much more because your business is much more than just its inventory.
An asset management assessment and subsequent asset registry can give you a better understanding of your company’s value
What is an asset management assessment?
Asset management assessment is the process of inventorying and analyzing all of your company’s assets. Once you have completed your asset management assessment and compiled an asset registry, you can then determine how you can leverage your business’s assets.
What is an asset registry?An asset registry is the physical record of the assets identified during the asset management assessment. Think of it as an inventory of all the physical and nonphysical assets in your organization
What are the benefits of conducting an asset management assessment?
The purpose of an asset management assessment is to identify things in a company that can be leveraged to enhance the business. That could include:
- Monetizing or selling company assets for profit
- Reducing expenses by eliminating redundant purchases
- Internal knowledge sharing to get to market faster and with less expense
- Reduction in lost equipment and associated costs
- Maximal uptime and reduced labor costs
With that in mind, assets can include knowledge of a process or industry, like a specialized understanding of chemical or physical properties. It could be skills developed working in a specific area. Certainly, it includes items of intellectual property and any patents.
It can also include technology and products you previously developed. You could leverage product components currently in the market or even ones that have been withdrawn. And then there’s the “sandbox” in which product developers play with capabilities that have never seen the light of day outside of the company.
All of these things are assets you’ll want to track and leverage in the creation of future products. Basically, you want to track anything you have within the company that will get you to market faster and with less expense than if you had to build from the ground up.
How to conduct an asset management assessment
Before you begin your asset management assessment, it helps to have an idea of what information you’re interested in capturing. You can do that by outlining your asset registry, the document that will act as the inventory of your company’s assets.
The asset registry, also called asset register, is usually a spreadsheet or asset management software. Every company’s asset registry will look a bit different, but in general, you’ll want to consider including the following information:
- Asset type (equipment, technology, product inventory, equipment, etc.)
- Date acquired
- Estimated value
- Location of asset (physical or virtual)
- Department responsible
Once you’ve defined your registry format, you can populate it with your available assets. There are a number of ways you can go about collecting asset information. Some companies email a blank registry along with the goals of the exercise and ask recipients to complete it on their own for their specific functional area. Other companies hold an informational meeting or webinar to explain the goals of the process and to answer any questions before they provide participants with the registry template.
For the most efficient and effective asset management assessment, we recommend hosting a kickoff meeting to explain the goals and objectives of the assessment and then face-to-face meetings with subject matter experts from around the company. These could be experts in your markets, processes or technology. During the face-to-face meetings, you’ll work with the subject matter experts to capture asset information for the registry.
This method has a couple of notable benefits. First, it creates a sense of urgency and lets you have more control over the timing, rather than having to rely on people to meet your virtual deadline. The interactive nature allows you to gain a better understanding of the company assets and a more complete picture of the inventoried assets. You may even uncover assets that might have been overlooked by simply asking individuals to fill out a form.
How to create and maintain an asset registry
Regardless of the method used to complete your asset management assessment, all information should be consolidated into a single asset registry. Once you have populated your initial asset registry, it’s important to maintain it. There are three critical information capture points to be aware of when maintaining an asset registry.
- Project initiation. At the start of any new project, be sure to capture any new assets you plan to create or procure during the project.
- Post-production. Review your asset registry at the conclusion (or cancellation) of each project to add any additional assets that were acquired during production and remove any that were not employed.
- Product sunset. Lastly, don’t forget to review the registry and update the status of any assets that will be withdrawn from the market as a result of discontinuing a product.
In addition to project and product milestones, it’s also a good idea to conduct an asset management assessment periodically based on a schedule. The exact timing will depend on your business’s pace of change but should occur every six to 12 months. Remember, the only thing worse than no asset registry is one that is out of date.
The purpose of an asset management assessment is to identify things in a company that can be leveraged to enhance the business.
How to use an asset registry
Once you’ve created your initial asset registry, you should share it throughout your organization so others can leverage the assets any time new projects are initiated. The asset registry should also be consulted anytime you are evaluating new opportunities to see if you have assets that may allow you to shorten time to market or reduce a project’s overall cost.
One note of caution: Because of the asset registry’s strategic value and the proprietary nature of the information it contains, treat it as extremely confidential information.
Examples of assets in practice
Asset management assessment is an important step for organizations to take to continue growing. Successful corporations have a solid understanding of their assets and leverage them to reduce cost and effort and increase productivity and profitability. Some companies even manage to turn their assets into products themselves. Consider how these corporations leveraged their assets to grow their businesses.
Around 2000, Amazon was looking to launch an e-commerce service for third-party sellers, but the company’s existing IT infrastructure hadn’t been built with that kind of scale in mind. So, Amazon’s engineers embarked on a mission to fix that. In the process, they built an internal set of IT services and found a way to run cost-effective data centers. The company’s executives in time recognized these abilities as a suite of assets that could be packaged and sold to other businesses. Amazon Web Services, a cloud infrastructure service, launched in August 2006.
Disney is incredible at many things, but perhaps most notably are its abilities to deliver a superior customer experience and train staff to provide consistently pleasant service to guests. These are huge assets, and Disney knows it. So in the mid-1990s, Disney decided to monetize its training program by establishing Disney Institute. Disney Institute offers corporate leadership and customer service training largely based on what its own leaders have learned in the corporation’s nearly 100 years in business.
What started out as an alternative to the brick-and-mortar movie rental business, Netflix launched its streaming service in 2007. But it quickly discovered they were earning more than just money from monthly subscriptions in the process. They were also collecting customer data. Netflix recognized it could leverage customer preferences and viewing habits to create original content to appeal to more and more users. Since launching its first major TV series, House of Cards, in 2013, Netflix has expanded its library of original content exponentially and is some of its most popular today.
With these examples in mind, ask yourself how your company could leverage its existing assets to grow its business.
Learn more about asset management assessments
Conducting an asset management assessment can help you reduce costs and increase profitability. Learn more about how to gather the right data and how to leverage it strategically by registering for Pragmatic Institute’s Foundations class today.