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Asset Management and Why It Matters

In manufacturing, we tend to have a lot of equipment. And because the equipment is used to manufacture products, it is an essential part of the business and an asset that needs to be properly managed.
May 19, 2020 | Manufacturer
By: Michael S.
I have over 40 years experience in a broad range of manufacturing areas. Starting with an apprenticeship in Germany I’ve worked my way through a variety of positions within the manufacturing field. I got my start as a Tool and Die maker. I next became a supervisor of a class A tool room, then manager of a machining department. I was exposed to lean manufacturing in the mid 90s and adapted the lean philosophy. Loving and teaching the lean approach, I moved on to become a Continuous Improvement manager which led to a job as a manufacturing manager. I joined Acuity in 2015 as their manufacturing expert. I hope to evolve how manufacturers deal with and think about insurance companies, as well as be a resource to my fellow employees – enabling them to better understand the unique needs of manufacturers.

In manufacturing, we tend to have a lot of equipment. And because the equipment is used to manufacture products, it is an essential part of the business and an asset that needs to be properly managed.

 

It is important to manage our assets so we can make decisions on how to best use them to meet the company’s goals. First, let’s talk about the different types of assets we have.

 

There are two types of assets: fixed and current. Fixed assets, such as your building, the HVAC system, and your oven or paint line, are acquired for long-term use. Current assets, such as a CNC machine, a robot, or a company car, are items that could be quickly converted into cash if necessary. 

 

You should think about both types of assets and establish an asset management process. The process should spell out what you consider an asset and how you are tracking and managing those assets.

 

For example, a wood furniture manufacturer might have a building, a dust collection system, an HVAC system, planers, saws, and a variety of hand tools. The items can all be classified as assets; however, I think it is important to establish a value system for assets. I don’t think it makes sense to track every screwdriver, hand saw, or power drill. You might decide to only track assets with an original purchase price of $1,000 or more.

 

Next, you need to identify the critical parameters of your assets, such as when and where they were purchased, the cost, and the size or capacity (e.g., table saw XYZ, bought in November 2010 from LMNOP for $15,000, 10HP, 440V, 3-phase, 126” with sliding table of 16”x120” with digital fence). It’s best to establish an asset template so the information is consistent.

 

Now you should assign each asset a unique number, like the VIN of a car, and place an identifying tag on the item. This allows you to walk your floor, look at an asset tag, and check your asset database to see the specifications. You can even add a picture of the asset.

 

If you have an ERP system, you might already have an asset tracking module. If not, there are plenty of add-ons and standalone systems you can buy. You could also develop your own using spreadsheet or database software. Regardless of what system you use, you need to ensure it is accurate. You should establish a verification process when you develop your asset management program and commit to auditing your system on a regular schedule, such as every six months. Your policy should also ensure newly purchased assets will be added as soon as they are operational or when the purchasing project is closed. You could even link your justification and project plan to your asset management system so all the information is linked together. It is much easier to do this right away than to chase information down months later.

 

Let’s discuss some of the benefits of asset tracking.

 

Value. An asset database provides you with a relative value of your company. You know what you have and the original cost. It also helps you manage asset depreciation and an asset replacement schedule. It can also be useful in the case of an acquisition or for insurance purposes.

 

Production planning. If you know what assets you have, you can use that information for capacity and master planning.

 

Maintenance. If you know how many machines you have and what maintenance needs to be done, you can staff and schedule accordingly. 

 

Risk. If you have just one of an item that is critical to your operations, you should develop a contingency plan in case the item breaks down. 

 

Capital purchase plan. If you depreciate your assets, you know when they are nearing end of life or when you need more capacity.

 

As you can see, there are many benefits of having an accurate and up-to-date asset management plan. The goal is to know what you have, where it is, and how it is used.

By: Michael S.
I have over 40 years experience in a broad range of manufacturing areas. Starting with an apprenticeship in Germany I’ve worked my way through a variety of positions within the manufacturing field. I got my start as a Tool and Die maker. I next became a supervisor of a class A tool room, then manager of a machining department. I was exposed to lean manufacturing in the mid 90s and adapted the lean philosophy. Loving and teaching the lean approach, I moved on to become a Continuous Improvement manager which led to a job as a manufacturing manager. I joined Acuity in 2015 as their manufacturing expert. I hope to evolve how manufacturers deal with and think about insurance companies, as well as be a resource to my fellow employees – enabling them to better understand the unique needs of manufacturers.