When you’re running a business, it’s critical to have insight into your resources—where they are, where they’re going, how they’re managed, when they require upkeep, and more.
Asset management and asset inventory management both provide this insight, but they focus on different types of resources a business owns. Learn what each area oversees, why they’re both important, and the key differences between them.
What is asset management?
Before you can understand asset management, it’s important to define what an asset is. In the business context, an asset is a resource that a company owns and uses to operate its business, providing value for the company. Assets range from entire buildings to technology, equipment, software licenses, and computer hardware.
Asset management involves purchasing, tracking, monitoring, maintaining, and retiring business’s assets. Sabine Saadeh, a financial trading and asset management expert states that “Asset management is increasing the wealth from the assets under management, and it’s part of the investment function in a business.”
An organization conducts asset management over four distinct phases that make up the asset’s life cycle:
- Planning or creation
- Acquisition or procurement
- Operations and maintenance
- Disposal
Organizations need to be aware of which life cycle stage the asset is in so they can determine how the asset can provide value. For example, an asset nearing the end of its operations and maintenance phase may not need repair if it breaks down since it’s so close to the disposal phase.
What is asset inventory management?
A related concept to asset management is asset inventory management. Inventory refers to any raw materials, parts, or products a company owns that it intends to sell to a customer. It’s vital for an organization to know how many inventory assets it has. If it doesn’t have enough assets in stock, it may lose out on potential revenue; if it has too many in stock, it may have difficulty with cash flow.
Organizations need to know how much inventory they have, where it’s stored, its level of quality, and how much more they’ll need to meet customer demands. “Inventory management is part of the operating function of a business. It’s ordering, storing, and using the products or services,” notes Saadeh.
Similar to how assets have a four-phase life cycle, so does asset inventory. The four stages of the asset inventory life cycle are:
- Raw materials
- Work in progress
- Finished goods
- Maintenance, repair, and operations
Effective asset inventory management can help organizations determine an accurate count of their inventory, meet customer demands, and increase productivity across the business.
What are the key differences between asset management and inventory management?
In summary, asset management and asset inventory management have similar scopes, but the key difference is what they manage. Asset management oversees a company’s resources used to operate the business, such as technology, equipment, and building fixtures. Asset inventory management oversees a company’s resources that it intends to sell, such as raw materials, parts, and finished products.
Further, asset management tracks assets across their life cycles, with the goal of maximizing the value each asset can bring to a company. In contrast, asset inventory management tracks inventory, considering how best to meet customer demands by always having the right amount of stock. Both business areas help companies improve their profitability by increasing revenue and managing expenses effectively.
Finally, asset management and asset inventory management are both strategic areas of operating a business. And now that you know what they entail and how they differ, you can use them more effectively to reach your business goals.
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