“Fixed Asset Management” is Not Enterprise Asset Management
Enterprise Asset Management is perhaps the most misunderstood function in most organizations, private businesses and government agencies. That’s probably a byproduct of the fact that Enterprise Asset Management is often the neglected source of competitive advantages of your business.
Some organizations think they have an Enterprise Asset Management system in place because they have a Fixed Asset Management system. But when they try to get a handle on all the assets they have, where they are, and who has custody of them, they realize that they can’t get that information from the Fixed Asset Management system. Like the picture above, the Fixed Asset Management system tracks the assets on the peripheral. They lose track of the assets once they are deployed to use.
Fixed Asset Management system tracks the Fixed Assets: how much they cost, the depreciation, and residual value. Organizations set their own threshold for “Fixed Assets”, often based on purchase cost. It could be $500 or $5000.
Enterprise Asset Management system managed the physical and IT assets throughout their life cycle. It tracks what assets, where they are, and who has custody of them.
Some examples to illustrate the difference:
- Fixed Asset Management is a Finance function, mostly focused on costs and depreciation. Enterprise Asset Management is an operational function, because physical and IT assets are required for all aspects of the business operation. Enterprise Asset Management often is directed by an operational department, such as Facility Management, IT Department, Logistics, etc.
- Fixed Asset Management doesn’t manage ALL assets. It only manages those assets defined as “Fixed Assets” based on specific cost threshold.Enterprise Asset Management should manage ALL assets, fixed or consumable. For example, if an organization has a threshold of $1500 for “fixed assets”, most laptops they purchased are most likely not in the Fixed Asset Management system? But should these laptops be managed tightly? I would think so!
Fixed Asset Management often focuses on the Beginning (i.e. purchase) and the End (i.e. residual value before the asset is retired). It misses the Middle, which is also the majority of the asset’s active life.