Asset Management: Definition and Types

Asset Management: Definition and Types

In business, assets such as machinery and equipment  are essential, since they can generate income or revenue for an organization. As a result, businesses must perform asset management effectively.


What is Asset Management?

Before delving further into asset management, it is important to understand its definition.

An asset management process involves maintaining, improving, and reducing an organization’s assets so that their performance and operational costs are enhanced.

Among assets are physical objects like vehicles, tools, buildings, as well as intangible items like databases and operational data.

The purpose of asset management are to increase the company’s value, enhance productivity, reduce operational costs, and improve asset utilization efficiency.

The Importance of Asset Management

Asset management helps companies identify the presence and condition of their assets, ensuring that the company can continue to grow and develop through proper asset utilization.

This management also assists businesses in staying on track, managing risks, and achieving business goals. All divisions in the company are involved in this process, including the COO (Chief Operations Officer), managers, auditors, engineers, IT specialists, and equipment operators.

Furthermore, adequate maintenance and the implementation of the right systems, people, and processes can lead to positive capital growth throughout the asset’s lifecycle.

What is the Asset Lifecycle?

The asset lifecycle is a concept used to describe the stages an asset goes through from its initial purchase to the end of its useful life.

This concept is crucial in asset management within companies because it helps maximize the value of their assets. The following is a further explanation of the asset lifecycle in a company.

Planning Stage

The first stage of asset management is the planning stage. In this phase, the company plans the acquisition of assets needed to run its operations.

This stage involves considering the asset specifications, funding sources, and useful life of the asset.

Acquisition Stage

After the planning stage, the company proceeds with the asset acquisition. During this stage, the company purchases or leases the required assets according to the plan made in the previous stage.

At this stage, quality of the purchased assets, pricing within budget, and warranty periods are considered.

Maintenance Stage

The maintenance stage is highly crucial in the asset lifecycle. In this phase, the company performs maintenance and servicing of its assets to ensure they are in good condition and ready for use.

Maintaining assets regularly and timely can avoid high repair costs and damage to assets.

Retirement Stage

As soon as an asset has been used for a considerable period of time, the company moves into retirement mode. During this phase, the company evaluates whether the asset is still effective or no longer suitable for use.

If the asset can still be used effectively, the company may opt for repairs or replacement of certain components. However, if the asset is no longer effective, the company may decide to sell or dispose of it.

Elimination Stage

A final stage in the asset lifecycle is the elimination phase, during which the asset is deactivated or retired from the company’s records.

Furthermore, elimination can also occur if the asset has suffered severe damage or if it has been stolen or lost.

Three Types of Asset Management

There are three common types of asset management applied in companies, as follows:

Physical Asset Management

Physical asset management focuses on managing the physical assets owned by the company, such as machinery, buildings, vehicles, and office equipment.

The goal of physical asset management is to extend the asset’s lifespan, reduce repair costs, and improve work productivity.

Financial Asset Management

Financial asset management involves managing the company’s financial assets, including investments, stocks, and bonds. The aims is to maximize profits and reduce the risk of losses.

Policy Asset Management

Asset policy management involves managing policies related to company assets, such as asset usage regulations, asset procurement standards, and asset maintenance practices.

The aim of policy asset management is to ensure that assets are utilized effectively and efficiently and comply with applicable regulations.

Benefits of Asset Management

Proper asset management enables companies to reap various benefits. The following are some advantages of asset management:

Enhancing Productivity

Regular asset management allows companies to improve their productivity. This is because the company can ensure that its assets are used optimally and are always in good condition. As a result, work can be carried out more efficiently and effectively.

Reducing Operational Costs

Asset management also helps companies reduce operational costs. By avoiding damages to assets that can lead to expensive repairs, the company can save money.

Additionally, by knowing the value of the assets, the company can decide whether an asset is still effective or no longer in use, leading to a reduction in unnecessary operational expenses.

Increasing Company Value

Asset management can also increase the company’s value. Knowing the value of assets enables the company to make better decisions regarding investments and development.

Moreover, well-maintained assets can enhance a company’s credibility among investors and customers.

Increasing the efficiency of asset utilization

Asset management helps companies ensure that their assets are used optimally and effectively. This way, the company can avoid wastage in asset utilization and maximize the value of those assets.

Improve Safety

Asset maintenance also helps companies ensure that their assets are in safe and well-maintained conditions. This way, the company can avoid accidents or damages that could threaten the safety and security of employees and customers.

Avoiding Legal Issues

By doing proper asset management, companies can avoid potential legal issues.  Due to this, the company can ensure that its assets comply with the laws and don’t violate intellectual property rights of others. In doing so, the company can avoid sanctions and losses that may result from legal actions.

Managing and Monitoring Existing Assets with LOKASI Intelligence

As businesses continue to grow in both value and size, asset management becomes increasingly important. When businesses neglect or fail to maintain their assets, these assets can become a financial burden for the company.

By using an appropriate asset management system, businesses can obtain regular data streams, plan equipment maintenance, and more.

One of the asset management software that businesses can use is LOKASI Intelligence. LOKASI is a geospatial software and location intelligence platform that helps businesses monitor and manage their assets.

LOKASI also helps businesses overcome the weaknesses of manual monitoring systems by providing information on the location and function of the company’s assets.

Learn more about how LOKASI Intelligence can benefit your business by contacting us via email at or through WhatsApp at 087779077750.


What is asset management?

Asset management is a process of managing the assets owned by a company to maintain, improve, and eliminate organizational assets.

What are the stages of asset management?

The stages of asset management include the Planning Stage, Acquisition Stage, Maintenance Stage, Retirement Stage, and Elimination Stage.

What are the types of assets?

The types of assets include Physical Asset Management, Financial Asset Management, and Policy Asset Management.

About Author

Related Posts