Unlocking Strategic Capital Planning: Leveraging Asset Performance Data for Optimal Investment
Asset performance data allows you to be more strategic with your capital planning, helping guide your repair and replacement needs and investment priorities.
When it comes to capital planning — deciding where to invest resources in your business and budgeting accordingly — you don’t want to guess where your money would best be spent. You want to know for sure so you can allocate your budget confidently, knowing you’re making the best use of your finances to set up your business for success.
To do that, you need asset performance data.
Understanding Asset Performance Data
Asset performance data can give you visibility into “where certain pieces of equipment are underperforming,” says Dylan O’Neill, a senior product manager at ServiceChannel, which specializes in providing actionable insights to CEOs and CFOs so they can make informed decisions at their facilities.
That is, asset performance data can help you determine which equipment is no longer worth investing in, O’Neill says: “Maybe [those pieces of equipment have] actually been failing and out for repairs more times than expected, and so you end up sinking more budget into those assets over time.”
Those are, in a nutshell, two key pieces of asset performance data that can help you with strategic capital planning: asset downtime and an asset’s total cost of ownership.
Total cost of ownership would include, among other things, how much you spent to buy the equipment plus how much you spend on maintenance and repairs over time.
Asset downtime — how often and how long a piece of equipment has been out of commission — comes with other sneaky costs besides whatever you spend on repairs. Say you run a restaurant and your fryer is broken, so you can’t make and sell fries until it’s been fixed. During that asset downtime, you’re missing out on potential revenue and your customers are missing out on one of your products. That, in turn, can affect your brand image.
“If I go to a Todd’s Taqueria here or a Todd’s Taqueria down the road, I’m expecting to have the same experience, getting the same food that I’m normally ordering,” O’Neill explains. “Not having your assets up at locations can obviously impact customer experience and impact the revenue that that location brings in.”
Using Data in Your Capital Planning
Understanding asset downtime and total cost of ownership is just the first step. Using that data in your capital planning is next.
“Most companies, when they buy a piece of equipment, [have] this general ‘useful life’ that they apply to it,” O’Neill says. Back to the fryer example: “When they purchase a new fryer, the general expectation is maybe that it should last 10 years. But if you start to see that performance is degrading over time and it’s actually [requiring] more repairs and you’re investing more into that asset, it’s likely that that asset might not even live to its useful life.”
Instead of guessing when you’ll need to replace an asset based on its age — which could result in unplanned expenses that eat into your capital planning budget — you should use performance data to get a much more precise view of your asset’s health. That way, you can approach capital planning strategically from the get-go, factoring in anticipated repair and replacement needs and prioritizing investments.
“The more data and the better data that you have being tied back to your actual pieces of equipment,” O’Neill says, “the more informed you’re going to be to make those types of repair/replace decisions or identify these larger capital investment needs.”