How to incorporate Asset Management in Supply Chain to decrease inventory write offs and holding costs with Dynamics 365?

How to incorporate Asset Management in Supply Chain to decrease inventory write offs and holding costs with Dynamics 365?

Asset Management | Inventory Write-offs | Dynamics 365

what is asset management?

The process of operating, developing, maintaining, and cost-effectively selling products of assets is known as asset management. Regardless of your business, if there is an asset involvement, you need to keep track of it efficiently by eliminating manual tasks and making your enterprise asset management automate on its own.

Asset management holds an important role when it comes to company performance. By keeping an accurate and automated track of assets through Dynamics 365, organizations can have updated knowledge about their availability and what measures they can add to have an optimal solution. Any companies’ success is formed on how accurately it manages its assets.

Several enterprises know that they will compromise productivity if they don’t manage and update the asset tracking. It is a lot more than just counting the fragments of equipment and adding them up into a sheet. However, knowing detail about them and the data over their Lifecycle facilitate companies inventory holding cost per asset and get the most out of each sale.

You can avoid costly problems like duplicate purchases and last-minute repair demands by knowing where your assets are at all times, who owns them, and their condition. While having that data available to employees twenty-four seven, will enhance the process of operating, developing, maintaining, and cost-effectively selling products of assets and this is known as asset management.

Microsoft Dynamics 365 enable task automation tracking by defining the status of assets through asset lifecycle states. By the end of this post, you’ll get complete knowledge of how to create lifecycle states and models, assign the states to models, and have real-time status of assets informing whether they are active, made, or disposed of. By doing this, you will increase the transparency and productivity of your supply chain.

So, without any further ado, let’s get into it step by step and know in detail.

Importance of Asset Management

Every business should maintain track of its assets. By accurate asset management, the owners can know which of them are available to generate the best possible revenues. Assets are divided into two groups: fixed assets and current assets. Assets credited for long-term practice are set as non-current assets; likewise, existing assets can be turned into cash quickly.

Managers are usually confronted with two challenges when it comes to asset management. The first question is: what role does asset management play in your business? Second, how can a company develop a successful asset management strategy?

There are several reasons why a company should manage focus on asset management, among many here are some of them;

Allow Companies to Accounts for all Assets

The process of asset management allows companies to keep track of all types of assets quickly. Further, it also allows owners to know the assets’ location, usage, and specific changes made to them. In this way, companies can also enhance the recovery of their assets, leading them to profitable returns.

Help Identify Ghost Assets

There have been instances where assets lost, destroyed, or stolen have been incorrectly reported on the books. The firm’s owners will be informed of any purchases that have been lost due to a strategic asset management strategy, and they will be removed from the books.

Help Identify Potential Risks

Asset management aids in the identification of possible hazards associated with the ownership or usage of certain assets. Perhaps an item isn’t operating as it should, isn’t being utilized at all, or is constantly breaking down and needing to be repaired. Tracking an asset’s lifespan can assist in making critical financial choices about whether it is a benefit or a liability to a firm.

Improve Workflow and Productivity

It is evident that when a company manages to keep track of their assets efficiently, they improve their workflow without any errors. By using the appropriate tools offered by Dynamics 365, companies can increase their work productivity up to 75%. After all, who doesn’t want an error-free supply chain processes with maximum productivity?

SUMMARY

Asset management is crucial for all sorts of industries dealing with inventory management or assets. In the above heading, the importance of asset management is briefly described with its respective benefits. Any enterprise incorporating asset management can comply with those benefits.

asset management system

Asset Lifecycle Management in the Supply Chain

Assets are precious to a company, particularly in the supply chain business. Assets are not only valuable, but they also contribute to the company’s wealth creation. Earnings are derived from investments. Supply chain equipment is critical since it is the foundation of the primary business. As a result, companies must maintain their assets in excellent working order. Understanding asset life is essential for keeping assets in perfect working order.

An asset life cycle is a sequence of events over time and is categorized into phases. The disposal stage follows  resource planning and acquisition stages of an asset life cycle.

Asset management and tracking software are required to maintain track of the asset stage. It keeps track of assets, so you can see where they are in their Lifecycle. The value of an asset is determined by some elements, including the asset’s cost, reliance on the item, etc.

Here are the phases of the asset lifecycle.

Planning & Acquisition

Firstly, the asset requirement is determined. Requirement planning is carried out in order to have complete knowledge of assets. How many assets are necessary if you want to execute the job order quickly? During the planning stage, several sorts of questions are discovered. Then comes asset purchase, which is the first step in the asset lifecycle. The procurement department handles the talks at this stage, and the asset is attempted to be purchased at the most cost-effective price.

Utilization

In the second phase of the asset lifecycle, the utilization is done at its fullest. Production operations are completed, and as time passes, assets require maintenance and begin to lose value, necessitating the use of depreciation for tax purposes.

Operation and Maintenance

The asset functions normally at this point, then it requires maintenance, and the problems are resolved. Maintenance operations are carried out to enhance performance. Furthermore, the procedure is carried out to improve asset performance. If maintenance is not completed on schedule, asset performance may suffer, and maintenance costs may rise. Maintenance is carried out at regular intervals until the product’s usable life has expired.

Disposal and Renewal

When an asset’s useful life has come to an end, it gets disposed of. It is completed when an asset’s anticipated life has expired, the life cycle reaches to the final stage of conclusion. Assets cannot be fixed at this point, and asset breakdown happens regularly, but productivity decreases. However, if the equipment continues to function well after its anticipated life has expired, you can continue to use it.

stages of asset management life cycle

SUMMARY

The supply chain sector is massive, and even a minor blunder or error can result in a significant financial loss. As a result, the asset lifespan must be careful contract an adequate resource monitoring! It can also influence the production and the bottom line of a company.

ASSET VALUE Competencies         
Procurement Technique

LLC

Intrinsic Quality RAMS Efficiency Maintenance Center Service Quality Availability Risk Exposure
Life Expectation

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CAPEX

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OPEX

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Performance Output

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Quality

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Customer Satisfaction

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Public Image

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Environmental

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Regulatory

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Safety

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Reliability

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Maintainability

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Simplifying the complexity of Asset Structure in D365 Supply Chain

The multi-level structure of assets is a crucial aspect in asset management that boosts the productivity of the maintenance crew. A productive asset may require “Child” assets to support operational and maintenance results, much as a finished product may require a bill of materials to describe it.

Either the child asset is a part of the unit procedure as a single unit, or you can build a priority equipment of your own design—the asset structure parts the inventory cost and maintenance steam in respected ways.

Though it is feasible to add layers of asset structure later in the implementation process, organizing equipment assets to a child level are essential to a successful asset management deployment. The ability to add features when the teams and data are ready to deploy them is a key aspect of a well-designed asset management solution.

In the following example, we’ll utilize a pump, which is used in various sectors and is used in many different types of equipment. Instead of being developed and produced by the primary asset OEMs, most pumps are made by specialist vendors and selected for equipment design:

The parent asset (firetrucks) might be used for twenty years, whereas the pump could be retired or rebuilt after three years. Pumps as child assets can be costly; therefore, they may merit their own fixed asset value, and we may have spares on hand in case they need to be replaced quickly. A warranty may cover the parent unit’s chassis and vehicle features, but the pump manufacturer only covers the pump, with different timing and coverage.

Spare pump items in spreadsheets, inventory, and/or fixed assets in ERP can help with some of this. If we want the fleet of pumps to be visible and in good working order, we need to track assets and organize more specific data. The pump could be considered a child asset of the firetruck parent. The following are some of the details:

  • Cost actions are being tracked and analyzed.
  • Covenant/warranty tracking.
  • Preventative Maintenance.
  • Maintenance that is both predictive and preventative.
  • Analytical counters.
  • Faults
  • Admin/data maintenance.
  • Parent-child relationships.
  • Attributes of specification.
  • Attachment documents and other raw materials related to the child’s specific unit or type of unit condition evaluation.

The commentary makes no mention of “attachments,” which are related accessories that may be necessary to complete work but can also be left at the depot when not in use. Firefighters wear the respiratory equipment, for example, may be associated with the firetruck in varying numbers of copies or assigned to another support vehicle. The connection to the truck is not established, even though it is vital to firefighting. Permanent and necessary components or subsystems are nearly often referred to as “Asset-Children.” Onboard subsystems essential to the unit’s productivity, such as an engine or an actuator, are known as Asset Children. Asset attachments may need asset tracking, cost management, et cetera. However, they are not a part of operating the parent necessarily.

The tree diagram shown below states the complete structure of parent children relation between the assets.

asset structure chart

SUMMARY

Asset Management is a collection of tools in Dynamics 365 Finance and Supply Chain that allows users to plan, track, and manage expenses and histories for specific assets. It is closely linked with all ERP domains. Companies with little maintenance expenditures and a small number of essential pieces of equipment may occasionally get by without logistic management by employing workarounds and accounting gymnastics. When assets are critical to the schedule, margin, and quality of an application in production or a project, the solution must support a maintenance team and the data they require for effective operations at several levels.

Steps to create lifecycle states, lifecycle models and assigning the states to models in Dynamics 365

Asset Lifecycle States:

Asset lifecycle states define the status of an asset, whether it is active or inactive. For example, we can­ set up asset lifecycle states such as Created, Active, and Disposed.

First, we create lifecycle states and then create lifecycle models and finally assign the states to models.

  1. Go to Asset management > Setup > Assets > Lifecycle states.
go to asset management
  1. Click on New to create a new lifecycle state.
Click on New to create a new lifecycle state
  1. Enter the ID and name for lifecycle state and click on Save.
Enter the ID and name for lifecycle state and click on Save
  1. On the General tab, Set the Active option Yes if this lifecycle state should be an active lifecycle state (in other words, if work orders can be created for assets that are in this lifecycle state).
select active option
  1. Set the Delete open schedule lines option to Yes if open asset calendar lines that have an asset lifecycle state of Created should be deleted when they are in this lifecycle state.
select the delete option schedule

Asset Lifecycle Model:

Asset lifecycle model is like a template for the lifecycle states. We create a model and add some lifecycle states to it and when we assign this model to some specific asset, those states would be applied to that asset.

  1. Go to Asset management > Setup > assets > lifecycle models.
asset management life cycle model
  1. Click on New in the action pane to create a new lifecycle model.
click on new in the action pane
  1. Enter the ID and name for lifecycle model and click on Save.
enter the ID
  1. On the Lifecycle states Fast Tab, select the asset lifecycle states that should be included in the asset lifecycle model. We can select the states from Lifecycle states remaining section and add them to selected section.
select the asset life cycle
  1. On the action pane, select Lifecycle state updates to define the asset lifecycle states that can follow a selected lifecycle state.
select Lifecycle state

SUMMARY

By following this step-by-step guide users can set up asset lifecycle states such as Created, Active, and Disposed.

Each of the above step briefly describes the way through which user can know the status of each asset automatically through Dynamics 365 Supply Chain.

Other ways to reduce inventory write-offs and cost holdings in Dynamics 365

Inventory write-offs is a term accounting professionals use to company inventories with zero value. There are two ways to register an inventory write-off. It can be charged to the cost of goods sold (COGS) account or offset the inventory asset account in a contra asset account, also known as the allowance for outdated inventory or inventory reservation. You can successfully reduce your inventory write-offs with the help of asset management lifecycle explained above. However, there are also other ways to make your assets free from write-offs and reduce holding costs. Here are some of the few things that you can implement and get the required results.

Reduce Lead Times

Reduced supplier lead time is one innovative method to save inventory holding expenses. Assume you can deliver a fresh shipment to your configured warehouse in seven days rather than ten. Because of the new lead time, you will be able to minimize the amount of stock you have on hand.

Because you don’t require as much storage space with more shipments, you may look at reducing work order quantities each shipment and lowering carrying expenses.

Assuming you have a strong connection with your supplier, emphasize the fact that you will be placing repeat purchases for a long time, ensuring them a steady stream of money. The new model also entails more frequent shipments, which might be beneficial to them.

Double Check your data

You’re getting data about your warehouse. We recommend double-checking the data before using it to make operational, sales, or other business decisions to confirm that on-ground stockpile levels match what’s on record. You can prevent a significant write-off if there are any inconsistencies. Double-checking your data doesn’t have to be difficult; Stockpile Reports’ drones, fixed cameras, and iPhone app can all help you create accurate stockpile reports on the fly.

Enhance stocking practices

Are you just ordering when you’re going to run out of something? Do you overorder or underorder? You may avoid issues like stock-outs and outdated goods by establishing a more planned, disciplined stocking strategy. One method is to set a reordering threshold, maintain track of your inventory levels, and place an order as soon as the threshold is met. Another option is to work with your supplier to set up a Vendor Managed Inventory (VMI) system, which will automate the stocking process. You can collaborate with SR on the development of such a system.

SUMMARY

You won’t be able to prevent all inventory write-offs, especially those that are inevitable, such as floor damage and spills. You may substantially decrease the bulk of them by employing smart management methods and contemporary technologies, such as Dynamics 365’s immediate measuring system. With only a small bit of work on your side, it will result in huge annual savings.

At Instructor Brandon | Dynatuners, we always seek innovative methods to improve your competitiveness and suit your Microsoft Dynamics 365 requirements. Our offerings are founded on defined procedures, industry experience, and product understanding. If you’re interested in consulting with our technical solutions experts on how we may help you to incorporate asset management in supply chain to decrease your inventory write-offs and holding costs with Dynamics 365, don’t hesitate to Contact Us.

How does data help in improving asset performance?

Asset performance is critical for an organization; if an asset is not performing well, the company will replace it. When you have many assets in the same category, data offers detail about asset performance. You may examine data for each purchase and determine an average performance. Furthermore, the company has leverage if it possesses previous data. They can forecast asset breakdown, reduce downtime, and boost production.

What are the benefits of asset lifecycle management?

Asset lifecycle management has numerous advantages, including the ability for managers to make educated decisions. Preventive maintenance may extend the life of an item. It contributes to a higher return on investment (ROI). Errors are being eliminated, and production is growing!

What is the importance of Track assets?

Asset monitoring gives you a high-level view of the functioning of your company's physical locations, such as the office, warehouse, and storage. This is significant because it allows you to uncover critical linkages in the way different industries utilize assets, enabling you to simplify company operations.

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