Table of Contents
It’s a bright, sunny workday when a team member approaches you with bad news: a critical asset in your company has just broken down. What should you do? Should you repair it or replace it? The two thoughts running through your mind and your head battling with which to go with. Yeah, this decision can be challenging right?
More often than not, you might initially lean towards repairing the asset, an option that might lead to further complications and incur more costs in the long run. On the other hand, replacing the asset might seem like a preferable solution to avoid the stress of potential post-repair issues. This approach involves spending more money that could be saved with a simple repair.
As an Asset Manager, what should you do? Let’s have a look at what factors should help you make a decision to either repair or replace the asset.
How To Decide Whether To Repair or Replace an Asset.
It’s time to make the big decision. How do you then decide? The following will serve as guidelines to help you make the right decision.
Step 1: Assess the Asset’s Condition
What is the condition of the asset? Are there wear, tear and operational issues? Is the asset still performing up to standard? You must do an assessment that answers all these questions in other to decide what to do with the damaged asset.
Step 2: Analyse Assets Repair Costs
Next, you calculate the total cost of repairs, including parts, labour, and potential downtime. Remember to consider how often repairs are needed and whether they are becoming more frequent and costly.
Step 3: Calculate Assets Replacement Costs
After calculating asset repair costs, you should calculate the replacement cost, also known as the Assets Replacement Value. This refers to the amount of money required to replace the asset with a new one of similar kind and quality, at current market prices.
To do this, you will add up the cost of the new asset, expenses for installation, setup, and any necessary staff training. You should also evaluate potential savings in maintenance, energy efficiency, and increased productivity with a new asset.
Step 4: Consider the Asset’s Age
How old is the asset and how long is its expected useful lifespan? This will help assess its depreciation and remaining value.
Step 5: Evaluate Technological Advancements
What are the technological advancements regarding the functionality of the asset? Is there a technology with improved performance, safety features, and energy efficiency? These will help determine if the current asset is becoming obsolete and how this impacts operations.
Step 6: Assess Operational Impact
If you choose to repair the asset, will it disrupt the company’s operation and how much of an impact would it cause?
Step 7: Environmental and Regulatory Factors
You also have to ensure that the asset meets current environmental and regulatory standards. So, you do a comparison of the environmental impact of repairing versus replacing, including potential energy savings and reduced emissions with a new asset.
Step 8: Review Warranty and Maintenance
Check if the current asset is still under warranty and what repairs are covered. Compare future maintenance needs and costs for both repairing and replacing the asset.
Step 9: Risk Management
Assess any safety risks associated with continued use of the current asset. Consider liability issues and how insurance might be affected by repairing or replacing the asset.
Step 10: Financial Analysis
Calculate the Total Cost of Ownership (TCO) for both repairing and replacing the asset. Evaluate the potential Return on Investments (ROI) for a new asset compared to repairing the existing one. Use Net Present Value (NPV) to compare the long-term financial implications of both options.
Step 11: Make a Decision
After carrying out all analysis in the previous steps, gather all the information and consider the benefits and side effects of each option. Involve relevant stakeholders in the decision-making process to ensure all perspectives are considered.
Step 12: Plan Implementation
When you have made the decision, plan for the transition to minimise disruption. Coordinate the timing of repairs or replacement to align with operational needs and availability of resources. Inform employees about the decision and provide necessary training or information.
By following these steps, you can systematically analyse whether to make an Asset Replacement Decision or Asset Repair Decision.
Conclusion
When faced with the decision to repair or replace an asset, it can be tasking to make the right choice that suits the organisation’s goals. However, following due steps and procedures makes it much easier.
Also, using Asset management software like Instanta Asset management software helps you efficiently manage asset replacement and repairs within your organisation. By utilising asset management software, your organisation can streamline the entire lifecycle of their assets, from acquisition to disposal.
