Do SMBs Really Need Equipment Tracking Software?

A company’s assets include any capital investments such as heavy equipment, tools, vehicles and inventory. If information regarding these assets is inaccurate or out of date, they could unexpectedly be out of service or missing, leading to excess waste, reduced productivity and increased replacement expenses.

Effective asset tracking software establishes chain-of-custody and accountability as well as ensuring employees always have equipment, tools, and other resources when they need them. In over 30 years of business, we have come to understand that there are two ways for a business to manage equipment.

1. Managing Physical Goods and Ad-hoc Fire Fighting

One way businesses can accomplish this task is by purchasing and maintaining spare assets to make sure one is available when needed. While this is seemingly easier than enforcing process change, due to very slim margins many of these companies struggle to stay afloat due to the overhead cost.

2. Data Management and Preemptive Planning

Our research proves that it is much more cost effective to manage information instead of physical goods. Through meticulous record keeping and automated data capture, companies can convert physical assets into data. These companies enforce procedures and meticulously monitor assets to ensure optimal efficiency.

The Cost of Poor Asset Management

When employees search for tools, test equipment, or supplies, the distraction may seem like an insignifi¬cant part of the workday, but the cumulative effect on productivity is significant. According to a 2003 survey 64% of companies reported that their operations personnel perform at least one search for assets or inventory every day, and nearly half (47%) reported their searches take up to one hour.

Let’s suppose, then, that a company’s workers spend the conservative figure of 10 minutes a day searching for and gathering needed items. Each employee would lose the equivalent of one full 40-hour workweek per year! To see the cumulative drain on expenses in your business, multiply the total search time expense by the number of employees at a salary level engaged in the same activity. If your burdened salary is $25 per hour, you are losing $1000 per employee per year.

Lost assets are an even larger drain on profitability, as the following scenario illustrates.

Assume that a maintenance without asking or notifying anyone, “borrows” a cordless drill valued at $60 for a home project. The following week another employee needs to use a drill, but cannot find one. The employee, who earns $18 per hour, spends 10 minutes thoroughly searching the tool crib, then looks for the drill in other areas around the facility. After a half hour of fruitless searching, the employee notifies a supervisor.

The supervisor (who earns $30/hour) makes a cursory 10-minute search of the area, declares the drill lost, and authorizes an asset replacement. If the company had already deployed an automated asset management system, the “borrowed” tool scenario never could occur. Consider the cost of this single incident: Employee search time ($9) + Supervisor search time ($5) + Tool replacement ($60) = $74.

If the company earns the S&P 500 average after-tax profit margin of 10.72 percent, it needs to bring in $690.30 of new revenue to replace the $60 drill. And once the new drill arrives, the company will have an extra drill when the first employee returns the borrowed tool, which represents excess capital equipment and lower asset utilization.

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