7 Ways Asset Tracking Factors Into the Bottom Line
Nearly every worker is entrusted with some kind of physical asset for their job. Depending on your line of work, this could be a uniform, a badge, a computer, a work phone, a set of building keys, a toolkit, or even a piece of machinery worth more than your annual salary.
Whatever the case, we’re all familiar with the stress of losing an item in your care. It might not be a big issue, but with hundreds or thousands of workers losing little things over time, the costs and hassle add up. Thus, it’s no surprise that more and more companies are exploring asset tracking systems to mitigate the risks of misplaced or lost goods. These systems include inventory tracking and management software, checkout protocols, barcodes, real-time location systems (RTLS), and custom systems combining these and many other technologies.
Most asset tracking initiatives are about shifting the bottom line—saving money somewhere or generating it elsewhere. The possible financial factors are endless, but here are just seven common areas that illustrate both the problem and the solution.
The dollar value of lost inventory
Expense for replacing missing items
Work hours spent checking inventory or searching for missing items
Unplanned / harmful delays to work routines
The value of unused or unneeded physical space
Costs to implement asset tracking or inventory management systems
Revenues produced by improving your process
1. The dollar value of lost inventory
This is perhaps the easiest factor to calculate—if you can determine which items are actually missing in the first place.
A good starting place is simply to consider the dollar value of your current inventory. This will make it clear just how critical inventory management can be. The next step is to explore the accuracy of your inventory upkeep. Then, when factoring in shipping timetables, replenishment, or replacement schedules for outmoded items, it will become increasingly clear how much money you can save through better inventory tracking.
The trickiest part of inventory management is the fact that there are so many ways for items to go missing. Workers can ship the wrong item by mistake, for example, or leave an asset somewhere and simply forget about it. Missed scans for items removed from inventory will also add up over time, compounding the problem of out-of-date records.
Whatever the approach to inventory—and whatever industry your organization is part of—there’s a lot to be gained by maintaining a current picture of your inventory and its cash value.
2. Expense for replacing missing items
Replacing missing assets is never as simple as plugging in the dollar value of a lost item.
For instance, assets that repeatedly elude inventory checks might not just be missing, they might have been stolen. One WISER customer found most of their missing equipment for sale on eBay. Combining a) item theft itself and b) the company’s lack of items intended for sale, their profit margins took a hard hit.
Temporal delays—like waiting for new products to be manufactured or shipped to you before you can use or distribute them to your own customers—can be extra costly as well. Perhaps the most harmful issue of all is that replacing lost assets can require purchase order requisitions, approvals, third-party buyers, and other congestible cogs. So, in sum, replacing lost stuff is rarely as easy as swiping a credit card.
3. Work hours spent checking inventory or searching for missing items
Digging deeper, it’s fair to say that labor costs represent one of the biggest reasons to improve asset tracking. If your business regularly loses inventory, you might have already started quantifying the expense. One company calculated that they spent 47% of their time “just looking for the right tools.”
The searching process doesn’t tend to be efficient, either. WISER’s team once toured a repair facility in which a teenager was paid to circulate all day with a clipboard, painstakingly checking all inventory again and again, no matter how often the results changed or stayed the same. Inefficient as this might sound, the situation is worse in many factories, warehouses, hospitals, and other settings. It’s usually permanent employees—who also have other critical, time-sensitive duties—who end up rummaging through shelves and workstations to find the needed item.
These workers can be highly trained experts whose time is extremely valuable. Case in point: In hospitals, nurses and doctors often have to adjust their routines to hunt for missing wheelchairs, IV pumps, or other medical implements. Similarly, in facilities with heavy machinery that needs servicing, machine technicians often need to search for these assets just so they can provide the servicing required.
One aerospace company reported losing thousands of technician hours each year searching for lost tools. The tools’ ultimate value was usually low. However, any tool left inside a sensitive area of an aircraft posed a major risk to that aircraft’s safety. This risk dwarfed the expense to send repair technicians searching for missing tools. Once this company implemented a real-time asset tracking solution, technicians were able to finish their work more quickly and get planes back into service, turning their lost hours into aircraft uptime.
4. Unplanned / harmful delays to work routines
Unplanned downtime can be more than just the hours spent searching for missing items.
Time spent looking for lost goods almost always subtracts from time to pursue revenue-generating tasks. When facilities shut down for a monthly inventory routine, for example, they typically need to halt production, shipping, and other key services that bring in cash for the organization. This is likewise true for ad hoc or unexpected delays when something goes missing.
In manufacturing settings, unplanned downtime can be as expensive as $260K per hour according to Aberdeen Research. One large automotive company indicated that they’d lose as much as $1M in an hour if a single assembly line halted—and misplaced equipment was a common reason for such delays in this particular organization.
Something as simple as a misplaced work order can lead to unintended downtime. Whatever the case is for your business, it’s difficult to pursue money-making work when your operations are stalled.
5. The value of unused or unneeded physical space
The expense to own, rent, or maintain a physical space is another element to evaluate. Just as it costs something to build a bigger workplace, occupying or keeping that workplace operable is expensive too, whether or not the whole space is in use.
In industries like shipping, warehousing, and storage, unused space can be a huge source of overhead. There are even more costs to watch when maintaining spaces that are temperature-controlled, insured, secured, and cleaned regularly. Also, larger settings add more variables—such as more places a misplaced item can sit unnoticed, longer search and inventory times, or just more stuff to track.
You’re not likely to lower your rent or get a tax break by consolidating inventory into a few less closets, but having an always-current inventory count can certainly help prevent your business from paying for more space than you actually need, let alone paying to maintain that space.
6. Costs to implement asset tracking or inventory management systems
The poet Ralph Waldo Emerson once said that “money often costs too much.” It might seem obvious, but the actual costs to own and operate an asset tracking solution are critical to review if you’re hoping to save or generate cash via asset tracking. After all, any type of asset tracking can potentially be expensive, with costs ranging from facility shutdowns for infrastructure changes to software subscriptions and training hours for your employees.
Implementing an asset tracking system will typically require some upfront costs for installation and onboarding. Maintenance and upgrade fees over time can also be considerable. Furthermore, most systems will require some sort of licensing arrangement depending on either the number of assets being tracked or the tier of services you’re accessing.
If, however, you’ve gathered information on the expenses mentioned above, you’ll be ready to ascertain the real ROI asset tracking could bring you—and whether it makes sense for your particular organization to adopt an asset tracking solution.
7. Revenues produced by improving your process
WISER worked with a small company that tasked its sales staff to package and ship the goods they sold. Over time this company had discovered a major process problem: The sales team needed to devote 40% of their work hours looking for the correct items to ship. If, on the other hand, sales personnel could repurpose even half of these hours into new sales, the company stood a good chance to increase revenues by 15-20% each year.
This feeds into perhaps the most encouraging number to calculate when assessing asset tracking solutions, which is the revenue you can generate by implementing asset tracking and improving work processes.
Part of this calculation is clear, direct, and tangible, as in the example above. In another example, if you operate a factory that has to close down one day a month for inventory updates, it’s easy to calculate the sellable goods you can produce if that day ran manufacturing instead. In healthcare markets, knowing exactly where to find key supplies or equipment can make the difference between visiting two patients or visiting three. Internet of Things (IoT) approaches to asset management generated an average of $9.4M in new revenues per individual initiative, according to one large study.
There are more qualitative impacts as well, such as increased stakeholder trust and satisfaction. After all, organizations that deliver on time, keep a careful tally of who has what, and safeguard the goods entrusted to them are likely to keep the confidence of their customers, employees, and shareholders.
Post by Stephen Taylor, Director of Communications at WISER Systems, Inc. This article first appeared in IIoT World and has been updated for its current publication.