Introduction: Why Should We Care about Surplus Assets? Step 1: Identify and Evaluate Surplus Assets Step 2: Determine the Appropriate Disposition Method
Introduction: Why Should We Care about Surplus Assets?
Surplus assets refer to any items or property that a company or individual no longer requires. Evidence has shown that when assessed, 15-20% of the assets of most companies are surplus; this may be higher or lower depending on the industry. Effective management of surplus assets is 'the holy grail' in many ways, as the benefits are threefold:
- Reducing costs
- Generating revenue
- Having a positive environmental impact
Ignoring the problem is costly and risk - unidentified surplus assets create unnecessary expenses including:
- Storage costs - Repair and maintenance costs - Insurance costs
- Taxation costs - Depreciation and loss in value of the potential resale price
This website is dedicated to identifying and implementing approaches to managing surplus assets to help individuals and businesses maximise their value and minimise their costs. There are 5 key steps:
Step 1: Identify and Evaluate Surplus Assets
The first step in managing surplus assets is to identify and evaluate what items or properties are surplus. This includes taking a comprehensive inventory of all assets and analysing each item's condition, age, and potential value. You should consider factors such as whether the item is still in use (or if it is likely to be in use again), if it is obsolete, and if it is of significant value to the organisation. There could already be data within your organisation to help with this analysis:
For industrial assets this could be utilisation rates, periodic equipment usage measures (hours, mileage, cycles etc) and documentation relating to production lines and how each item is used.
For inventory, you may have a schedule of slow moving and obsolete stock, based on historic sales data.
Step 2: Determine the Appropriate Disposition Method
Once you have identified and evaluated your surplus assets, the next step is to determine the appropriate disposition method. There are several options available, including selling the assets, donating them, recycling them, or disposing of them through a waste management program.
You should consider the potential benefits and drawbacks of each option, such as the potential revenue generated from selling the asset, the social (and taxation) benefits of donating it, and the environmental impact of recycling or disposing of it.
You should also be aware of the different avenues for sale, the pros and cons of each, and how to select third parties that you may want to assist you in this process.
Step 3: Develop a Surplus Asset Management Plan
After identifying your surplus assets and determining the appropriate disposition method, the next step is to develop a comprehensive surplus asset management plan. This plan should outline the steps you will take to dispose of each asset, including timelines, budget considerations, and any legal or regulatory requirements. You should also identify the resources needed to implement the plan, such as personnel, equipment, and technology.
Step 4: Implement the Surplus Asset Management Plan
Once you have developed a surplus asset management plan, it is time to implement it. This includes assigning responsibilities and delegating tasks to the appropriate individuals or departments, such as sales or logistics. It also involves tracking the progress of the plan, evaluating its effectiveness, and making adjustments as needed.
Step 5: Monitor and Evaluate the Results
The final step in managing surplus assets is to monitor and evaluate the results of the plan. This includes tracking the revenue generated or costs saved from disposing of surplus assets, evaluating the impact on the environment and community, and analyzing any feedback from stakeholders. You should use this information to refine your surplus asset management plan and identify opportunities for improvement.
You should also share it within the organisation to ultimately try to reduce surplus - for example, if similar items keep on being classified as surplus your procurement team should be made aware and review their purchasing approach with this asset type.
You can also measure the positive environmental effect of a surplus asset management program - including in terms of the savings in carbon, raw materials and water that enabling the reuse of surplus assets can have.
The Bigger Picture
There are additional considerations to the above - including getting buy in throughout the organisation, the context of the surplus (is this a full factory closure, a line closure, or just obsolete items), whether the surplus is one off or a regular occurrence, and other factors to consider, but this is a starter framework for an effective surplus management program.
It is also worth mentioning that this is a huge area, and there are multiple associations and industry groups associated with the various stages of managing surplus, including the valuation/appraisal process, the sale of assets (by third party auctioneer, through your own platform).
Surplus can also take many forms - capital equipment (plant and machinery), inventory (raw materials, WIP and finished goods), or retail (including retail returns). There are different approaches to managing all of these asset classes.
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