Asset Utilisation, Definition and Calculation Methods

Purchasing updated, more dependable equipment might involve a substantial initial expense, but it has the potential to greatly enhance asset utilisation rates and increase your return on investment. When thinking about purchasing equipment, it’s essential to take into account the overall cost of ownership (TCO), consisting of the initial purchase price, continuous maintenance expenses, downtime costs from equipment malfunctions, and disposal expenses. Nevertheless, it is not solely about the expenses. Considering how this new equipment can contribute to your business success is crucial, and this is where the ROI plays a crucial role.

For example, consider a company thinking about investing in a state-of-the-art CNC machine. Even though it is expensive at the beginning, it operates constantly with very little downtime. Advanced diagnostics enable predictive maintenance, which helps prevent unexpected stoppages and costs.

The firm can determine the ROI by measuring the rise in production, improvements in efficiency, and reduction in downtime. If the combined profit increase and reduced costs are greater than the total ownership cost within a reasonable timeframe, the investment is deemed justified.

Every company must consider both Total Cost of Ownership (TCO) and Return on Investment (ROI) when considering equipment utilisation or upgrades to ensure thorough financial evaluation. Continuously reassessing and adjusting asset utilisation strategies to align with changes in the business or technology environment is essential, as is monitoring for improved efficiency and waste reduction.