Fixed asset cost minimization models are financial and optimization tools used to reduce the costs associated with the acquisition, maintenance, and operation of a company's assets, without compromising its efficiency or operational capacity. These models focus on efficiently managing the life cycle of fixed assets, which include property, plant, machinery, equipment and other tangible investments.
Below are some of the most common models and approaches to minimize costs on fixed assets:
Description: This approach takes into account all costs that arise throughout the useful life of a fixed asset, from purchase to disposal. The objective is to analyze and reduce costs throughout the life cycle, including acquisition, installation, operation, maintenance and final disposal costs.
Application: Cash flow projection techniques, long-term cost analysis, and preventive maintenance strategies are used to reduce total costs throughout the life cycle of the assets.
Description: Implementing preventive or predictive maintenance plans can minimize unexpected failure costs, extending the useful life of assets. Predictive maintenance uses sensors and technology to predict failures before they occur.
Application: Maintenance costs are usually lower if minor problems are identified and fixed before they become major problems.
Description: This model focuses on determining the optimal time to replace a fixed asset. The aim is to minimize the total cost by comparing the costs of maintaining an old asset (maintenance, reduced efficiency) with the costs of acquiring a new one.
Application: Asset replacement analysis typically involves comparing equivalent annual costs or net present value (NPV) analysis of the cash flows associated with the option to maintain or replace an asset.
Description: This model evaluates the financial costs and benefits of acquiring or maintaining fixed assets, considering factors such as depreciation, taxes, operational efficiency, and the productivity that the asset generates.
Application: A detailed financial analysis is performed to ensure that investments in fixed assets generate a return greater than acquisition and maintenance costs.
Description: This approach seeks to ensure that fixed assets are being used to their maximum capacity without incurring additional costs. It often involves optimizing production and inventory management to avoid underuse or overuse of assets.
Application: Techniques such as process simulation or bottleneck analysis can be applied to identify areas of improvement in asset utilization.
Description: The use of accelerated depreciation methods, such as the MACRS (Modified Accelerated Cost Recovery System) depreciation system in the USA or the double declining balance method, allows the costs of fixed assets to be quickly deducted and reduce the burden tax in the first years of the assets life.
Application: Although fiscal costs are reduced in the short term, it is necessary to evaluate whether this strategy is convenient in the long term in terms of cash flow and financial costs.
Description: Instead of acquiring certain assets, some companies choose to outsource certain functions or use leasing contracts to access the assets without incurring the full purchase cost.
Application: The costs of acquiring vs. lease assets over time, and choose the option that minimizes costs.
Description: This model seeks to minimize asset downtime, which can generate large losses in productivity. Risk analysis involves identifying factors that could negatively affect asset performance and anticipating them.
Application: Data-driven monitoring and maintenance controls are implemented to minimize unplanned downtime.
These cost minimization models can be complemented with tools such as data analysis and artificial intelligence, which improve the accuracy of decisions regarding the management of fixed assets and their associated costs.