Some people would argue that small or medium-sized businesses do not need an asset tracking system as long as they only have a minimal amount of assets in operation. That being said, if there is a massive volume of assets in business, an asset tracking solution like RFID systems are necessary. Without an efficient asset tracking system, a business can face numerous problems affecting its operations and revenues.
Read on to discover the major risks businesses face when they ignore asset tracking in their operations.
1. Asset theft
Asset theft is a huge challenge that many businesses face, especially those that do not correctly implement asset tracking systems. Each asset adds to a company’s net worth, with large-scale asset theft having the ability to seriously decrease the bottom line due to the high cost of replacing stolen goods, loss of operational productivity, and reputational damage.
Most of the time, the theft of assets even goes unnoticed until substantial losses have been incurred. The most effective way to prevent asset losses due to theft is to put in place asset tracking solutions and designate clear duties for asset management. This helps businesses maintain an accurate inventory of their valuable assets and gives them greater control over their access.
2. Operational inefficiencies
By not investing in asset-tracking solutions like RFID, companies do not have the real-time visibility they need to ensure that their assets are in good condition and secure. This can lead to operational inefficiencies since valuable resources, such as inventory and production floor machines, may be left unchecked and prone to theft, misuse, and damage.
Without an effective asset management system, businesses likewise miss out on insights into operational measures like asset utilisation. This can minimise efficiency because the equipment is left idle while not sufficiently accounted for. Ultimately, when a business faces multiple operational issues, and no action is taken, then productivity reduces. With the continuous reduction in productivity, direct financial losses are sure to occur.
3. Inventory shortage or overstocking
When a company has no asset management system in place, it will never achieve a perfect balance between inventory stocks and production rate. This means either the inventory stocks are too much because of overstocking or too low due to shortage. Maintaining manual reports of inventory can essentially increase the risk of errors. Furthermore, even a small error can impact the profitability of a business.
Sometimes, there may even be conflicting or duplicate information. The results can be quite counter-productive if important decisions are based on such data. Simply put, a company cannot handle and manage its inventory effectively without an accurate asset management system. On the contrary, when they utilise asset tracking software, they can have complete historical data and make good decisions on how many inventory levels they need to maintain. RFID technology also plays an important role in eliminating ghost assets, which are fixed assets on a business’s balance sheet that are rendered unusable or missing in the real world.
4. Asset depreciation
Businesses that fail to invest in asset tracking solutions usually face a substantial risk of asset depreciation because of poor or lack of asset maintenance. Although asset depreciation is an unavoidable part of the asset lifecycle, it can be substantially accelerated if the movements of assets and preventive maintenance routines are not monitored and tracked in real time. This negligence often results in businesses losing more money faster due to their capital investments turning over quicker than necessary.
Moreover, replacements of assets can disrupt business operations that can further damage the business’s reputation with unforeseen delays or unmet customer expectations. Therefore, companies should consider investing in cloud-based asset tracking software to detect indications of despair promptly and make proper asset management decisions efficiently, which ultimately reduces risks and associated costs.
5. Failure to comply with regulatory requirements
Asset tracking systems enable businesses to mitigate the risk of failing to comply with regulatory requirements. For instance, the system can assist a company in ensuring that their asset management policies are consistent with industry standards and those set by the government – from recording asset details accurately during inventory cycles to averting asset dumping or ensuring that equipment is not utilised for tasks that decrease safety ratings.
Breaches of regulations often lead to potential litigation, hefty fines, and tarnished business reputation. Hence, investing in asset tracking systems is necessary, as it will help keep companies compliant and guarantee a minimal financial hit when compliance verifications, such as audits, occur.
The risks of ignoring asset tracking in operations will be costly for businesses. Asset tracking systems like RFID undoubtedly give companies the control and visibility to handle and manage their assets more effectively.
In contrast, businesses may face asset loss, depreciation, operational inefficiencies, and failure to meet regulatory compliance when they choose not to invest in asset tracking solutions. These consequences are costly and can significantly disrupt business operations and ultimately damage a company’s reputation in the long run. As such, businesses should partner with RFID companies in implementing RFID systems that effectively reduce the risks of failed asset tracking.