Why are components “Lumped Together” in a Reserve Study?

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This was a good question asked recently by a client. They wanted to see all the separate items in their equipment shed in their Reserve Component List, not all the mowers grouped together, or the small runabouts grouped together. The reason we did this, grouping, or lumping them together, is the same reason why we group furniture together in a Recreation Room… it is better to replace all at once. If we separately identify the assets in the Reserve Component List, it is not as obvious that these components should be replaced together all at the same time.

It is easy to understand when you consider furniture in a recreation room. The assets are a matched set, with complementary styling and age. They all share the same purpose, Useful Life, and Remaining Useful Life. It would not be appropriate to replace the tables and chairs, but not the couch (with the same trim). For aesthetics, it is best to replace all at once. The same principle applies for assets within timeshares… it is best for consistency of appearance between rooms, and within an individual room, to not memorialize exceptions by tracking individual assets separately (now on different life cycles) in the Reserve Study. It is best to replace all at once for a consistent, purposeful aesthetic.

With mechanical assets, the principle is the same. A fleet of mowers tends to age, and rather than track which ones are new and which ones are old, stocking multiple sets of replacement parts, continuing to squeeze a few more months of life out of an old unit, in many instances it is best to simply get a new fleet. Management time is saved, and maintenance time is saved.

Remember, a Reserve Study is a budget planning tool, not an asset management inventory. The additional # of Reserve Component line items found when individual assets are listed often detracts from the recommended concept of replacing an entire category of asset at the same time. It is not a matter of your Reserve Study provider taking a shortcut. A Reserve Study helps you cost-effectively maintain the assets of the corporation, maximizing appearances and minimizing management and maintenance overhead. Assets with similar purpose, with identical Useful Life and Remaining Useful Lives, are often appropriate for being “grouped”, or “lumped” together.