Managing construction projects also means managing all that comes with it, such as inventory and assets. Now you might be wondering, what is the difference between the two?
For one, inventory management tracks all the stocks and reserves that come in and go out of the construction company’s warehouses; asset management tracks the supplies and equipment used to keep the business running.
Inventory management is all about tracking the flow of items that a company uses to deliver a construction project. The goal is simple: to find the right balance between the demand in the market, get the most affordable and quality items, and maintain the stockpile level to bring the project to completion on budget and on time.
Asset management, however, monitors the items or “assets” that the company uses internally, which are not for sale. Management is not the only objective; it also highlights scheduling the availability of the items and keeping the asset value in check.
What is Construction Inventory?
Inventory, most commonly known as stock in construction, is the raw materials, products, or supplies that a company keeps to build construction projects. There are four types of inventory in this industry:
- Raw Materials
- Finished Goods
- MRO or Maintenance, Repair, and Operations
What is a Construction Asset?
Assets are the items or resources that a company owns to run a business. These can include tools, equipment, machinery, even fixture and furniture that a company owns or rent out and intellectual properties such as patents. Inventory assets are key to a company since asset shortages affect overall revenue.
Inventory Asset, on the other hand, is the finished products that a company intends to sell.
- In Accounting, a company records inventory asses as “current asset” on its balance sheet,
- In Manufacturing, inventory asset is considered a “buffer” if there is a spike in demand.
Construction Inventory VS Construction Assets: Are They Different?
Inventory includes materials, parts, and products and how much these costs may change over time. Assets, however, are equipment and resources, and the amount of assets a company possesses at any given time is usually stable.
Inventory is reflected as current assets in accounting ledgers because a company usually keeps it for less than 12 months. Existing assets may include accounts receivable and expenses. Inventory that doesn’t turn over after one year is considered a dead stock or obsolete and is counted as a liability.
What is Construction Inventory Management?
Inventory management in construction refers to tracking the stock a company adds, delete, moves or stores. The whole practice also enables determining what new stocks to order and when is the best time to do so. This can minimize the chances of an inventory shortage and keep a healthy inventory turnover ratio.
The types and quantities in your construction inventory usually change depending on the kind of projects your company is currently handling. Good inventory management reduces preventable problems and offers the following benefits to those who will practice it constantly and religiously:
1. Enhance Team Productivity
Inventory management solutions save a lot of time that can be spent on other more urgent and pressing on-site activities.
2. Better Data and Insights
You now have the capability to track recalled products and easily spot sales trends with proper stock control and inventory tracking.
3. Increased Revenue
A better understanding of the demand and availability of the construction resources leads to higher inventory turnover, which translates to higher profit for the business.
4. Reducing Excess Stocks and Stockouts
Minimize the number of days items are out of stock to prevent carrying too much inventory with better management.
5. Save Carrying Costs
Inventory stock costs money until it is used. Carrying costs are inclusive of storage handling and transportation costs, employee salaries, and insurance packages. Inventory is also at risk of internal and external theft, loss from natural causes, or obsolescence.
6. Avoid Over Ordering
You won’t order products or stocks if you better track what’s already in store and what’s on backorder.
7. Better Inventory Accuracy
Good inventory practices allow you to know what’s in stock and order only what you need to meet demand and schedule the ordering.
8. Better Relationship with the Project Stakeholders
Lastly, inventory management provides you with knowledge and insights into the construction resources you can use to negotiate better pricing and terms with suppliers.
Implementing inventory management could also include a warehouse management system to place popular items near construction job sites and write clear procedures that describe how to receive, pick, ship, and put away items properly.
A related method is inventory control, which focuses on the daily tasks of managing stock in warehouses or anywhere you store your construction inventory. The significant difference between inventory management and control is that the former encompasses the entire process of ordering, forecasting demand, and managing stock on hand.
How Does Construction Inventory Management Work?
Inventory management helps a business monitor the life cycle of its stock. The process involves receiving and storing resources in a warehouse and packing and shipping. Inventory management gathers relevant data on these activities to increase fulfillment rates and improve inventory turnover.
Effective inventory management prevents overstocks, understocks, and obsolete stock. Additionally, the practice prevents a construction company from tying up cash in inventory that will not be used in any project. It’s critical that a company document its inventory management processes.
What Is Construction Asset Management?
Asset management refers to overseeing items a company uses to be operational. Asset management involving tracking equipment, computers, devices, vehicles, fixtures, furniture, and essential company documents. Governments, nonprofits, and related companies all use asset management.
Asset management follows the complete life cycle of an asset, from the time a company buys it until it is time to be disposed of.
Some of the benefits of asset management in construction include:
- Enhanced awareness of lost items
- Improved tracking of essential documents for regulatory or legal compliance
- Prevent duplicate purchases
- Reduce the frequency of asset company audits
- Enhanced overall quality control and quality assurance (QA/QC)
- Reduce costs from maintenance checks and repairs
- Reduce equipment downtime since there are systems that can prompt users to order parts before the scheduled maintenance
- Decrease labor costs since employees always have the resources they always need on hand, whenever they need them
- Limits downtime
Incorporating an asset management program into your business begins with understanding the performance and condition of current assets. Perform a gap analysis to survey on hand assets and what users need from them. After that, consult all project stakeholders to establish asset performance goals.
What Is a Fixed Asset?
Fixed assets refer to the items and property that a company cannot easily convert to cash. These assets are also called tangible assets and property, plant, and equipment (PP&E). Some examples include land, buildings, machinery, and computer equipment and tools.
How Do Asset Management and Asset Tracking Work?
Asset tracking uses software and construction inventory apps to manage everything and is constantly updated in one place effectively. Asset management leverages the data and trends that asset tracking collects.
With hood asset tracking and asset management, a construction company reduces administrative costs and enhances the team’s efficiency. Employees don’t need to search through old-fashioned spreadsheets or locate items physically to determine where they are placed or their current condition.
Understanding how a construction team makes use of a particular asset helps in anticipating maintenance or downtime. Reliable asset tracking and asset management support better supply chain management.
What is the Role of Software in Construction Inventory and Asset Management?
A construction asset management and inventory management software offers technical benefits for its users.
Inventory application that provides a glimpse into how your company manages assets and inventory can also illuminate productivity issues. Once all of your construction assets are organized and appropriately tracked in an inventory app, you may notice specific procedures that are redundant or outdated.
Incorporate a Construction Inventory Software for a Peace of Mind
Good inventory management software can help companies pick up on inventory theft or loss sooner. Since there are stricter standard operating procedures for tracking inventory and assets with inventory software, many companies find that tight protocols help avoid inventory theft before it even begins.
Many companies in different industries have invested in valuable inventory, which is used by clients, subcontractors, or other employees at various locations. For instance, the procurement department might send precast concrete, rebars, paint, electrical wiring, and other items to different construction job sites across the country- or maybe even internationally.
These companies need to know accurately where their equipment is, who stores it and what condition it’s currently in—all with the click of a button. With construction inventory software, like Pro Crew Schedule, your business can quickly locate more about any given item in your inventory at any time.