When it comes to managing construction, one of the most challenging tasks is efficiently and effectively managing your inventory. Managing inventory can be a laborious, tedious, and time-consuming process in itself, especially if you handle multiple projects at the same time that involves millions of resources – materials, labor, equipment, and assets. Even a tiny mistake or mismanagement of your inventory can make or break your project’s success. The significance of effective inventory management for a smooth and seamless project duration is constantly emphasized for every project, regardless of size, budget, or scope.
For many businesses, physical inventory is their most significant expense. So, if you are still handling your inventory management through the traditional pen-and-paper, then maybe it is time you should consider an upgrade. Undoubtedly, inventory management in construction is a complicated business process to do by hand. However, with the advancement of digital tools available in the industry, construction software can significantly reinvent how you handle your inventory.
To help you understand whether your construction business could benefit from utilizing and optimizing your inventory management with construction software, let us dive in on the basics of inventory management first in this article.
What is Inventory?
A construction inventory list comprises all information on the number and condition of all existing resources, materials, equipment, labor, and other assets present in a particular area at a specific moment. It can be categorized into two:
All materials or resources directly employed in developing a building or structure are referred to as direct inventory, and it is necessary for its completion. It may include raw materials such as cement, reinforcing steel bars, concrete hollow blocks, finished goods such as primer and paint, plumbing fixtures, and electrical wirings.
Indirect inventory is utilized to execute a job or activity but is not included in the raw materials. It may consist of apps or software, office, and administrative items, and utilities and rent expenses.
What is Inventory Management?
Inventory management is the process of maintaining track of and controlling your company’s inventory throughout its shelf life. It is in charge of the entire flow of resources, from when the material is procured, purchased, made, stored, and finally utilized by the crew during construction activities. An efficient inventory management system ensures that you always have suitable amounts of the correct item in the specific place at the proper time. It helps you determine which products to purchase and how much to order at what time.
Why is Inventory Management Important?
It is critical for construction to have adequate inventory management in place during project management. In order to maintain workflow operations moving forward efficiently while also keeping cash flow and profitability stable, inventory plays a significant role in maintaining productivity in the field. Often, mishandling and mismanagement of inventory mean increased costs, lack of inventory balance, ineffective decision-making, and delayed project completion in the worst-case scenario.
Listed below are five advantages of effective inventory management, as described in more detail in this section:
Keep Your Project Within Budget
Understanding your inventory data and trends means you see how much and where you have something in stock and devise strategies to utilize them. This prevents any potential problem of replacing or reordering supplies due to mismanagement. Unused and spoiled inventory equals a part of your budget, so proper handling of these items means cash is constantly moving through the business.
Heightened Tracking, Transparency, and Accountability
One of the vast benefits of an inventory management system is heightened tracking and transparency. With all of your assets continuously being monitored, you can identify which key components are throughout the project’s lifetime. Further, this promotes employee accountability since you constantly know your inventory and keep your team conscious of utilizing the goods.
Improved Supplier Relationships
Because all items are monitored through real-time updates, you and the supplier know your timelines and commitment to deliver onsite. You will be able to forecast when your things will need to be bought and plan delivery more orderly and systematic. This helps to keep interactions operating well since both sides know what is expected of them.
Accurate Inventory Forecasting and Planning
Maintaining healthy levels of inventory is critical for businesses of all sizes and in all industries. Inventory management assists in better planning and ordering of resources, as well as in reducing costs. It prevents difficulties, job interruptions, and delays from occurring, enabling project managers only to replenish inventory when necessary.
A well-executed inventory management plan results in an organized and effective warehouse operation. This includes cost savings and improved resource allotment and utilization to manage their inventory levels efficiently.
What are the Three Key Components in Inventory Management?
Inventory management strikes a balance between the requirements and expectations of the project management team and those of the stakeholders. The following are three critical components of inventory management that a contractor should consider when putting together an optimized system.
Inventory forecasting, also known as demand planning, analyzes historical data, current trends, and anticipated future events to estimate the inventory required for a specific timeline. With accurate forecasting, companies can guarantee sufficient inventory and not overspend on inventory.
Optimized Purchase Orders
An optimized purchase order process can save time and money and manageable resource allocation and boost efficiency across the supply chain. It may assist you in effectively tracking expenditures and identifying and resolving issues as they develop.
Precise Inventory Control
Inventory control is part of the overall inventory management system of a project. It involved checking and maintaining a project’s inventory at the desired levels. In other words, inventory control is the process of ensuring that the company has enough goods on hand to fulfill deadlines and milestones while minimizing holding costs.
Why Should You Use a Construction Software for Inventory Management?
Good construction software should encompass the three crucial features when managing construction: project scheduling, construction crew management, and inventory. If used efficiently and effectively, it can completely reinvent how you handle your inventory management, resulting in a smooth, seamless, and optimized project progress.
Simplify your Inventory Management System
Construction software was created to make things simpler and more accessible for everyone involved. The significant advantage of adopting inventory software is that it makes the whole process of maintaining your inventory more manageable – allowing you to save time and costs. By automating your essential business operations, you can reduce the likelihood of human errors and inconsistencies.
Added Budget Savings
You may not only remove the inventory expenses associated with inefficiencies by optimizing your inventory management operations, but you can also save time and money in other ways. By setting your minimum and maximum inventory levels and determining your safety stock, you may eliminate excess and outdated stock, as well as the expenses associated with it.
Avoid Stock-Outs and Excess Stocks
Determining the appropriate balance when it comes to inventory management is a complex undertaking. After all, having too little inventory might result in a stock out, job interruptions, and labor inefficiency. On the other hand, excess goods may eat up precious warehouse space and cost you money. On the other hand, a web-based inventory software allows you to monitor low stock levels and pinpoint reorder points for each product, preventing stock outs.
Make Sound Business Decisions
Inventory management software can give vital sale data, enabling more data-driven business decisions. It can provide you with the tools to make strategic choices by accessing reporting features and inventory indicators.
Increase Your Company’s Profitability
If your inventory is not correctly managed, you risk delays, substandard quality, and untimely project delivery. A construction software may assist you in reducing risk and streamlining expenditures, which will eventually result in healthier profitability for your company.
Boost Inventory Availability and Visibility
Inventory software incorporates forecasting capabilities and automatic reordering methods through its automated system. It can also give you notifications and alerts if you run out of a particular item at any point throughout the day. This increases the odds that you’ll have enough resources whenever you may need them. Product recalls may be made more efficient using reasonable document control.
Inventory management is one of the daunting responsibilities a project manager has to do daily. It is a time-consuming, complex, and labor-intensive procedure that, if mishandled, may make or break the success of your project’s overall outcome. As we mentioned above, inventory management software can help you juggle your inventory when you’re overseeing multiple sales channels. Making accurate and timely records of your inventory, costs, efficiency, and productivity is made easy – giving you the ability to manage and operate your project more successfully and efficiently. It can also help you manage inventory storage and stock levels between various warehouses to ensure you always have the right items at the right place at the right time.