Dos and Don’ts of Construction Inventory Management

Dos and Don’ts of Construction Inventory Management

If you’re a construction company owner, manager, or contractor, one of your biggest concerns is construction inventory management. A boost in demand for your services leads to a greater need for construction materials, supplies, and equipment.

Without the right inventory systems in place, you’ll have to deal with increased inventory storage costs. You’ll also find it challenging to manage your suppliers’ lead times and fulfill your customers’ orders when you have inadequate supplies.

Since construction materials comprise approximately 50% to 60% of the total project costs, a sound construction inventory management system is even more important to avoid losses and waste.

In such cases, a just-in-time (JIT) inventory model won’t suffice. A better and more feasible solution is to replace it with a construction inventory management system.

Let’s get your inventory system in order by discussing construction inventory management and six tips to help you manage it more efficiently. In this article, we also look at three common traps to avoid when managing construction inventory. By learning more about the subject, you can focus on growing your construction business with minimal inventory-related losses.


What Is Construction Inventory Management?

Construction inventory management is a process or method that allows construction business owners, managers, contractors, and suppliers to record and track inventory at a construction site.

What are examples of inventory in construction? Some common examples include supplies, tools, equipment, workforce, and factories.

Construction inventory management also involves preventative maintenance scheduling for tools and equipment, preventing needless downtime for repairs.

This process helps with efficient project scheduling and management which is especially important for businesses that handle multiple complex projects at the same time. It also prevents under-ordering, delays, as well as lost and misplaced items while boosting profitability.


What Are the 4 Types of Inventory Management Systems?

The four types of inventory management systems include:

  • Just-in-time (JIT) management: Under this model, vendors send supplies based on current production needs.
  • Materials requirement planning (MRP): It factors in the existing demand and bill of materials (BOM) to determine the number of materials, parts, and prefabricated products required for production.
  • Economic order quantity (EOQ): This system relies on the exact quantities of materials that a business must order to keep inventory costs low.
  • Days sales of inventory (DSI): DSI helps companies calculate the average number of days it takes to sell their inventory which indicates stock liquidity.

Businesses can use any of these inventory management systems to suit their specific needs.


6 Best Construction Inventory Management Strategies

How do you maintain inventory at a construction site? Here are our top six strategies and tips to help you manage your construction inventory:

1. Embrace Inventory Management With a New Outlook

Acknowledging the importance of inventory management helps construction business owners and contractors stay agile, efficient, and competitive. It also ensures timely project deliveries that stay within predetermined budgets.

Construction businesses have always preferred the JIT inventory method. This model obviates the need for inventory management as materials and supplies reach the construction “just in time” and not before.

Adopting a superior, full-fledged construction inventory system starts with a change in mindset and reduced reliance on third-party suppliers. Overhauling existing systems is also crucial for the smooth adoption of a construction inventory management system.

2. Regularly Audit Supplies

Most issues with construction site inventory arise from inaccurate information that leads to managers making poor decisions. Faulty record-keeping practices cause unexpected shortages in inventory and unexplainable losses which negatively affect construction businesses.

Regularly conduct inventory audits to ensure accurate inventory records. You must periodically inspect the number of construction materials, other consumables, equipment, and tools you have at your disposal. It will give you a bird’s eye view of your inventory while avoiding inaccuracies and errors.

Note that inventory audits need to be planned beforehand and take time. So, avoid conducting audits when you have too many orders to fulfill or when your supply chain management is already hectic. Scheduling audits when business is slow or when you have fewer orders helps you do it efficiently and accurately.

3. Build a Resilient Supply Chain

You must rebalance your supply chain for resilience instead of focusing on efficiency, which is the norm in JIT. Having inventory bottlenecks will disrupt your business and cause cashflow problems. So, you must have a reliable supplier network that can support you whenever the need arises.

Maintain detailed records of vendor delivery centers, especially if you use third-party suppliers. It should have your suppliers’ contact information and addresses. This practice will allow you to manage delivery times in case of material shortages.

Also, create a list of vendors who offer last-minute deliveries just in case you find yourself dealing with tight deadlines and emergencies.

You must also build inventory, secure essential supplies and long-lead goods, and identify alternative suppliers. A backup supplier network will shield your business during crises.

You can also identify suppliers who can produce prefabricated parts and items like concrete, steel sections, walls, and roof trusses in controlled settings. It will help you increase off-site construction and enjoy cost savings.

4. Use a Robust Inventory Management System

The widespread adoption of automation now allows construction companies to automate their inventory management processes. It helps streamline complex construction projects and manage materials in multiple construction sites. It also helps businesses remain efficient and eliminate manual tasks that take more time and effort.

Automating inventory management and streamlining warehouses, purchase orders, and work orders is easy with a powerful inventory management system. Modern systems have many features that help manage inventory across different construction sites while optimizing storage locations and categories.

Business owners and contractors can also easily monitor changes in supply levels on a digital dashboard. This helps them understand what is in stock at the construction site and warehouses and what needs reordering. It prevents shortages in supplies and tools for seamless operations.

Site managers can also track shipments from multiple suppliers and materials moving between construction sites in real-time. They can also distribute supplies across many sites in the event of damage, inclement weather, or theft. This helps save time and costs by preventing operational delays and thereby boosts profits.

Moreover, construction businesses can ensure seamless integration of their inventory management systems with their accounting systems. Automatic data syncing between different software ensures better asset tracking, job costing and reporting, and inventory level management. It also makes inventory audits easier as you have all the necessary information in one place.

Many inventory management systems also include the scheduled dates for equipment maintenance which helps contractors avoid potential downtimes and improve efficiency.

5. Adopt New Technologies

Technological advancements have eased many processes in the construction industry, including inventory management. Companies can harness new technologies to streamline their inventory management and improve logistics tracking. They can track inventory flows with budget-friendly mobile phone scanners.

They can also leverage radio frequency identification (RFID) technology for high-value asset tracking across various construction sites. It helps site managers know the locations of their consumables, equipment, and tools. It also reduces the need to rent more tools when they’re having trouble locating the ones they have.

6. Develop Your Workforce

Workforce management is an essential piece of the inventory management puzzle. Without enough labor, managing inventory gets difficult as you need employees to move and track inventory. Even with sophisticated software in place, you need someone to read and understand the reports generated by the software.

But labor shortages are a common issue that plagues the construction industry. The last few years — especially during the pandemic — saw greater strain on a labor market that was already stretched thin. So, it is essential to shore up your workforce by enacting initiatives like:

Alternative Labor Sources

Protect your construction business against labor shortages by looking beyond conventional recruitment methods. Ask your existing workforce for referrals, frequently monitor dedicated online job boards, and use search engines and construction temp agencies.

Employee Training

A well-trained staff is often more aligned with their job roles and expectations. Regularly training your staff promotes productivity, performance, commitment, job satisfaction, and security. It helps them do their job with ease and manage inventory systems better.

Offer Positive Feedback Regularly

As a construction business leader or manager, you must provide consistent feedback to your employees. Helping your workforce learn about their strengths and weaknesses allows them to work on their skills and become better assets for the company. It also prevents inefficiencies, especially in inventory management.

Adhere To Industry Best Practices

Maintaining alignment with industry best practices will help you proactively identify improvement areas and upgrade workplace conditions. Ensuring workplace safety also makes your staff feel important and valued. It will thereby boost staff morale, productivity, operational efficiency, and business profitability.

You can also give your employees personal protective equipment (PPE) to safely handle and move inventory and perform other duties on the construction site. Incorporating safety measures promotes long-term employee retention.


3 Traps To Avoid in Construction Inventory Management

Here are three traps to avoid when managing your construction inventory:

1. No Training

Most inventory systems need a certain level of know-how for smooth operation. But many businesses perceive software training for employees as a waste of money, which leads to issues in the long run. They may lose important data or be unable to read reports, leading to inefficiencies and losses.

2. Lack of Inventory Checks

Not verifying a site’s physical inventory against the data on the system may save a little time in the present. But it may lead to counting errors, inaccuracies, as well as wasted time and effort in the future.

Employees may needlessly add misplaced or lost items to the inventory list, leading to losses, operational delays, and disruptions. Lost items that are found may also not be included in the software, leading to unnecessary reordering and a waste of money.

3. Absence of Forecasting and Real-Time Reporting

Wrong forecasting and not using real-time inventory reporting tools prevent proper inventory tracking and reduce efficiencies. It results in order fulfillment failures and unhappy customers.

Timely tracking of supply levels helps you proactively plan for and reorder out-of-stock items. It helps you learn about your most-used and best-selling items and poorly performing and less-used inventory.


Final Thoughts

Effectively managing construction site inventory ensures timely access to supplies and equipment. Using the above strategies and tips will help you simplify construction inventory management while remaining agile and profitable in today’s competitive and uncertain business environment.

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