When Should Contractors Use Construction Inventory Management Software?
June 9, 2023
The global construction market is currently worth $15.4 trillion.
With a market this size, there is incredibly stiff competition—construction companies and contractors fighting tooth and nail to get the best bids. But even if your company wins a bid, there’s no guarantee the project will be profitable for you.
One reason for this is faulty inventory management.
Poor management of inventory can cost you your business. We’ve seen it happen with large retailers like Walmart; while construction is an entirely different industry, its effects on cash flow and revenue are similar.
You can tackle inventory issues with robust construction inventory management software.
This article examines when your construction project could benefit from inventory management software and how software will help your business thrive in a highly competitive industry.
What Is Construction Inventory Management?
Are you wondering, what is inventory management in the construction industry?
It is a system designed to track and manage different types of assets for efficient workflows. This can include, but is not limited to, the following:
- Hand tools and power tools, plus corresponding information about their types, parts, manufacturers, and instructions for safe use.
- Equipment, such as pallet jacks, excavators, forklifts, etc., and their locations.
- Construction materials, such as timber, drywall, seal coat, etc.
- Consumable inventory, including nails, screws, nuts, bolts, etc.
A well-managed inventory system helps you keep track of all assets for all members of your teams: those on the field, in your back office, and in your warehouse, if you have one. A robust system is constantly updated and provides all the information you need to automate the replenishment of under-stocked items.
If you manage your inventory well, you can approach all your projects knowing that all the assets you need will be readily available. You will be able to meet all project timelines and minimize waste in terms of time, labor, and other critical resources.
With construction inventory management software, you can streamline operational workflows on all levels and for all departments.
Problems Construction Companies Face with Poor Inventory Management
Construction inventory management depends on the scope and nature of the business, so there is no follow a one-size-fits-all model.
Last-minute order fulfillment due to poor inventory management is expensive. It also wastes valuable work hours, leaving workers without the necessary tools or equipment.
At its extreme, it can cause significant project delays leading to late delivery of the project and a negative reputation for your business.
Poor inventory management can impact your people and business in several ways:
Inconsistent Asset Tracking
Manual, paper-based tracking is incredibly time-consuming, labor-intensive, and can lead to many errors.
Spreadsheets or other forms of digital inventory tracking can be a viable alternative. However, without an integrated system for communication among departments and automatic updates, there is the risk of errors across all workflows. There is no scope to identify inventory trends to streamline procurement, either.
With no knowledge of what is in stock, whether a piece of equipment has gone for repair or a certain tool has been misplaced, those on-site cannot work to their fullest potential.
Construction contractors and businesses often buy items in bulk, keeping thousands of units of inventory on hand. It’s cost-effective, but without proper inventory management, there is no system to spot losses due to theft or misuse.
Additionally, when you don’t track what you have and when you acquired it, certain items could get damaged by sitting idle for too long. It can affect the day-to-day operations of your construction crew and impact your bottom line.
The lack of inventory optimization can impact your business in many ways.
Incorrect demand forecasting can lead to wasted work hours and project delays. The lack of preventive and active maintenance for equipment can lead to unexpected breakdowns and higher expenses for emergency repairs.
What Are the 4 Types of Inventory Management Systems?
- Just-in-time management (JIT): Goods are only ordered and received as close as possible to the date or time they are needed. This is done to reduce inventory waste and holding costs. However, if demand is not forecasted accurately, it could halt works in progress.
- Materials requirement planning (MRP): This system ensures calls for taking stock of your inventory, identifying which materials are required to assemble the building components. This is great for optimizing inventory schedules.
- Economic order quantity (EOQ): This scheduling model is based on ordering the number of goods required to make full use of the storage space to minimize expenses. This also ensures minimal excess inventory.
- Days sales of inventory (DSI): This system calculates the average number of days it takes to clear off your holdings and turn them into sales.
Not all of these systems are suitable for construction, though they could have elements that will help you meet the specific needs of your business. So, identify areas where you can further streamline workflows, then look for software that will help you reach the pinnacle of efficiency.
How Construction Inventory Management Software Can Help
Margins in the construction industry are paper thin, averaging 6% per completed project. Companies must operate efficiently to ensure longevity and success.
Robust inventory management software can make a huge difference.
In recent years, the demand for this technology has increased 4x, and for good reason. Take a look at how it can help your construction business, and you’ll be ready to integrate it into your current workflows:
Monitor Assets Anytime and Anywhere
Most construction companies work from multiple locations.
You’ll have a centralized main office for administrative purposes, a warehouse for storing all your assets and equipment, and — of course — your project site.
So, how do you track construction inventory across these locations?
A manual inventory system can give you updates on stock levels, but it is not equipped to help you track your inventory’s whereabouts across different locations.
A common, pocket-friendly option would be to employ asset-tracking software.
QR codes, barcode solutions, and Radio Frequency Identification (RFID) will make tracking all assets across departments easier than ever. You get instant access to item details and track high-value equipment and materials as they change hands in real time. This is a great way to prevent misplacement or theft.
Track Equipment Maintenance Needs
With construction inventory management software, you can closely monitor equipment usage and schedule regular maintenance and repair services to keep them in tip-top shape. This is the best way to prevent unexpected machinery breakdowns and delays.
If you lease equipment, this data will also help you tally up your tasks and get more value without renting them for longer.
Meet Legal Requirements
Construction companies require certain permits and certifications to operate. As with everything related to standards of safety, multiple documents are needed to verify the claims. There must be uniformity and order to avoid the risk of errors.
Inventory management software can help with that. All you have to do is upload the documents on a centralized system, and they’ll be accessible to all relevant parties with just a few clicks.
Ensure Optimal Organization
Construction inventory management software can also help you organize your warehouse based on your active jobs. It ensures better item visibility and provides much-needed transparency regarding the number of assets, materials, tools, and equipment on-hand.
This ensures the optimal use of resources. You can easily avoid low stock or surplus stock levels, which can be detrimental to your cash flow.
You can also use this software to track employee activity with mobile-friendly solutions.
Construction inventory management software is critical for smooth workflows, effective communication, and timely projects. This ensures maximum revenue flow and profitability for long-term success.
Choose the best software solutions to take your construction business to the next level.
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