A part of a construction company’s success hangs by the thread of inventory management. This industry’s inventory includes all materials and supplies needed to complete a project. Examples would include tractors, screws, heavy machinery, power drills, and more.
In 2023, the US construction sector was valued at $2.3 trillion. Going forward, it is experiencing a growth rate of 4%. Maintaining an up-to-date inventory can help contractors enjoy greater shares of the industry’s revenue.
It will also enable them to deliver each project on time with little to no glitches. In this article, we will discuss four inventory management best practices for construction enterprises.
Conduct a Comprehensive Inventory Analysis
It is impossible to have a sufficient inventory unless there’s a clear idea of what’s available and what’s missing. In other words, construction companies must keep track of their equipment and tools at all times.
This will require a thorough inventory analysis or audit. The process makes it easier for stakeholders to understand all materials at hand across different storage locations. Inventory analysis is generally not a one-step process.
It involves multiple steps where the existing inventory is categorized in terms of product type, importance, usage, and optimal storage requirements. Using it, the contractor can develop an inventory hierarchy where each item is assigned its location based on project goals and expected profits.
Whether employees manually verify the inventory or technology takes the lead, the following must be noted –
- The exact location of each item
- Confirmed quantities of an item versus the amount required for the project
- Stock’s condition, whether it appears to be at risk of damage, obsolescence, or shortage
- Whether the tools’ conditions remain the same or are steadily deteriorating
Staff Workforce Properly
The construction industry is currently hard-pressed for workers. Studies have found that an estimated 1.9 million employees may leave construction to join other sectors in 2024. What makes matters worse is the fact that this industry requires the right professional for the right task to see positive project results.
In some cases, contractors lack enough workers to efficiently reallocate, track, and organize their inventory. Poor resource management leads to unexpected delays and loss of revenue. Construction companies must verify whether they have adequate staff.
Moreover, the teams must be scheduled properly to get the most out of the inventory management process. In the case of larger enterprises, hiring a regional inventory manager may solve the issue.
Implement Just-in-Time Principles
Every contemporary construction company needs to have a ‘just-in-time’ inventory, which can align the current stock to scheduled project deliveries. A good example would be the availing of construction equipment rental services.
From earth-moving equipment like power generators and compaction dirt tools to handy materials like chipping hammers and concrete saws, you can get any on rent. According to SitePro Rentals, the extensive inventory and flexible rental conditions can always make a contractor project-ready.
This way, you can ensure project timeliness and mitigate the risks commonly associated with over or under-stocking. To implement this strategy effectively, keep in mind the following –
- Prepare a list of the most important equipment based on the project at hand. Then, create an inventory delivery schedule.
- Choose an equipment rental service that enjoys a good market repute for consistently delivering high-quality tools on time.
- Keep a contingency plan also handy just in case there are any delays.
Perform Periodic Demand Forecasting
It would not be wrong to state that a construction company’s lifeblood is demand forecasting. It is the method using which future demand for certain equipment and tools is predicted based on existing historical data and company analyses.
Market trends can deeply affect the demand and supply of equipment. It’s important to stay in touch with suppliers and discuss possible vulnerabilities in the supply chain. Suppliers often have a clear idea of what other contractors are ordering and can offer much-needed insights into proper inventory management.
The following best practices in demand forecasting should aid project success –
- Consistent collection and analysis of inventory consumption data
- Thoroughly reviewing current stock’s condition to predict when critical equipment may be required in the future
- Using relevant technologies to forecast demand
- Constantly evolving forecasts based on new projects and their requirements
As we wrap up, let’s delve into the top challenges currently faced by contractors. Besides labor shortage, construction companies are struggling to maintain steady cash flow, adopt technology rapidly, ensure occupational safety, and manage inventory.
With this article, we have tackled one of these problems. Gradually, companies need to step up in all areas if they wish to evolve with the lightning-fast pace of the industry in question.
Article and permission to publish here provided by Daniel Washington. Originally written for Supply Chain Game Changer and published on June 19, 2024.
Cover photo by Josh Olalde on Unsplash.