3 causes of poor inventory management

poor inventory

Poor tool inventory management can affect all construction businesses - from self-employed tradesmen to large multinational companies. Without the proper systems in place, it’s often extremely difficult for businesses to accurately keep track of what tools they have, where the tools are and the condition they are in.

The symptoms of poor inventory management, however, go far beyond inaccurate stock control and the odd misplaced tool. It can have a huge impact on construction site productivity, which over time can seriously stunt the profitability and growth opportunities of a company.

It's a really common issue, particularly for companies who have grown quickly and are reliant on old systems. Let's take a look at 3 of the most common causes of poor inventory management:

1. Manual inventory tracking & stocktaking

When starting out, most small businesses will use some sort of manual inventory or stocktaking system. While this is logical and inexpensive when starting out, it can quickly become obsolete as you grow. Unfortunately, this often means your recorded tool stock is one step behind your actual inventory levels.

A particularly significant practical issue with manual inventory tracking is that an individual has to physically count and record assets. Not only does this take considerable time - especially if stock is dispersed across sites - but if it isn’t done regularly, it’s easy to assume stock is still there when it's been taken out. This can cause problems when workers require tools that aren’t there, with companies having to hire equipment to make up for poor inventory management. Manual stocktaking is usually overly reliant on one or two people, and if a person isn’t present (due to holidays or sickness), others are unlikely to know what is in stock and where.

Without an automatic system, it’s easy to have excess stock (of both tools and materials), meaning you might accidentally invest considerable capital into equipment and supplies you don’t need. It's also difficult to keep track of the working status of equipment through manual stocktaking, as workers don’t always report breakdowns when returning a tool. This can create numerous issues on-site should workers be equipped with tools that aren't fit for purpose.

These issues are all linked to human error, with manual systems prone to time and productivity setbacks.

2. Excel spreadsheets

As with manual systems, many small to medium sized companies rely on spreadsheet inventory management to manage their stock. While spreadsheets can work in a small organisation, they can quickly lead to serious issues as a business grows and more inventory is kept.

One study of errors in spreadsheets found that just 15 workbooks contained a total of 117 errors. As toolparks become larger, spreadsheets become less and less effective, which can lead to potentially costly mistakes in terms of stock levels and misplaced tools.

A particularly major issue with using spreadsheets is keeping them up to date. Manual input of stock is time consuming (and let’s face it - dull), with spreadsheets often neglected as a result. Many spreadsheets are subsequently outdated, containing stock items that the company no longer owns, or not listing recently procured tools. Often this happens because the person who manages the spreadsheet is not updated when equipment is removed or added to the toolpark.

Spreadsheets aren't reactive either, so there's no way to effectively keep track of what tools are being taken and when. Excel is not equipped to deal with the realities of everyday construction work, such as workers quickly taking what they need for a specific job, tools being returned late, and people not writing down what they have taken.

These issues can have huge implications on a company’s toolpark, with overstock a likely side-effect of using Excel spreadsheets for inventory management. Having an out-of-date record of your company’s inventory means that you are never able to see where your tools are at any given time. This can cause major problems in terms of lost or misplaced items, keeping tools maintained, and ensuring workers have the appropriate tools for the job.

3. Remote equipment

For both manual and spreadsheet-based inventory management systems, remote equipment can cause issues. When a company has numerous sites, keeping track of equipment becomes much more complicated. As tools are taken and moved around sites, it's impossible to know whether equipment is being used, is in storage at a different site, or is broken or missing.

Often this can arise from a lack of transparency across locations. When a system is managed centrally using manual or spreadsheet-based systems, communication between sites can be difficult. While this is frustrating, it's completely understandable - it just isn’t practical or feasible to ask workers to record and update the status of every item they take.

Without a clear sense of what equipment you have in your toolpark, overstock and understock are extremely likely, with workers often being equipped with the wrong tools. This can lead to downtime on-site and increased costs, as well as excess stress for procurement teams, plant managers and workers.

It’s really easy for a company to outgrow manual and spreadsheet inventory management systems - particularly if the business has grown quickly. The various problems associated with these systems can develop over time, and many companies may not realise how inefficient their systems have become.

Effective inventory management helps negate these problems by allowing you to see clear, up-to-date information on your stock, which can vastly improve your overall productivity.

For more advice on how managing your assets can increase efficiency in your toolpark, download our free productivity guide. As well as providing essential information on inventory management, the guide will give you a variety of practical tips on improving all aspects of productivity on-site and across your toolpark.

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