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Building Operating Management

Understanding the Benefits of Inventory Management



It's important to balance available space, inventory carry costs, lead times, and projected needs. Here are some tips on how to do that.


Facility managers are constantly struggling to balance competing priorities for their operations. Operating and energy costs, personnel requirements, response times, work backlogs: Facility managers understandably tend to focus on these areas as they seek to improve the efficiency of their operations. Often overlooked are the benefits that can be achieved by applying the same attention to managing their inventory. Part of the reason for this neglect is that inventory management is seldom seen as a core responsibility. Equally important, few realize the impact that a good inventory management system would have on practically every aspect of the operation.

It has been estimated that more than $100 billion is spent on operating and maintenance materials by facilities each year — everything from cleaning supplies to replacement parts for building HVAC systems. Studies have looked at what is stockpiled by facilities. They estimate that nearly 10 percent of what is ordered and stocked simply sits on warehouse shelves and never gets used. Eventually, when warehouse space becomes short, the items are disposed of.

If getting a piece of that 10 percent of $100 billion sounds like an opportunity worth exploring, consider a comprehensive inventory management system. By providing facility managers with up-to-date information on what is in their inventory, as well as how and when inventory items are used, these systems can improve decisions concerning what items should be maintained in the inventory, what quantity of those items should be maintained, and when and how many items should be reordered. 

Efficient operations

One of the most important factors in keeping a facilities operation efficient is having the right materials and parts available to maintenance personnel when they need them. Not doing so results in delays and increased costs as personnel scramble to find and order, or pick up off-site, what they need. 

Not having items when they are needed is only part of the inventory problem. The flip side is having too much of a particular item or having items that are no longer needed. Either way, too much capital is tied up in inventory. Overstocking also increases the chances of theft and inventory obsolescence, particularly when there are no adequate controls. 

For all facility inventories, managers must carefully balance available space, inventory carrying costs, ordering lead time, and projected inventory needs. Inventory management involves setting up systems and processes that identify what items should be kept in inventory, how many of those items should be in inventory, when to replenish those items, and when and how those items are being used within the facility. The benefits include:

• Inventory balance. A managed approach to inventory helps to eliminate shortages, overstocking, and stock obsolescence. Inventory management helps facility managers find the right balance between carrying too much and too little inventory.

• Inventory turnover. The longer an item sits in the warehouse, the greater the chance is that it will be obsolete. Installed equipment within the facility changes frequently, and if the warehouse stocks an overly large supply of replacement parts specific to the old equipment, they will become obsolete. A managed system will identify items that no longer need to be carried as well as additional items that should be added to the inventory.

• Ease of access. Tracking inventory use will identify items that are used most frequently. By organizing the warehouse so that frequently used items are readily accessible, the time spent retrieving these items will be minimized.

• Tracking of inventory use. One of the most important benefits of an inventory management system is that by tracking the items that are being used, how often they are needed, and what time of year they are needed, facility managers can anticipate needs and make certain that the warehouse is properly stocked when the items are needed. 

• Tracking costs. Whenever items are drawn from inventory, their cost can be tied to the maintenance or service activity being performed. This allows facility managers to accurately track operating costs for those tasks and for individual pieces of equipment. And if the work being performed is reimbursable, the system will provide accurate billing costs.

• Improved efficiency. Inventory management systems come with tools that eliminate many of the time-consuming and error-producing processes associated with manual systems. Software can tie parts inventory to purchasing and billing systems. Bar code scanners can tie parts checked out to individual work orders. Inventory numbers and bar codes identify where the items are stocked in the warehouse. Tools like these help make the entire system more efficient and reduce errors.

While inventory management systems will benefit any organization, they are particularly valuable in facilities with multiple warehouse locations. By tracking inventory and use by locations, the systems can help to eliminate unnecessary duplication across warehouse sites as well as to identify the best storage location for specific items.


Continue Reading: Inventory Management

Understanding the Benefits of Inventory Management

Data Drives Inventory Management Systems

Overcoming Obstacles To Effective Inventory Management

posted on 3/21/2018

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