How to Deal with Excess Inventory in Construction
How to Deal with Excess Inventory in Construction

How to Deal with Excess Inventory in Construction?


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No matter how lean your operation is, your construction business will most likely end up with excess inventory. Any slip-ups when it comes to your list will lead you to extreme costly effects. Excess in your inventory is typically quantified as any amount larger than your target. You may be purchasing too much and becomes exceedingly optimistic in forecasting, resulting in overstock. In many cases, you won’t be recovering all of your costs and it’s very concerning.

It is crucial to optimize inventory control and implement measured inventory management in construction to help prevent excess inventory. If you find yourself having such issues in your inventory, read on this blog to discover the best way to deal with excess inventory.

The Real Problem with Excess Inventory


Excess inventory or overstock are items and resources that are not yet used and probably cannot be used anymore due to many underlying reasons. These resources and supplies are often kept for weeks, months, and even a few years without being used. These issues are often a direct result of poor construction inventory management and unpredictable market demand. It may cause you financial burdens and can result in loss of revenue.

Excess inventory can become a severe financial drag in your construction business. For instance, if you know what to do with these excess supplies or stock, no matter where they came from and what they are – it is considered a dilemma. Excess inventory also causes you to run out of space to continue storing these extra loads. There are many reasons and factors why your construction business suffers in excess inventory. Take a look at the following: 

  • Inaccurate predictions/forecasting

If your construction business mistakenly forecasts product demands, you may overcompensate and can end up in excess inventory. Your predictions must take into consideration some factors like sales history and market data.

  • Poor inventory management system

Your inventory management team handles basic tasks such as purchasing and ordering construction materials and supplies while collaborating with the other teams within your firm. If the system is disorganized or faulty, you can easily encounter excess inventory issues.

  • Unreliable reasons

If you found out your suppliers are unreliable, you may find yourself overcompensating to prevent insufficient inventory, leading you to acquire more supplies than you need. For instance, perhaps their deliveries are usually late, or items are frequently back-ordered. Hence, you need to order or overbuy in advance, resulting in excess inventory.

  • Lengthy lead times

From sellers to manufacturers, anyone involved in your inventory chain may provide long lead times that make it harder to predict how much you need to order correctly. If this happens to you, you may feel the need to keep more construction supplies on hand.

  • Demand variability

It is harder to order the right amount of supplies and stock when the product demands vary from time to time. To make sure you don’t fall short, you can likely play it safely by purchasing extra rather than not having enough.

Reduce your Excess Inventory Using These Ten Ways


1. Divert the inventory to new products

Perhaps the raw materials and components can possibly be used in other lines or sectors. Your inventory may need some serious rework. Thus, the cost of that must be taken into account. Today, some construction companies have created their products from their excess materials and supplies. Others have made products from scrap and also overage from others.

2. Trade with industry partners

Competitors can be your quick friends in terms of sharing supplies and inventory. The items and supplies taking space in your stockroom or warehouses can be precisely what other company needs right now. In return, these companies may have stock and construction supplies you and your team can use. This type of negotiation helps your inventory management and builds strong relationships, which is considered a valuable aspect of the industry.

3. Liquidate excess inventory if necessary

First, identify which products and items from the inventory you have too much. You can best track everything using online inventory software. Next, take action on the items and stock with the largest gap between the amount in the inventory and your company’s actual needs.

In cases like this, you are probably looking to get rid of the excess stock and supplies. You can negotiate with a liquidator if you decide to get rid of everything. A liquidator will purchase up everything you have for a fair and reasonable price. That’s all for the deal.

4. Plan ahead

Make sure you are taking pre-emptive measures even before finding yourself in an overstock situation. In your effort to protect cash, try collaborating with your suppliers on shared risk solutions, staggered delivery, or extended payment terms. Make sure also to reevaluate your company’s actual needs and assortments if the production hasn’t started yet.

Also, when it comes to inventory, making someone accountable and responsible is a great way to improve the overall management, thus, reducing the possibility of excess. Determine the maximum time a specific item sits in the warehouse before immediate action is necessary. Each item and stock should have a different answer.

Moreover, it would be best to consider factors such as storage costs, item shelf, lead times, and how quickly items become obsolete.

5. Make a list of perishable and non-perishable resources

So okay, this might be the hardest action you can take. You need to start somewhere and the very first thing you have to do is prepare the construction inventory list and then execute an accounting of all stocks and resources your company owns. Doing so will help you determine your company’s needs versus what it didn’t need, preventing excess inventory. To further assist this effort, consider these two categories, perishable and non-perishable.

Perishable resources are items designed to be used one way to another:

  • Oil filters
  • Saw blades
  • Engine belts
  • Screws and bolts
  • Pens and markers
  • Note pads
  • Etc.

Non-perishable resources are suitable for long-term:

  • Construction tools: power and non-power
  • Construction equipment 
  • Ladders
  • · Computers, printers, other devices.
  • Company vehicles
  • Blowers, shop-vac, etc.

6. Return for a credit or refund

If, by any chance, your supplier allows this solution and will offer you a full refund and a reasonable discount, then this may be the best option for you. You will probably take a hit on both shipping and managing supplies, but at least you can swap out any dead excess in your inventory for something that’s more useful.

7. Sell to your customers

The route of this plan relies heavily on whether your customers are businesses or plain consumers. If you sell excess construction items directly to businesses or distributors, approaching them right away. Make sure to approach them differently. You can offer finished goods since most consumers are always looking forward to it. You may try packaging such items and give a discount price. 

8. Set rules

Contractors should create rules on what exactly to do with excess inventory. A few options include selling items to employees at a reasonable discount and giving some items from inventory to a charity. Your crew members can also receive selected items from inventory as a job perk.

You can personally ask suppliers to take some returns if necessary. Today, most suppliers will accept to do so regardless of whether you were past the return window, particularly if you’re willing to pay a restocking fee. It makes some sense to pay a restocking fee compare to keeping inventory for several years. In a worst-case scenario, try disposing of items instead of spending time and money storing them again.

9. Analyze the causes 

Look deeper into why you wound up too much in the inventory in the first place? Do you order buffer stock due to unreliable supplier? Is it because of the production bottlenecks? Do you purchase so much due to poor inventory monitoring? Are your items all aligned with distribution capacity and sales forecasts?

The answers to such questions should help you zip in on effective solutions. This may include smoothing out supplier and production problems and improving inventorying tracking.

10. Monitor your inventory using the inventory management software

Brilliant decisions start with the well-collected information. Make sure to have an excellent track of your inventory using a specialized system that records and stores quantities, acquisition, date, locations and reallocation frequency of all items. Proper monitoring and tracking help you prevent excess problems in your inventory. 

If you search for a better way to manage your inventory, deploy one of the best software solutions in the market – Pro Crew Schedule. You can quickly look at the stock level and access all item details through your phone and tablet. If you wanted to have more control over your inventory, Pro Crew Schedule is the best option you’ve got!

This software tool isn’t only for inventory management but also other critical areas. Here are its excellent benefits:

  • All-in-one platform
  • Time-tracking and monitoring 
  • Document control and sharing
  • Effective task delegation
  • · Construction crew management
  • Real-time collaboration
  • Cloud-based storage
  • User-friendly and easy to explore

If you’re new to this software solution, click here to get a FREE live demo and enjoy your 30-day FREE trial!

Key Takeaways


 Inventory excess will costs your construction business valuable resources and time. In addition to this, inventory ties up in your capital. If you are not managing it effectively, it’ll quickly absorb valuable cash flow and worse, it may hide inefficiencies within your operations. That is why it is vital to follow the ten ways outlined above to control your control excess properly.

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