The 6 Common Strategies in Inventory Management in Construction
The 6 Common Strategies in Inventory Management in Construction

The 6 Common Strategies in Inventory Management in Construction


Be part of our exclusive Construction Professional list and get exclusive discounts and monthly executive summary

* indicates required
( ) - (###) ###-####
Subscription to Newsletter


* indicates required
Subscription to Newsletter *
* indicates required
Subscription to Newletter *

Construction inventory is a crucial element of most businesses in varying construction trades. Shift inventory fast enough, and you will usually produce more revenue for your company. Now the question is— how do you make this possible?

Before we proceed with the strategies in inventory management, let’s dive into its basics first.

What Is a Construction Inventory?


Construction inventory is a solid, complete list of everything a company or entity has got in stock, even if it’s not yet ready to be used or sold, or stored in a remote area.

A management company inventories the project it maintains. A baker inventories all the types of flour she keeps on hand. A pharmacist’s inventory information shows every medication on the shelves and the number of supplies required to fulfill a customer’s prescriptions.

So, what is the definition of inventory? Often referred to as stock, inventory can either be sold to a client directly or indirectly or help a business carry out its services.

What is Construction Inventory Asset?

Construction inventory assets are items that a company intends to sell for profit. These items can fall under any inventory classification, from raw materials to a finished good or output. Construction inventory assets are also considered business assets and should be carefully tracked and monitored on an inventory list or using online inventory software.

Construction inventory assets are items that a company intends to sell for profit. These items can fall under any inventory classification, from raw materials to a finished good or output. Construction inventory assets are also considered business assets and should be carefully tracked and monitored on an inventory list or using online inventory software. 

Inventory is an essential element of many businesses—and frequently, inventory is regarded as one of a business’s most valuable assets. Since a company can have so much cash tied up in the overall inventory, practicing smart inventory management strategies and tight inventory control is critical. All of that, of course, begins with a good inventory list.

What is a Construction Inventory List?

Construction inventory lists are intensive, detailed reports of every item your construction business stocks.

An inventory list is so much more than a basic list of items. This also reveals important details about each building material tool or equipment, including where a given item is currently located or stored. These lists should contain relevant details, from purchase price to location and supplier information to current item condition.

Below are some suggestions for what to include on your construction inventory list, which can be kept via traditional pen and paper, a conventional Excel spreadsheet, or inventory management software.

  • Name
  • Photos
  • Value/Unit
  • Size
  • Model/Part Number
  • Location
  • Amount in Stock
  • Purchase Price
  • Supplier Information
  • Other Attachments

Some information, like photos and attachments, can be complicated to track on paper inventories or spreadsheets. Applications for inventory can help you record this essential information, even if it doesn’t fit perfectly into a stubborn cell.

Related: Construction Inventory Management: Paper, Spreadsheet, or Software?

What is Construction Inventory Management?

Construction inventory management is organizing, ordering, storing, and using inventory relevant to construction project operations. No matter what your company keeps in stock, inventory management is essential to keeping your flow running smoothly. To fully understand your inventory, your construction team should practice inventory management and strategies consistently. 

Whether your construction company is a huge enterprise or a tiny startup, practicing strict inventory management is critical to your company’s profitability and overall productivity. There are many different platforms to manage your inventory, including using conventional pen and paper methods, entering data into spreadsheet cells, or incorporating inventory management software.

Now, what type of inventory does a construction business stock? Check out below the four main types of inventory and their definitions:

4 Types of Construction Inventory

1. Raw Materials Inventory

Raw materials inventory refers to all the items a manufacturer has in stock but has not yet been put to use for a work-in-process project or a finished good. 

2. Work-in-Process Inventory

Work-in-process, or commonly known as work-in-progress inventory, includes raw materials, labor, and overhead costs. Generally, it is a “big picture” look at inventory costs, as it accounts for things such as preparing items for use or sale or the packaging aspect.

3. Finished Goods Inventory

Finished goods relate to inventory that is perfectly ready to be sold or used.

4. Overhaul Inventory         

Overhaul inventory, which typically involves repair, maintenance, and operating supplies, implies all the inventory needed to complete the finished goods. From wall screws to panel board labels, every little detail you need to keep your business running smoothly can be categorized under overhaul inventory.

6 Common Strategies in Inventory Management in Construction

Now that you understand the basics and specifics of construction inventory management, some strategies can be used to enhance your inventory management practices that you should be familiar with. They can be applied in any areas needed and will likely work with any existing strategies already incorporated in your operation. 

The strategies listed here are only a few of the options available, so it is possible that one that is right for your company’s circumstances may not be listed here. If need be, feel free to search more for additional options.

A few of the most commonly used strategies in managing construction inventory includes the following:

1. Conventional Manufacturing Strategy

Conventional manufacturing is an inventory management strategy that is a tried and true method used with factories and assembly lines for decades. It mainly involves inventory usage, each area with its specific inventory and own segment of the work. Nothing is left to idle in this method, which means that production is continuous, and inventory levels are usually synchronized throughout the line. 

This strategy does have a major flaw, though, as any hiccups in the production operation can potentially through the entire system off. Low inventory levels and other bottlenecks can quickly bring the whole system to a spontaneous halt, causing unwarranted delays for a construction project.

2. WRS: Warehouse Management System

As the name implies, Warehouse Management Systems is best used with warehouse inventories. These are digital systems that enable automation of the entire inventory process and only need staff to enter data and complete tasks. 

A WMS can be very beneficial for companies with extensive inventories, as they help to minimize inaccuracies that are common with high quantities of inventory items. This can, in turn, operation costs, reduce waste, and extend the procurement cycle rate of a construction company. Multiple businesses create WMS software, so there’s are options available on the market for construction companies and procurement teams to choose from.

3. JIT: Just-In-Time Method

The JIT method takes traditional practices and tweaks them a little to establish a better consistency. Instead of keeping inventory levels up to meet the varying production demands, they are kept high to meet customer demands. In most cases, production rates don’t always match up with the demand of the customers, which is how possibilities of surplus develop with the final product a company produces. 

The Just-in-Time method balances things out a little better by reducing product waste, maintenance and storage costs, and profit lost due to out-of-sync demand levels. Integrating this method into your company operations requires paying close attention to the inventory levels of all production materials, resource availability from suppliers, and the market for the product. The entire procurement line can stall due to the inability to keep up with demand and incorrect information.

Related: Construction Inventory Management: The Just In Time Method

4. EOQ: Economic Order Quantity

Another method that considers customer demand, Economic Order Quantity, tries to make that demand at a constant level and synchronizes inventory depletion. As the demand decline, so do the inventory levels; they both reach zero simultaneously, leaving no unhappy customers in the process. There’s a lot of pressure on the timing of things in this strategy, so problems like mistakes or delays can be incredibly detrimental. 

Similar to the JIT method, EOQ involves careful monitoring of critical factors to ensure that levels are correct for the sake of the EOQ strategy’s success.

5. MRP: Materials Requirement Planning Method

Material Requirements Planning heavily relies on the use of software and applications to monitor inventory levels accurately. An intensely detailed and constant analysis of inventory information related to procurement management generates solutions designed to perpetuate production.

For instance, determining the schedule to order new inventory of an item so that the supply never declines below the minimum quantity required to keep things operational. The software and monitoring, not to mention the installation of Material Requirements Planning software, can be costly. The value they incur overtime inaccurately allocating inventory, procurement, and production timing can justify the expensive cost should it be a viable option. 

6. Push or Pull Models

Lastly, the push and Pull models address inventory based on two varying approaches to demand.

First, a pull model depends on the customer’s demands and is another term for the JIT method. 

On the other hand, the push version excludes the current customer demands for products and uses past data to predict the demand in the near future. It’s highly dependent on demand forecasting and the accuracy of data and records. There’s also a huge risk attached to the push model, as slight miscalculations can lead to expensive waste and write-offs.

Some companies use a hybrid version of the push and pull models to establish a system that combines the best features of the two into a highly functioning system. This version is referred to as a lean inventory strategy which allows adjustment of forecasted data to provide more accuracy for future demands.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top