In the July 2018 Snapshot Survey, we asked contractors all about inventory management. Here’s one survey question and its results from the summary report, which is now available in its entirety to EGIA members.
Question: Does your company have a formal, data-driven forecasting process to attempt to ensure the correct inventory is on hand?
While every contracting company carries some inventory, only 17% of surveyed companies use a formal, data-driven process to forecast how much they should have on hand, while 83% simply estimate. Of course, not having equipment when you need it can cost you sales, but holding excess inventory is likewise going to impact your bottom line by occupying capital you could be allocating elsewhere while increasing the myriad fixed and variable costs associated with warehousing. In a perfect world you’d have zero inventory on-hand while the supplier never misses an order. Short of that however, you should at least proactively incorporate data in order to forecast as accurately as possible. Some considerations include:
• Previous sales history — What products have sold in the past? What quantities? What time of year?
• External influences like utility rebate programs or distributor pull-through programs (rebates, eg)
• Planned growth
• Planned marketing initiatives and associated demand changes
• New equipment models and models that will become obsolete, according to distributor or manufacturer
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For a deep dive into inventory management, material handling, truck stock and more, and to access training materials, recommendations and education pieces, visit the Contracting Best Practices Library at the EGIA Member Dashboard.