Navigating the Top 8 Inventory Tracking Challenges

You know what’s changed a lot in our industry in five years? The evolving mindset towards inventory control — particularly the growing inclination towards real-time digital tracking. As I approach my fifth year serving as Nexstar Network’s Inventory Coach, I’ve noticed remarkable changes in the way business leaders are thinking about inventory, and it’s really interesting.

When I first started, ServiceTitan had just launched its inventory module, sparking curiosity among those using the platform. Today, the emphasis on improving inventory management is something many contractors are thinking about on a regular basis, and the amount of questions I see about starting points, optimization strategies, defining success, and navigating potential pitfalls has increased tenfold.

If you’re curious about the process of digitally tracking inventory, read on to gain some tips on how to navigate the top eight inventory tracking challenges.

1. Pricebook Set Up & Maintenance Tips

• The pricebook should be set up with all core parts and equipment, consistent part nomenclature, and accurate part costs. There should not be duplicates.
• A clear pricebook category structure is critical – a good structure will make purchasing, estimates, and replenishment much easier and more accurate.
• It’s important to put a process in place for regular material cost updates from your suppliers.

2. Truck Standardization Tips

• Truck standardization is critical when digitally tracking inventory. Standardization will help with inventory counting, as well as the accuracy of truck replenishment.
• Create a standardized list for each department, with a goal of standardizing from list to layout.
• Setup should include part bin locations, bin labels, and barcodes. A scan book is also helpful.

3. Warehouse Standardization Tips

• The warehouse should be under lock and key with cameras. There should also be a parts counter, like we see in supply houses.
• The warehouse should have bin locations that flow with the way material is counted, as well as barcodes and bin labels.
• Stocking slow-moving and non-moving materials and equipment is a poor use of cash flow. A good rule of thumb is: If the material has not been consumed in one year’s time, it should be written off.

4. Accountability Tips

• The number one issue most contractors face when digitally tracking inventory is parts moving physically, but not being relieved digitally. This poor practice inflates the company’s balance sheet and causes significant write-offs. I cannot underestimate the importance of getting control of this process.
• Your technicians should be 100% accountable for the inventory on their vehicles.
• Field manager buy-in for the inventory process is critical.
• The warehouse should be 100% accountable for the inventory in the warehouse, with the understanding that all physical movements of parts require immediate digital activity.
• An acceptable variance should be ~2-3%, but without accountability, expect to see 10% or more variance.

5. Purchase Order Process Tips

• Without a strong purchase order process, digitally tracking inventory will not be successful.
• All purchase orders should be entered in real time, with accurate costs.
• All transfers need to be completed in real-time.
• An itemized purchase order process is a necessary component for tracking inventory. Without this, digitally tracking inventory will be impossible.
• Be aware of unit-of-measure issues, as they can cause large inventory variances.

6. Receiving Process Tips

• Materials and equipment should be verified for accuracy and damage at time of delivery. It’s best to compare the purchase order, packing slip, and product during the receiving process.
• Blind receiving should not be allowed.
• Designate a separate area for receiving.
• Materials should be received into inventory in real-time.
• Materials should be stocked in part location or staged for a job by the end of the business day.

7. Material Returns Process Tips

• Add an extra bin labeled “excess materials” on trucks. When technicians pick up replenishment, they can bring the excess to the warehouse to be returned.
• Drop and run of returns by the technicians should not be allowed. Techs should notate job number, customer name, and technician name on a form or sticky note.
• Have a dedicated return area per vendor.
• All material returns should occur within 5 business days.
• Best practice: Returns are done by the job vs. by department.

8. Counting Tips

• Plan for twice-yearly or quarterly full counts of both trucks and warehouses.
• The warehouse should have a mixture of daily, weekly, and monthly cycle counts.
• The trucks should have monthly cycle counts. (A cycle count is an audit of several bins; it’s the only way to bridge the gap between full physical counts.)
• Blind counts are best, with a goal of 2-3% variance.

Successful digital inventory tracking hinges on a few key things: meticulous setup and maintenance of the pricebook, standardization of trucks and warehouses, accurate and consistent counting, and strict accountability measures.

It can be slow-going, at first, when you’re trying to put these measures in place. But it’s absolutely worth it. You can achieve the accurate inventory management that’s crucial for sustainable growth and profitability in the contracting sector.