Assets vs. Inventory: Explaining the Difference

As a construction crew settles to build a project, their productivity relies on the availability of resources. The term “resources” comes with a diverse definition. It could be anything. Big or small. Cheap or expensive.

The ultimate goal behind a successful construction project is to help workers be as productive as possible. This could be done by making sure the in-time availability of all the tools, equipment, and materials they need.

For the sake of simplicity and clarity, we categorize these resources under two categories:

Assets and Inventory.

Now, you might be scratching your head… And asking yourself this question:

 “Is inventory an asset?”

To your surprise, it isn’t.

Let’s draw the line between them and show you how – After understanding the difference – you can control the project costs and limit the waste in a major way.

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What Is The Term “Inventory” Used For In Construction Operations?

Inventory is the raw material or supply you need to get a construction job done. You need inventory to complete the projects, and they come in and go out given your need for every project.

We classify inventory into four types:

Raw Material: You need raw material to start your project. Imagine you’re building a house. You need wood, cement, nails, and pipes. The list goes on. That’s your raw material.

Work-in-progress: The supply of goods you need at each stage of the project.

Finished goods: The ready-made materials. Ones that could be sold or transferred.

MRO (Maintenance, Repair, and Operations): You need this to maintain the performance of your equipment.

Inventory keeps your back in a project.

It ensures you:

1. Never run out of resources in the middle of a project
2. You should not hold too much

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What Is A Construction Asset?

You leverage assets in the long term to keep your business up and running. A construction company owns the assets, such as fleet or equipment, to generate revenue.

They are worth more. They have a long life span. (Typically a year)

If you are a construction company… Assets are the resources that serve your OVERALL business, not a single project.

Is Inventory An Asset?‍

Answered:

Here’s an easy way to remember this…

Inventory is for a project or a couple of projects, assets are for the business.

Inventory can be used up and replaced regularly, or at least from project to project.

Assets are your long-lasting tools/resources. They are upgraded only when needed.

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How & Why Do We Manage The Construction Inventory?

If you hold too much inventory for a long period, it becomes risky for the company.

Useless and unwanted inventory ties up the cash.

Additionally, the products can spoil and simply become obsolete if not used.

This can potentially put a huge dent in your wallet.

Too little inventory – on the other side of the picture – can lead you to run out of resources in the middle of the project.

If something like this happens… 

Imagine your team has to wait around for materials. You don’t have enough resources to get the project going, especially when the demand is high.

Management helps strike the right balance.

You can rest assured that you are not running out of resources, and you’re not overspending on resources either.

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What Does Asset Management Look Like In A Project?

Asset tracking and management are crucial for a company’s success.

This helps reduce the asset loss and downtime.

You have your assets in total control. 

With this setup, utilizing these assets across the project becomes just efficient.

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How We Can Manage Our Assets And Inventory?

Many companies are juggling with manifold spreadsheets or paper forms for inventory and assets management.

And some are using outdated software solutions.

All of these solutions make it hard to keep track of your equipment. These desperate annual solutions take a lot of your valuable time to manage the resources.

Instead, here’s a better and more efficient way:

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A Tailored Construction Inventory Software That Makes Your Life Easier

Managing inventory and assets with a traditional setup is overwhelming and time-consuming.

Good construction management software makes it easier and more efficient.

You can manage all the incoming assets, check out assets to targets, and keep notes on each asset.

Construction inventory software, like Clue, empowers you to manage inventory in real-time.

You can assign the equipment to the workers or employees with ease.

This software system takes care of your management tasks. Which – otherwise – takes a lot of time, effort, and energy.

We help you solve all of that. So you focus on what matters the most (a.k.a. building amazing projects)