What Every Contractor Needs to Know About Managing Inventory - December 2022

Fri, Dec 23, 2022 at 8:00AM

Trent Cotney, Partner, Adams and Reese LLP

These days, everyone is feeling the pressure of finding the right materials and getting them on time. It is an ongoing challenge. However, once your materials are delivered, it is crucial that you know how and where to store them. Too often, contractors might be tempted to improvise, which can be the easiest approach for the short term. But in the long term, it pays to have an organized system in place.

Purchasing Process

After you win a bid and begin the project, purchasing materials is a key process. It often involves negotiating with suppliers around quantity and price. Then, you must create a schedule for all the materials to arrive. The major materials take priority since they will likely require more time for installation. You will probably acquire miscellaneous materials from a distributor and you can get those on shorter notice.

Some contractors collect lists of materials needed for the next day and place orders daily. While this tactic eliminates the need for managing inventory, it can be risky. Materials might not be delivered before workers arrive the following morning or they could be delayed even further. A safer approach is to order everything in advance and then schedule specific items to arrive the day before they are needed.

In some cases, contractors choose to order only about 80 percent of the materials they need and then order the remainder as they get closer to project completion. This strategy helps keep inventory down, but it can be dangerous if vendor supplies run low. Read more.

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