Inventory Management vs. Asset Management
Inventory management and asset management are two distinct but related areas of business. While inventory management tracks the flow of items a company sells or uses to make goods, asset management monitors the equipment and supplies used internally by the organization. Inventory management focuses on finding the right balance of stock to satisfy customer demand, while asset management ensures asset value and availability.
What Is Inventory?
Inventory refers to the goods, raw materials, supplies, or parts that a company holds either for sale or for use in producing goods. It is also known as stock. There are four types of inventory: raw materials, work in progress, finished goods, and maintenance, repair and operations (MRO).
What Is an Asset?
An asset is something that a company possesses and utilizes to generate income, increase productivity, or provide other benefits. Assets can include tangible items such as buildings, machinery, and inventory, as well as intangible items like patents, trademarks, and copyrights.
What Is the Difference Between an Asset and Inventory?
Assets and inventory are different in that inventory is sold to generate revenue, while assets provide value to the company by enabling it to manage inventory effectively. Inventory is made up of products, parts, and materials, and the quantity of inventory can vary over time. Assets, on the other hand, include equipment, fixtures, and furniture, and the amount of assets owned by the company typically remains stable. In accounting, inventory is classified as a current asset since it is held for less than 12 months, and it is reported alongside accounts receivable and other current assets. However, if inventory does not sell within 12 months, it is considered obsolete or dead stock and is recorded as a liability.
Understanding Inventory Assets
Inventory assets refer to the stock of finished products, parts, or raw materials that a company has on hand to sell. These items are recorded as a current asset on the company’s balance sheet in accounting. In a manufacturing environment, inventory assets serve as a cushion in case there is a sudden increase in demand.
Inventory assets play a crucial role in the success of a business because shortages can negatively impact revenue. In times of peak production or sales, retail channels and production lines need a steady supply of inventory to meet customer demands.
Inventory Asset vs. Inventory
An inventory asset is a type of asset that refers to the finished products, parts, or raw materials that a company intends to sell, while inventory is a broader term that encompasses all items a company holds for sale or use in the production of goods. Assets, on the other hand, refer to all resources that a company uses to generate value, including machinery, intellectual property, and property, among others. In short, inventory assets are a subset of inventory, which is a subset of assets.
What Is Inventory Management?
Inventory management is the practice of monitoring, organizing, and controlling a company’s inventory as it moves through the supply chain. It involves tracking inventory levels, ordering new stock, and ensuring that products are stored and shipped in a timely and cost-effective manner. Effective inventory management helps companies avoid stock shortages, reduce the risk of overselling, save costs, and increase profits.
Managing inventory can be challenging, especially as stock levels and demand fluctuate. However, good inventory management can help companies achieve the following benefits:
- Improved Inventory Accuracy: By accurately tracking inventory levels, companies can avoid overstocking or understocking products, and only order the necessary amount of inventory to meet demand.
- Reduced Risk of Overselling: When companies have better visibility into their inventory, they can avoid overselling products that are out of stock, which can damage their reputation and customer loyalty.
- Cost Savings: Inventory costs money to store, transport, and insure. By minimizing the amount of excess inventory, companies can reduce carrying costs and lower the risk of theft, loss, or obsolescence.
- Avoiding Stockouts and Excess Stock: By managing inventory levels more effectively, companies can minimize the number of days that items are out of stock and avoid carrying too much inventory, which can reduce the risk of stockouts and excess inventory.
- Increased Profits: Better inventory management can help companies achieve higher inventory turnover rates, which can lead to greater profits.
Greater Insights: Inventory tracking and control can help companies identify sales trends and track product recalls or expiry dates.
Inventory management involves a range of activities aimed at efficiently managing a company’s inventory to meet customer demand while minimizing carrying costs. This may include implementing a warehouse management system to streamline warehouse operations and organizing items based on popularity. Additionally, creating procedures for receiving, putaway, picking, and shipping items can help ensure that inventory is properly tracked and managed.
Inventory control, on the other hand, is a subset of inventory management that focuses on day-to-day activities related to managing inventory in a warehouse or store. The primary difference between inventory management and inventory control is that the former involves forecasting demand, determining when and how much to order, and managing stock levels, while the latter focuses on the physical management of inventory to ensure that items are properly accounted for and available when needed.
How Does Inventory Management Work?
Inventory management is the practice of overseeing the flow of goods from the manufacturer or supplier to the warehouse, and from the warehouse to the point of sale. The process involves tracking the inventory throughout its lifecycle, from receipt to shipping. It also entails forecasting future demand, determining optimal inventory levels, and implementing strategies to maintain and manage inventory.
Effective inventory management involves tracking the inventory’s status and location, as well as its movement within the supply chain. It is important to keep track of stock levels to ensure that a company does not run out of products or have too much inventory that goes unsold. Additionally, inventory management software can help automate the process and provide real-time data on inventory levels, demand, and sales.
The ultimate goal of inventory management is to reduce carrying costs and increase fulfillment rates, while ensuring customer satisfaction. By implementing best practices such as organizing the warehouse, keeping track of inventory levels, and monitoring demand, a company can avoid stockouts, overstocks, and obsolete inventory. This not only saves money, but also ensures that customers can receive their orders on time and that the company remains competitive in the market.
Definition of Asset Management and it Benefits
Asset management is the practice of monitoring and maintaining the items a company uses to operate. This can include equipment, vehicles, computers, fixtures, furniture, and important documents. Asset management is utilized by a wide range of organizations, including governments, nonprofits, and businesses.
Asset management involves tracking an asset’s entire life cycle, from acquisition to disposal. Each asset is assigned a unique ID and an owner who is responsible for its maintenance. Implementing an asset management program can yield a number of benefits, such as reducing duplicate purchases, increasing awareness of lost items, and improving regulatory compliance.
To begin an asset management program, a company must first assess the condition and performance of its current assets. This can be done through a gap analysis, which surveys existing assets and identifies areas for improvement. Stakeholders should then be consulted to establish performance goals for the assets. By effectively managing assets, companies can reduce costs, increase efficiency, and minimize downtime.
What Is a Fixed Asset?
Fixed assets are long-term tangible assets that are held by a company to support its business operations. These assets cannot be easily converted into cash and are typically expected to provide benefits to the company for more than one accounting period. Examples of fixed assets include buildings, land, machinery, vehicles, furniture, and computer equipment. Fixed assets are reported on a company’s balance sheet and are usually depreciated over their useful lives to allocate their cost over time.
Understanding Asset Tracking and Its Benefits
Asset tracking is a method of monitoring a company’s equipment, furniture, and other assets using electronic tags. These tags can take the form of scannable barcodes, GPS devices, or radio-frequency identification (RFID) tags. Each asset is given a unique ID, which is recorded in an asset management system.
Asset tracking systems are designed to keep track of an asset’s location, user, condition, repair history, calibration dates, and storage location. The level of sophistication in the system can vary, from basic features to more advanced systems that monitor assets in real-time.
Asset tracking is useful for preventing loss, theft, or misplacement of assets. It also helps companies keep track of when assets need repair, calibration, or maintenance. By automating the monitoring process, companies can save time and reduce errors that often occur in manual tracking.
Asset tracking provides an accurate inventory of a company’s assets, enabling them to reduce the number of duplicate purchases and minimize equipment downtime. It also helps companies comply with legal and regulatory requirements related to asset management.
Asset tracking is an essential tool for companies looking to optimize their asset management practices. By automating asset tracking, businesses can save time, reduce errors, and improve their bottom line.
The Synergy between Asset Tracking and Asset Management
Asset tracking and asset management work together to streamline a company’s operations and increase productivity. Asset tracking involves the use of barcodes or electronic tags to record the use of assets, while asset management leverages the data that asset tracking collects.
The benefits of combining asset tracking and asset management include reduced administrative costs and improved efficiency. Employees don’t need to locate items physically or search through lists or spreadsheets to determine where they are or their current condition. Instead, they can access real-time data on asset location, user, condition, calibration or repair date, and storage location through the asset management system.
By having accurate data on the use of assets, a company can make informed decisions about repair and maintenance, reduce equipment downtime, and avoid unnecessary purchases. Asset management can also help with legal or regulatory compliance, by providing an easy way to track important documents.
The synergy between asset tracking and asset management helps companies to optimize their operations, save time and money, and improve their bottom line.
Understanding the Relationship between Asset Tracking, Asset Management, and Inventory Management
Asset tracking and asset management work together to improve operational efficiency and reduce administrative costs. When an asset is used, asset tracking records the event electronically and asset management uses the data to make decisions about the asset’s lifecycle, repair, and replacement.
Asset tracking and asset management also provide data for audits, physical counts, and support better supply chain management. On the other hand, inventory management tracks the stock a company receives and issues from its stores and warehouses, while asset tracking monitors individual items that a company uses to run its business.
For example, inventory management tracks where a product is on a shelf in a warehouse, while asset tracking monitors the shelving unit itself. Understanding the difference between inventory management and asset tracking is crucial for companies to make informed decisions about their asset and inventory management processes.
Understanding Asset Tracking and Its Benefits
Asset tracking is a method of monitoring a company’s equipment, furniture, and other assets using electronic tags. These tags can take the form of scannable barcodes, GPS devices, or radio-frequency identification (RFID) tags. Each asset is given a unique ID, which is recorded in an asset management system.
Asset tracking systems are designed to keep track of an asset’s location, user, condition, repair history, calibration dates, and storage location. The level of sophistication in the system can vary, from basic features to more advanced systems that monitor assets in real-time.
Asset tracking is useful for preventing loss, theft, or misplacement of assets. It also helps companies keep track of when assets need repair, calibration, or maintenance. By automating the monitoring process, companies can save time and reduce errors that often occur in manual tracking.
Asset tracking provides an accurate inventory of a company’s assets, enabling them to reduce the number of duplicate purchases and minimize equipment downtime. It also helps companies comply with legal and regulatory requirements related to asset management.
Asset tracking is an essential tool for companies looking to optimize their asset management practices. By automating asset tracking, businesses can save time, reduce errors, and improve their bottom line.
The Synergy between Asset Tracking and Asset Management
Asset tracking and asset management work together to streamline a company’s operations and increase productivity. Asset tracking involves the use of barcodes or electronic tags to record the use of assets, while asset management leverages the data that asset tracking collects.
The benefits of combining asset tracking and asset management include reduced administrative costs and improved efficiency. Employees don’t need to locate items physically or search through lists or spreadsheets to determine where they are or their current condition. Instead, they can access real-time data on asset location, user, condition, calibration or repair date, and storage location through the asset management system.
By having accurate data on the use of assets, a company can make informed decisions about repair and maintenance, reduce equipment downtime, and avoid unnecessary purchases. Asset management can also help with legal or regulatory compliance, by providing an easy way to track important documents.
The synergy between asset tracking and asset management helps companies to optimize their operations, save time and money, and improve their bottom line.
Understanding the Relationship between Asset Tracking, Asset Management, and Inventory Management
Asset tracking and asset management work together to improve operational efficiency and reduce administrative costs. When an asset is used, asset tracking records the event electronically and asset management uses the data to make decisions about the asset’s lifecycle, repair, and replacement.
Asset tracking and asset management also provide data for audits, physical counts, and support better supply chain management. On the other hand, inventory management tracks the stock a company receives and issues from its stores and warehouses, while asset tracking monitors individual items that a company uses to run its business.
For example, inventory management tracks where a product is on a shelf in a warehouse, while asset tracking monitors the shelving unit itself. Understanding the difference between inventory management and asset tracking is crucial for companies to make informed decisions about their asset and inventory management processes.
The Similarities and Intersections of Inventory Management and Asset Management
Inventory management and asset management are both important aspects of running a business efficiently. Both methods aim to ensure that the company has the resources it needs to meet demand and avoid costly mistakes.
One similarity between the two is that they use tracking systems to monitor assets and inventory. These systems allow for more accurate counts, lower the risk of human error, and can help predict when items need to be replaced.
Both inventory management and asset management also use data to make informed decisions. They can analyze trends in demand and usage to optimize operations and reduce waste. Additionally, both methods can help a company save money by identifying areas where they may be overspending or where they can cut costs.
Inventory and assets intersect in a few different ways. For example, inventory is an asset that a company invests in with the goal of converting it into revenue. However, excess inventory that doesn’t sell can become a liability. In addition, some assets, like machinery or equipment, may be considered part of a company’s inventory if they are used in the production or delivery of goods.
While inventory management and asset management are distinct practices, they share many similarities and work together to help businesses run smoothly and efficiently.
Inventory Management vs Asset Management: What’s the Difference?
While inventory management is concerned with the movement of parts, products, and supplies within a company’s supply chain, asset management focuses on analyzing how a company uses items it owns, such as equipment or property, that are not intended for sale.
| Inventory Management | Asset Management |
|---|---|
| Inventory management is responsible for monitoring the flow of goods into and out of a company. | Asset management oversees the lifecycle of items that a company owns, from acquisition to disposal. |
| Restocks items and components to fulfill customer demand. | Regularly maintains and services assets through inspection, cleaning, repair, and replacement when necessary. |
| Items are returned to inventory by customers only in the event that they are dissatisfied with their purchase. | Items are checked out by users and returned to the shared asset pool once they are no longer needed. |
| Items are handled briefly and only basic information is recorded for them. | Identify the assets that add value and those that create liabilities for the organization. |
What Is an Inventory Management System?
An inventory management system refers to a software program designed to monitor and record the flow of stock into and out of a company. By accurately tracking the inventory, the system helps companies forecast demand and optimize their stock levels to meet customer needs efficiently.
What Is Asset Tracking Software?
Asset tracking software is a digital tool that provides real-time tracking of assets, enabling companies to locate them and monitor their status. By collecting data on asset usage, condition, and depreciation, the software allows for predictive maintenance and upgrades, while helping companies determine when to replace aging assets.
Asset tracking and management are essential for businesses to keep track of what they own and how valuable it is. Accurate tracking ensures that companies don’t pay unnecessary costs for depreciated or lost assets. Additionally, asset management software helps businesses optimize their operations by providing insights into asset utilization and performance.
Differences Between Inventory Management System and Asset Tracking Software
Although both inventory management systems and asset tracking software share the goal of improving a company’s operations, they differ in the items they track. Inventory management software handles stock from procurement to sale, while asset tracking software monitors non-disposable items a company keeps, such as equipment and tools, from acquisition to disposal.
| Inventory Management System | Asset Tracking Software |
|---|---|
| Tracks items that a company purchases, sells, or consumes as part of its operations. | An asset tracking system tracks items that a company keeps for an extended period and uses regularly in daily operations. |
| Removable labels are equipped with a stock keeping unit number (SKU) or a manufacturer universal product code (UPC) for tracking. | Company information and a unique asset ID are added to durable tags. |
| An inventory management system provides insight into the location and quantities of groups of goods or products on shelves in a warehouse. | Tracks the use and condition of assets for insurance and financial reporting. |
| Monitors the movement of goods into and out of a warehouse, as well as their location within the facility. | An item’s usage and movement within a company are monitored. |
| Calculates the worth of a company’s stock and how it fluctuates with time. | Calculates how much an asset’s value decreases over time. |
How to Choose the Right Inventory Management System with Asset Tracking and Management for Your Business?
To choose the right inventory and asset management system for your business, look for a solution that can meet your current needs and scale up for future requirements. Cloud-based solutions eliminate the need for software maintenance and dedicated staff. Mobile capabilities enable real-time tracking and accurate inventory management. The ideal system should include inventory control features, asset depreciation calculation, and maintenance planning.
NetSuite’s Integrated Inventory Management System with Asset Management Can Help Grow Your Business
NetSuite’s cloud-based inventory management system provides a comprehensive solution for businesses looking to track and manage their assets. With automated replenishment and accurate cycle counting, you can streamline your inventory management process. The traceability feature allows you to track items by lot or serial number and monitor expiration dates across multiple locations.
NetSuite’s Fixed Assets Management provides complete control over the life cycle of an asset, with support for depreciation and seamless integration with the accounting module. By reducing operational costs and increasing cash flow, NetSuite’s Inventory Management System and Fixed Asset Management System can help your business grow.
