“Implementing perpetual inventory in building supply operations helps keep accurate, real-time inventory counts, improving stock management, minimizing stockouts, and reducing shrinkage. A perpetual inventory system continuously updates inventory records whenever there’s a transaction, making it ideal for distributors managing large inventories of building materials.
Here’s a step-by-step guide on how to implement perpetual inventory in building supply:
- Understand the Perpetual Inventory System
In a perpetual inventory system:
Inventory records are updated immediately after every transaction (e.g., sales, purchases, returns).
Stock levels are tracked in real-time, allowing for more accurate and up-to-date information on inventory.
The system provides greater visibility and control over stock, reducing the need for manual counts.
Key Benefits:
Real-time tracking of materials
Reduced manual stock-taking
Improved stock accuracy
Better demand forecasting
- Choose the Right Inventory Management Software
To successfully implement perpetual inventory, you’ll need a robust inventory management system (IMS) that supports continuous updates.
What to Look For:
Real-time updates to inventory records as products are sold, purchased, or returned
Barcode/RFID integration to scan items and automatically update inventory counts
Multi-location tracking if you have multiple warehouses or yard locations
Integration with other systems, like ERP, POS, or accounting software, for seamless workflow
Customizable reporting features that show stock levels, sales trends, and order history
Popular Software Options:
NetSuite
TradeGecko (QuickBooks Commerce)
SAP Business One
Fishbowl Inventory
Loc8 (for field operations)
- Organize and Categorize Inventory Properly
For effective perpetual inventory, categorizing your inventory correctly is essential. In building supply, materials can be divided into various categories such as:
Product Types: Lumber, plumbing, electrical, flooring, etc.
Material Grades: Pressure-treated, premium, standard, etc.
Stocking Locations: Yards, warehouses, jobsite inventory, etc.
Units of Measure: Pieces, bundles, cubic yards, square footage, etc.
Ensure each category and unit type is accurately represented in your software, and implement a consistent labeling system to minimize human error.
- Train Your Team and Ensure Accurate Data Entry
For perpetual inventory to be effective, accurate data entry is critical. Even the best software can’t fix problems caused by manual errors.
Training Areas:
Barcode Scanning: Teach warehouse staff to use barcode scanners or mobile devices to update inventory after every sale or receipt.
Receiving and Stocking Procedures: When new stock arrives, ensure it’s scanned and entered into the system immediately.
Inventory Audits: Train staff on how to handle discrepancies between physical inventory and the system’s data.
- Integrate with Point-of-Sale (POS) Systems
A key part of a perpetual inventory system is seamless integration with your Point-of-Sale (POS) system.
Sales Transactions: When a customer buys materials, the sale should instantly update your inventory in the system.
Returns and Exchanges: Returns should also be processed quickly in your system, updating stock levels accordingly.
Bulk Orders: If contractors are placing large orders, you should have features in place to manage bulk inventory and adjust it quickly as goods are reserved for customers.
- Implement Barcode/RFID Technology
Using barcode scanners or RFID technology allows for faster inventory tracking, reducing human error and making data collection more efficient.
How to Implement:
Labeling: Label each item or bundle of materials with unique barcodes or RFID tags that can be scanned.
Mobile Devices: Equip yard and warehouse staff with mobile scanning devices to instantly update inventory records when materials are sold or moved.
- Conduct Regular Cycle Counts
While a perpetual inventory system provides real-time data, occasional cycle counts (rather than full physical inventories) are important to ensure the system’s data remains accurate.
Best Practices:
Conduct regular cycle counts for high-turnover items (e.g., nails, screws, cement).
Focus on high-value items that are more likely to be miscounted or subject to shrinkage.
Perform counts during off-peak hours to avoid disruptions.
- Set Up Replenishment Triggers
One of the most valuable aspects of perpetual inventory is its ability to automate inventory replenishment.
How to Set Up:
Low Stock Alerts: Configure your system to send automatic alerts when stock levels fall below a pre-set threshold.
Automatic Reordering: Some systems can automatically trigger purchase orders when stock reaches a certain point, reducing stockouts.
Demand Forecasting: Use sales data and historical trends to predict future demand, helping to optimize stock levels and purchasing.
- Monitor Performance and Adjust as Needed
After implementation, it’s important to continuously monitor the system’s performance. Regular analysis of inventory data and KPIs will highlight areas of improvement.
Key Metrics to Track:
Inventory Turnover Rate: How quickly materials are sold and replaced.
Order Fulfillment Accuracy: How often inventory matches customer orders.
Shrinkage Rate: Losses due to damage, theft, or errors.
Stockouts: Instances where an item is out of stock when customers need it.
- Maintain Data Integrity and Backup Procedures
Finally, ensure you have backup procedures in place to maintain inventory accuracy in case of technical issues, such as system crashes or data loss.
Data Integrity Tips:
Regularly back up your inventory database.
Set up user permissions to prevent unauthorized changes to inventory records.
Maintain a process for tracking and correcting discrepancies.
Conclusion
Implementing a perpetual inventory system in building supply operations is a powerful way to enhance accuracy, reduce shrinkage, and improve customer service. While it requires a thoughtful approach to selecting software, training staff, and integrating technology, the benefits — including better inventory visibility, smarter ordering, and reduced operational costs — are well worth the investment.
By following these steps and continuously refining processes, your operation will be better equipped to handle fluctuations in demand and optimize stock levels, ensuring smoother business operations and increased profitability.
