Best Practices for Accurate Inventory Tracking

Arielle Cox

Tony Tye, InTempo Product Manager and former Chief Technology Officer of a multi-location equipment rental business, shares some of his recommendations for more accurate inventory tracking.

When you think about managing your rental inventory, you have to think about the life of a piece of equipment. Let's think about the lifespan of a part number.

That lifespan begins when you purchase a new piece of equipment. You purchase it, you receive it, you control it, you count it, you analyze what you're using, and then you set up your reorder process on what you need.

PO Approvals

A lot of the controls that rental companies put in place start with who is buying the equipment (or parts, or merchandise). Who do you want to be able to order new items? You can use buyer authorization settings in your rental software to control that process. Authorizations are your first defense against wasteful purchasing and can be set up for various product types, categories, and line-item amounts (i.e., the total amount of the purchase order or individual amounts for each product on the order).

Of course, it is possible to be too rigid with your approval limits. If, for instance, you have one manager who wants to approve all purchases, this manager may get 20 + emails per day. That will likely be difficult to keep up with. It may take a bit of trial and error to find your sweet spot. However, one option is to set up different approval workflows for parts, merchandise, and equipment, or to break it down for corporate/regions/districts/locations. This prevents one person from dealing with the responsibility of approving every purchase across your entire organization.

You can also set up approval hierarchies, where different users have different levels of approval authorization. For instance - a 4 can approve a 3, a 5 can approve a 4, and it goes all the way from 0 to 9. If one user is out, a user above them in the hierarchy can approve purchases in the meantime to prevent unnecessary bottlenecks.

Using Requisitions in Place of PO Approvals

Requisitions are different, but they're managed in the same spot in InTempo. I'm a bigger fan of requisitions; I think they’re a more efficient way to manage who's buying what than the PO authority.

If you don't have the authority to cut a PO over a certain level, you can't do it, full stop. Somebody else has to do it. That's where, with requisitions, somebody could put in a requisition, somebody else approves it, and you can order it.

Approvers can go in and approve all of their open requisitions at a specific time of day. For instance, with one customer, a Service Manager had a specific time of day that he would go in and approve all the requisitions to meet a specific order time. They ordered different things every day. The Parts team would then go in and order the parts once they were approved. It was a more efficient process, set up through requisitions.

Standardizing Part Submissions

Once you’ve dealt with who is ordering things, you need to deal with what they are ordering.

Here too, lack of specificity in your system can be a challenge. How many companies, for example, have batteries set up in their ERP with five different part numbers, but it's the same battery? That is a struggle among struggles.

If too many people can set up a part number without a formal process, you end up with a mess. Catalog files are one-way InTempo’s rental software can help you better control your inventory.

Catalog Files run in the background. You can get – for instance – every part number JLG makes. Then, you can update costs. I've loaded up to 300,000 or 400,000 part numbers in the system. You may only use 20 percent of those, but they're there and the description is consistent. When you look for a part and can’t find it in your existing system, you look at the catalog. Once you find the part, you can activate it and set it up in your system with all the correct data.

You can also use item submission queues. Users can fill out all the information about the part number, but it goes into a queue and notifies the appropriate manager. Whoever has the corresponding authority can go in and make sure it's not a duplicate part and has all the needed information. When they hit approve, it creates a part in the system and applies it to whatever transaction the person was in.

Exception reports are also helpful for you to identify recent submissions that may not meet your company’s standard conventions.

Here too, you don't want your policies to be too rigid that they get in your way. You can't have it where your counter can't perform a necessary action if whoever is approving the item submission is off. So, you don’t necessarily want to block the counter team from being able to ad-hoc set up a part. But you can create an exception report so that every time a new part number is set up, an email comes through to the person that is responsible for part setup. When they return, they can review the details and fix anything that needs to be standardized.

Re-Ordering Inventory Based on Your Location File

The Item Location file is another helpful inventory tracking tool – especially when it comes to re-ordering. If you have your re-ordering process set up correctly, you have multiple bin locations and multiple vendors you can track.

Keep in mind, if you're re-ordering from the system’s auto-create PO module, it's going to search for your default vendor. You can override this, but a default is there for speed of faster ordering. Similarly, you can input pre-approved substitute items in case your first preference is out of stock.

ABC Inventory Prioritization

One last tip to consider is an interesting inventory tracking method that Henry Ford come up with that ranks items based on three metrics: cost, usage and hits. This lets you categorize your inventory into tiers: Class A, Class B, or Class C.

How many months in the previous 12 months have you had movement on that part? Nine months out of the year, it's class A part. Two months out of the year, not so much. You probably don't need to keep that unless it's something that's hard to get.

Of course, you do also have other variables, like lead time. You may not use that product often, but it takes you a year to get. When it breaks, the machine is dead and you’re unable to rent it out until you can get your hands on the part, so you may need to keep a backup on your shelf to reduce that risk.

Get More Inventory Tracking Tips from InTempo

Our rental ERP doesn’t just give you a full spectrum of inventory management tools; our Professional Services Team helps you make the most of them. We’ll help you configure your system to reflect the unique needs of your business. It’s not just the solutions that we make; it’s the real-world expertise that helps you run your rental company today while growing it for tomorrow.

For a deeper dive into the inventory tracking tips we shared at our 2024 User Conference, watch the whole session here:

If you’d like to see any of our inventory management solutions in action, contact us for a demo.