What Is the Difference between Inventory Management and Asset Tracking?
Asset tracking and inventory management are terms that are sometimes used interchangeably, but there are critical differences between these functions and the software used to improve each of these applications.
Both types of solutions are focused on improving resource optimization and reducing costs. But while both asset and inventory management systems involve tracking items, the difference between inventory management and asset tracking lies in how those items are tracked and — more importantly — why they are tracked. Generally speaking:
- Assets = what you own
- Inventory = what you sell (or consume)
The former is a fairly stable and predictable pool of items, while the latter can be a highly volatile moving target.
Asset tracking is focused on computers and software (aka: IT assets), tools, machines, equipment, vehicles, important documents, furniture, and other items that companies use internally for their own operations or that are a part of their manufacturing output. Assets often fall under capital expenditures, and there are a fixed number of assets at any given time.
Benefits of Asset Tracking
Asset tracking systems help companies reduce asset auditing efforts while improving asset inventory accuracy to nearly 100%. This produces substantial savings in labor costs, unnecessary equipment losses, and subsequent duplicate purchases.
When the assets being tracked are tools or machines involved in the production of final goods for sale, the value becomes one of increased quality and improved end product, happier customers, and improvements to the bottom line.
When important documents are being tracked, losing a single file could have drastic legal or financial consequences. In this scenario, the value of a modern asset tracking system is equally important to that of quality control/assurance in manufacturing operations.
Implementing Asset Tracking
All these benefits result from a business’s ability to better determine where each asset is, who used it last, when it was last serviced or calibrated, when it was last repaired, where it should be stored, what condition it is in, and when it will need to be replaced. Barcodes, RFID tags, and serial numbers can be used to track items, and their condition or location can be updated in real-time or on a daily/weekly/annual schedule, depending on the application.
The software used for asset management can range from very straightforward, such as a small barcode application, to very complex, like that of a large RFID implementation involving hundreds of fixed readers and automatic real-time tracking for multiple asset types.
Inventory management systems help companies manage stocks of consumable items across a variety of environments. This can apply to a wide range of markets — from optimizing incoming materials and outgoing finished good in the manufacturing industry to managing on-shelf stocking and re-ordering in retail settings.
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Unlike assets, inventory is constantly being depleted and replenished. This volatility can also make it a very intricate system to manage depending on the size and the complexity of the inventory use. The amount of raw steel at an automotive factory, the number of toys on a retail store shelf, or the amount of a particular medication at a pharmacy can vary wildly based on market conditions, seasonality, sales and promotions, or even the weather.
How Does Inventory Management Work?
Inventory management leverages supplier data, such as materials costs and available supply of parts, as well as customer data, like sales history, to help improve planning and forecasting for production and sales.
It helps track consumables, replenish stock, and locate items within a warehouse or a store. Typically, these systems include receiving, picking, packing, shipping, and replenishment functions. They are targeted at warehouses, distributors, retail stores, hospitals, and other organizations that buy, sell, or consume goods.
Asset and Inventory Intersection
Assets and inventory do occasionally cross over within the same enterprise. Some companies use asset management solutions to track and manage equipment (like servers, oil pumps, or heavy machinery) for service and maintenance that they have already delivered to customers. In this case, an end use item that was tracked using an inventory management solution during production and sales is now being tracked with an asset management solution.
Both asset tracking and inventory management are crucial applications for companies that are trying to contain costs and improve production. Knowing the difference between these operations and the systems that can improve them will help enterprises better address and manage their unique challenges.