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The Perfect First-time Inventory for asset control

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Podcast 1 FINAL

Asset Systems Inc.

I’m Alden Snyder and this podcast discusses the Perfect First-time Inventory for asset control. Our goal today is to cover a range of topics that come into play when developing strategy and conducting the inventory.  While each inventory is unique, there are many common topics which if overlooked or not addressed in a workable way can spell disaster for the project. We hope to heighten your awareness of these issues.

A couple of points of clarity -- an inventory of any size is an expensive undertaking. We believe that conducting an inventory in isolation or throwing out the results at the conclusion of the process is wasteful and a prime reason that inventory projects are often viewed with distaste.  If your only interest is an immediate, short term fix, what follows may not be of interest. Also, our topic is the first-time inventory.  If your starting point is existing asset records, many of the decisions may have already been made for better or worse.  We will deal with these confirmation or audit inventories in a future podcast.

To start, not all inventories are driven by the same motives.  The most common cause is the desire of the accounting department to clean-up the fixed asset ledgers. This comparison of the accounting records to the actual assets in the field is fraught with challenges as we will discuss but remains a frequent motivator. A second trigger is the implementation of a formal asset tracking system once the organization recognizes that their controls are weak or non-existent and the situation desperately needs a reset.  In other situations, a portion of the assets might be targets such as IT, bio-medical, vehicles or some type of specialty equipment.  Finally, the cause may be external – MNA transaction, government/regulatory mandate, ISO compliance, or similar event.  These situations on the surface may skew the project scope in a particular direction and need to carefully be managed to make certain that it does not jeopardize the long term value of the inventory. Many of these situations can influence how the inventory is designed and conducted and we will speak to these as we review the various components.

Next, you will need to settle on the strategy for the inventory. Will your approach be a comprehensive, wall-to-wall effort that will individually identify and record every movable asset, or will you uniquely identify only the higher value items and combine lower cost assets into groups? Is your intention to inventory a subset of the assets or maybe a limited spot inventory to vouch for existing records? Whatever the approach, it needs to be thoroughly understood by all concerned before getting too deeply into the project. You are encouraged to check elsewhere in the organization to determine if other departments may need field data while the resources are deployed. Often a cost sharing between departments can support a more complete project and optimize the field visits.  Managing expectations as these strategies are developed is crucial.

With the strategy in place, you can turn your attention to the actual data to be collected. The information captured in the field is limited to what’s available during a site visit.  Typical elements include complete asset description, location, asset number, serial number and condition. Data that can also be collected if circumstances permit may include custodian or employee name, department or even photos.  Caution is advised when considering valuations in the field.  If the intent is to capture the value for insurance or PPT purposes, the effort may be worthwhile but if the goal is to determine the historic cost of assets attempting to do so in the field rarely yields much of value and can add significant time to process. Please note that these data elements fall short of the requirements for tracking assets long term because some of those data fields can be easily added after the field inventory or can only be added as the asset is managed.

Where the inventory is to be conducted seems obvious – where the assets are! Often, we will see locations, like storage areas or unstaffed locations, be overlooked.  Small, remote sites with few assets may be cost prohibitive to visit and require a modified approach.  Once the physical sites are determined, the granularity of the location assignments need to be considered and coded for ease of input. It may be that GPS coordinates may be sufficient or needed as an additional data point. The final step is to make sure that maps with appropriate location data are available to guide the field personnel through the facilities.

Next up: breadcrumbs.  At the outset, we noted that inventories are expensive.  The only means to reduce future costs is to physically identify the assets, in other words, tag them.  The tag needs to be readable by electronic means – bar code, QR code, RFID or NFC technology. There is a temptation to use a shortcut of the manufacturer’s serial number but, in our experience, it does not work.  Manufacturer serial numbers may be difficult or impossible to locate, not be present on certain classes of assets, may be unreadable or unwieldy or yield inconsistent results in the data base.  Moreover, you cede control for the identification standards to others which will come back to haunt the process. Once you have settled on a tag, you will need to decide which assets should be tagged and which should not and the final numbering sequence. There are several other considerations on labels but too many to unpack here; we will deal with those in a future podcast.

A final consideration before designing the inventory process may be reconciliation.  Particularly with accounting driven inventories, there is a need to reconcile field results to the existing records. It is important to think this step through before the inventory is conducted as it may influence a number of decisions as we have already discussed. What is the basis of the reconciliation – exact match of serial number, match of description/location or simply description? What is the strategy for grouped assets in the ledger if any exist? There will always be items found in the field that do not appear in the ledger.  Should they be added? If so, at what cost? A greater number of items in the ledgers will not be found. Should they be retired? If so, should it be comprehensive or selected based on a formula? Understanding how this requirement will be addressed will greatly influence the design of the process.

With these factors in mind, it is time to turn our attention to the actual inventory process – how will the data be captured, recorded and verified. This is a significant topic that we will discuss comprehensively in a future podcast, but we want to provide some broad principles here. During this phase, there is a tension between the speed that an inventory is completed and the accuracy and usefulness of the results. There are no absolutes, only tradeoffs. Here are several imperatives with inventories:

  1. Generic information is less costly to capture in the field but risks not being useful if it does not adequately identify the assets.
  2. Data must be collected electronically.This is immutable.
  3. Leverage the database to make the task more efficient.
  4. Label placement is key.
  5. If you are visually identifying assets, make sure that those responsible are familiar with the assets they will encounter.
  6. Cover site access to make certain that all needed areas can be accessed with a minimum of delay.
  7. Leave elbow room in the schedule to allow for catchup if things don’t go as planned.
  8. Provide sufficient staffing to get the inventory completed promptly while resisting the temptation to overstaff and create chaos.
  9. Verify, verify, verify.Daily, weekly and at the end of the project.

Remember the inventory process will vary for each project, there is no formula.

As stated, inventories are expensive and formidable undertakings. If you follow these steps, you will avoid many of the pitfalls that others have experienced performing asset inventories. But that alone is not enough.  You need to invest your best understanding of the organization’s dynamics and the expected outcomes to stay on track. Always keep everyone concerned up to speed with progress and results. If you do all of that, you will tip the odds in your favor for a successful project.

That’s it for this installment of Asset Ingenuity.  Thanks for joining us.


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