Inventory Management vs. Asset Management

Inventory management tracks the stock that comes in and goes out of a company’s stores and warehouses. Asset management tracks the equipment and supplies that a company uses to run the business.

In other words, inventory management and asset management both track a company’s property. But inventory management focuses on the flow of items a company sells or parts it uses to make goods. One of the goals of inventory management is to find the right balance of stock to satisfy customer demand or, in a manufacturing environment, supply production lines. Asset management, on the other hand, monitors items an organization uses internally, which are not for sale. Asset management also deals with ensuring asset value and availability.

How Asset Management and Inventory Management Work Together

What Is Inventory?

Inventory, also called stock, is the products, raw materials, supplies or parts a company holds to sell or build new products. The four types of inventory are raw materials, work in progress, finished goods, and maintenance, repair and operations (MRO).

Read the article on inventory basics to learn more about the types of inventory.

What Is an Asset?

Assets are resources that a company uses to run a business, manufacture items or otherwise create value. Assets include the equipment, fixtures and furniture that an organization owns or leases and intellectual property like patents.

What Is the Difference Between an Asset and Inventory?

The difference between assets and inventory is that a company sells inventory to make money. Assets offer the business a different type of value, helping the company buy and manage inventory.

Inventory includes products, parts and materials, and how much is on hand may change over time. Assets include equipment, fixtures and furniture, and the amount of assets a company has at any given time is usually stable.

In accounting, inventory appears as current assets because a company keeps it for less than 12 months. Current assets also include accounts receivable and expenses, such as insurance policies. Inventory that doesn’t turn over after 12 months is considered dead stock, or obsolete inventory, and is counted as a liability.

What Is an Inventory Asset?

Inventory assets are the finished products, parts or raw materials that a company intends to sell. In accounting, a company records inventory as a current asset on its balance sheet. In manufacturing, inventory assets serve as the buffer in case there’s a spike in demand.

Inventory assets are key to a business because asset shortages affect revenue. During peak production or sales times, production lines and retail channels require a consistent supply of stock to satisfy customers.

Inventory Asset vs. Inventory

Both inventory and inventory assets are company assets. However, not all assets are inventory. Companies sell stock or use raw materials from their inventory to make goods to sell. These are inventory assets, and may sometimes be referred to as simply inventory. Assets are items, like machinery, that a company uses to manage or create inventory.

What Is Inventory Management?

Inventory management tracks stock as a company adds, sells, moves and stores it. The practice also determines when and what new stock to order to avoid shortages and helps a company maintain a healthy inventory turnover ratio.

Types and quantities of stock often change, making it challenging to track and maintain. Inventory management mitigates that challenge and offers these benefits:

  • Better Inventory Accuracy: This allows you to know what’s in stock and order only the amount of inventory you need to meet demand.
  • Reduced Risk of Overselling: You won’t oversell products if you have better tracking of what’s in stock and what’s on backorder.
  • Cost Savings: Stock costs money until it sells. Carrying costs include storage handling and transportation fees, insurance and employee salaries. Inventory is also at risk of theft, loss from natural disasters or obsolescence.
  • Avoiding Stockouts and Excess Stock: Minimize the number of days, if any, that items are out of stock to avoid carrying too much inventory with better planning and management.
  • Increased Profits: A better understanding of both availability and demand leads to higher inventory turnover, which leads to greater profits.
  • Greater Insights: You can also easily spot sales trends or track recalled products or expiry dates with inventory tracking and stock control.
  • Better Terms With Vendors and Suppliers: Inventory management also provides knowledge of which products sell and in what volume, insights you can use to negotiate better prices and terms with suppliers.
  • More Productivity: Good inventory management solutions save time that could be spent on other activities.
  • Better Customer Experience: Customers that receive what they order on time are more loyal.

Implementing inventory management could include a warehouse management system to reorganize warehouses to place popular items near packing areas, as well as writing procedures that describe how to receive, putaway, pick and ship items.

A related practice is inventory control, which focuses on the daily activities of managing stock in a warehouse or store. The major difference between inventory management and inventory control is that inventory management encompasses the entire process of forecasting demand, ordering and managing stock on hand.

How Does Inventory Management Work?

Inventory management helps a company monitor the life cycle of its stock. The process includes receiving and storing goods in a warehouse and picking, packing and shipping. Inventory management gathers data on these activities to improve inventory turnover and increase fulfillment rates.

Effective management prevents understocks, overstocks and obsolete stock. In addition to reducing inventory carrying costs, the practice prevents a company from tying up cash in inventory that won’t sell. It’s important that an organization document its inventory management processes. Examples include having a logical warehouse layout, keeping items in the same locations and dedicating time for regular stock checks and counts.

What Is Asset Management?

Asset management is responsible for overseeing items a company uses to operate. Asset management tracks equipment, vehicles, computers, devices, fixtures, furniture and essential documents.

Governments, nonprofits and companies all use asset management.

How Does Asset Management Work?

Asset management traces the complete life cycle of an asset, from when a company buys it until its disposal. Each asset has a unique ID and an owner who maintains it.

The benefits of asset management include:

  • Reducing duplicate purchases
  • Reducing the frequency of asset audits
  • Increasing awareness of lost items
  • Improving tracking of important documents for legal or regulatory compliance
  • Enhancing quality control and quality assurance (QA)
  • Reducing costs through regular repair and maintenance checks
  • Minimizing equipment downtime because the system prompts users to order parts before scheduled maintenance
  • Reduces labor costs because employees always have the resources they need, when they need them
  • Limits downtime

Implementing an asset management program begins with understanding the condition and performance of current assets. Do a gap analysis to survey assets and what users need from them. Then consult all stakeholders to establish asset performance goals.

What Is a Fixed Asset?

Fixed assets are items and property that a business cannot easily convert to cash. Fixed assets are also called tangible assets or property, plant and equipment (PP&E). Examples include buildings, land, machinery and computer equipment.

For tips on managing fixed assets and lease accounting compliance, see “NetSuite Fixed Asset Management.” Find out how to make fixed asset accounting easier, by reading “Overcoming the Challenges of Fixed Asset Accounting.”

What Is Asset Tracking?

Asset tracking uses electronic tags to track assets. Tags could be scannable barcode labels or more advanced versions that broadcast the asset’s location using Bluetooth Low Energy (BLE), GPS or radio-frequency identification (RFID).

How Does Asset Tracking Work?

In asset tracking, each item receives a unique asset ID. The asset system records the ID and other data in the system log.

Asset tracking is responsible for knowing an asset’s current location, user, condition, calibration or repair date and storage location. Asset tracking systems can be basic or have a robust set of features and can monitor items in near or real time and update tallies daily, weekly or annually. For example, staff may use a few barcode readers to scan tags manually or multiple static readers may scan RFID tags. Real-time monitoring is particularly useful when many people carry items from one site to another.

Tracking helps a company know whether an asset is lost or stolen, in good repair or depreciated. Asset tracking removes the need for error-prone, manual monitoring and provides an accurate counts of assets.

How Does Asset Tracking and Asset Management Work?

Asset tracking uses barcodes or electronic tags to record the use of assets. Asset management leverages the data that asset tracking collects.

With asset tracking and asset management, a company reduces administrative costs and improves efficiency. Employees don’t need to locate items physically or search through lists or spreadsheets to determine where they are or their current condition.

How Do Asset Tracking and Asset Management Work Together?

In asset tracking, each time someone uses an asset, the tracking system electronically records it. Asset management uses the scanned data to decide how many assets a location requires and predicts the repair and replacement schedule.

These records provide information for audits and physical counts. Understanding how people use an asset helps companies anticipate maintenance or downtime. Dependable asset tracking and asset management also support better supply chain management.

Inventory Management vs. Asset Tracking

Inventory management tracks the stock a company receives and issues from its stores and warehouses. By contrast, asset tracking monitors individual items that a company uses to run its business.

For example, inventory management tracks where stock is on a shelf in a warehouse. Asset tracking is responsible for monitoring the shelving unit itself.

What Do Inventory Management and Asset Management Have in Common?

Both inventory management and asset management oversee the movement of assets through a company. Both methods aim to reduce costs, make the most of resources and promote efficiency.

Similarities Between Inventory Management and Asset Management

Although inventory and assets serve different purposes, they share similar aims and approaches. Both inventory management and asset management:

  • Ensure a company has enough stock to satisfy demand, without shortages.
  • Verify a company can always find equipment and supplies it needs to sustain operations.
  • Avoid human counting and recording errors.
  • Reduce spoilage of assets or loss through misplacement.
  • Monitor items to determine when to scrap or replace them.
  • Lower costs.
  • Use serial numbers to track an object through its inventory or asset life cycle.

Where Do Assets and Inventory Intersect?

Asset tracking and inventory management systems reduce costs and improve production and service. Manufacturing departments use inventory management systems to aid in the production of goods. Fulfillment departments track sales and the flow of goods through the warehouse or store.

Inventory is an asset because a company invests money in it that it then converts into revenue when it sells the stock. Inventory that does not sell as quickly as expected may become a liability.

Differences Between Inventory Management and Asset Management

Inventory management tracks parts, products and supplies as a company buys, sells or consumes them. Asset management analyzes how a company uses items it owns that it does not intend to sell.

The following table shows the difference between the two disciplines:

Inventory Management Asset Management
Tracks stock as it enters and leaves the company. Manages items an organization intends to keep through their complete life cycles, from procurement to disposal.
Replenishes goods and parts to sell to customers. Implements regular inspection, cleaning, repair or replacement of assets.
Customers only return items to inventory if they are dissatisfied with their purchase. Users borrow items and return them to the asset pool.
Minimal contact with each item and minimal details recorded for items. Determine which assets provide value and which are liabilities.

What Is an Inventory Management System?

An inventory management system is software that tracks stock as a company receives and issues it. Inventory management systems forecast demand, so a company can optimize the amount of stock on hand as much as possible.

For tips on picking a system that’s right for your company, read “Choosing the Right Inventory Management System.” To learn how inventory management can boost your business, read “Inventory Management Systems Are Key to Success for These Three Businesses.”

What Is Asset Tracking Software?

Asset tracking software tracks the location and condition of assets in real time. The software uses real-time data to analyze usage trends, calculate value and depreciation, monitor certification status, schedule upgrades and repairs and predict when a company should replace assets.

Companies use asset management to locate assets, their certification status and when they need maintenance. An asset tracking system follows an item’s life cycle from purchase until disposal.

Asset inventory management is vital because a company must understand what it owns and its value. Otherwise, a company may pay taxes, insurance or other costs for depreciated items or things they no longer hold.

Differences Between Inventory Management System and Asset Tracking Software

Asset tracking software and inventory tracking software differ in what they track. Inventory management software encompasses the entire process of forecasting demand, ordering and managing stock on hand and asset tracking software tracks items that generally stay in the company.

This comparison table details how the two systems differ:

Inventory Management System Asset Tracking Software
Tracks parts, products or materials that a company sells or uses to make things. Tracks items a company keeps for a long time and uses in everyday processes.
Removable labels contain a stock keeping unit number (SKU) or a manufacturer universal product code (UPC). Durable tags add company information and a unique asset ID.
Understands the location and quantities of groups of goods or groups of goods on shelves in a warehouse. Monitors the condition and use of each asset for insurance, financial reporting and other purposes.
Tracks flow of items into, around and out of a warehouse. Tracks the use and flow of an item within a company.
Measures value of inventory and how it changes over time. Calculates asset depreciation.

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How to Choose the Right Inventory Management System with Asset Tracking and Management for Your Business

When looking for an inventory and asset management system, a business should choose a solution that can meet current needs and adapt to future ones. Cloud-based solutions remove many of the headaches that come with software maintenance and upgrades and eliminate the need for dedicated staff to support the system.

Many solutions offer mobile capabilities that facilitate real-time tracking as items move throughout the warehouse, which is critical for accurate inventory management. The right solution should provide inventory control features, calculate asset depreciation and plan maintenance.

NetSuite’s Integrated Inventory Management System with Asset Management Can Help Grow Your Business

If you’re looking for an inventory management system that provides asset tracking and management, consider NetSuite. Its cloud-based inventory management solution offers automated replenishment and accurate cycle counting. Traceability allows you to track items by lot or serial number—ensuring they’re used before expiration dates—across multiple locations, like stores and warehouses.

NetSuite’s Fixed Assets Management offers complete control over the life cycle of an asset, with comprehensive support for depreciation and integration with the accounting module. Learn more about how NetSuite’s Inventory Management System and Fixed Asset Management System can help reduce standard operational costs and increase cash flow.