Inventory Management vs. Asset Management: What’s the Difference? (2024)

Inventory Management vs. Asset Management

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

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

What Is Inventory?

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

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

What Is an Asset?

Assets are resources that a company uses to run a business, manufacture items or otherwisecreate value. Assets include the equipment, fixtures and furniture that an organization ownsor 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 manageinventory.

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

In accounting, inventory appears as current assets because a company keeps it for less than12 months. Current assets also include accounts receivable and expenses, such as insurancepolicies. Inventory that doesn’t turn over after 12 months is considered dead stock,orobsolete 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 tosell. In accounting, a company records inventory as a current asset on its balance sheet. Inmanufacturing, 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 peakproduction or sales times, production lines and retail channels require a consistent supplyof stock to satisfy customers.

Inventory Asset vs. Inventory

Both inventory and inventory assets are company assets. However, not all assets areinventory. Companies sell stock or use raw materials from their inventory to make goods tosell. 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 practicealso determines when and what new stock to order to avoid shortages and helps a companymaintain 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 instock andorder only the amount of inventory you need to meet demand.
• Reduced Risk of Overselling: You won’t oversell products if youhavebetter tracking of what’s in stock and what’s on backorder.
• Cost Savings: Stock costs money until it sells. Carrying costs includestorage handling and transportation fees, insurance and employee salaries. Inventory isalso at risk of theft, loss from natural disasters or obsolescence.
• Avoiding Stockouts and Excess Stock: Minimize the number of days, ifany, that items are out of stock to avoid carrying too much inventory with betterplanning and management.
• Increased Profits: A better understanding of both availability anddemand leads to higher inventory turnover, which leads to greater profits.
• Greater Insights: You can also easily spot sales trends or trackrecalled products or expiry dates with inventory tracking and stock control.
• Better Terms With Vendors and Suppliers: Inventory management alsoprovides knowledge of which products sell and in what volume, insights you can use tonegotiate better prices and terms with suppliers.
• More Productivity: Good inventory management solutions save time thatcould be spent on other activities.
• Better Customer Experience: Customers that receive what they order ontime are more loyal.

Implementing inventory managementcould include a warehouse management system to reorganize warehouses to place popular itemsnear 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 managingstock in a warehouse or store. The major difference betweeninventory management and inventory control is that inventory management encompassesthe 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 processincludes receiving and storing goods in a warehouse and picking, packing and shipping.Inventory management gathers data on these activities to improve inventory turnover andincrease fulfillment rates.

Effective management prevents understocks, overstocks and obsolete stock. In addition toreducing inventory carrying costs, the practice prevents a company from tying up cash ininventory that won’t sell. It’s important that an organization document itsinventorymanagement processes. Examples include having a logical warehouse layout, keeping items inthe 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. Assetmanagement tracks equipment, vehicles, computers, devices, fixtures, furniture and essentialdocuments.

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 ituntil 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 beforescheduled maintenance
• Reduces labor costs because employees always have the resources they need, when theyneed them
• Limits downtime

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

What Is a Fixed Asset?

Fixed assets are items andproperty that a business cannot easily convert to cash. Fixed assets are also calledtangible 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 FixedAsset Management.” Find out how to make fixed asset accounting easier, byreading “Overcoming theChallenges of Fixed AssetAccounting.”

What Is Asset Tracking?

Asset tracking uses electronic tags to track assets. Tags could be scannable barcode labelsor more advanced versions that broadcast the asset’s location using Bluetooth LowEnergy(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 andother 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 havea robust set of features and can monitor items in near or real time and update talliesdaily, weekly or annually. For example, staff may use a few barcode readers to scan tagsmanually or multiple static readers may scan RFID tags. Real-time monitoring is particularlyuseful 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 ordepreciated. Asset tracking removes the need for error-prone, manual monitoring and providesan 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 managementleverages the data that asset tracking collects.

With asset tracking and asset management, a company reduces administrative costs and improvesefficiency. Employees don’t need to locate items physically or search through lists orspreadsheets 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 electronicallyrecords it. Asset management uses the scanned data to decide how many assets a locationrequires and predicts the repair and replacement schedule.

These records provide information for audits and physical counts. Understanding how peopleuse an asset helps companies anticipate maintenance or downtime. Dependable asset trackingand 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 andwarehouses. By contrast, asset tracking monitors individual items that a company uses to runits business.

For example, inventory management tracks where stock is on a shelf in a warehouse. Assettracking 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 acompany. Both methods aim to reduce costs, make the most of resources and promoteefficiency.

Similarities Between Inventory Management and Asset Management

Although inventory and assets serve different purposes, they share similar aims andapproaches. 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 andservice. Manufacturing departments use inventory management systems to aid in the productionof goods. Fulfillment departments track sales and the flow of goods through the warehouse orstore.

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

Differences Between Inventory Management and Asset Management

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

The following table shows the difference between the two disciplines:

What Is an Inventory Management System?

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

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

What Is Asset Tracking Software?

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

Companies use asset management to locate assets, their certification status and when theyneed maintenance. An asset tracking system follows an item’s life cycle from purchaseuntildisposal.

Asset inventory management is vital because a company must understand what it owns and itsvalue. Otherwise, a company may pay taxes, insurance or other costs for depreciated items orthings 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. Inventorymanagement software encompasses the entire process of forecasting demand, ordering andmanaging stock on hand and asset tracking software tracks items that generally stay in thecompany.

This comparison table details how the two systems differ:

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

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

Many solutions offer mobile capabilities that facilitate real-time tracking as items movethroughout the warehouse, which is critical for accurate inventory management. The rightsolution should provide inventory control features, calculate asset depreciation and planmaintenance.

NetSuite’s Integrated Inventory Management System with Asset Management Can Help GrowYourBusiness

If you’re looking for an inventory management system that provides asset tracking andmanagement, consider NetSuite. Its cloud-based inventory management solution offersautomated replenishment and accurate cycle counting. Traceability allows you to track itemsby lot or serial number—ensuring they’re used before expirationdates—across multiplelocations, like stores and warehouses.

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