Inventory Forecasting and Demand Planning in Construction

July 28, 2023 • 6 min read

In the complex world of construction, accurate inventory forecasting and demand planning can make or break your project’s success and profitability. Assessing equipment and materials planning, predicting changing project demands, and forecasting inventory levels directly impact project timelines, budget, and client satisfaction.

This article deep dives into construction forecasting and demand planning to understand the challenges, best practices, and latest technologies that can help.

Inventory forecasting drives projects

Inventory forecasting is one of the most critical responsibilities on a construction job—whether it’s equipment, building supplies, machinery or any other material. It unlocks your ability to accurately predict shifting dates and costs.

Prioritizing inventory forecasting helps you:

  • Optimize construction job resources and management for each project
  • Gain better insight to your excess inventory materials to reallocate or return
  • Evaluate and assign which of your inventory is allocated to a specific project
  • Plan more efficiently across all of your jobs, sites, and locations to reduce waste

Factors leading to poor inventory forecasting

When inventory forecasting and planning demand isn’t tightly managed and controlled, it impacts all aspects of a construction job. Everything becomes more complicated, harder to track, and more time-consuming.

Worse yet, it can cause project delays and financial losses. Inefficient, delayed, or inaccurate ordering can lead to overstock, which means excess inventory and costs. Conversely, it can result in stockouts, bringing projects to a grinding halt with material shortages.

Inventory forecasting is also important when planning for seasonal peaks and valleys. You don’t want excess roofing material in the dead of winter, nor plan resources and materials for building in the sweltering sun of summer.

 Adequate lead times are essential in construction inventory forecasting, which can sometimes be unpredictable. It should include the time you order the product, to the supplier processing your order, to shipping to you, and stocking the item.

Another factor to consider is variability in projects, which impacts the capacity, inventory, and time to get the job done. For instance, if there is rework required on one job site but not another, or equipment failures, a sudden winter storm, or a new government regulation that brings a job to a halt.

male construction worker installing a door - demand planning

4 Best Practices for Effective Inventory Forecasting

You know the “heavy lift” inventory planning and demand forecasting takes, but how can you be sure you’re taking the right steps for your business? 

Whether you’re in residential construction, plumbing, HVAC, or any other type of construction, these inventory forecasting best practices can benefit your business. They have a pivotal role in:

  • Allocating resources more efficiently. Knowing that certain phases of a job require different skills, you can distribute site managers, workers, and other team members with more confidence.
  • Estimating project duration more accurately. Understanding how long projects take based on data means you can create the project schedule and deadlines with more accuracy.
  • Managing costs better. When you can forecast materials, equipment, and other inventory items precisely, it’s easier to stay within the allocated budget.
  • Mitigating risk proactively. Getting in front of potential material or other supply shortages will help inventory demand planning and minimize project impact.

1. Cross-team communication

In construction, teams are often spread out from the main office to a job site, to off-site contractors, and to other locations. Everyone needs to know what’s happening when, whether it’s a material delay, a new city ordinance, or an unexpected project event. Information sharing and project collaboration across teams are critical to forecasting inventory adjustments.

2. Historical data analysis

Reviewing and analyzing past data can and should inform your future inventory planning. Conduct a look-back at prior estimates and actuals for similar job sizes, materials, profitability margin, and other aspects which can help drive future inventory decisions. 

3. Predictive modeling

Adopting predictive modeling techniques deliver actionable insights to improve inventory efficiency, uncover demand forecast patterns, increase supplier efficiency, and be more competitive.

4. Trend forecasting

Staying on top of construction industry shifts is critical for smart inventory management and forecast decisions. This data includes industry growth, materials, regional demands, and other factors that affect inventory needs.


Related: How Sortly Inventory Software Makes Managing Inventory Easy


The role of demand planning strategies

Demand planning plays a central role in managing inventory efficiently. It impacts what inventory you buy and store, helps determine the production schedule, informs your pricing and sales strategy, and more.

Factors outside your control can also affect the ability to accurately forecast demand, including seasonality, economic conditions, supply chain issues, new competition, or unforeseen events.

There are a number of methods to help determine demand planning efforts. These methods are not necessarily mutually exclusive, and you may employ a combination of them at different times for different types of inventory.

Method 1: Demand sensing

Beyond your monthly inventory forecast, short-term forecast to predict what the needs might be. This helps you dynamically make decisions about ordering, shifting, or other inventory moves gleaned from data insights.

Method 2: Customer segmentation

This method analyzes a company’s client base, including their purchasing behaviors and other unique characteristics that affect potential future inventory demands.

Method 3: Market analysis 

Research goes beyond looking at customer trends to develop and distribute surveys. This direct feedback can be invaluable for rich insights into future planning and customer requirements.

Demand planning also calls for an agile supply chain management approach, which means making rapid decisions and shifts based on supply data. Similarly, adopting a just-in-time inventory practice means you’ll have what you need in stock from suppliers when you need it, but reduce the holding cost and space of overages.


Why construction inventory software matters

Optimizing inventory forecasting and demand planning is key to growing your business. Together, they empower your company to stay ahead of market demands, manage inventory levels better, and stay competitive in a crowded landscape. The good news is, you don’t need to be an inventory expert to start forecasting and demand planning today. 

Construction inventory software can take the hassle out of inventory forecasting and demand planning, and makes it simple to put those strategies into practice. By digitizing manual inventory processes and allowing you to track inventory fluctuations in real time, inventory software provides data insights to inform inventory forecasting and demand planning—not to mention ongoing re-ordering.

The rapid pace of the construction industry may make implementing a new technology seem intimidating, but modernizing to an easy-to-use inventory system delivers immediate benefits across your team.  A good construction inventory solution can help you:

  • Forecast and track inventory levels in real-time. These software solutions allow you to get reminders to restock, notify you when a certain item is low, and many other tasks.
  • Improve accuracy through automation. Human error is inevitable in manual processes. With a digital inventory system, you can use resources for higher-level responsibilities.
  • Make data-informed decisions with reports. Having one place to go for inventory forecast, tracking equipment out, or customized reports is invaluable and can easily be distributed.
  • Collaborate with team members. A central hub for real-time project communication and coordination saves time, resources, and frustration for everyone.

Using construction management software for inventory forecasting and demand planning can help you improve project efficiency, save time and money, and serve client needs better. 

If your construction company would benefit from improved inventory management, try Sortly free for 14 days. Sortly lets you organize, track, and manage your inventory—from any device, in any location. Our easy-to-use mobile app lets you and your team update inventory on the job, scan barcodes from your smartphone, set low stock alerts to remind you to re-order, and more. That means you can work more efficiently, plan for jobs better, and serve your customers to their highest satisfaction. Join the over 20,000 construction professionals who trust Sortly as their inventory management solution and start your trial today.