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What are the differences between IT asset management and inventory management?

Differences between ITAM and inventory management

IT asset management (ITAM) and inventory management are both useful practices that can benefit any organization using IT. Inventory management can exist without IT asset management, and in fact, it does in many organizations as it has been in existence and in use for a much longer time. Conversely, ITAM can’t really exist without some form of inventory management, as this provides a strong base of trusted and accurate information about what assets exist. Before exploring inventory management vs IT asset management, it is first important to understand each practice. 

What is IT asset management (ITAM)?

ITAM is defined as a set of business practices that join financial (such as depreciating value of IT assets), contractual (in the case of software licenses), and inventory functions (such as inventory management) to support lifecycle management and strategic decision-making for the IT environment. IT asset management, unlike inventory management, is not just about keeping the books. IT asset management systems leverage related processes, including inventory management, to maximize the benefits for an organization.

To understand what IT asset management is, it is first important to define an asset. ITIL v3 defines an asset as anything that could ‘contribute to the delivery of a service.’ ITIL 4 defines an asset as ‘any financially viable component that can contribute to the delivery of an IT product or service.’ It defines IT asset management as ‘the practice of planning and managing the complete lifecycle of all IT assets.

Why is asset management important?

Asset management is vital to the success of any organization. With a well-organized and accurate asset management system in place, you can:

Manage asset data better

Asset management is important because it allows you to better manage your asset data. You can use this information to track the location, condition, and maintenance history of each of your assets. This will allow you to make sure that you are using all of your company’s assets in the most efficient way possible.

Maintain thorough and accurate asset records

Keeping accurate records of your assets is the first step to making sure that you are keeping track of the value of your business. Without accurate and thorough records, it’s impossible to know how much an asset is worth, which means that you won’t be able to make informed decisions about what kind of equipment or machinery will provide the most benefit for your company.

Prepare and file reports quicker

The faster you can prepare and file reports, the more time you have to do other things. It’s easy to set up asset management software so that it automatically updates the data on your spreadsheets whenever it detects changes in your documents. Additionally, it will also make it easy for other people who need access to this information to find it because they will be able to locate everything they need in one place. This will reduce confusion and ensure that everyone involved with producing a report has access to all of the necessary information so that nothing gets overlooked or forgotten about when creating their own part of the project.

Easily manage change requests

Asset management is important because it allows you to easily manage change requests. When your company is growing rapidly, it’s important to be able to keep track of what items are being requested and when. Asset management helps you keep track of all of this information so that you can easily find out if a specific item has been requested recently, or if an order has been placed for an item before.

Automate asset transfers

Asset management also allows you to automate the transfer of assets between different accounts. This means you can quickly and easily move your assets around without having to manually do it yourself. It also means that you can ensure consistency across all locations and no matter where they are, you can keep track of them all.

Save maintenance costs

When you don’t have an asset management program in place, you’re more likely to suffer unexpected costs from unexpected failures. Asset management allows you to set up a schedule for regular maintenance checks, so that when something breaks unexpectedly, you can plan for the cost of repairs and have them done quickly.

Generate reports and analytics

Asset management allows you to generate thorough reports and analytics about assets and their usage, maintenance, anomalies and more, track the performance of your assets, including their efficiency and their cost per unit, and have visibility into the status of each asset, including when it will need to be serviced.

Increase awareness of lost assets

When you have an asset management system in place, you will be able to track the location and status of any assets that are missing from your organization. This means that you can easily identify the scope and scale of any problem with missing assets. You will also be able to identify patterns in missing assets so that you can take steps to prevent further losses from occurring.

Limit downtime

Asset management helps you reduce downtime. You can schedule maintenance and repairs and have a better idea of when things will break down. This also means that when something does break down, you’ll have time to replace it or fix it before it affects your business operations.

What is inventory management?

It is a business process responsible for managing, storing, moving, sorting, arranging, counting, and maintaining an inventory of items both used by the organization and produced by it. Hence, the scope of inventory management is not restricted to managing IT assets.

Inventory management can be applied to items of legislative requirements, such as assets with a value that are included in the company’s accounts and items that need to be carefully tracked, such as saleable products that it makes and the components that make up the saleable products.

Unlike IT asset management, inventory management has been used for a long time. It is primarily concerned with ensuring that a sufficient quantity of items is available to enable the business of the organization.

For example, if the organization makes desktop computers, the inventory management system has to ensure that there are always enough components in stock, such as cases, CPU boards, and keyboards to be able to assemble the computer. To do this, it has to keep track of the items it already has, but it also has to track the flow of incoming orders and components, including maintaining a forecast of expected use.

The information provided by inventory management can then be used by IT asset management systems to make strategic decisions. Using the example above, if your inventory management system identifies that there are regular issues with procuring the CPU boards from a particular supplier, IT asset management could be used to make a strategic decision to shift to another supplier.

In IT, inventory management can also be used to track the supply of consumable items such as keyboards, mice, cables, printer supplies, and backup media within the organization. In this type of usage, inventory management systems can help to prevent an organization from running out of these items. 

Why is inventory management important?

Good inventory management within IT requires a good understanding of the link between supply and demand for your IT components. This is particularly true for consumable items and for IT assets such as software licenses.

If you supply more than the demand requires, you will have unused inventory to track and you may have potentially wasted money. If you supply less, you risk the continuity of your services.

Inventory management can even apply for items that you rarely purchase, such as network routers, as it’s a good idea to maintain spare stock of critical IT equipment that your IT services require.

What are the activities of inventory management?

IT asset and inventory management both involve the application of several different activities. For effective inventory management and to support IT asset management systems, every one of these activities should have your attention.

Research

Analyze every occasion when you ran out of something important, and find out why it happened. You can analyze  the stocks you hold of IT equipment, components, and software and how old the stock is. This activity in inventory management can help you to get some quick wins by targeting your efforts on aspects where you can quickly get value. Instead of guessing, use the data that you gather to fix issues with how you have previously managed inventory.

Demand patterns

Review the usage statistics of IT components for the last few years to identify any peaks or troughs in demand and see if there is a pattern. This will help you build a model for inventory management that you can use to avoid shortages or excessive stock in the future. One key driver can be the number of new hires into the organization, as these drive demand for IT equipment. By working closely with your human resources function, your inventory management approach can benefit by getting an early sight of potential increases and decreases in demand. 

Inventory and supply costs

It is important that you understand the costs of both the inventory and the costs of managing it. These costs can include various expenses incurred throughout the supply chain, including freight, storage, distribution, and disposal. Review how your current approach to inventory management has impacted these, and identify where streamlining activities or re-negotiating supply deals could lower the costs. 

Process automation

Inventory management is essentially a set of related workflow processes. With today’s technology and tools, there is no reason to rely solely on manual processes for your inventory management system. Reducing the amount of human intervention in the execution of your inventory management processes will limit the opportunities for human error. For example, adding barcode tags to your inventory items and investing in barcode readers should eliminate incorrect identification and speed up data capture in your inventory management. 

Supplier performance

Inventory is usually sourced from suppliers. Hence, they are an essential part of your inventory management approach. Engage with them on what you are trying to do; they may have ideas that could improve your inventory management. One example is where a supplier will keep stock of regularly used items at your location, still owned by them. You only pay for it when you use it, saving you the costs of excess stock by using best practice techniques. 

Inventory classification

Different types of IT components will have different patterns of usage and lead time. If you use different categories for different types, then you can tailor how you apply inventory management, recognizing that you need to address different periods of demand for specific types of IT assets. This type of best practice can be readily achieved using inventory management tools.

Set category goals

To accompany your inventory management classification, establish appropriate goals for each category so that you can measure and track efficiency. Using this technique will also enable you to track different issues and determine if they are category-specific or are signs of a more significant issue. 

Prioritize changes

When you first start with inventory management, you might find several areas that need improvement, but it is unlikely that you will have the capacity to deal with all of them simultaneously. Review and prioritize issues that can be fixed quickly and cost-effectively. This could be as simple as creating a buffer stock for items that you regularly run out of, such as toner cartridges. 

Inventory management policy

It is important to document and demonstrate how you intend to operate inventory management in a formal policy. This can change over time, but unless it is formally documented, it is highly likely that you will end up with inconsistent ways of managing inventory. The policy should include the responsibilities for different activities, the categories, and any protocol that must be followed. 

What are the differences between IT asset management and inventory management?

Can inventory management and asset management work together? Yes. 

Are they mutually exclusive? No. 

Inventory management and asset management are both crucial aspects of any business. However, the two functions are not the same thing. Here are some key differences:

Inventory management IT asset management
Focuses on recording stocks as they enter or leave a company’s possessionFocuses on recording everything from physical assets to digital assets 
Involves replenishing stocksInvolves managing the entire lifecycle of an asset 
Customers only return items to inventory if they are dissatisfied with their purchaseUsers borrow assets from the pool of available assets, use them for an agreed upon amount of time and then return them so others may use them when needed
Customers only return items to inventory if they are dissatisfied with their purchaseMore hands-on approach to managing your investments with regular inspection, cleaning, repair or replacement of assets

Differences between IT asset management and inventory management

While inventory and assets serve different purposes, they share many of the same aims and approaches. Both inventory management and asset management:

  • Make sure that you have enough stock to satisfy demand, without shortages
  • Ensure that you always find equipment and supplies it needs to sustain operations
  • Verify if an object has been used or damaged, as well as monitor items when they need maintenance or replacement
  • Reduce costs by keeping track of every item’s location at any given time
  • Rely on serial numbers to track an object through its inventory or asset lifecycle

How can Virima help?

Virima helps you go beyond simple inventory management tools and offers you a set of tools and solutions to address IT’s most critical management challenges and will help you improve the overall health of your estate while enabling your organization to benefit from configuration management, including your CMDB, and IT asset management. 

Virima’s IT Discovery, IT Asset Management (ITAM), and IT Service Management (ITSM) solutions can help you maximize the value of business processes and service management investments. Virima features can automatically discover and map your critical IT resources and the interconnections that link them to one another, your applications and services, and your users.

Request a demo to find out  about Virima’s IT and service management solutions.

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