Better and Best
Practices in
Physical
Inventories
By Marla Williams, CPPM
President, Integrated Asset
Management, Inc.
President, Federal Center
Chapter
What is a Best Practice?
a technique or methodology
that, through experience and
research, has reliably led to a
desired or optimum result
FAR 52.245-1
“….the Contractor shall initiate and maintain
the processes, systems, procedures,
records, and methodologies necessary for
effective control of Government property,
consistent with voluntary consensus
standards and/or industry-leading
practices and standards for Government
property..”
Where do I find standards?
• ASTM International
• Voluntary Consensus Standards
Development Organization
• Wide base of users
• Vote to
– Develop
– Amend
– Maintain
ASTM Committee E53
• NPMA and ASTM formed E53 in June, 2000.
• Develops criteria for the management and
administration of durable and movable
assets, including:
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Performance standards
Practices
Metrics
Methods of effectiveness
• Currently 25 Standards have been developed
E2132-01(2007) Standard Practice for
Physical Inventory of Durable,
Moveable Property
• Visit the ASTM.com web site to join.
• Basic Membership with on-line access to the
current standards for $75.00 per year.
• Volume 4.12
• Participate on Committees
Other Sources for Best Practices
• Join NPMA
• Attend your Chapter’s Monthly
Meetings
• Join the Special Interest Group (SIG)
– Property Inventory Management SIG
– Federal or Contract Property SIG
• Never miss the National Education
Seminar
What is a Physical Inventory?
• Verify that your records match the
actual physical conditions
• Includes:
– Identifying property that is not currently
in the system
– Identifying assets that are no longer
needed by the organization.
What Do You Expect?
• Baseline or Fine Tuning your Data?
• What kind of deficiencies will you
find?
• What is your past experience?
• What is the trend?
Loss Rate
• What loss rate is acceptable?
• Weapons, hazardous materials, laptop
computers with sensitive information
may have a zero acceptable loss rate
• Low cost items may have acceptable
loss rates as high as 20%
• Typical Loss Rates -- .5% to 5%
High loss rates =
poor property management
• Cost and effort to replace the item
• Lost productivity
• Release of company-sensitive or personal
info
• Danger to the individual, the community
or the organization
Types of Inventories
• Cyclical or Inventory by Exception
Inventories
• Contract Termination Inventories
• Statistical Sampling
• Wall to Wall
Cyclical or Inventory by Exception
• Every time item is touched, it counts
as “inventoried”
– Receiving, Transfers, Repairs,
Retirements
• Inventory Period Specified
– Every year or two years
• Items not “touched” are inventoried at
the end of the period
Contract Termination Inventory
• 100% Inventory at Contract’s End
• For example, government furnished
equipment must be 100% inventoried.
– Team of Outgoing Contractor, Incoming
Contractor and Government Representative
– Outgoing Contractor locates items
– Incoming Contractor verifies existence and
condition
– Government Rep witnesses
transition
Statistical Sampling
• Based upon the laws of probability
• A small portion of the assets are
inventoried and the results are used to
assess the entire inventory
– If results are favorable, you assume that the
balance of your assets are accurate.
– If results are unfavorable, a 100% inventory
may be required.
• The smaller the sample,
the higher the risk.
Wall to Wall Inventory
• Most common type of inventory
• Requires:
– All locations are visited
– All items are inventoried
• Most expensive type
Frequency
• Typically governed by:
– internal policy
– contract requirements
– government regulation
Frequency – Other Factors
• Type of Equipment
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Hazardous Materials
Precious Metals
Weapons and Ammunition
Equipment with Sensitive Information
• Consequence of Loss
• Security of Environment
– Unlimited access, multiple buildings
– Limited access, tight security
• Potential for Theft/Loss
• Value of Assets
What is included?
• Capitalized Assets
• Accountable or Controlled Assets
–Sensitive Assets
Capitalized Assets
• Useful Life of Over One Year
• Acquisition Cost Greater Than Threshold
– $5,000 to $300,000, depending on size of
organization
– Usually represents 80% of total asset value
• Reported on financial statement
• Any additions or changes must be noted on
annual statements
• Ultimate responsibility of the Chief Financial
Officer.
Accountable Assets
• Items that may be vulnerable to theft
• Computers or PDA’s with personal or
sensitive information
• Hazardous material
• Weapons
• See ASTM E2608 Standard – provides
Equipment Control Matrix
Who Should Do the Inventory?
• Inventory is an audit
• Needs to be performed by individuals
who have no vested interest in the
outcome.
• Use:
– third party vendor
– headquarters personnel
– teams from another location
What Tools Should You Use?
• Over 1,000 assets, should justify
automated inventory tools:
– Commercial Off-the-Shelf (COTS) Single
Workstation System with one HandHeld
Computer <$10,000
– COTS Multiple Workstation System over a
network with two HandHeld Computers
$20,000-$25,000
– Oracle or SQL-based system with customized
screens and interfaces to suit your specific
needs $250,000+
Handheld Computers
• Old handhelds had proprietary operating
systems and limited memory
• New handhelds are portable computers
running Windows Mobile or CE operating
systems:
– Can read RFID, UID codes or bar codes
– Allow multiple configurations or prompts
– Run multiple applications (e.g. work orders,
preventative maintenance, etc.)
Automated Identification
• Linear Bar Codes
– Most common and affordable
• UID
– DOD Program for Equipment over $5,000
– 2d matrix codes and linear bar codes assign
unique identification numbers to serialized
equipment
– Purchase Information is sent to a National
Registry
– Benefit to non-DOD. . .
Automated Identification
• RFID
Tags can be passive or
active
Inventory with Handhelds
or Fixed Station Scanners
Fixed Scanning at Loading Dock, Entrances, and Hallways
makes collection automatic but can be expensive
– Consider for server rooms or areas that contain sensitive
or hazardous materials
– Not a “real” security measure unless hidden inside
equipment
– Cost Effective for High Volume Supply Chain Management
Applications like Wal Mart
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Make an Inventory Plan
• Project Manager should develop a
detailed Inventory Plan and share it
with all interested parties
– Inventory personnel
– Employees
– Security personnel
– Management
Inventory Plan
• Preliminary Schedule
– Dependencies, resource availability,
unforeseen circumstances (Microsoft
Project)
• Temporary Office for Contractor, if any
– If using your system, access to your system
– If their system, lockable private office or
place to store personal items, table, task
chairs, power, telephone, fax and copier
access, internet access, printer, etc.
Inventory Plan
• What Property Records to Provide:
– Barcode Number
– Category, Class, Type, Description
• Features, Color, Material, Width, Depth, Height
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Manufacturer
Model
Serial Number
Location (Region, Building, Floor, Room)
Organization (Division, Department, Unit)
Property Custodian
Status
Purchase Date and Value
Inventory Plan
• Main Contact
– Available during work hours
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Location Contact or Custodian
Access Cards/Security Badges
If escorts are required, how many?
Procedures for Locked Rooms
Maximum Number of Returns to Location
Inventory Plan
• E-mail or Flyer to Employees
– Ask for complete cooperation
– Instruct employees to remove property from
overhead compartments, desk drawers and
storage closets and leave the items out until
inventoried.
– Give employees a contact name and
telephone number for questions.
– Provide copies of the e-mail to the inventory
team - to reduce interruptions.
Inventory Plan
• Bar Code Label Supply
– Consider pre-printed labels or print your
own
Inventory Plan
• Bar Code Labels for Locations
– Some systems use bar code room tags to identify
locations.
• Floor Plans with Location Names and Organization
boundaries
– Assign location names to workstations/cubicles
Inventory Plan
• Condition Codes
Put them in writing
Give Examples
Ask for specific damage information
Inventory Plan
• Status Codes
– IU-In Use
– IS-In Storage (available for use by
another)
– EX-Excess to be turned in
Inventory Plan
• Strategy for Laptops, PDA’s,
Cellphones
– E-mail known owners
– Create Flyer for inventory team to leave
– Host doughnut stations at elevator banks
– Create Mail In Packages for Remote
users
– Don’t Forget Federal Continuity of
Operation Assets (COOP)
Inventory Plan
• Laptops and Docking Stations
– Many users are not familiar with proper
undocking procedures
– Check with IT Department for proper
“undocking” procedures
– Consider assigning special IT Help Desk
person to assist with docking issues during
inventory
• Leave flyer with Help Desk contact at each
station when finished
Inventory Plan
• Strategy for Vehicles
– Station Inventory personnel at
Centralized Maintenance or Fueling
Locations
– Use fuel card system data
– Organize special inventory times that
minimize disruption
Inventory Plan
• Catalogs keep descriptions uniform and
consistent
Identify Categories and Classifications
Basic Types (e.g. PC-Desktop, PC-Laptop)
Manufacturer Names
Model Numbers, Part Numbers
Dimensions (Floor Standing Equipment,
Furniture)
– Furniture Attributes (Color, Material, Finish, etc.)
– Document Catalog Development Guidelines
– Determine Process for Adding New Catalogs
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Inventory Plan
• Digital Images
– Linked to Catalog/Asset by Renaming Image
e.g. J00000234.jpg becomes EP1000,jpg or 123456.jpg
– Can be done with $100 digital cameras
– Place sign in photograph with number to allow
you to rename later
• Can be dry eraser boards with magnets/velcro or preprinted numbers generated in Excel in a large font
printed on plain paper
– Some companies use cameras that will allow
them to assign the name in the camera
Inventory Plan
• Standardize Tag Placement Guidelines
– Keep it simple
– Use photographs to illustrate
– How will it look?
– Is the tag easy to remove or tamper
with?
– If locked, can I access the tag?
– If moved, will it block the tag?
Inventory Plan
• Training
– If Contractor is using your equipment, be sure they
have been adequately trained
– Consider train the trainer sessions for handhelds
– Consider detailed scripts for inventory personnel
• Flyer to Leave for Employees Who Are Out
• Set Progress Goals and Monitor Them
– How many assets will be inventoried each day?
– What level of accuracy should we find during
auditing?
– Are we on target to meet our completion deadline?
Inventory Process
• Ideally, wall to wall inventories should be
conducted building by building, floor by floor,
room by room
• Rooms should be inventoried sweeping from
left to right, right to left or some consistent
pattern
• If done by Organization or Custodial Officer,
may miss items or whole room/areas not
previously recorded – suggest tracking
carefully on master floor plans
Daily Process
• Uploads
– Equipment failures or accidents could lose hours
or days of valuable work if not transferred
• Enter New Catalogs
– New catalogs should be entered immediately to
reduce duplications and keep descriptions
uniform
• Update Master Floor Plan
– Master Floor Plan should be updated to reflect
each team’s work, locked rooms or unusual
conditions
Daily Auditing
• Run Reports by Location
• Randomly audit 5% of each inventory
team’s work – catching problems
while they are small . . .
Daily Meetings
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PM posts each team’s counts and reasons
for daily gains and losses
PM meets with teams at the end of each
day:
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to receive feedback from teams about their
progress
review previous days audit results
share productivity gains or losses
Go over information about changes in schedule,
etc.
Interim Reconciliations
• Run Exception List of Items Not Found
by previous location
• Send Inventory Personnel back
• Update inventory data
• Run Exception List of Items Not Found
by Organization and Location
• Send list to the Accountable Organization
for further research
• Third Party should verify items found
Final Reconciliation
• Reconcile all assets inventoried by tag
• Does the system look for duplicate
Serial Numbers?
• Look for Serial Number matches
between:
– List of All New Assets Tagged
– Exception Listing of Items Not Found
• Update reconciliation
Final Reports
• Run several reports or spreadsheets:
– All New Items Tagged by Organization
– All Items Not Found with Purchase Cost
by Organization
– All Items Found with Purchase Cost by
Organization
Import Inventory Data
• If you used a Contractor’s Inventory
System, the inventory data will need
to be imported.
• If required, the file format and data
elements should be specified in the
Request for Proposal.
Results
• Measure annual overage or loss rates
by overall number and value
• Also makes these calculations for each
Organization
• Also calculate these values by
category of equipment
• Compare new information to previous
losses/gains for trend
Investigate
Generally, if the total value of your
losses are in excess of 5%
Or you have an Organization with losses
in excess of that rate, further
investigation is required.
Independent Review
• Form a temporary committee
• At least three people without responsibility for
property under review
• May individually or collectively examine property
and/or records.
• Determines the circumstances of a specific
instance involving, loss, damage, destruction or
similar matters
• Results may indicate failure to observe
procedures, discrepancies, premature or excessive
wear or requests for early disposal
Possible Improvements
• Too many assets not tagged:
– Consider requiring assets to be tagged before
contractors are paid.
– Consider centralized receiving
– Look at credit card purchases
• IT assets missing:
– Consider putting scanners in the hands of IT
Technicians and provide data to their Help Desk
system.
– Consider linking to auto-discovery tools
• Key to Success
– Get those assets tagged and identified when they
arrive. . .
Now its up to you!
You can just rely on the physical inventory
to maintain accuracy and continue to get
the same results, or worse,
or
you can look at the physical inventory as
an opportunity to make improvements in
the property management process
Questions?
Marla Williams, CPPM
President
Integrated Asset Management, Inc.
marla@weinventoryassets.com
(800) 731-9569
Severna Park, Maryland
President, Federal Center Chapter