HVAC Inventory Management: Guide for Contractors

What Is HVAC Inventory Management & Why Does it Matter?

HVAC inventory management is the process of ordering, paying for, and storing items that techs need to deliver HVAC services. It includes inventory tracking, asset management, demand forecasting, and vendor management.

Inventory management ensures HVAC technicians have the necessary equipment to deliver projects within set deadlines, boosting customer satisfaction. 

Here are other reasons inventory management is important:

• Reduces wait times: Effective HVAC inventory management tracks inventory levels. It helps you know the exact quantity of each item in real-time, making it easy to place orders early and reduce wait times.

• Prevents stockouts: Tracking inventory levels lets you identify low-stock items in advance, allowing for timely reordering. This ensures service technicians always have the materials they need to deliver seamless customer service. 

• Eliminate waste: Without inventory management, it’s easy to overstock items, tying up resources that could be better used elsewhere. Excess inventory can also lead to waste if the items become obsolete or depreciate.

HVAC Inventory Management Tips for Contractors

Managing inventory can be a pain in the neck, involving different moving parts. To simplify the process, we’ve compiled tips learned through building a comprehensive inventory management platform and speaking with field service businesses.

Here’s a birds-eye view of the tips we’ll be discussing:

Let’s get to it.

Tip #1: Develop an HVAC inventory methodology  

A haphazard approach to inventory management increases the risk of costly errors. 

For example, without an effective system for storing your HVAC tools, items can be misplaced or stolen. Additionally, low visibility into stock levels can lead technicians to assume an item is unavailable, resulting in project delays or lost sales opportunities.

The ideal way to prevent this is to design an inventory system that defines storage locations and uses clear labeling, ensuring techs can access items at any time. 

To label items, use ServiceTitan to attach barcodes, allowing technicians to scan items with their tablet’s camera and add them to a customer’s invoice.

Once scanned, ServiceTitan’s system will automatically fetch the price from our Pricebook in real-time, which integrates with the catalogs of top suppliers.

Warehouse managers, technicians, and other employees can also scan barcodes to identify items when performing cycle counts or receiving purchase orders. This way, the software maintains an accurate inventory record. 

Tip #2: Conduct regular inventory audits

An inventory audit involves checking your storage for the quantity of inventory items. During the process, you note the available items, their quantity, condition, shelf life, and expiry date.

By conducting audits, you can determine which items to restock, dispose of, or be discounted before they lose value. 

For effective results, schedule inventory audits annually or biannually. However, the frequency could depend on shelf life or usage rates as they may require frequent checks. 

Tip #3: Perform vendor management

Inventory management also involves building strong relationships with suppliers to ensure they deliver quality items at favorable prices and flexible payment terms. It influences them to prioritize your orders, reducing lead times and ensuring you always have materials and tools to serve customers.

The soul of vendor management is learning to negotiate favorable payment terms. Once agreed, the terms should be recorded and locked into service-level contracts.

To mitigate risk, always have a backup in case unexpected events prevent the vendor from delivering.

Tip #4: Train and educate staff

All your employees should be familiar with the basics of inventory management, such as accurate record-keeping, demand forecasting, following procedures, identifying discrepancies, and processes related to their day-to-day responsibilities. 

For example, technicians should learn to record used items accurately and return the unused ones to the correct locations. CSRs should know how to confirm inventory levels and estimate when certain parts will arrive before giving customers a completion date.

To ensure you have well-trained staff, include questions related to inventory management in job interviews such as ‘how to handle project delays when an item is out of stock.'

Tip #5: Leverage inventory software

Inventory management is a process that’s far too complex to be done manually without the risk of costly mistakes. 

For example, failing to adjust the inventory record after installing a tool for a client might make you assume it’s still available. This assumption can lead to stockouts, lost sales, angry customers, and inaccurate financial statements. 

That’s why using inventory software is important. It automates tracking and simplifies viewing item quantity, condition, and placement across various storage locations—warehouses, vans, ongoing projects, etc.

One example of an inventory tool is ServiceTitan’s Contractor Inventory Management software. It has an Item Overview tab that presents each inventory item's quantities, locations, and total stock values.

Clicking each item reveals a tab containing more detailed information, such as usage frequency, available quantity and location, and deployment history. This functionality allows you to keep track of your inventory easily.

Tip #6: Track key performance metrics

To quote the popular maxim, “You can only improve what you measure.” The same goes for inventory management, where precise data is required to identify inefficiencies and make improvements.

Some inventory metrics to track include:

• Return rates: The rate at which items are returned to vendors.

• Inventory carrying cost: The amount it costs to store an item.

• Inventory shrinkage: The amount of inventory lost due to theft, spoilage, recording eros, etc.

• Inventory turnover: Measures the number of times an item is exhausted in a truck or van.

• Out-of-stock rate: The rate at which technicians fail to find items they need for ongoing projects.

To track these metrics more effectively, keep detailed records of inventory usage. This will ensure you have sufficient data to calculate each KPI.

Tip #7: Separate inventory into categories

Inventory classification involves dividing your inventory into categories based on specific criteria such as usage rate, criticality, value, and storage methods. 

It helps you identify specific items that must always be in stock due to their impact on project completion times and makes it easier to find items.

When creating a classification system, use labels your technicians are familiar with. Better yet, engage them in suggesting labels to avoid confusion.

Once you’ve defined a system, ensure cross-departmental consistency by publishing it to the entire company. Then, regularly gather feedback from stakeholders to identify when the classification system needs updating.

Tip #8: Create standard operating procedures

Standard operating procedures (SOPs) are documents that contain step-by-step instructions for carrying out specific tasks. They help employees perform complex tasks and comply with your company’s inventory standards.

Typically, your inventory SOPs should cover workflows for processes such as recording used inventory, managing returns, and performing cycle counts. The instructions should be clear and direct and written in terms that field techs can understand.

You can digitalize SOPs using ServiceTitan’s user-friendly Field Service App to create digital workflows and checklists for specific processes, such as the steps to take after arriving at a job site.

The software also lets you create and program forms to appear at certain job cycle stages so technicians know what to do next.

Why Contractors Should Leverage HVAC Inventory Management Software

Managing inventory with HVAC inventory software is easy as it eliminates risks associated with manual processes.

However, some inventory platforms, particularly those disconnected from other aspects of an HVAC company, still have inefficiencies. Employees have to copy and paste data between platforms and switch between interfaces to confirm details.

That’s why we designed ServiceTitan’s Inventory Management platform to pull data from other ServiceTitan tools. The platform tracks any price-book item you identify as inventory, from its purchase and use time to when the stock is replaced.

Here’s how it works:

Whenever technicians add an item to an invoice via the mobile app, our software automatically changes the status from “available” to “on hold.” This causes a corresponding change in the inventory tracking table, with the quantity of the item on hold increasing while the quantity available decreases.

Next, ServiceTitan’s software system will check the inventory template you’ve assigned to that location to confirm the maximum and minimum order quantities.

If the available quantity of the item you’ve used falls below the preset minimum order quantity, ServiceTitan will automatically trigger a replenishment order to replace the quantity that’s been used.

This replenishment location can be either the warehouse (if the warehouse has healthy stock levels) or a vendor. If it's the latter, ServiceTitan will automatically ping the warehouse manager (or whoever is in charge of requisitions) to create a purchase order within the platform, which they can print out or email directly to the vendor.

They can then track the purchase order using the various status indicators (pending, sent, partially received, received in full, or canceled) and pay the agreed amount without leaving the platform.

With this automated workflow, dispatched technicians will always have the tools required to complete their assigned projects, elevating customer satisfaction.

HVAC Inventory Made Easy with the Right Tool

Understanding inventory management is fundamental to running a successful HVAC business.

So, take your time reviewing the strategies we’ve shared. Create an inventory system, perform frequent audits, track key metrics, and train your employees on inventory management.

Lastly, use HVAC software like ServiceTitan to streamline the process from start to finish.

ServiceTitan is a software solution that helps field service companies run their business more efficiently by automating essential processes like invoicing and customer management. Join over 100,000 contractors nationwide who use the platform to boost revenue.