Managing your business for operational consistency

When you run a business, any business, it sometimes seems like you are being nibbled to death by ducks. We are always on the lookout for the "big things" that will bring us asunder; cash flow, late payment, insurance increases, fuel costs, material cost increases, payroll issues and the like. The reality is that the little things that can go wrong, consistently, are a much greater cause for concern. Why? Because they bleed profit and operating capital at a slow rate and, because they do so at that slow rate, we don’t pay much attention to them.

As an example, while we might be worrying about that $10,000 check that is due on the first of the month, not paying attention to the inventory in your service trucks can cost you that much or more annually. Have you ever had a service mechanic sell an item off his truck at a price less than it cost because he didn’t have pricing information for it? How about taking a look inside one of your trucks and finding hundreds of dollars worth of saleable materials strewn across the floor or stuffed between the seats? Polished chrome parts don't sell really well once they have been used as air hockey pucks across the truck bed. Costs incurred from damaged and destroyed service truck inventory (and jobsite inventory as well) are a big ticket item wrapped in a small package.

Gaining and keeping control of the little things that siphon your profits and working capital is not hard to do. Sometimes making the decision to do it is the hard part. If you are an organized person, you probably already have some system in place to catch some of the waste, so turning that system up a notch should not be all that difficult. If you are not so organized it might be more difficult. Deciding that it is worthwhile is the first step.

Gaining inventory control
One of the easiest things to do, especially with computer technology today, is to get control of your inventory, your entire inventory. You can do it all at once or in small increments, but do it you must.

If you decide to do it all at once, you can designate a specific day or days and have all your employees on hand to get it done in one full swoop. If you can't dedicate your company operation for that concentrated effort, then doing it in small increments, say one truck or location at a time might work better.

Count every single item. Don't lump things together. Make a material list and count off the items on it one at a time. If you come upon an item that is not on your list, add it as a line item. Once you have accomplished this task you will have done several things; first, you will know within a reasonable certainty what material you have on hand. Further, you will be able to see what stock is stale and what moves so that your ordering will be more efficient. Second, by applying values to your inventory, you will have a good idea of the dollars that you have invested in it. Third, your accountant will love you, because you will have an accurate dollar figure that he can work with when preparing your financial statements.

Keeping it consistent
So now you know what you have on hand. How do you keep that information updated and consistent? My suggestion would be to make up a price book for your service plumbers. You already have the inventory list, so adapting it for use by your field sales force is the next step. It is an easy thing then to generate a "sell" price list and have it in the hands of your employees. By doing that you will eliminate the guesswork when it comes to pricing a service ticket in the field, and you’ll be able to adjust your inventory on hand by deducting the materials used for each truck or jobsite from your master list on a daily basis. If your service tickets do not have a way to itemize each part on them you will need to add that to them. Listing materials on the ticket makes everyone's job easier and gives the customer something he can refer to as well.

If you file job tickets daily from your service trucks, it will also be an easy matter to replace the used material on those trucks on a daily basis as well. You can have your plumbers restock from the shop at the end of each day based upon the materials shown on their service tickets. It is a matter of a few minutes at the end of the day to do this. In this way your service trucks will always be completely stocked and ready for the next job and your inventory will be current and updated daily. Next we’ll look into the actual layout of a service truck and how to make it a ‘shop on wheels.’

The Brooklyn, N.Y.-born author is a retired third generation master plumber. He founded Sunflower Plumbing & Heating in Shirley, N.Y., in 1975 and A Professional Commercial Plumbing Inc. in Phoenix in 1980. He holds residential, commercial, industrial and solar plumbing licenses and is certified in welding, clean rooms, polypropylene gas fusion and medical gas piping. He can be reached at [email protected].

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