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Stock It Up!

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Too many times, we as owners/managers try to balance inventory control with cost and customer satisfaction. None of us like to look at an inventory report and see we have money tied up when we would like to be using that cash for advertising, capital projects, investments, or our own payroll. The truth is that it must be done, but the question is how much is enough and how do we track it.

What should I have on my trucks?

Since each market has a different footprint of equipment manufacturers and types, it is impossible to answer this specifically. We have found the best solution for us is to stock as many of the universal parts as we possibly can. We now use Emerson’s Rescue motors and Honeywell’s universal control boards and universal ignition modules. Products like these  are designed to help you carry one product versus the alternative of five, 10, or more different sizes or boards. Another area you want to look for is your inventory turnover. This is the number of times you sell a part in a given time period. Many times owners/managers will make decisions based on his/her experience, and quite often that info will be outdated since equipment and parts are always changing. If a part is not being used at least once a month, you probably should not stock it. You stand to risk not being able to sell the part at all or the part getting damaged. This decision should also depend on the cost of the part and how much space it takes up.

Is it possible to save money by increasing stock on your trucks?

Many owners do not want to tie up cash in inventory when they have many other bills and payroll to pay. They sometimes decrease their stock to keep the cash flowing. The fact is they may be paying more.

Let’s discuss how the service call will go. The tech will go to his call and start a diagnosis. He finds out the he needs a ½ HP motor. He knows he does not have this motor on his truck, so he informs the customer he will need to go get it. Depending on which city you service, here is where the bucks can add up. He gets in his truck and will easily spend an hour getting the motor. In larger markets, this could take up to two hours. When you add in the cost of gas, plus wear and tear on the vehicle, you will easily be spending $40 to $80 dollars. In addition, you have now reduced the number of calls the tech can run for the day, and during the busy season you have pushed the tech into overtime. Also, keep in mind the customer is generally waiting the whole time. The longer you delay a customer, the more irritated the customer becomes. This gives the customer a bad experience with your company even though everything else with the call was perfect.

How to keep my trucks stocked and reduce shrinkage?

Probably one of the largest concerns an owner has is how to keep a truck stocked and eliminate shrinkage. Many owners are people who fix things, not a person who does paperwork. Transitioning from an industry obsessed with paperwork into an environment where paperwork is nonexistent, I discovered paperwork and technician compliance is like oil and water. To top that off, no owner wants to get a report which shows he/she is overstated in inventory, and now they did not make as much money on a truck as he/she had thought.

So how do you correct the problem? It depends on what you have the capability to do. To solve our problem, we utilized a computer system that tracks and issues reports on which trucks sold parts and what parts they need back. Yes, this system relies on the tech to properly identify the part on his invoice and to do this we made our parts our billing codes. You know the tech will issue billing codes correctly since this is how he gets paid in many companies. By doing this, the computer will help you stock your trucks by giving you replenishment reports. This will keep the paperwork down and make everyone happier in the long run. Determining what and how much stock to have on your trucks is not a simple question. In fact, this question is commonly debated among our industry’s most elite companies. The fact still remains that taking care of the customer the first time and eliminating the homeowner’s problem as fast as possible should be a top priority. To do this, you must carry the proper inventory and track the inventory as close as you possibly can.

Posted In: ACCA Now, Management

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