BY JOE HODES
SPECIAL TO CONTRACTOR
WHAT ARE YOU in business for? Are you risking everything each day only to spend your "free" time trying to figure out why your ends don't meet? How about spending that same time walking with your "honey" along a tropical island shoreline at sunset?
Your vacation funds could very well be found right under your nose. Are needless hidden expenses costing you that vacation, more time with your family, buying that next truck or even staying in business? If you're wasting time searching for the products you need, driving around town to get them or tying up valuable dollars in dead stock stuff, then there is good news for you.
Being selfish with your time by following through on a plan to get organized can save you enough cash out of daily operations to gift wrap for yourself that all expensessaved vacation. The following might be some things you can work on:
Separate ‘stock' from ‘stuff'
Don't be materialistic. It is easy to turn cash into inventory. The magic comes when you are able to consistently turn inventory into cash. Start by placing all products you have not used in the last 30 days in a separate area of your shop. It is amazing how much time is spent walking past or even looking at dead stuff. You can deal with those slow-moving items later by returning them to suppliers or using them as unique tree ornaments.
Create and maintain a specific list of your valued stock items. Just like Santa, the owner should take sole responsibility for creating and maintaining a specific "naughty" or "nice" list of what to keep in stock. This prevents unusual items from gaining stock status or, more importantly, keeps techs from becoming delivery drivers when items are not brought into stock quickly enough.
A spot for each stock item
Just as your home has a street address so folks can find you, so should all your products have a stock number that allows anyone and everyone to find the product he needs quickly. If you've designated the item as a stock item, then it's very likely that you will receive it into stock on a regular basis. How much faster would it be to put products away on a daily basis if you knew exactly where the item belonged? Ask your vendors to pack items in your bin location order.
It may seem obvious but make sure the product you've purchased gets put away the very same day it's received.
Track all products
Does a bank allow all their employees full access to their vault? The stock on your shelves represents an investment risk and opportunity that must be protected. Allowing your technicians full access to your "vault" is not in the best interest of them, you or the customer. It creates future stock-outs and many hours of lost time keeping things organized.
Tracking parts as they leave the bin will allow for efficient replenishment of stock based only on what was actually used as well as make overstock situations and those emergency product pickup runs unlikely.
Keep inventory space clean
Designate a specific person to be responsible for keeping the inventory space clean, organized and properly stocked. I've visited hundreds of service shops and have yet to find a consistently successful business that is in disarray.
What does it cost you to run out of stock or to tie up cash in products that don't get used? To illustrate the payback equation for taking the above actions, below are notes taken from an actual inventory control conversation. This may sound familiar:
"One-and-a-half truck service-and-repair operation. Booked about $250,000 in revenue last year. Material purchases were about $52,000 of which about $39,000 was for regularly used, ‘stockable' products. Currently without an inventory-control system in place, finds he is going to the supply house for relief valves, auto air vents and other little stuff. A supply house visit to pick up one item takes about 30-45 minutes total. If he knows he needs other things and happens not to have all his lists with him (has multiple lists ... in his truck, in his techs' trucks and one in his office) he'll spend a lot more time walking around the supply house trying to jog his memory. His total average trip time then is one hour and he goes about twice per week, which is eight hours a month. Time taken to make up an order list, when working on it a little bit during the month, includes consolidating his three lists, looking through catalogs and going through his bins, is about two hours per month. The big time user is putting things away, spends about one hour a day, or 20 hours a month. Total time per month is 30 hours, break-even rate is $147, sell is $175, which is break even of $4,410 spent per month, sell is $5,250... believes a bar code inventory-control system could save him half of these numbers per month ... $2,205 and $2,625 monthly or $26,460 and $31,500 respectively, per year."
For this particular contractor, saving more than 10% of his revenue dollars each year might not be a bad way to gift wrap himself some much needed "recharge" time each year. How about you?
Joe Hodes is president of Hodes Co. To contact him, or for information on Hodes Co.'s inventory control Stock Service System for warehouses and service trucks, products and services, visit www.HodesCo.com or call 800/777-6500.