Inventory tracking is one of the most complex and vexing issues for pool and spa/hot tub retailers and service companies. Virtually everything that happens in a business conspires to degrade inventory accuracy. Service employees forget to write things down, sales staff give items away, operations people are bogged down and no one is tracking warranties… the list goes on. However, one of the most common, and complex, inventory questions commonly heard is “How can inventory be tracked properly on service trucks?”
Before this can be answered, it is important to first know the following:
- What is the reason for tracking inventory on service trucks?
- Are unacceptable amounts of inventory being written off (what is acceptable)?
- Is inventory being lost, or is it inaccuracies at the operations level?
- Is one or more staff members suspect of theft?
All of these questions should be discussed at length before making any significant changes to how inventory processes are handled as each requires a cost/benefit analysis. That said, those that make the commitment to managing inventory at the vehicle level almost never regret the decision.
The key to managing inventory at the vehicle level is to ensure all employees understand the importance of keeping accurate stock of all products and equipment. Regrettably, there is little incentive for most employees to worry about inventory accuracy. Unfortunately, in some cases, there is incentive for them to intentionally degrade inventory accuracy through theft.
Having worked with some large retailers in the hearth and pool industries, this author has witnessed on several occasions where a company has had to write off six figures worth of inventory over the course of a year.
One such company operates five retail stores and has 20 maintenance trucks on the road servicing residential and commercial pool clients. Before committing to a service truck inventory plan, this business was writing off between $50K and $150K per year. However, once it put an inventory management plan in place, and started using business software to help execute it, write offs were reduced to $3K in the first year of implementation.
Devising a service truck inventory plan
It is important to note, while this article focuses on managing inventory at the service and delivery truck level, the following plan must include all employees responsible for inventory locations, such as warehouse managers, and retail store employees. This type of plan will take some time to implement and evolve; therefore, it should not be expected to be introduced and executed over the course of a weekend. A typical service and/or delivery truck inventory plan (depending on the size of the business) will likely take six months to implement and execute before seeing any results. To put a comprehensive plan in place, the following two-step program is recommended.
Step one: Setting up a plan
- If possible, create an inventory area in the warehouse for each service and/or delivery truck. It will be much easier for one operations person to manage truck inventory ‘in-house’ if they do not need the truck in front of them. One idea is to use pallets, bins, or shelves designated for each truck. This is nothing more than a ‘flex’ of the truck inventory and should be counted as one unit.
- Devise a standard inventory truck stock and fit the truck to it. Start by stripping the truck down and restocking it, counting every single piece in the process. Perform this task one truck at a time over the course of a few weeks. After doing this, there can be no doubt about inventory accuracy from the get-go.
- Next, set-up stock sites within the business software system giving each service and/or delivery truck a unique name (e.g. ‘Greg’s Service Truck’ or ‘Delivery Truck 1’). Use inventory re-order system alerts to really hone in on inventory levels. Seasonality levels can also be used to squeeze down inventory during slower periods. Try to use case quantities so stock does not have to be replenished constantly. If a service tech needs a filter cleaner on their truck, give them a case on the pallet and let them pull it as needed. This will allow the operations person to run inventory needed reports at their leisure and replenish the stock site as needed.
Step two: Implementing a bonus program
- Once the inventory management is in place at each stock site, implementing a bonus program can help ensure employees adhere to it. To do this, the amounts set-up as ‘bonus’ need to be determined and weighed in relation to the cost/benefit analysis mentioned above, but it needs to be significant enough to get all staff to buy into the program. For instance, a service technician is not going to buy in for $50 if they are doing jobs on the side using company inventory. Perhaps, try giving two bonuses twice a year. For example, a company with one retail store and one warehouse employing four service technicians that offers a $250 bonus might give out a total of $6K per year. For a business that was previously writing off $50K to $150K in inventory losses each year, this bonus idea should be a no-brainer.
- Trucks should be cycle counted on a regular basis (e.g. monthly or quarterly) and bonuses can be applicable on two of these counts. As mentioned earlier, each employee would be eligible for two bonuses—the first paid on individual accuracy (depending on what is considered an acceptable level/loss). Keep in mind, inventory levels that are over are just as bad as being under. The bonus should be based strictly on accuracy within a certain percentage (e.g. within 98 per cent) inventory valuation.
- Each employee is eligible to get a second bonus as well, but the catch here is everyone must be above the threshold to receive it. This can be done in a quick huddle, paying the bonuses out in cash, whereby creating some fun and friendly tension. It could also work as a team building process as the peer pressure will be immense on the person who kept everyone from getting the second bonus.
Investing in inventory
With this program, not only is everyone invested in their own inventory, but also their colleague’s inventory. There is no more motivation for taking stuff off each other’s trucks or running into the store and just grabbing something off the shelf, because they are working as a team to ensure inventory accuracy as a whole. Staff members will also start to help one another perform inventory checks, and double-check parts on service orders. Once the service truck inventory plan is in place, and employees understand how it works, it should only take two cycles to get things on track.
Having accurate, real-time inventory is one of the most powerful and profitable metrics for any business. For instance, inventory turns can be increased to ensure product stock is at optimum levels, while also targeting inventory dollars to the departments and product types with the highest gross margins, which can increase profitability.
Over the long-term, inventory history can accurately report gross margin and turn data for past years, resulting in better buying decisions. Most importantly, by implementing a comprehensive inventory plan that includes service trucks, companies are able to lower their overall inventory. In addition, business software puts real-time information at the fingertips of decision-makers, making it easier to reduce inventory carrying costs, which is essential to remaining competitive in today’s marketplace. Once there is buy in, everyone on staff can access and trust the inventory listed, allowing retailers to better service, control costs, and make smarter purchasing decisions.
Implementing a solid inventory management system using an integrated business software program will not only help to save money, but also allow managers to implement new marketing campaigns, make smarter purchasing decisions, or change the course of business if there is a shift in operations or fluctuation
in industry trends.
There is nothing worse than sitting on $100K of inventory that is not needed and should have never been ordered. With this in mind, it is never too late to plan an inventory control system that drills down to the service and/or delivery truck level and reap the many benefits it can offer.
Author’s note: This article was adapted from a blog post by Dan Bradford, a former sales manager with Evosus for more than 10 years.
This article was written by Jessica Chase and originally appeared on Pool & Spa Marketing [link].