Tight Rein on Inventory Helps Cut Costs

Tri-monthly swap-out improves efficiency and profitability for Wisconsin plumbing company.
Tight Rein on Inventory Helps Cut Costs
Dan Callies, president of Oak Creek Plumbing in Oak Creek, Wisconsin, believes close inventory control increases efficiency and improves customer service.

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Dan Callies can relate to those well-intended plumbers who, despite their best efforts, watch their well-organized service trucks slowly fall victim to misplaced and damaged parts, and failure to accurately track inventory. After all, the president of Oak Creek Plumbing in Oak Creek, Wisconsin, has been there himself.

But realizing that mismanaging truck inventory has a cost, Callies decided to do something about it. The solution: On a rotating, tri-monthly basis, each of the company’s seven plumbing service trucks gets completely restocked, somewhat akin to what retail store employees do periodically to capture an exact picture of inventory. Only this company’s process is far more extreme than just counting items.

“We bring one of our trucks into our warehouse on a Thursday morning during our weekly tech meeting,” says Callies, whose company serves customers in southeastern Wisconsin. “During that meeting, our warehouse manager and an assistant remove all the parts bins off that truck and swap in a new set of bins that are completely stocked with the proper levels of inventory. By the time the meeting is over, the truck is ready to go. It takes about a half-hour — it’s a pretty quick process.”

The warehouse manager then restocks the bins that were taken off the truck. That takes about two weeks, because he does that in and around his other responsibilities. If the inventory in the bins removed from a truck is more than 10 percent short of where it should be, that throws up a red flag that something is wrong.

“And if a technician is consistently off, then we bump up the frequency of the restocking,” Callies says. “But we generally aim for four times a year.”

The key to this process — aside from the commitment to actually do it — starts in the company’s warehouse. Inside its walls stands a complete mockup of the storage system used in all the company’s high-roof Dodge ProMaster service vans. (Oak Creek Plumbing uses aluminum rack/shelf-and-bin systems made by J&M Truck Bodies.) Each truck is set up similarly and carries about $8,000 worth of parts, along with a RIDGID sewer cleaning machine and a smaller RIDGID hand-held sink unit.

The storage system is fully stocked with an optimum number of parts. Callies says he worked with Quality Service Contractors (www.qsc-phcc.org), a subsidiary of the Plumbing-Heating-Cooling Contractors National Association (www.phccweb.org), to develop a customized materials list that fits the company’s needs. The total cost of the mock-up storage system was about $5,000, not including a full complement of parts.

Callies came up with the concept after a hunch that his technicians, despite decent inventory-control efforts, still weren’t serving customers as well as they could. Technicians were already required to make a list of parts used on a particular job, then take a picture of that list with a smartphone and send it to the warehouse manager, who orders parts for next-day restocking.

“But as careful as we are, things still slip through the cracks after several months,” Callies says. “We weren’t as organized as I thought we were. I thought there had to be a better way to take control and provide better service to our clients. … If the guys swinging the wrenches are doing other things, too, like making unnecessary trips to supply houses, they’re costing the company money.”

Another reason for his concern: Adequate truck inventory is critical to optimizing the company’s flat-rate pricing structure. So Callies implemented the clean-sweep restocking concept, which he learned about at a plumbing seminar in California.

Initially, technicians were wary of what some thought was a Big-Brother-is-watching-you mentality.

“They had a hard time with it at first — they were a little offended,” Callies says. “But they get used to it and they now understand the efficiencies we gain. … The daily moaning about not having certain items they need has basically gone away.”

Why are so many plumbers unaware of the costs associated with disorganized trucks and inefficient inventory management? Callies believes part of the disconnect stems from the fact that when plumbers start their own
businesses, they’re usually great craftsmen but not great businessmen. Moreover, it’s difficult to put a price on the expenses linked to inefficiency — things such as how much time is wasted trying to find parts and tools in a messy truck.

“Or you find the faucet you need, but it’s damaged,” he says. “Or you don’t have a part, so you steal it off a new faucet, then put the faucet back in its box — and forget about it until you open the box again on another job.

That’s all wasted time that you can’t recoup.”

Some people may find Callies’ approach a bit extreme. And he admits it’s difficult to quantify how much it increased profitability at Oak Creek Plumbing, which gets about half its revenue from service work and the other half from bathroom and kitchen remodeling projects.

“I don’t know how it couldn’t improve our profitability, but it’s hard to quantify how much it did,” he says.

But one thing he is unequivocally sure of is the practice has improved customer service.

“The only way to really provide the best possible service to our clients is to be as efficient as possible, which means having the proper items for them when we need them,” he says. “And to do that, you need a consistently organized system.

“In the end, it’s a value proposition for our clients,” he adds. “You can always charge customers for your inefficiencies, but that’s not the value proposition we want to offer our clients.”

Noting there’s always room for improvement, Callies says he’s considering ways to fine-tune the restocking process, like training technicians to be more specific when they list all the parts used on jobs. For example, a technician’s parts list may include a toilet flapper, but the truck might carry 20 different styles of toilet flappers, so more specifics would be beneficial. But until then, Callies will stick with the system he has and keep inventory under control — one truck full of parts at a time.



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