Inventory tracking is one of the most complex and vexing issues retailers and wholesalers deal with.
Virtually everything that happens in your business conspires to degrade inventory accuracy. Service employees don’t write things down, Sales staff gives items away, Operations people forget or don’t have time to process RGA’s…the list goes on. As a self-described “inventory geek,” I love it when both current and prospective clients ask me complex inventory questions. One of the most common is:
How do I track inventory on my service trucks?
It is a complex question and one that requires you to answer some basic questions first.
- Why do you want to do it?
- Are you writing off unacceptable amounts of inventory (what is acceptable?)?
- Are you losing it or is it just inaccuracy at the operations level?
- Do you suspect one or more of your staff of theft?
The key to managing inventory at ALL levels is to get ALL your staff to buy into your inventory accuracy
Let’s face it, there is little incentive for most employees to worry about inventory accuracy and in some cases, there is an incentive for them to intentionally degrade inventory accuracy in the case of theft. I have worked for some pretty large retailers in both the hearth and pool industries, and in several instances, there were occasions where we wrote off six figures worth of inventory over the course of a year. That was the cost-benefit analysis I used to come up with the following plan. It’s important to note, that while we are talking about service and delivery trucks, the following plan MUST include all employees responsible for inventory locations, such as warehouse managers and retail store employees. This plan will take some time to implement and evolve, so don’t expect to get it done and implemented in one weekend. This should take you six months to implement and to start seeing results.
The plan:
Step 1: Getting Ready
- If at all possible, create an inventory spot in the warehouse for each service and delivery truck. It will be much simpler for one Operations person to manage truck inventory “in-house” if they don’t need the truck in front of them. I like using pallets designated for each truck. This is nothing more than a “flex” of their truck inventory and should be counted as one unit.
- Come up with a standard inventory truck stock and fit the truck to it. Start by stripping the truck down and counting every single piece you put back on the truck. Do it one truck at a time over the course of a few weeks. There can then be no doubt about the inventory accuracy starting out.
- Set up your stock sites in Evosus, (an example is Service Truck 2 or Greg’s Service Truck). Use inventory reorder alerts in Evosus to really hone in on inventory levels. Use the seasonality levels to squeeze down inventory in the slow season. Try very hard to use case quantities so you don’t have to replenish constantly. If a guy needs filter cleaner on his truck, give him a case on his pallet and let him pull it as needed! This will allow your operations guy to run inventory needed reports in the ICPO area at his leisure, and replenish the stock sight as needed.
Step 2: Implementing the Bonus Program
- Once you have the inventory right in each stock sight, you can implement the following BONUS program. The amounts are up to you and need to be weighed in the cost/benefit analysis mentioned above, but it needs to be significant enough to get them to buy in. A service guy isn’t going to buy in for fifty bucks if he’s doing jobs on the side with your inventory. You will give two bonuses TWICE a year. Let’s use a bonus of $250.00 as an example and assume we have 4 service guys, 1 retail store and 1 warehouse. If we use that formula, you could quite possibly give out a total bonus pool of $6000.00 per year. For me, weighed against a six-figure inventory loss each year, this was a no-brainer.
- You count the truck inventory twice a year (stores and warehouses should be on cycle counts and you could use random cycle counts as your benchmarks).
- Each employee is eligible for two bonuses as I mentioned earlier. The first bonus is paid on individual accuracy (you decide what that level is and what is acceptable loss). Remember that being OVER is just as bad as being UNDER. Say a guy is within 98% inventory valuation, or is only missing $200.00 or less of inventory; you would pay him his $250.00 bonus.
- Each employee is eligible to get a second bonus as well, but the catch is EVERYONE must be above the threshold to get the second bonus. One person is below the threshold and NO SECOND bonus for anyone. If you do this in a quick huddle and pay the bonuses out in cash, you can create some tension and have some fun. The peer pressure will be immense on the person that kept everyone from getting the second bonus.
The Key:
With this program, EVERYONE is invested in not only your inventory but their inventory AND everyone else’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 invested in everyone’s accuracy. You will see them helping each other count inventory. You will see them asking each other, “Dude…is that part on a service order?” Once they know you are tracking it and they get the flow of how it works, it should only take two cycles to get things on track.