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Having No Inventory — And Loving It

August 15, 2011
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What started out as a lack of space has turned into a pot of gold for one HVAC contractor. For Wesley Holm of Thompson Plumbing, Heating & Cooling of Cincinnati, the realization that his building was too small was the beginning of the end of keeping a large cache of parts and equipment in his physical inventory. And he couldn’t be happier.

“I’m not in the supply house business,” he said. “I’m an HVAC and plumbing retailer. We have 61 operational trucks on the road, which is a nightmare for inventory control.”

Holm has done away with what he believes is the cumbersome job of maintaining a big inventory of service/replacement parts and equipment and turned the job of managing his inventory over to his local supplier, Corken Steel Products.

“Our supplier logs into our inventory system and creates a purchase order for each truck every day,” he said. “The parts are shipped every day and the trucks are kept fully stocked. Every HVAC service vehicle has the exact same stock inventory, in the exact same place — in our entire fleet of 34 HVAC service team vehicles. The same is true for installation team vehicles, along with our plumbing team service vehicles, and drain cleaning service team vehicles.”

Holm said that one possible kink in this system might be paying more for a part than he might if there was face-to-face communication with the supplier. “We lock in the prices for parts at 30-day intervals,” he said. “The system will not accept an order if the wrong price is entered for the part.”

This system also allows for Thompson employees to input the parts and equipment sold each day for tighter inventory control. Holm noted that his company has created a kit for normal installations that might typically include plenums, line sets, etc. Any extra parts that are not needed are returned immediately. If there is a need for other parts or equipment for an installation, Thompson installers will contact the supplier with information about the job and an installation kit can be assembled and delivered the next day.

“Corken Steel Products does a great job,” Holm said. “They do a wonderful job of customer service.”

It is no wonder that Corken Steel Products likes to do business with Thompson — they get paid for all invoices almost immediately. “Ours is a cash business,” said Holm. “Corken gets all of our business and we pay them within four days. That’s unheard of in our industry.”

Holm said the convenience of having a supplier control his inventory helps his business concentrate on providing more timely service to its customers — a very critical element. “We are in the time business,” he said. “We have done informal client surveys over and over with our client base. Their most important concern is time.

“Not only is time valuable to our clients, but more importantly time is valuable to our internal customers: our service specialists in the field. This team has a tough job each and every day, out there by themselves, fighting traffic, solving problems, and dealing with clients face-to-face. The worst thing that can happen, at 5:15 p.m. on a Friday afternoon, when traffic is bumper-to-bumper, is needing one 25-cent part to finish the job.”

Holm said that Thompson employees love the inventory control system because it cuts down on paperwork and wasted time on the road, searching for parts. “It is clear that this program has made each member of our team more productive, and it is our responsibility as owners to create processes and procedures to increase the level of success of our team each and every day,” he said.

So how has this inventory control system impacted Thompson’s bottom line? Holm said it is tough to quantify the exact impact but added, “We doubled in size from January 2009 through Dec. 31, 2010, but the program had been implemented previous to that. Our growth rate presently stands at 41 percent for 2011, and there is no question that the inventory process that we’ve been able to implement has helped with revenue.

“We have had substantial cost reduction, as we have over 60 vehicles on the road every day, without a warehouse person on the payroll, without a parts warehouse, and again we have increased the productivity of our field staff substantially. One thing you won’t find in a supply house is a Thompson truck!”

Holm said he isn’t sure why his competition hasn’t embraced this type of inventory control system, but he is happy they haven’t. “We cannot thrive as a team without being innovative,” he said. “We can’t gain market share everyday without doing what the other guys don’t do.”

Publication date: 08/15/2011

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