A friend of mine recently tried to provoke me to jealousy as he was proudly telling me about his all-expenses-paid trip to the headquarters of a major parts manufacturer, compliments of his local supply house.

It didn’t take long for me to recognize the wonderful relationship he enjoyed with his local supply house was all about money. His trip was not about friendship, camaraderie or best practices. It was all about profits. Not profits for him, but sustained profits for the supply house.

Many of us have enjoyed golf outings, overnight getaways, fishing trips and the like compliments of the local supply house. Have you ever wondered why they invite some and not others?

When I was a small, one- or two-truck operation, I never got invited to attend golf tournaments, let alone any other event hosted by the local supply house. In fact, I couldn’t get any support, such as faucet brochures or brand catalogs, at all. Whatever I could scrounge up at the parts counter was about it. Never did I have a sales rep call on me, with the exception of one guy from a particular supplier. But that is a whole different story. (I will say however, that more than a decade later, my now much-larger company is still loyal to that same sales rep and the supplier he works for).

As my company, Plumbing Doctor, grew, so did the amount of sales reps who desired my time and relationship. What they really desired was my money.

Proper inventory management

Therefore the management of parts should be a high priority on our list of best practices.

Over the years I have seen the cargo area of more plumbing trucks than I care to think about. Something most outfits seem to have in common is the lack of a proper inventory management system. Notice I used the word “proper” here. Everybody has an inventory management system. The small, one truck operation has one and the five-truck operation has one, as does the fifty-truck mega-company.

But my question to you is: Is it proper?

Most plumbers and owners are not prone to back-office type solutions. The back office is often a mess and neglected unless they hire somebody to create and implement an efficient system — or better put, a proper system. I’ve sat with owners in offices that were an absolute disaster and wondered how they could function. The truth is, they weren’t functioning well. They were being overcome with papers and files and invoices that were slowly choking the life out of them.

Now take a step with me even further into the abyss that is far removed from what the plumber loves doing, i.e. servicing the client and fixing things. Take an honest look with me into the back of the service truck, garage, mini storage space you rent or your warehouse. Wherever it is you put the parts. It should look like a bank vault and be as secure as your savings account. The reality for most is the space is a mess.

One of the best compliments I remember receiving took place at a supply house loading dock. Back in the day when I was building Plumbing Doctor, I would frequently need to make a run to pick up inventory we were low on or ran out of. The order would be placed electronically; the supply house would fill the order and have it waiting on their loading dock. I would back my service van up to the dock, they would load it and off I go. It would take place in mere minutes. One day, the warehouse worker said this to me, “I see and load lots of plumbing trucks, and none are as clean and organized as yours.” I thanked him for the observation and compliment. It was a proud moment for me.

Not difficult to do

Creating a proper inventory management system is essential if you want to maximize profits.

A proper inventory management system is not difficult to do; in fact it is quite simple. I believe the reason many or maybe even most in our industry do not create one is not because they are stupid people. I have known and do know lots of plumbers and they are some of the brightest, creative and innovative people on the planet. I believe the reason more do not create the system is because they are not good stewards of time management.

I challenge you to begin to look at parts as money in your pocket and inventory as an asset. If you do, you will be motivated to create a system that works. Convert inventory into a money making machine so you can take the vacation, trip or golf outing — all expenses paid — compliments of your proper inventory management system.

One last thing about this “parts is money” revelation before I sign out: The price of a Coke varies depending on where you buy it. Am I right? Yes, I’m right. I can buy a huge Coke at a popular fast-food drive through restaurant for a buck or I can buy one at another fast-food drive through place and pay nearly 100% more. What’s the difference? Price.

Back to the story of my friend who got the free trip from his local supplier. I burst his bubble by pointing out that his “free,” $3,000 dollar trip actually cost him $70,000. Here’s how I figured it. As a franchisee of mine, I knew where he was buying his parts. I had been encouraging him to use the same supplier the rest of our franchise partners were using, but he didn’t see the value in switching. That is until his $70,000 trip. A quick study of his 12 months of purchases using his local, popcorn-, donut- and trip-providing supply house revealed this: had he used my recommended supplier and taken advantage of our buying power, he would have saved $70,000 in just 12 months. That’s $5,800 a month, $1,300 a week, $270 a day.

Believe me when I say: “Parts is money.” The Doctor is out. 

"This article was originally posted on ww.reevesjournal.com."