Managing the supply chain for a large-scale construction company comes with its own set of challenges, from dealing with material shortages and rising transportation costs to the complexity involved in forecasting demand or trying to transform to a digital tracking system.
An effective supply chain management strategy gives you visibility, reliability, and predictability over the entire process. ServiceTitan Instructional Designer Inessa Simonyan and Michael Takemura, Director of Technology and Supply Chain for Barron Heating, AC, Electrical and Plumbing in Washington State, demonstrate how ServiceTitan can help companies achieve all three during Pantheon 2023—ServiceTitan’s annual conference for the trades.
The way ServiceTitan allows us to create efficiencies in the supply chain is that we can track quantities on hand at different inventory locations. We can ensure techs have the parts they need.”
“You’ll be able to define how ServiceTitan can help you to enhance overall your supply chain management, recall how ServiceTitan inventory module helps you to simplify overall your inventory management, and identify how inventory module is going to help you to enhance the speed and the accuracy of your inventory transfers,” Simonyan says.
Challenge #1: Supply Chain Management
Takemura says an abrupt shift in supply chain processes over the past few years caused many companies in the trades to change the way they managed inventory, including for Barron, a $50-million multi-trade company with about 220 employees serving customers in northwest Washington state.
“I know for us, we went from a ‘just-in-time company’—we'd order it, get it in, and send it out— to a ‘just-in-case company’—where we’re going to buy it, just in case we might have to put it in sometime in the next six months,” Takemura says. “All of these challenges came with that shift in the supply chain process.”
To adapt their inventory management, Barron purchased another warehouse and beefed up its inventory stock to meet customers’ needs. Now, they’re using that inventory and ServiceTitan’s inventory management tools to leverage Barron’s buying power and gain new customers.
“The way ServiceTitan allows us to create efficiencies in the supply chain is that we can track quantities on hand at different inventory locations. We can ensure techs have the parts they need. And we can put controls in place to help us reduce potential shrinkage or slippage in the inventory,” Takemura says.
How ServiceTitan’s full inventory cycle works
In ServiceTitan, the intended inventory cycle consists of two parts: procurement cycle and replenishment cycle, Simonyan says.
The procurement cycle starts when you initially request items through purchase orders from your vendors to get all the items stocked and ready for future transactions. Once all items are received, a receipt is generated and the PO request is marked complete.
“During the final phase of the procurement cycle, those items that you received are going to be used during the jobs by technicians from their truck stock,” Simonyan explains. “That is going to decrease the truck stock, and it's going to start the replenishment cycle for you.”
Once the items are used and the truck stock decreases, ServiceTitan triggers truck replenishment. Once truck replenishment occurs, the warehouse stock decreases, which triggers the need to restock your warehouse using vendor POs.
“And once you have the truck and your warehouse replenished and stocked and ready for your future transactions, that completes your whole replenishment cycle and inventory cycle,” Simonyan says. “Procurement and replenishment cycles together, and they make up your whole inventory cycle.”
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Key terminology for ServiceTitan inventory workflow
To understand how the ServiceTitan inventory module workflow operates, it’s important to know how items are labeled, organized, and tracked. Here’s some key terminology you need to know:
Inventory items: All items categorized in your pricebook as materials and equipment are considered inventory items.
Inventory locations: Warehouses or trucks, where inventory items are stored.
Inventory transactions: Any transaction that affects your inventory tracking table.
Inventory tracking table: Tracks movement of all inventory, including the transaction, location, and quantity.
Inventory templates: Stocking lists, including minimum and maximum quantities assigned to different locations. Templates also trigger replenishment in ServiceTitan.
Quantity available: The quantity of items available at a physical location and not reserved for any future transaction.
Quantity on hold: The quantity of items available at a physical location but reserved for a future transaction.
Quantity on order: The items requested from a vendor but not yet received.
Quantity on hand: The quantity available and the quantity on hold make up the quantity on hand.
Total quantity: The quantity on hand and the quantity on order make up the total quantity.
The Procurement Cycle
The procurement cycle starts when you request inventory items from a vendor, thereby increasing your quantity on order. Simonyan says there are two main transactions involved in the procurement cycle: 1) purchase order and 2) receipt.
Companies use purchase orders to request materials and equipment from vendors, she says.
“A purchase order is going to affect your inventory tracking table by increasing your quantity on order and your total quantity,” Simonyan says. “Once your purchase order is received, ServiceTitan automatically creates a receipt, removes your quantity on order, and increases your quantity on hand.”
The Replenishment Cycle
When you reach the replenishment cycle, that means particular items have been consumed and need to be restocked for future use. The replenishment cycle starts with your inventory items usage on your invoices, Simonyan says, or when you add items as materials or equipment on the invoice.
Some important things to remember when you add items to an invoice:
“The bottom line here is showing the impact when the job is still in progress. You're going to have a change in quantity available minus one, so you actually decrease your quantity available and increase quantity on hold,” Simonyan says. “Once the job is completed, you're going to have the quantity on hold decreased and your total quantity and quantity on hand decreased by one.”
ServiceTitan triggers replenishments with the help of inventory templates, which can be found in your inventory module dashboard. Once you create a template, you can assign it to one location or multiple locations.
“You need to specify which items you need to have in specific trucks or a warehouse with the minimum and maximum quantity,” Simonyan says. “The meaning behind the minimum and maximum quantity is that once the items are used from an inventory location and it drops below the minimum quantity, you’re going to have an automatic replenishment triggered to have it increased back to its maximum quantity.”
Challenge #2: Simplifying Inventory Management
“Before we started on ServiceTitan’s inventory platform, we were managing inventory through a boatload of different systems,” Takemura says. “We were using five different systems, including probably 10 Excel spreadsheets. One of the challenges that come with that is inefficiencies.
“We had inefficiencies in managing purchasing. We're buying things that we already have because we don't have one source of truth,” he adds. “It also created the need for manual checks. I have to go out to the warehouse and check on that because I don't really trust that it's there or not there. And it also makes it difficult when we're updating pricing.”
ServiceTitan’s inventory module now serves as Barron’s one source of truth, Takemura says, with streamlined efficiencies to generate POs, bills, receipts, and more from one system.
“With ServiceTitan, we also have things integrated with carriers or vendors that allow us to adjust the cost and price rapidly, such as dynamic pricing and updated pricing through billing,” he adds. “It also allows us to create and generate multiple transactions simultaneously with one step, which is a huge advantage.”
For proper inventory workflow management, Simonyan says, make sure to configure your pricebook correctly. Inventory items need to be listed as materials or equipment in your pricebook, the primary vendor must be selected for each item, and the specific cost must be included.
To automatically pull in specific items to your pricebook from supplier catalogs, Pricebook Connect is available to ServiceTitan customers using Pricebook Pro or any supplier integrations. With Pricebook Connect, any time an integrated supplier makes changes, ServiceTitan drives the entire pricebook update process—from making updates to pricing based on the latest materials costs and adding new marketing descriptions and images, to receiving automatic notifications to add upgrades or recommendations that sell well for specific services.
If you’re “buying to the job” on large-scale construction jobs, Takemura says, the requisition process in the inventory module, rather than procurement and replenishment, is the best way to go.
“With replenishment, we can request quantities, and then we have a procurement source. Whether that’s a transfer or a purchase order, that will, in one step, create all of those things for you,” Takemura says. “It will create the transfer or the PO for multiple vendors, all in one step.
“This allows us to more effectively manage the lifecycle of a PO and transfer. It allows us to follow that all the way through and it reduces the need for excess communication outside of the system,” he adds.
There are two ways to create bills in ServiceTitan. You can do it manually or turn on settings that automate the bill creation based on the receipt.
With costs and commodity pricing changing nearly every day, large-scale construction companies may need to update prices on the billing invoice. Simply update the item cost, then click “update pricebook” to record a permanent change.
ServiceTitan’s inventory app creates a better experience for inventory module users, Simonyan says, because it enables them to conduct their transactions at the same time and place as they do their physical duties.
“As a result, you're going to have your data entry more accurate and more timely, which will help your inventory module to calculate your inventory stock-level replenishment needs more correctly. Inventory application also is going to give your warehouse employees greater insights into their daily tasks, and they can perform those tasks on the go with the help of their mobile application,” Simonyan says.
Some core functionalities coming for ServiceTitan’s inventory app include:
Receiving purchase orders and marking them as “arrived”
Picking items from the transfer list
Conducting accurate inventory counts
Using serial numbers or bar codes for receiving purchase orders, picking transfer items, and conducting inventory counts.
Challenge #3: Increasing the Speed and Accuracy of Inventory Transfers
“Another challenge that we see with companies in our industry is the speed and accuracy of our inventory transfer,” Takemura says. “So, making sure things are moving through the process fast enough. That can be a challenge, both physically and electronically.”
An electronic transfer may not happen quickly enough, which then affects your inventory counts. And when you fail to transfer certain items in a timely fashion, you may experience issues with invoice closeouts and inaccurate cycle counts.
“If you don't know that it's been moved, then you can't deal with that,” Takemura says. “The way that ServiceTitan can help, we talk about efficiencies in doing multiple transactions with one or two clicks. Speeding that up allows us to move that way. We also can track inventory more precisely. If we know the timing of when things have moved, we can do a better job with inventory tracking.”
Transferring inventory can be done in several different ways, whether you’re moving it from a warehouse to a truck, from one truck to another, or from the truck back to the warehouse. With software automation, you can track inventory more precisely and keep more accurate counts.
When transferring between two trucks or any two warehouses, you’ll see the following categories: pending, picked, received, or canceled status.
“Transfers in the inventory app are much the same as receiving any other way,” Takemura says. “We're creating that pending transaction, it’s ready to be picked up, it gets picked up, and then it gets received into the final location.”
Just remember, electronic transfers are just as important as physical ones, he adds.
“We need to have that, otherwise our reporting goes away. They have to be timely, they have to be done right away. They can't be delayed a week. You can't let them pile up. It won't work effectively, especially on large-scale jobs because they need to know that material or equipment has been used. If that isn't done, then it won't be replenished or it won't show as missing in inventory,” Takemura explains.
For best practice with reporting, take note of the item overview tab, Takemura says.
“It allows us to understand where inventory is in the supply chain, and we can see if it's tracked or not. We can also see the dollar value associated with those.
“Be aware of both the location and the status, because when we move items from one spot to another, they're going to go on hold or on order, and then they will move to the new location. So understand your reporting,” he adds.
Conduct frequent cycle counts, Takemura advises.
“You’ve got to do cycle counts, otherwise your inventory won't be right. If you're not doing cycle counts, then you won't be able to hold technicians and managers accountable.You need to hold them accountable to their inventory. Otherwise this will fall flat.”
And before you make any adjustments to cycle counts, you need to investigate why that adjustment is being done.
“If you don't have a reason and your variance is way off, you're just putting a bandaid on it,” Takemura says.
Another common challenge for large-scale construction companies is putting all of your inventory items in your project invoice in advance.
“All those items are going to remain on hold, not taking into account that you actually consumed them,” Simonyan says. They’ll remain on hold until the project is completed, then trigger a huge decrease in your stock levels, which only causes huge confusion with your inventory counts.
To overcome this challenge, Takemura suggests the following:
Create weekly jobs for the project
Break up jobs by stages
Create weekly jobs for the project only for inventory
Each week, add inventory items used to the job invoice
At the end of the week, close out the job
Whichever way you decide to go, Takemura says, “you're going to have all your items considered as consumed, not under on hold.”