How many hours a week do you waste on purchasing?
Maybe your experience with purchasing runs the gamut—from owner/operator running to the supply house to buy what you need, to overseeing inventory for hundreds of techs and spinning your wheels each week trying to figure out who spent what and where.
The latter proved to be true for Adam Cronenberg, COO at A1 Garage Door Service, where techs used to order and pick up whatever they needed, or wanted, from local vendors.
“We had no control,” Cronenberg says. “No idea of what we were purchasing, what we were paying, who was ordering it, who was authorized to order it, or even what we wanted to order.”
To regain control over purchasing and inventory, A1 Garage began looking for a software solution about four years ago, and convinced ServiceTitan leaders to integrate the garage door industry into its platform. In exchange, Cronenberg helped the field management software company work out the bugs on multiple integrations, including ServiceTitan’s new Purchasing Module.
“We now know what was used on the truck, when we need to replenish it, who we buy it from, and why we buy that item,” Cronenberg explains. “Through the ServiceTitan Purchasing Module, you really have distinct purchasing from specific vendors at a specific price.
“It really flows all the way through the entire process to make sure what we know we ordered was authorized and ordered by an authorized purchaser, and the invoice matches exactly what we were expecting,” he adds.
Whether you’re a ServiceTitan customer leveraging legacy systems to manage purchasing, or an industry leader spending hours on the phone with manufacturers to clear up order confusion, ServiceTitan’s Purchasing Module can help save your company time and money.
In a recent ServiceTitan webinar, Cronenberg joined Chris Hunter, Director of Customer Relations at ServiceTitan, to explain the benefits of using ServiceTitan’s Purchasing Module.
Why perfecting your purchasing process is important
While budgeting and purchasing inventory requires owners of home service companies to tap into a different accounting skill set, it’s something you must learn or hire someone to handle for you, says Hunter, founder of Hunter Super Techs and GoTime Success Group.
Otherwise, you may not stay in business very long.
Before selling his HVAC company and joining ServiceTitan, Hunter says he got his wake-up call after going through a couple of his techs’ trucks at Hunter Super Techs in Ardmore, Okla. One truck looked like it contained half a supply house inside, while another was empty.
“Here I am wondering, why am I not making much money? Then it hit me, they’re just going to the supply house, and it’s like Walmart. They just throw stuff in there, whatever they want,” Hunter says. “On the flip side, I cleaned out the other guy’s truck and it was completely barren. That left me wondering, did they take the inventory with them or were they just not that organized?
“I had no process, no way of measuring, no way of knowing what was going on,” he says.
Business owners and stakeholders understand the need to know what’s going on when it comes to purchasing and inventory, because it helps to keep costs down and profits up. The challenge, however, comes when trying to show employees why it matters.
Cronenberg started the process at A1 Garage by explaining the term, “purchase order.”
“It’s not just a PO. It’s a permission slip to spend money. It allows us to track who ordered this, and why we ordered it,” the COO says. “It was definitely a transition to get the entire team to understand why this was important, get the tech to verify the PO number, understand what they were getting, and really get that buy-in.
“Purchasing and inventory pretty much involves everybody in your company. It’s not something that one person manages. It’s ongoing with everybody,” Cronenberg adds.
How to assess your service company’s purchasing needs
Sit down and think critically about your company’s needs in a holistic way, Cronenberg suggests. What inventory do you buy on a regular basis? Which parts need to be stocked on your techs’ trucks or in the warehouse?
For instance, does it make sense to save 50 cents by buying 10 oddball parts, when you only need one or two, and the rest remain sitting in your warehouse five years later? Stock the parts your techs use all the time, and special order the others when you need them—even if bulk discounts seem too good to resist.
Think purposefully when developing a purchasing strategy. Who will organize it? Who will be authorized to purchase? Why do you want to buy or stock a particular item?
Last year at A1, Cronenberg bought 1,000 wall buttons to operate its garage doors, stocking 10 on each of its 200 trucks, or two each of five different models. After running a simple legacy report in ServiceTitan—revenue by SKU— he discovered the company only sold 100 wall buttons for the entire year.
“So, the other 900 are just going to waste...that’s not a really smart business decision,” Cronenberg says.
To fix the issue, he explained the waste to the A1 team and together they decided which wall button model worked best.
“We made a decision, adjusted it down, and hopefully this next year, I’m only buying 100 extra and not 900 extra,” Cronenberg says. “Look at your data, and know your strategy.
“If it was up to the guys, we’d buy everything, everywhere, all the time, because they may need it,” he adds. “That’s not a sound business decision or strategy.”
Price shouldn’t always be the deciding factor either, Cronenberg says. If your tech has to wait an hour to get parts at one supply house versus paying a dollar more for another supply house to get him or her in and out in five minutes, it’s better to pay more for the parts now and save on labor costs later.
“We’ve dropped cheaper vendors in the past, because their paperwork was an absolute disaster. They didn’t have systems or processes, and it would take my accountants an hour to figure out if we were getting billed correctly or not,” Cronenberg says. “That hour of work was not worth the $5 less they charged us for that item.”
Use your data, figure out what you want to buy, who you want to buy from, and what amount you want to buy. Then, review it every six months to make sure it still makes sense.
Who ‘owns’ purchasing, and how do you get buy-in?
No matter the size of your company, someone needs to own your purchasing process to make sure it is done correctly.
The lesson Cronenberg learned at A1? “When everyone is accountable, no one is accountable,” he says.
“It’s all about scale, but even if you’re a small shop, you’re not purchasing as much as we do, so you can really take the time to own it,” Cronenberg says. “The flexibility of this module works well for a five-truck outfit, and it works really well for our 200-truck outfit, and anywhere in-between. So, who owns it depends on your capacity.”
Dedicate a lead dispatcher, senior install coordinator, or general manager to get the feedback, gain the buy-in, and collectively plan a strategy for what to purchase, when to purchase it, and from which vendor. As you scale and grow, consider dedicating specific procurement teams for different departments.
While Hunter says he’s a huge fan of systems, processes, and documentation, he also cautions owners to not rely on that one person, who just seems to “make the magic happen” when purchasing inventory. One day, that person may not be around to help decipher what you’re spending.
“Whoever does own the process, they record the process and have a daily, weekly, or monthly checklist that you as the owner or other leader in the company can double-check and oversee,” Hunter says. “Don’t put an over-reliance on one person.”
To get company buy-in, simply explain why you’re implementing a system, what’s in it for them, and why it benefits everyone on the team, collectively.
Cronenberg breaks down the benefits of a well-defined purchasing process for his team this way:
Helps owners know the exact inventory on every service truck
Ensures techs can access the parts they need to service the customer
Helps techs increase customer satisfaction
Helps techs increase sales
Helps owners increase performance pay for techs
Ensures accurate costs, invoicing, and financial reporting
“If you educate them on why and how it affects others, it helps them be part of something bigger,” he says.
Negotiating with suppliers to save money on purchasing
Knowing how much you’re spending, on what items, and from whom you’re buying that inventory also allows companies to clearly see the value in every supplier relationship.
“Price is a huge factor in this, but it’s not all about price,” Cronenberg says. “It’s about service, convenience, and reliability. If there is an issue, how quickly are they going to take care of it? If we have a warranty claim, do we have to fill out paperwork and wait for 30 days?”
Form relationships with your vendors and ask about their company goals, and then work out a partnership that benefits both of you. Suppliers want steady relationships with professional trade companies, and they appreciate efforts to streamline the ordering process and keep accounts in good standing.
“If you’re holding up your end of the bargain, they will work with you,” Cronenberg says. “In the future, you may have an oddball request and want them to bring in something crazy, or you may want them to brand something with your own name on it. They’ll do that, because you held up your end of the bargain.”
Best-practice shops tend to seek multiple bids from vendors, then narrow down who they prefer to buy from based on best integration, best pricing, and best delivery, Hunter says. That method saves money for both parties, with the shop committed to buying in volume from that vendor based on upfront pricing for the whole year.
“It sharpens both people’s pencils, and the prices do come down significantly,” Hunter adds.
The ServiceTitan Purchasing Module also improves communication by matching your company’s item code with the vendor’s part number and unit cost to eliminate any confusion over what was ordered. This requires some setup on the front end, Cronenberg says, but most of it comes from what he loads into his ServiceTitan Pricebook.
The module also allows complete tracking of all purchase orders, from pending, sent, and received to market, job type, and more.
“It’s a really smart and intuitive system,” Cronenberg says. “We can send an order over to our vendor accurately, for the right price, at the right quantity, with all of their information in like 30 seconds. It is incredibly powerful, and it saves so much time.”
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