Published: May 2006
Whether small or large, all electrical contracting companies need to effectively manage tool inventories. The computer-based systems available today not only monitor where tools are, they provide a wealth of other information and also can be applied to consumables and equipment.
Tool-tracking systems improve a company’s tool retention, increase job site efficiency, generate accurate job cost information and positively impact its bottom line, said Don Kafka, president and chief executive officer of ToolWatch.
“These systems,” he said, “make it easier to effectively manage large tool inventories and can give users immediate access to a specific tool’s location. By storing tool information in a powerful database, companies can track more information about each tool and readily access it when needed. These systems allow companies to track consumable use by department, assign tool and consumable costs to specific jobs, and even manage tool repairs and safety inspections.”
Darryl Maggard, regional sales manager, QuickPen International, said many clients report that they are able to control 98 to 99 percent of their inventory with computerized tracking programs.
“The bottom line is money,” said Maggard. “Can a computerized tracking system save a contractor money? The answer is ‘yes,’ Overwhelmingly, yes.
“Computerized systems provide detailed history of all tool movements, including who performed the transfer, what employee received the tools, and what project they went to, along with a date and time stamp, and employee signatures and a usable status of the tool. Inventory can be tracked by employee, project or both. Items can be billed to specific projects or jobs using a variety of billing methods. Service, maintenance and repairs can be automated and their costs tracked. Lost or missing inventory can be identified. Tool investments can be monitored, along with automated cost recovery efforts to determine profits and losses.”
A basic tool-management system consists of Windows-based software that runs on computers an organization already owns, handheld data scanners and docking stations, and labels that are placed on each tool or machine to be tracked. A tool is scanned when it leaves the office and again when it is returned from a job. Scanners can be used in the field, as well as the office, enabling entries to be made in the system when tools are taken directly from one project to another.
Information entered on each item varies with user needs, but typically includes type of tool, brand, serial number, date of purchase and cost, condition, repair status, date out, date in, billing cost per day, days billed, and total amount billed.
Items entered in the tool database also vary widely among users of computerized systems. Some contractors set a dollar amount and enter everything that costs that much or more. Others may use cordless drills or another commonly used tool as the starting point, while still others record everything from gasoline cans to ladders, generators and other equipment.
Although tool-tracking systems have been available for many years, the latest versions are more powerful and easier to use.
ToolWatch’s Kafka said the best systems available today are designed with the user in mind.
“The right tool-management system is easy to understand, easy to use and makes employees’ day-to-day work easier,” he said.
Some systems are beginning to offer options using radio frequency identification (RFID). These options use tags, containing silicon chips, and antennas that respond to radio frequency queries from RFID transceivers.
“Implemented alongside a bar code system,” said Kafka, “RFID offers the promise of more convenience, because employees can scan items that contain an RFID tag without having to remove them from the carrying case, and RFID can provide an even higher level of security.”
Maggard said tool-management systems have become easier to use because software interfaces have changed dramatically and designs are more intelligent.
“Databases can provide more information at a much faster pace with less data entry required,” he said. “Hardware has become more powerful as well, allowing developers to create more robust applications designed for handheld units. Wireless technologies allow handheld scanners to communicate back to the master database from anywhere there is a wireless signal. Users can be completely mobile.”
Tool-tracking systems can be customized to fit the needs of most contractors, Kafka said.
“By choosing the features that are most relevant to the company, any contractor can benefit from a tool-management system,” he said. “Many companies provide a variety of modules that clients can select to fit their specific needs. A tracking system that is capable of growing with a company’s needs starts at around $5,000. In general, a company can expect to recover its initial investment in a tool-tracking program within a year of implementation through decreased tool replacement spending and increased employee efficiency.”
Maggard said a system’s cost depends on each client’s size and individual needs—a “small” company using his firm’s system usually has annual billings of more than $2 million and has tool inventories in excess of $75,000.
“For a contractor in this category, the cost would be $7,000 to $10,000,” he said. “Return on investment is usually less than seven months, including cost of the system and its implementation.”
Yet for all these systems offer, many contractors hesitate to implement computer-based tool tracking, and cost does not appear to be the primary reason. The task of entering hundreds or thousands of items into a database and training employees to implement the program discourages many owners and managers, and there are other reasons, as well.
“Some may resist tool-management systems because they don’t fully understand what they are spending on tool replacement and lost productivity,” Kafka said. “Often they are even less aware of how much money they could save by using a reliable tool-management system. Tool inventories can cost many thousands of dollars, even millions, and without an easy system for managing those tools and holding employees accountable, a company is almost certainly losing tools on every job. Unfortunately, without a tool-management system, the company may not even notice its tools are disappearing from jobs. Contractors can also be concerned about their employees’ ability to pick up on the technology. Many contractors are uncomfortable with technology and prefer to continue using the system they’ve used for years.”
Maggard believes many companies do not have a clear, well-designed plan for managing tool inventories, lack an understanding of the long-term cost and consequences associated by not managing tools, and believe computer-based systems are difficult to implement.
How do suppliers address these issues? Kafka said a first step is pointing out that in today’s competitive contracting industry, clamping down on tool loss and tool replacement costs is a significant advantage.
“Any contractor not using such a system is throwing money away and losing their competitive advantage to companies that are managing tools,” he said. “Without a way to reliably track tool movement, many tools are most certainly not returning to the warehouse. Add to that the fact that knowing where tools are when you need them can significantly improve job site efficiency—helping avoid job site delays—and a company has no reason not to implement a tool-management program.
“The best option is to get training directly from the company that provides the tool-tracking program. By working with the people who design the system, contractor employees that will be using the system every day get personalized training on the tasks that are most relevant to their jobs. Training can help contractors avoid common pitfalls during the implementation process.”
Maggard finds that most contractors either ignore or postpone action regarding tool management until a critical event takes place, such as a major tool theft, project delay as a result of poor controls or an employee is injured because of tool or equipment failure.
“Recognizing the long-term risk of not modernizing these processes is the first step to a logical solution,” he said. “A clear action plan is required. The development of such a plan largely becomes the responsibility of the software vendor, because he is the expert.
“We start with an analysis of the contractor’s current environment, identify key personnel and policy makers within the organization that will be responsible for installation and implementation of the product, examine the present processes and procedures, and then develop a proposal for the client that includes the measures and resources necessary to properly implement our system within their organization.
“Implementation of any computerized system requires a commitment from both the user and the software vendor,” Maggard continued. “A clear channel of communication between the two parties is paramount to success. Putting the plan in action requires cooperation of both the tool-management vendor and the contractor’s key personnel.” EC
GRIFFIN, a construction and tools writer from Oklahoma City, can be reached at 405.748.5256 or email@example.com.