How Your Inventory is Costing You

Published on septiembre 14, 2021

Mobile, decentralized inventory is a nightmare to manage.  In most cases Shepherd’s customers report that they would cost parts at the time of sign-out from the warehouse whether or not the technician later used those parts performing service.  There are multiple problems with this practice aside, of course, from the fact that it is just wrong.  

Stock sign-out does not always mean used or sold

First and foremost, sign-out does not constitute usage.  In most cases technicians will sign-out more parts than they need in the morning or the beginning of the workweek so that they need not spend half the day traveling back and forth from site to the warehouse in order to withdraw the exact quantity of required parts.  Few would insist that they do!  Sign-out is a cost-free transfer lacking any General Ledger (GL) impact.  It is only upon usage of the part that it is correct to record a cost, reduce inventory, and record revenue in the case that the service parts are for sale.  The acts are independent and require different treatment in NetSuite.  It is not correct to invoice for parts signed-out; one must only invoice for parts used.

Your inventory extends beyond your warehouse

Second, over time technicians will accumulate rather valuable inventories in their vans or on their persons given that they will have used fewer parts than they sign out on so many occasions.  These uncounted inventories may include valuable, critical, or long-lead parts whose ‘absence’ hinders your business’ ability to serve its customer.  Why delay an overhaul because your supplier gave you a three-month lead time when John has three of the required fuses in his truck?  Why stress working capital to purchase items that your staff already have in their possession? You likely have unknown thousands or tens of thousands squirreled away in your fleet of vans and trucks.

Give your ERP accurate information to get accurate estimates

Third, demand planning in NetSuite will analyze your inventory usage and suggest to you, based on multiple criteria, those parts that NetSuite determines your business will soon require.  If you do not distinguish between sign-out and usage, you will feed to NetSuite incorrect data which will only increase the frequency and the volume of your purchasing.  NetSuite’s recommendations will have been sound given the data that you supplied, but incorrect in practice as the data that you supplied suited a larger business with greater inventory requirements.

How Shepherd’s solution helps you

NetSuite, at its core, is a bookkeeping software. and it triggers the GL impact transactions (journals) from those inventory adjustments mentioned above in real time.

As a native CMMS solution for NetSuite, Shepherd makes it easy for technicians to make those inventory adjustments and then triggers the necessary NetSuite standard functions in real time.

The same applies to time tracking. When time is tracked, we know the cost, which is also captured by the Shepherd solution in real time. Shepherd pushes NetSuite to do what it was initially designed to do which is allow the user to bill their customers but sooner and more accurately. All of this functionality is underpinned and boosted by Shepherd’s easy-to-use mobile app.

Once you do adopt the practice of recording parts sign-out in Shepherd/NetSuite and then postponing costing & invoicing until actual usage, expect to see your purchasing diminish, your inventory value raise as you discover long lost inventory, and your customer challenges to parts invoicing become less frequent.

If you’re concerned how much your inventory management might be costing your company, why not get in touch with us?

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