- Published: 18 May 2009 18 May 2009
While you can’t cost-save your way to a profit, there’s a good possibility that you can spend money to keep it – with an investment in inventory software.
Your working stock may not represent quite the same investment as a new CNC machine, but the total value of your slabs and remnants can reach into the six-figure range. If you’re not accurately tracking all the pieces, you literally don’t know the worth of your most-important material
And, if you can’t put your hands on the second slab of Galaxy Black you need to finish a kitchen that’s already in production, or find the right remnant to replace a mismeasured backsplash, not knowing your inventory can cost you plenty.
Throw in the ability to track other materials in the shop – from sinks to grout – and let your production, sales and office staffs actually communicate with each other, and the extra cost in software can provide some real savings.
THE NEED TO KNOW
Slab wholesalers report that many of their fabricator customers are being more-prudent than ever before in ordering materials. Not coincidentally, publishers of stone-industry inventory-management software say there’s a greater need for their products.
“When cash flow is tight and you don’t have the right material to make a sale, that’s a loss,” says Vipul Shah of Chicago-based Global E-Sourcing Inc. “If you have material that’s not moving, your money is tied up.
“And, if you have remnant material, and you can service a small job from it, your material cost for that specific job is effectively zero – which is a better margin.”
That investment in stone can be sizeable. Louis Gryga of Villanova, Pa.-based Aegis Commerce Solutions estimates that many shops have $100,000 or more tied up in inventory.
“That’s a good reason to have more control over what you’re buying and how much of it is being used as part of each job,” he says.
Matt Binsfeld, applications engineer for St. Cloud, Minn.-based Park Industries, says that holds particularly true when it comes to managing remnants.
“A lot of people cut a slab-and-a-half for a job,” he says. “The other half-slab goes in the yard and is forgotten about. Too many people don’t have a good way to manage that, or figure out what kind of a piece they can cut from that remnant.”
Whole slabs and remnants are only part of a shop’s working inventory, and these programs can go beyond counting stone pieces.
“Inventory is inventory,” says Shah. “While slab inventory has different requirements than grout inventory, good inventory software can handle any item that you need to track by SKU (stock-keeping unit) and by bar code so you understand what’s being used where and the transaction history of the inventory item.”
“Not everyone is managing their materials beyond slab material, but it’s important from an inventory control standpoint to allocate your costs-per-job for sinks, for faucets, and the materials used for the installation process,” says Gryga. “That gives you a better overall handle on costs.”
Ravi Rudraraju of Chicago-based Stone Profit Systems says this type of system is already used widely in the tile industry, where keeping track of everything down to blades and polishers is common. Other shops use it to track architectural elements, such as statues or medallions.
“You add the categories and select the filters yourself,” he says.
DOING IT BETTER
Whether you’re tracking slabs in the yard or sinks in the showroom – or both – opinions vary only a little on just what constitutes a good software package. Harry Hollander of Reno, Nev.-based Moraware, says it should help the shop owner do what he’s already doing better.
“You really have to understand your own process for managing inventory,” he says. “The software can be there to automate whatever you have, but inventory relies a lot on trusting the people in the shop, and relying on them to be accurate with things.”
The toughest part of the job, Hollander adds, is already done in a shop where the employees already record taking materials out of inventory and putting remnants back in.
“It also has to be simple enough that somebody who isn’t necessarily a native English speaker, or highly trained on computers, should be able to use it,” he says. “When you’re tracking inventory, there’s always a question of how much effort you want to put into it.”
Saying a good inventory system should be able to do purchase orders makes it too simple, says Global E-Sourcing’s Shah.
“A good system should be able to do purchase orders for you by job, as needed, as well as understand your order points and economic order quantities, and order materials accordingly,” he says. “In addition, it should be able to project needs based on current usage and determine where you should look next, as well as provide seasonal guidance on colors or promotional items you need to be aware of.”
Guidance is probably a good word for what these software packages can offer. For instance, Stone Profit Systems’ Rudraraju says if you’re buying from several different distributors, a good inventory-software package will help you compare the cost of material based on actual cost from the supplier ... as well as freight costs and any allowances a particular supplier might provide.
“It can also show you the age of slabs you may have on consignment, as well as how fast you’ve been consuming materials and an inventory valuation,” Rudraraju says. “Especially if you know in the last three months you’ve used 10 slabs of this color and five of that, because of the history you might consider buying in bulk to make better deals.”
“Having information at your fingertips is the key,” says Hollander. “It should let you know when you’re going to run out of a particular item, how many you have today and how many you expect to have next week. Forecasting is probably the biggest advantage to managing your entire inventory in a single system.”
Then there’s the matter of remnants. Hollander says managing them is frequently the reason shop owners get into using an inventory software package.
“With whole slabs, most people have a pretty good understanding of what they’re buying and selling,” Hollander says. “Remnant inventory is unintentional, but over time you build up a huge inventory with a lot of value. Once you figure out what you have, you can do things with it to bring customers into the shop.”
Most of the software companies view remnants in a similar way, noting that each piece is a child of its parent slab – which is critical if part of a job has to be made over. Some incorporate photography into their inventory-management software, and say that part of the process is particularly important when managing remnants.
“A big part of our system is being able to bring a photo of that remnant up and fitting a part onto it without having to go to the yard,” says Park’s Binsfeld. “The user can fit it on the photo, see what it looks like and if it works, and then the system will tell them where they put it in the yard.”
SOMETHING FOR EVERYONE
If it sounds like a good inventory-management software package has a little something for everyone, it does. It should be able to address concerns of the sales team, the production staff and the people in the office.
Global E-Sourcing’s Shah says that, for the production manager, the system should act much the same way a dashboard does in a vehicle: It should have critical information available at a glance.
“He needs to know that this particular material was cut for this job, and he can trace it back to a particular slab and order lot if needed,” he says. “The sales manager needs to understand what’s in inventory if he wants to do a special promotion. And, the office person needs to know what materials the shop is sitting on, what’s coming in, and what that does to the cost structure.”
Binsfeld says it’s really up to the user to set the parameters for the most-important reports for the operation. A popular one for the production manager is running a report on what’s on next week’s fabrication schedule.
“They’ll have that sorted by the location and the color of the slab, so the material handler can sort it by ascending or descending order by the manufacture date,” he says. “That will give him a way to stage the slabs for the next few days, and it’s a real positive report to have.”
At the same time, it can go beyond telling the sales team what’s in inventory and what’s been assigned to a job.
“They can also put the names of the install crews in there, so they know if the job has been done, and who to talk to to make sure nothing broke during the installation,” Binsfeld says.
Of course, any shop doesn’t run by inventory alone, and these inventory software packages are only a part of the larger picture. These companies write applications for other parts of the shop operation or that interface with off-the-shelf packages when it comes to accounting. Stone Profit Systems is fairly typical.
“Our system goes all the way from accounting to inventory to job-costing, estimating, and job-scheduling, all in one pipeline,” says that company’s Rudraraju. “You have a streamlined system to pull out what you need.”
When it comes to inventory, there’s another bit of streamlining that may not immediately appeal to some shops: bar-coding. Opinions vary on whether it’s absolutely necessary, although everyone agrees an inventory system will work better with the scannable ID.
“A lot of people want to use a bar-coding system, but very few actually do,” says Moraware’s Hollander. “Bar-coding is a great way to speed up data entry, but it also requires investing in hardware and giving the guy in the shop a scanner that can cost $1,000 or more. A lot of people aren’t comfortable with that yet.”
Still, Hollander thinks the industry is headed that way, and Aegis’ Gryga says it’s a more-attractive option than others currently available. Rudraraju says his company is also trying to make it less expensive by creating labels that can be printed by a laser printer, rather than a more-expensive thermal printer.
“It’s an option with our system,” says Park’s Binsfeld. “It’s also pretty popular with our users. They’d rather do that than have a guy in the shop punching numbers in a keyboard all day long.”
Large shop or small, these software manufacturers say the important thing for owners is to think about how they can be doing things better. And, for many, this can be a worthwhile step in that direction.
“I think it’s for the smaller guy, as well as the bigger guy,” says Aegis’ Gryga. “It relates to a little effort to control a large amount of money. If you’re doing five or more tops a week, then inventory control can point at savings in a very short period of time.”
The others agree. Rudraraju notes that even a shop doing a top a day is probably going to deal with more than 100 slabs in a month.
“Even a guy who’s not inventorying a lot of slabs himself may want to track what lot and block number they come from,” says Binsfeld. “Being able to bring up photos makes them look more professional to their clients. Even smaller guys are using this to make an early step into the digital world.”
This article first appeared in the May 2009 print edition of Stone Business. ©2009 Western Business Media Inc.