The ROI of Improved Inventory Management
Our continuing series about the ROI of field service software is back with another in-depth look at how the right solution lowers costs, drives revenue, and pays for itself many times over.
In our last post in the ROI series, we focused on the ROI of improved scheduling and utilization. As that piece established, making better use of how technicians are scheduled and utilized can have an immediate and impressive impact on the bottom line of a field service provider.
In this post, we focus on the ROI of improved inventory management. As readers will learn, improving how a company manages its parts and equipment inventory saves time and reduces frustration and waste, among numerous other benefits – all of which we can put a dollar amount on to better understand how, when, and to what extent the right field service software recoups its own cost.
Why Inventory Management Matters
To start, it is important to explore why inventory management needs improvement in the first place. After all, every field service provider already has some method for managing parts, tools, trucks, and other equipment required to complete a job in the field. And since getting these assets to the right place at the right time is so important for service delivery, the current method probably works.
That being said, there is a difference between a process that works and one that works well. It may also be the case that a process that worked in the past no longer does – especially in the wake of everything from a global pandemic to a sustained supply chain crisis.
Inventory management is both a huge cost for field service providers and a major driver of service outcomes. Therefore, it should never be taken for granted that management is working as well as it could be, especially in terms of cost efficiencies. There is always room for improvement. And as the numbers below will illustrate, there are compelling incentives to improve whatever is not working.
With STH’s legacy systems, managing truck inventory required tedious, error-prone extra steps, which delayed giving the customer an invoice at job completion. Now, when a job is done, parts and materials used are automatically included in the invoice. – STH Case Sudy
Where Inventory Management Goes Wrong
A small field service provider can still have a substantial inventory. And even when it does not, the inventory is important and probably expensive, making it essential to manage the contents carefully. That is never easy, unfortunately, and it only becomes harder the larger a field service provider grows. So much harder, in fact, that inventory management can slow the speed of expansion or cap how big a provider can get. That is to say, the consequences of bad management affect the entire company and cut deep into the bottom line:
- Stock losses and shrinkage – Inventory losses can take many forms. Theft is the most common, but parts and equipment can also get misplaced, misused, or mismanaged. No matter the cause, inventory shrinkage has a direct cost in the form of wasted spending on parts and equipment. But it also has indirect costs that result from technicians not being able to complete jobs as planned. Every field service provider deals with shrinkage to some extent – but many underestimate the size of the losses or the full cost involved.
- Low first-time fix rate (FTFR) – When a tech heads to a job with incorrect or insufficient parts and equipment loaded on the truck, they will not be able to complete the job on the first visit. There are many costs associated with a low first-time fix rate (see the next bullet), but perhaps most problematic is the effect it has on customer satisfaction. People want their issues resolved as quickly as possible. When a field service provider cannot do that in one visit, it makes it less likely that person will become a loyal customer. Every field service provider tries to maximize the lifetime value of each customer. Ineffective inventory management can have a significant negative impact on that value.
- Repeated visits – Making multiple trips to a client site inflates the cost of that job in several ways: higher labor costs, greater gasoline usage, extra wear and tear of trucks, among others. Repeated visits can also exacerbate the shrinkage problem because making more trips back and forth increases the likelihood of lost, abandoned, or otherwise wasted inventory. Completing a job with the fewest truck rolls necessary depends on first identifying all the parts and equipment it requires.
- Billing issues – When it is unclear what parts and equipment were used in the course of a job, it becomes harder to bill that job accurately. Either things get missed, in which case the bill is too low, or extra costs get included on the invoice, which can lead to billing disputes and angry customers. Poor visibility into what parts were used on the job can also inflate administrative costs.
With NextService, Eagle Point has the ability to quickly run a report that helps monitor materials on a job site.
Thanks to NextService, Eagle Point has increased inventory location visibility from 0% to 90%.
Inventory reconciliation, which previously took 30 to 40 hours every month, can now be completed in just 8 to 10 hours. That is a 75% reduction in time spent. – Eagle Point Case Study
How to Fix Inventory Management with FSM Software
Most field service management (FSM) solutions on the market come with tools for managing parts, equipment, and other assets. Relying on digital tools will always be an upgrade over using clipboards, ink pens, and spreadsheets. How much of an upgrade, though, varies widely across different solutions.
NextService takes a unique approach to inventory and asset management designed to make life easier for schedulers, techs, managers, executives, and clients alike. How? With the power of NetSuite.
Before we explain how NextService works, consider what the alternatives offer. Some try to build FSM products with every feature imaginable for service delivery and business management, becoming a jack of all trades yet a master of none. Others try to integrate FSM software with popular business management platforms through an API that can be slow, buggy, or incomplete when it comes to exchanging information between systems. So, while inventory management may improve with either example of FSM, it still won’t be perfect…and it may replace problems related to manual entries with more complex technical issues.
NextService avoids those issues by running on-platform within NetSuite, meaning it runs inside NetSuite and shares the same underlying databases. Our best-in-class FSM solution works seamlessly with the powerful and popular business management features of NetSuite.
Why does that matter for inventory management? Because NetSuite has a robust inventory management tool that tracks parts and equipment from end to end. Combine that with the NextService mobile app, which makes it simple for techs to record everything they do in the field, and field service providers now have a clear record of when, where, why, and how every single item in their inventory is utilized. That record moves seamlessly into the accounting side of the business for efficient billing and cost tracking. In that way, inventory management is not a discreet responsibility but part of a seamless process to plan jobs, deliver service, collect revenue, and repeat.
Estimating the ROI of Improved Inventory Management
Keep in mind that the ROI will vary depending on the size, type, and inventory of a field service provider. There are also returns that are undoubtedly beneficial but difficult to calculate exactly, such as the savings on administrative costs once it is easier to track and bill for inventory. Even with those caveats, however, it is clear that using NextService to improve inventory management results in a return that quickly and repeatedly exceeds the investment. Here is how with evidence from actual users:
- Shrinkage reduction – End-to-end part tracking has been shown to reduce shrinkage rates by as much as 90%. If a business loses $80,000 in inventory on average annually (not unusual), it can save $72,000 each year it uses NextService.
- Administrative optimization – Improved inventory tracking helped one of our clients lower the time spent on inventory reconciliations from 40 hours each month to 10 or less. Another client took advantage of NextService to reduce administrative staff by 65%. Whether getting more from the same team or meeting requirements with a smaller team, labor costs are lower thanks to NextService.
- Job planning – NextService gives both schedulers and techs better information about the parts and equipment each job requires. That way, each truck gets loaded properly to increase the likelihood of a first-time fix and lower repeat visit rates. NextService helped one client reduce job prep time by 50%. And when it is faster to prepare for jobs and more likely to finish them in one visit, techs can complete more work overall; one of our clients saw a 30% increase in the number of jobs completed by each technician.
- Upsell success – Once it becomes easier to get the right inventory to a job site, it becomes easier to get extra inventory there as well: potential add-ons or upgrades a customer may decide to buy when presented with the opportunity on-site. How often upselling works and how much extra revenue that leads to depends on many factors – but if it elevates the average value of each job by just a few percentage points, that results in four, five, or six figures of new revenue.
Add all these together and it is apparent that the return on improved inventory management could, by itself, offset the investment in NextService – to say nothing about the prodigious ROI created by other aspects of our FSM software (we will explore all of those by the end of this blog series).
Next Service – A Bigger ROI Is Just the Beginning
More than just a way to improve various aspects of field service and offset software costs in the process, NextService gives providers a way to prepare for the future of field service – an industry that is growing and changing fast while creating new opportunities and expectations along the way. Every company needs to evolve in response. With NextService running on-platform with NetSuite, users have the tools to evolve with ease, then emerge stronger in every way.
Stay tuned for the next post in our series, which explores an issue that drives success or failure for a field service provider arguably more than anything else: customer engagement. We will reveal why this issue matters more (much more) than many providers realize, then highlight how NextService keeps customers happy, loyal, and engaged. Until then, schedule a demo or speak to an expert about a personalized ROI calculation.