The Link Between Profitability and Inventory Control for Service Contractors

Maintaining profitability and driving growth is top of mind for service contractors as they battle challenges from labor shortages to increased competition in a hot growth market. They also face competition from big-box stores and customers who try to DIY.

On top of it all is a lack of inventory visibility. When cash is tied up in inventory – some of which may be obsolete or lost in a pile of unused parts – a contractor has less to invest in new trucks and new markets. But too many service contractors have not prioritized better inventory management and control, despite its potential impact on their long-term growth.

The benefits of better inventory control for the service contractor include:

  • Increased technician productivity, which means more jobs completed in less time since they have the right parts to begin with and are not running off to the supply house each time they run out of a part.
  • Improved cost accounting; a contractor can better understand profitability by tracking inventory use down to the job, customer and technician levels.
  • Less cash is tied up in inventory that a contractor doesn’t need, and cash is generated more quickly thanks to an increase in jobs completed. As outlined in this article from Electrical Contractor, profit and cash flow are tightly linked.
  • Less shrinkage: With better inventory control, your tools and parts are less likely to get lost or to walk away from a technician’s truck.
  • More inventory plan flexibility, with data that allows a contractor to track and respond to changes as needed. Changes including seasonality, contractor trade or specific inventory by individual technician.

A contractor’s inventory needs to be tracked in real time to better predict how much of each tool or part they need to meet their customers’ needs, without sacrificing service.

To take back control of inventory, many contractors are implementing mobile inventory management systems like MarginPoint, which tracks their teams’ material usage in real time down to the user, job and customer level. To make the most of the system, they are linking it to their suppliers so that they can take advantage of the benefits of automated replenishment.

Learn more about MarginPoint’s Mobile Inventory management solution.

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