How to Make a Tool Management System Work For You

Bar coding your tools and registering them on to a computerized monitoring system is one of the key components of good tool management.

If you want your company to grow, you must put the systems in place that will allow it to do so. What worked when you had eight employees almost certainly won't work when you have 80.

At Gem Plumbing and Heating, we recently dealt with the challenges associated with explosive growth. In 2000, we had 80 employees; today, we have 325.

One area in which we were able to improve our company's efficiency, save money, and enable this tremendous growth was tool management. If your company doesn't have a tool management program in place, you're risking thousands (or even millions) of dollars in assets every day.

Do you know where your major tools are? Do you know what kind of condition they're in? Are you able to provide your workers the tools they need when they need them?

If you're like we were, the answers to these questions are, "I have a general idea," "Kind of," and "Sometimes." That's no way to operate your company efficiently and set the stage for growth.

Why Our First Attempt Failed
As our company grew, we were buying tools on the demand of our technicians as they needed them. We handed the tool over to them, and had them sign a piece of paper saying, "I have this tool."

This plan didn't work. Sure, we had signed receipts for the tools, but had to go through volumes of books to find out who may have signed for it. By that time it was too late — the tool had already been passed to someone else, who had passed it to someone else, who had lost it.

So we were constantly losing tools, or they were coming back broken. It was costing us a fortune to not have a system in place to track our tools, but the fear was that it would cost even more to capture all the tools, put them on a software product, and manage and monitor them.

We tried a small software program to get all of our tools recorded on the computer, but the system didn't have much power and was only marginally useful. That's when we realized what we were doing wrong. We were trying to use a software program to run tools, instead of having the software program assist an individual or manager.

Our solution — and our recommendation to other contracting firms who want to run a tool program the right way — is to put a gatekeeper in charge of the program. You don't need to hire a new person; your tool manager can be whoever is in charge of your tool crib right now.

This person will be accountable and responsible for all of the company's tools, and he or she will make sure that accountability works it way down to the individual technicians. Without someone to oversee the program, all the work you do bar coding and registering all your tools will go to waste and you'll be back to where you started from.

Making the Investment
Once we decided to commit to a tool management program, and had a person assigned to oversee it, we reconsidered our software options. We decided to invest in a powerful tool management program. We wanted to track all tools that cost more than $40, as well as all specialty tools (things we don't use often, so we don't want to purchase more than one).

We started to run this program in its entirety a few years ago. The key is that it holds people accountable. We know what tools the technicians have, and we charge the jobs for the tools that are being used there. The techs now realize that every day they leave a tool on-site when someone else could be using it, they're costing the company money.

At the end of the month the service and installation teams see the profit and loss numbers on their jobs, with a line item being the tool cost. At the end of the year, there's a bonus if they've done well on their jobs and managed their tool use well. Now our crews want to get the tools back as quickly as possible so that they're more profitable on their jobs.

The fees we charge are nominal. The fees show the techs that there's a cost in hanging onto the tools. We show them the cost of the tool, and the cost to the company of carrying that tool, so they can understand what the company's thinking when we're making decisions.

In addition, it's no longer acceptable to bring back a tool damaged or broken, and say, "Oh yeah, I dropped it. Too bad." Now, technicians are held accountable for the damaged tool through attachments to any bonuses or pay raises they might get.

Once we established a level of responsibility, our people began to realize that there's a real value to these tools, and they became much more serious about the way they handled them.

It's also very important that once a month, we mail to all the foremen on the larger construction sites a list of all the tools that are signed out to them. This way, they know what we have in our system, and if there are any questions we can address them right then and there.

Promises Management Must Keep
In order for your tool management program to work, you must be willing to make and keep two very specific promises to your technicians.

The first promise is: "If I take a tool from you, when you want that tool back I will give it to you in equal condition, or better, or brand new."

Rightfully so, technicians can be afraid they won't get the tools back when they need it, or when they do get it something will be broken on it.

That's why you have to make that promise and keep it. The vast majority of technicians, who are doing things in an honest and conscientious way, don't have a problem with giving a tool if they know they're going to get it back in good condition when they need it.

The second promise you need to make to your techs is that when they need any tool, you'll jump through hoops to get it to them as quickly as possible. This is where a good software program is very valuable. It allows the tool crib manager to find the tool quickly, and go (or send a parts runner) to pick that tool up and drop it off to someone else. At Gem, we can locate a tool in the system and get it to whoever needs it in an hour.

Trust and True Cost
Expect it to take a little time to fully implement your tool management program. The first item you have to build in any relationship between owners or managers and technicians is trust. Technicians need to see that they'll get tools on demand, in good condition. Once they do, they'll have no problem checking their tools in and out.

One of the most important things that has come out of quantifying tools is that now we understand the true cost of our inventory of tools and equipment. We understand that every four to five years we must replace many of these tools, because of wear and tear. Our tools program has enabled us to budget what our true tool costs are going to be each year. We factor that into our job costing, so that we know at the end of the year that we'll have our tool expenses covered.

We own well over $1 million worth of tools and equipment. If we need to replace our inventory on a rotation basis every four to five years, that means approximately $250,000 every year will be reinvested into new tools. If you're not paying attention to it, that can take a big chunk out of your bottom line.

But we've found that by monitoring our tools, we're able to increase their lifespan because our technicians are taking better care of them. In many cases, we've been able to increase the lifespan of our tools to five-and-a-half or even six years. So we've been able to take that $250,000 annual line item and reduce it to $160,000 or $170,000 in annual new tools purchases. We're saving $80,000 to $90,000 each year just by watching our tools.

We realize that techs love their tools. We also knew we had a real problem with tools, we just didn't know the extent of it. Initially, tool management seems like an expense, but it's really an investment that allows your company to grow without chaos.

Larry Gemma is vice president of operations at Gem Plumbing and Heating, Lincoln, RI. Gem serving commercial and residential customers in Rhode Island, Massachusetts, and New Hampshire. The $34 million company has 275 tool-loving technicians in the field. Larry Gemma can be reached at 401/459-4802, e-mail [email protected]