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When my dad started his wood flooring contracting business, Schmidt Custom Floors Inc., in 1968, he probably would never have imagined that today we'd have 50 guys out in the field installing floors and 15 people running the office. And, there's no way he could have imagined the role that technology would play today in running our business. Technology is so important to us now; I don't know how companies of our size did it before these tools existed. Here are three of the most important technological tools that have improved our business.
GPS
One of the best things we have is GPS units on all our vans, but these units aren't like the ones you get at Best Buy. Rather, they are part of a service that costs $35 a month per van. The service does all sorts of things that make our business run better. First of all, the GPS is constantly running diagnostics on that van. It works exactly like the computer a service guy at an auto repair shop uses. If it finds a problem, it immediately sends you a message via the Internet that there's a problem with the van. It also keeps track of the miles on every van and it will send you alerts like "Van 36 needs an oil change."
But even more importantly for us, the GPS is how we handle our job-costing and time sheet management. When each truck leaves the shop in the morning, the GPS starts the employees' time sheets automatically. After that, it records anywhere they stop for more than 10 minutes. It also lets us know exactly how much time they spent at each job. If they were at six jobs that day, we know how long each job took. The next morning, when the guys come in, their time sheets for the day before are printed out and waiting for them. All they have to do is write down the job numbers and what they did at each job. Someone at the office enters that, and at the end of a job, I can run the profitability on each job because we have the exact hours that job took and the wages and benefits of each worker on that job.
This also eliminates questions on time-and-materials jobs. You'll have customers tell you that your guys didn't show up until 9:30, but we can go back for 3 months and see that they actually got there at 8. If you have that information, there's nothing more they can say; they can't try to swindle you.
Besides job costing, this also is a management tool. I can log onto the GPS Web page for our company at any time and see a map showing exactly where each one of our vans is. Sometimes you can't get a hold of somebody on their phone and you're wondering: Where are they? What are they doing? Now I can just look them up on the map. It eliminates things like guys doing side jobs. And, if I need someone to pick up something on the north side of Milwaukee, I can see who's closest.
When we implemented this, we also eliminated another problem we had: wasted time. When our guys come in every morning, their vans are loaded with the wood, but they have to clean their buckets and things like that. Before, they all sat around and talked about hunting and had a cup of coffee—getting 50 guys out in 10 or 15 minutes is hard, and I don't like going around telling people to get to work. I told the guys I would pay them for 15 minutes every morning, whether they took five minutes to get ready or 30. The savings from that alone paid for the system.
Of course, as a manager or an owner, you have to sell this concept right to your employees. We pay our guys really well, and I told them that if there are guys who aren't working hard or are goofing off, they're taking from the guys who are working hard. In fact, productivity did increase dramatically, and with the GPS, we have a tracking system in place. Each employee has a percentage assigned to him: If we expected a job to take 100 hours and it took him 125, then his percentage is 125. At the end of the month, the system goes through all the jobs each employee did and calculates his percentage. We give bonuses every two months if they hit their goals for productivity and quality, and at the end of the year, we have an awards night.
Inventory Control
When you have 50 guys coming in and out of your warehouse and taking a piece of wood here and there, there's no control, and your inventories are never going to be accurate. We never had a huge problem—our inventory was generally within 2 to 3 percent—but when you have $3 million of inventory every year, 3 percent is $90,000.
All of that isn't necessarily stolen; it can be just sloppiness, or maybe they started the job wrong, had to rip it out and grabbed two extra bundles.
Now we have one person in charge of inventory, and all the guys have key fobs that are programmed for only certain parts of the building during certain hours. They don't have access to go get their own wood. With this system, our inventory is within about three-quarters of one percent. That's a difference of about $60,000.
When we receive a signed proposal, we input the bill of material into our inventory system with the date of the job. We can run a report for whenever we want it—say, the next three months—and it tells us how much wood we'll have at the time and how much wood we're using. It gives us a really good idea what to order. We also implemented bar codes for things like wood vents and finish. As guys take those items for a particular job, they scan the bar code, and it will put them onto that specific job.
Digital Cameras
It sounds like a simple thing, but having digital cameras for all the salespeople and service people is really useful. For example, if there is a repair, the guys in the field know what to expect. If the salespeople need to figure out what kind of wood is in a home, they can have people back in the office take a look at it. We also use cameras to take pictures when we do walk-throughs of finished jobs. If someone missed a jamb or there's a chunk out of the wood, we can bring it back to the guy who did it and use it as a teaching tool.
We also have cell phones with digital cameras for all the guys out in the field. That's useful for cases where you tell a builder there are 10 sheets of drywall in your way. Usually a builder will just tell you you're full of it, but now we say, "Here's a picture." It's another tool to make the guys' jobs a little easier.
You might think some (or all) of these things sound too complicated or too expensive, but they actually end up paying for themselves in no time. The savings in time and money are significant, and, most importantly, they eliminate a lot of the hassles and aggravation that come with running your own wood flooring business.
BUSINESS BRIEFS
Slashing Prices
In times of economic growth, price cutting is a serious problem, but in tough economic times like the ones we have now, price cutting "morphs into an absolute disaster," says Dr. Albert D. Bates, founder and president of the Boulder, Colo.-based Profit Planning Group.
According to Bates, the following across-the-board price cuts require the following increases in dollar sales in order to maintain the same profit level as before:
Price Cut Required $ Sales Increase
1% 4.6%
2% 9.7%
5% 29.5%
10% 92.9%
15% 325.0%
A far better option than blanket price cutting is targeted price cutting for exceptionally price-sensitive items and adjusting prices upwards for SKUs that aren't price-senstive, Bates says. — K.M.W.