Winning at the Tool Management Game

Using tool management software to improve productivity and the bottom line


Welsbach Electric, a large electrical contractor in New York, uses tool tracking software to manage calibrations of safety tools and ensure they are completed on schedule. Such information used to be recorded in spreadsheets before implementing the new software, making it difficult to prioritize activities. Now, the software reminds managers when a tool is due for calibration. The warehouse foreman can print customized reports of tool calibrations, certifications and locations.

For instance, Welsbach uses the software to track calibrations of gas meters and other indicating equipment. When such precision equipment is not working in the field, it costs the company time and money: the tool must be returned and exchanged for another that works properly, and just one insulation megger that performs incorrectly in the field could take out a switch wire, potentially costing the company millions. Even worse, an employee could face serious injury from an improperly calibrated megger.

Additionally, the company also owns 100 pairs of high-voltage gloves that must be tested annually. Before implementing the tool management system, testing the gloves was managed by ledger. If the gloves were not working correctly, workers could be severely injured in the field. Welsbach now uses its tool tracking software to monitor testing schedules. The software issues reminders to the warehouse foreman, which allows him to locate the exact gloves that are due for testing and record results of the test. Because Welsbach can prove it's completing these tests on schedule, it reduces its liability in the event of an accident.

Using Tool Management to Increase Profitability and Accountability

Decision-makers often resist investing in a tool tracking system because they think it's just a high-priced toy for the warehouse. However, while tool tracking can improve tool retention and organization within the warehouse, it can also affect a positive financial impact throughout the company. In fact, many companies that invest in an automated tool management system find that the product pays for itself within the first six months of use.

A large general contractor in the Northwest experienced just such a scenario. Within six months of recording new tools and logging returns from jobsites, the company had a solid handle on its $2.5 million tool inventory. At the end of the six-month period, the company identified an additional $200,000 in revenue, improving the company's financial performance by 16 percent. The company attributes the immediate, tangible return on investment directly to the purchase of an automated tool tracking system.

A tracking system contributes to a company's profitability in many other ways, too. Because having a tight reign of tool inventory leads to better tool retention, a company ultimately benefits through a reduction of funds that previously were allocated to replacing missing tools. And since those missing tools often reappear after they have already been replaced, clearly the funds spent replacing them could be better invested elsewhere. Typically, a comprehensive tool management system will save $0.40 per hour per employee compared with the $0.80 per employee per hour typically lost by replacing small tools. For a company with 1,000 employees, that translates to $16,000 saved each week, or $832,000 each year.

The software's features also let companies compare the cost of similar tools over their lifetimes. By comparing the number and costs of repairs, warehouse managers can make smarter purchase decisions. And, large companies can use the software to combine tool orders from all divisions. Pooled ordering allows companies to negotiate better prices for tools.

And let's not forget that with the passing of the Sarbanes-Oxley Act of 2002, public companies face requirements for managing and disclosing their assets. In a public construction company, tool inventories can easily be worth millions of dollars, a substantial asset by any assessment. Under Section 404 of the act, companies are required to attest to the internal controls that are used for financial reporting. Such controls include software programs that firms use to track and monitor hardware. Companies are also required to account for all assets valued at more than $100, a floor many tools easily meet. Tool tracking software records the movement or disappearance of company-owned tools. Without a system in place to effectively track these assets, accurate reporting of assets is impossible.

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