Inventory Management Best Practices for Petroleum Maintenance Companies

Before digging into the petroleum equipment maintenance industry’s best path forward, it’s important to understand what challenges face the industry. Here are a few of the most difficult issues that may be bubbling below the surface:

Keeping Track of Core Parts

As you know, core returns are a foundational part of any petroleum equipment service company’s operation. However, it’s easy to overlook how heavily inefficient core parts tracking weighs on your bottom line. To maintain revenue, you need to know what’s been replaced and who has the defective parts you need to return to a supplier sitting on their truck. All the while, you need to know which of the core parts you have on hand need to go back to manufacturers for credit. Anytime you overlook a potential return, you’re losing chunks of money from your company’s bottom line. 

Managing Core Returns 

We all know the petroleum equipment maintenance industry isn’t like other sectors when it comes to returns. When a core part stops working, you can’t afford to just toss it out. For the majority of core parts, you need to return failing items to the manufacturer, and if you’re not tracking reimbursement credits property, it’s easy for money to leak out of your company. 

Trying to Scale Manual Inventory Management Processes 

Often, a petroleum equipment services company will start out managing inventory and core returns manually, only to realize the team is overwhelmed when the organization grows. Unfortunately, as the company takes on more customers and deals with more parts and manufacturers, it’s easy for manual inventory management processes to break down. In turn, you may end up losing thousands on missed parts credits or unmet customer demand. 

Setting Accurate Pricing

If you’re not pricing coreable transactions into your daily billing, it’s easy to lose swaths of money quickly. For instance, imagine you pay $1,000 to your supplier for a part, but if you bring in a defective part, you get $600 back. Too often, a company will end up passing that final saving onto the customer—even when they aren’t sure a job will be subsidized by a return. Ultimately, that can leak money out of your company. 

The bottom line? If you don’t know exactly what you’re saving on parts, you won’t know how much you need to be charging. That pricing error can turn into major losses. 

Balancing Parts Inventory for Jobs

Petroleum equipment maintenance companies don’t just have to worry about managing core returns in the back office. Inventory management also weighs on your technicians’ ability to deliver service. If you don’t know where parts are, what parts you have on hand, and which technicians need a piece of equipment, your first-time fix rates can suffer. By streamlining these inventory processes, it’s easier to get the right part to the right tech at the right time, making it seamless to reach more customers and bring in more revenue.

On the surface, mismanagement of inventory probably throws a kink in your day-to-day operations, but you may not recognize how much it costs your company. Beyond creating headaches for your teams, there are several more lasting money leakage issues that stream out of the problems in the current inventory management process: 

You miss out on core return credits.

The most obvious way inventory mismanagement leads to money leakage is through lost return credit. Anytime your team overlooks a core return, you forget to return a part, or the manufacturer loses track of a return, it shaves money off your company’s bottom line. With so much of your inventory falling into the core return camp, it’s easy to make mistakes—and every little mistake pulls money out of the company. 

You risk job delays.

To impress your customers, you need to get the right part to a qualified technician in time to complete the job. If you’re not managing parts inventory accurately, it can trigger maintenance delays that hold up your customer’s business. Those downstream consequences can cause you to upset customers, lose business, and miss out on revenue. 

You risk passing costs on to your customer.

Especially if you’re trying to manage core returns manually, you risk passing extra costs on to your customers. When you aren’t sure which parts are eligible for core returns, it’s impossible to set prices that match the amount of money you’re receiving from the manufacturer. When there are discrepancies in the price of returns, either your company will end up swallowing the cost or your customer will take a financial hit. 

You waste time.

Managing core returns and parts inventory levels manually is an extremely time-consuming process. Not only do manual processes increase the likelihood of costly errors, but they also bog down your teams and waste valuable human resources.

By improving your inventory management processes, you can lift pressure off of your back office, save money on core returns, and deliver better service to your customers. Here are a few ways to streamline your inventory management processes: 

Know Your Parts Levels

Knowing your parts levels has always been critical for petroleum equipment service companies, but recent supply chain disruptions are pushing those needs front and center. According to Statista, supply chain issues are now costing organizations $184 million per year on average.

Worse yet, even when the current supply chain returns to normal, petroleum equipment maintenance companies will face a high risk of disruptions. In one report, McKinsey ranked the petroleum industry as one of the top three sectors that is most vulnerable to shocks in the supply chain. 

The recent shakeups in the supply chain shine a light on a critical fact: Petroleum equipment service companies need to know their parts levels. Wondering how to track your parts levels more efficiently?

Advanced field service management software will generate inventory management reports that help you see how many parts you have on hand, where your core returns are, and the level of demand you have for equipment. You can also manage cycle counts and track your warehouse levels via a mobile app. By automating this entire inventory management system, it’s easier for your company to avoid disruptions when the supply chain is unreliable and reach more customers.

Simplify Core Parts and Warranty Returns

Especially as your petroleum equipment maintenance company grows, your back office will see more and more chaos from core returns. Although your teams probably understand how valuable core return credits are, they may not be able to accurately keep track of warranty claims and return information on their own. That’s why it’s important to use an automated system to monitor your core parts, check return statuses, and spot part whereabouts. 

Here’s what the best petroleum equipment service software solution will show you:

Where Your Dead Stock Is

You can recoup a large sum of money by simply understanding where your dead stock is. Advanced software will help you see what parts you have on hand that are eligible for return credits. By spotting where this dormant inventory is, you can mine your current stock for returnable parts and bring in more money. 

Where Core Returns Are

Advanced software will let you track the entire core returns process—from your initial claim to the instant credit lands in your accounts payable. That way, if a vendor loses a part in the shuffle or overlooks a core return, you can identify errors right away. Ultimately, that means you know how much a supplier owes you, and you retain more revenue. 

Where Inventory Is by Serial Number 

The best field service management software solutions will provide serialized inventory tracking for your original equipment manufacturer (OEM) parts. With this advanced tracking ability, you can easily see what parts are being replaced and which parts are covered under warranty. That saves you time and money in a few key ways:

1. You can establish more accurate pricing. By knowing exactly what parts qualify for coreable returns and which don’t, you can nail down pricing that’s more beneficial for both you and your customers. Advanced software also saves your internal offices time by letting you set up list-plus and list-minus pricing by manufacturer. That opens the door to establish special pricing for select customers. Essentially, this type of software will make it easy to identify accurate price points, set up custom prices based on core returns, and follow credit memos at every stage of the process. That means it’s easier to keep finances straight, you stop wasting time lining up quotes for customers, and it’s simple to account for money when it comes time to expand. 
   
   
2. You ensure replacement parts arrive at your warehouse. If you lose track of replacement parts at any point in their journey, it’s costly, but it’s especially important for parts to make it back to your warehouse. That’s because these parts affect both the money you’re retaining and potential revenue you can bring in from customers. After all, if a replacement part doesn’t end up in your warehouse, it can trigger delays, upset customers, and cause lost income. Full inventory tracking ensures your replacement parts end up in your warehouse, so you can deliver them into the hands of technicians and drive more business.
   
   
3. Inventory management becomes a simpler process. By gaining access to inventory tracking, your back office spends less time trying to sort through warranty information manually. Instead, it’s easy to see exactly what defective parts can be returned, where they are, and what parts you need to stock up on.