Redback WMS
How to manage costs in field work is not always the most “sexy” or talked about subject when one considers field service. But since starting the RedbackWMS offering and speaking to a wide range of field service providers in different industries, it’s actually become one of the most common discussion points for me.
After all, businesses are out there to make a dollar and, after increasing revenue, the most important subject for a business is to control costs. So being able to link your costs and revenues to your work is actually quite an important topic.
Many businesses today (small and large) use a reactive approach. They produce a quote based on the final number they think is acceptable to the customer and itemise it so as to justify that number. If they win, they just go out there and execute, because, well, “you don’t know what you don’t know”. In effect, they give the field agents the leeway to do whatever they think needs to be done. A lot of material is bought directly and specifically for the work and the time spent is roughly controlled by the supervisor who keeps it all in mind.
At the end of the job, the office administrators wait for the vendor invoices to come in. If they roughly make sense and fit within the original quote, they accept these in and initiate the payment process. If something looks off, they may check with the field supervisor and hope he can recall what happened on that specific job.
So in other words, the costs are linked to the job when the vendor sends them in, and these may only get disputed if they don’t really fit in an estimate that was made long before even starting the job.
The purchase order
Certain field service providers, who may be a bit more organised then others, will try to control this by making it a policy to raise a purchase order for any material or time needing to be purchased. It is a little painful for the field agent to have to request this every time they need something, but at least it allows the office administrators to quickly confirm that the costs on the vendor invoices are as requested and expected.
This is called two-way matching as there is a two-way link between the invoice and the PO: are the costs on the invoices as expected on the PO and is the PO completely invoiced?
A two way match is a good control point, but it has its limitations. A PO is often raised away from the field. The planner or the supervisor calls or emails his requests to the purchasing administrator who creates a PO and emails it to the vendor. This can be done days after the request from the field as been made and even sometimes, after the job is already done. This means that the PO may be less accurate than expected.
There can also be the case where vendors raise the POs for themselves, when field agents “walk in” for material.
The actual
There is a third control point that can help greatly increase the accuracy of the costs and control over them. An actual is a recording of what “actually” occurred on the field. It is most often captured directly by the field agent on the mobile device and at the time it happens.
This is in effect the field agent recording the statement “I have used this amount of this material for this task at this time”.
Actuals can be for labour, material, equipment or services. And when they are for vendor material or services, they can be considered a receipt of that purchase.
When the invoice comes in, the office administrator then has 2 points to compare against: the original Purchase Order, requested by the planner, and the actual, entered by the field agent at the time of usage. This is called a three-way match as it looks like a triangle between the PO, the Actual and the Invoice.
In other words, there are now 3 opinions, from 3 different people, of what the costs are. If they all match, all good. If one doesn’t, then at least we still have two that do, so a good chance of having the right cost captured. If they all mismatch, than we need to investigate, but at least we have a clear signal that something is wrong.
Storeroom management
This approach is actually how storeroom management works, and has always worked. A PO is raised when material needs to be replenished, which is sent to the supplier and triggers the logistics process. When the material arrives at the storeroom, it is receipted immediately (not days later or when the invoice comes in), and this also affects the inventory levels immediately. Then, when the invoice comes in, a three-way match is done and costs are simply confirmed (they have already been accounted for at the time of receipt in the RBNI or GRNI account).
For decades now, storeroom employees have been using mobile devices to “scan” material in at the time of receipt. And so, it can be the same for work management. Field agent can use their mobile device to capture the actuals (that serve as receipts) as the material is used or contractor time is done. What that means for field service organisations is that the costs of the work can then be accounted for immediately, as it’s done on the field, not 30 days later when the invoice comes in. The invoice just serves to “confirm” the cost and raise alerts where there is a mismatch.
This approach is where a large amount of the benefits of cost reduction and revenue leakage reduction come from: capturing the actuals allow you to better control your costs and thus, lose less.