Work Order Management is simply defined as the process of managing work orders that requires some sort of service or build instruction. When work orders are managed manually, the process can involve many steps, waste a lot of paper, and use valuable staff time that could be spent on other projects throughout the organization. This is where many fluid power distributors benefit from an automated Work Order Management System, which is a program typically found in your ERP solution, to streamline the process and reduce the tasks surrounding the project. Below, we provided five industry best practices for organizing your work order management system to effectively manage costs and maximize gross margins.
Create a work order for every request
A “work order” is defined as a task or job for an employee or vendor. For fluid power distributors, that could specifically mean the process of creating a hose assembly or power unit. Another scenario could be quoting a floor jack repair, which could be challenging if a work order doesn’t yet exist.
As an industrial distributor, it’s best practice to create a work order for every request. TrulinX by Tribute has a very sophisticated Work Order Management module that allows work orders to be entered directly from the sales order or created independently and then later attached to the sales order. The TrulinX WOM module enables distributors to enter work orders on the fly and can use our Next Step feature to convert a quote to an order with just a click of a button. Not to mention, work orders can be quickly and efficiently created and processed for any sales made at the counter or over the phone, which can be very profitable.
Manage and track labor and burden
In order to apply appropriate labor and burden to a work order, you must also understand what the term means and includes. The term, “labor and burden,” includes not only the base pay rate of an employee (labor), but also the additional costs associated, such as federal payroll taxes, unemployment and workers comp insurance, and any additional benefits you may offer like health insurance (burden).
You can avoid all the math and work compiling all that information and use the industry average found in reports from trade associations such as FPDA, NFPA, and NAHAD. You then calculate using the base pay rate to get your labor and burden for each employee. For instance, if the industry average that an employer is paying for burden is 35% of an employee’s wages, you multiply 1.35 X $20.00 (your employee’s hourly rate) to get a $27.00 per hour rate to apply to your work order.
The ability to track and apply labor and burden automatically should be a key proponent of your ERP solution, and if it is not, it’s time to upgrade! TrulinX’s WOM module allows you to enter estimates of both labor and burden if desired. If estimates are entered, they are used to help determine the cost when jobs are partially completed. The actual costs applied are also tracked throughout the process. TrulinX will keep track of inventory items used as well as costs by category. Users may have as many labor and burden lines as they desire, and the labor and burden will be accumulated for each subassembly as well as for the entire job.
Get accurate costs to maximize gross margins
Maximizing gross margins can be tricky when you consider all of the costs you need to cover. Everything your industrial distribution business does to maintain operations―from employees’ salaries to utilities to supplies to credit card processing, just to name a few―all has to be considered to get to that bottom line. Understanding what makes up this calculation will ensure you are set up to reach the maximum gross margin you desire for your business.
“Gross margin” is defined as the difference between the selling cost and the wholesale cost of an item or service. It does not incorporate any of the other expenses, and therefore, that calculation alone will not give an accurate picture of how much profit you have made from a product sale. We’ve covered all the vital data you need to measure and track your performance in our recent blog post.
TrulinX software makes sure that you can add in estimates regarding labor and burden, and when a job is complete, TrulinX offers a comprehensive picture reconciling both actual and estimated costs. In addition, it helps you measure gross margin percentage, operating expense ratio, gross margin return on inventory, inventory turnover, and more. Ultimately, this will give you a more accurate picture regarding work orders that can help you maximize gross margins.
Separate fabrication orders from my regular distribution orders
If you are a fabricator of hose assemblies, power units, or even provide a repair service, then you may find it challenging to keep production flowing seamlessly, while keeping a pulse of where the orders sit in the job line. Having an ERP with a sophisticated WOM module that provides you with the transparency of work in process (WIP), inventory levels, and even Bill of Materials when you don’t have a fabrication order, is essential to your distribution business. This is where TrulinX provides the tools you need to manage your distribution business effectively and efficiently.
The TrulinX WOM module allows you to designate an assembly as a fabrication, which will move components to a “work in process” inventory while assembly is being completed. TrulinX offers numerous easy and flexible options to move components from one job to another, or to route purchased components directly to a specific job when received. You can easily make the distinction of whether a BOM or subassembly will be completed internally, at another location, or by an outside vendor. You can also control the final destination of the completed assembly with shipping papers generated to help warehouse personnel and outside vendors route products correctly.
Partner with a Work Order Management Solution that knows your business
TrulinX is a business management software designed specifically for industrial distributors that provide fabrication and system integration services and is focused on the following industries: Fluid Power & Motion Control, Industrial Hose & Accessories, Fluid Handling & Flow Control, Fluid Sealing, Instrumentation & Process Control, Automation & Robotics, and Pump Distribution.
With over 36 years of industry experience and a staff tenure averaging more than 15 years, Tribute, Inc. has the in-depth knowledge of the industry and long-standing manufacturer partnerships to keep their customers ahead of the competition. For more information on TrulinX software specifically designed for industrial distributors that provide value-add services, Request a Demo!