Know the Count

Can you accurately answer this question: How many cylinders do you own?

How many cylinders do you own? This may not seem like the most important question at first, but not knowing this answer has the potential to greatly impact your rental income and relationships with your customers. For over 30 years, the team here at Dataweld has had the good fortune of working side by side with distributors in the gases and welding supply industry. In that time I have long since lost track of how many times I have asked this question, but one thing that I do know is that the answer is almost always the same.

Smaller distributors tend to say that they have around 1,000 to 2,000 cylinders, while larger distributors tend to say around 15,000 to 20,000 cylinders. Let's think about this from an assets standpoint. Cylinders have different prices, but for the sake of discussion, let's just use an average price per cylinder of $200. A variance of only 1,000 cylinders would represent an investment around $200,000. That's not exactly pocket change. What if you were looking at accounts receivable and, instead of finding an exact number, found a note that read "somewhere between $200,000 and $400,000"? 

4 Suggestions for Solving the Asset Problem:

 1. Put controls in place.

 2. Keep accurate records of cylinders shipped to your vendors.

 3.Keep track of empty and full cylinders on your dock.

 4. Consider using bar codes or RFID tags to track serial numbers.

Think about the accuracy of you cylinder records from another perspective. Inaccurate cylinder records can have a negative impact on your customer relationships. Improper record-keeping often means incorrect billing. Incorrect billing often results in lost billings on gases, cylinder rental income, and time spent reconciling balances with customers.

Identify the Problem

Many of the distributors we've worked with over the years have said things like "I don't make that many mistakes..." or "It's not that big of a deal...", but let's apply a little math to this topic and see what the numbers say. Let's say that there are 100 invoices a day and that there are two types of cylinders on every invoice giving us a total of 200 cylinders. Assuming that there will be returns, for this example we will keep the returns equal to the amount of shipped cylinders, our total amount of cylinders is now 400. Now there are 400 transactions involving cylinders for every 100 invoices billed. Assuming 22 working days in the month and 12 months in the year, the result is more than 100,000 transactions.


If cylinders could talk...
How old is your oldest cylinder? Whip Seaman, president of Corp Brothers in Providence Rhode Island, reports that he has a cylinder dated 1911. "It's shoulders are covered with retest dates, every five years, from then to present. Can you imagine the places that cylinder has been? Fab shops, hospitals, ambulances, factories, served our country through two world wars, and to sea on a research vessel. How many times was it refilled? What customers kept it the longest time? What gases were pumped into it? Questions like that could go on forever!" Indeed those questions could go on forever. Again, the question stands, how old is your oldest cylinder? What is your best cylinder story? Let us know by clicking here: My Cylinder Story

Let's also assume that we are above average and are 99 percent accurate. In this example, if we only make one error in every 100 invoices, then 1000 errors will be made before the end of the year. There are more things to consider however. 

Things to Consider:

1. Did the mistake involve one cylinder or ten?

2. Was the mistake in my favor or the customer's?

3. Did the customer loose the cylinder or were the returns improperly recorded? 

Solve the Problem

Where do we begin? First, 1. Controls need to be implemented. Employees need to be balancing the trucks, every day,  to the orders that were both taken and delivered. The place to start is by taking a physical inventory of each truck before it leaves and when it returns. The beginning inventory of cylinders, plus or minus the number of cylinders that were delivered to customers, should equal the ending inventory. If there are too many cylinders on the truck, then the driver most likely didn't record some of the returns. If there are too few cylinders on the truck, then the driver may have forgotten to record those extra cylinders that the customer didn't order but asked for at the time of delivery. Catching these mistakes now will keep things from getting out of hand later.

2. Keep accurate records of cylinders shipped to your vendors. Vendors make mistakes, but no one wants to loose assets or pay rent on cylinders that don't exist because a vendor's driver didn't record the correct number of shipments and returns. 

3. Keep track of empty and full cylinders on your dock. Knowing how many cylinders are on the dock completes the picture of how many cylinders are available and where they are located. 

The Formula: 1 + 2 + 3 = How many cylinders you have.

1. How many cylinders are at customer sites?

2. How many cylinders are on the dock?

3. How many cylinders are at the vendors?

The suggestion above will do wonders for the accuracy of cylinder records, but there is another important benefit. Not counting cylinders can say to employees that cylinders are not important. If employees see from management that these assets are highly valuable, then they will be much more likely to also value the assets. 

Now would be the time to take a closer look at tracking cylinder assets by Serial Number using Bar Codes or RFID tags. Tracking by Serial Number can help to resolve those more complicated issues. For example, if a cylinder asset is returned from a different customer than it was shipped to and no tracking is in place, then there will now be two customers with incorrect cylinder balances. 

The cylinders that were shipped to the first customer may have been returned, but credit was not given to the customer for the cylinder. Now the second customer has been given credit for cylinders they didn't rent. This sets up the company for loss of rental income and an unpleasant meeting about cylinder discrepancy.

GAWDA Cylinder Task Force
The US Department of Transportation says that a standard cylinder must be filled by its owner or by someone with the express permission of the owner. As we all know, the question of determining cylinder ownership has been a longstanding problem in this industry. To combat the issue, GAWDA's Government Affairs and Human Resources Consultant, Rick Schweitzer, has been working with a handful of GAWDA distributors as part of the Cylinder Task Force. The goal: to develop a policy template that will help resolve ownership issues. Please check the GAWDA website for more information.

Accuracy is the Key

When it comes to cylinders, accuracy is everything. There needs to be as much emphasis on accurate cylinder balances as there is on bank records. The purpose of accurate cylinder records is not just about answering a question or giving the overall number. The purpose is about improving customer relationships, about reducing those uncomfortable discrepancy meeting, and about improving billing revenue. Accuracy should be your state of mind.

Mobile Processing

Using mobile technology saves time and money while improving accuracy and customer service. After being in the welding supply business for a long time, being very successful at running the business, and upgrading to the latest computer technology, you keep hearing people say you need to consider something called mobile processing. What exactly is mobile processing, and why should you give it a second thought? 

What Is Mobile Processing?
Depending on whose talking, a variety of definitions will be given. One very simple definition is performing work away from your office. For example, mobile processing includes any time a call is made back to the office to find out what a customer owes. Another example is when drivers sell something off of their truck and write up a ticket in the field to give to the customer. Any work of this type performed in the field could easily be described as mobile processing.

When GAWDA talks about mobile processing, the definition typically involves the use of technology. When technology is added to the mobile processing equation, the benefits can be tremendous. Here are a few examples.

Improved Customer Service
Most distributors have outside salespeople calling on customers. Those customers often have questions that require a call back to the office. Questions like: "Did you receive my last payment?” or "What is my price for that helmet?” or "How many cylinders do you have me charged with?” If the salesperson does not have a printout with them, then they have to call the office and get someone to stop what they are doing to look up the answer for the question.

Suppose that a salesperson has a laptop or cell phone. Instead of having to call back to the office, the questions could be answered immediately for the customer. The customer gets their information quickly, the salesperson isn't wasting time calling back to the office, and the inside salesperson is free to continue working on other tasks. 

More Accurate Cylinder Records
One of the big headaches for many distributors is cylinder balances, specifically, keeping them accurate. Here is where mobile processing can help a company and it's customers. Even if cylinders are not currently being tracked by serial number with a PDA, ruggedized handheld computer or cell phone, the cylinder information could be downloaded to one of these devices. This would give the sales team and drivers the capability to perform cylinder audits when visiting customers. The sales team would be able to perform audits and immediately alert the customer to any discrepancies. At this point, they could begin working toward resolving the issue before they get out of control.


In this example, mobile processing with a mobile computer opens up the opportunity to improve the accuracy of cylinder records, reduce the number of meetings involving cylinder discrepancies and demonstrate to customers a higher level of customer service.

Processing Orders at the Point of Delivery
Many distributors stock extra cylinders and inventory on their trucks in case the customer decides they need a few more oxygen cylinders or some extra tips. Regardless of whether the order is generated ahead of time or at the customer site, changes to the order have to be made when the customer wants more products. How do these changes get back to the host system accurately and efficiently?

In many cases, what happens is that the driver writes down the changes on the ticket and brings those back at the end of the day. Then someone else deciphers the handwritten changes and manually enters the changes into the host system. Hours every day are spent on this repetitive, potentially error-prone task. 

Mobile processing gives the capability to streamline this operation. Instead of writing down the changes on a printed ticket, the driver simply brings up the ticket on their mobile computer and notes the changes. At the end of the day, the mobile computer is returned to the office and the orders, with all of their changes, are updated to the invoicing system. No one has to enter the changes that were made. No one has to enter the number of empty cylinders picked up because those, too, are in the mobile computer. Hours of data entry can be saved.

What is Needed to Get Started?
Mobile processing has come a long way in the last few years. The choices available are as wide ranging as the products you offer to customers. Some distributors download data to laptops every day and are already reaping the benefits of mobile processing. Other distributors have worked with their software suppliers to set up VPNs (virtual private networks), allowing them to use the laptop computer to access their host systems from wherever they happen to be.

If you think smaller is better, then take a look at the latest generation of rugged handheld computers with built-in bar code scanners and even transponder readers. These make it possible to do everything discussed above, plus track cylinders by serial number.

Don’t forget about that cell phone you're using. Instead of just using them to call back to the office or synchronize with email, download tons of information about customers’ buying patterns, cylinder records and even payment history. 

Maybe it’s time to give mobile processing a second look. Your software supplier can probably get you set up with one or more mobile processing options in no time flat. Not only will this save time and money, but think about how many trees will be saved by not printing out those inventory reports and price lists that the sales team are carrying with them.

This article originally appeared in the First Quarter, Winter 2008 issue of Welding & Gases Today Copyright ©Data Key Communications, Inc. All rights reserved. Authored by Jim Broughton.