Managing Your Number One Asset

Cylinder tracking technology has made major advances. Is it time for you to grab a handheld and take the plunge?

Today’s gases and welding distributor has many options when it comes to cylinder management: inventory audits, customer invoicing, bar coding, transponders or some combination of these and other methods. With recent spikes in metal prices, cylinders and other gas storage systems have become increasingly expensive to replace, resulting in many GAWDA members taking a fresh look at bar code and transponder technology as important protection against the loss of these valuable assets.

What Method Do You Use?
In a recet GAWDA Connection Survey, readers were asked what management systemthey use for cylinder tracking. Here are the results.
What Cylinder Tracking Method Do You Use?

Making the Switch
Cylinder management technology is not new; some distributors, like Gary Armstrong, president of General Air Service and Supply Company (Denver, CO), have been using the technology to track cylinders for decades. The defining moment for Armstrong came in 1986, when his company bought part of a competitor’s business, including its cylinders. With the purchase came a pallet load of print documents. “We used a manual system to try to manage these new cylinders,” Armstrong says. “We controlled the process at the back end, after the transaction had already been accomplished. We figured that if we could control things from the front end, we’d reduce errors, which would go a long way to improve customer service.”

Armstrong hired a software engineer, who got his hands on a release copy of a relational database—a database program that groups data using common attributes—that was developed in the ’60s by the federal government for the space program. The software engineer adapted the program to create a cylinder tracking system that used a pair of matching peel-off bar codes that were attached to a cylinder to track delivery and return. “When the cylinder was shipped, the driver would peel off the first bar code as a record of delivery,” Armstrong says. “When the cylinder was returned, the second bar code was peeled off to document it. We didn’t have field scanners, but we had scanners at the office to record the bar code information.”

Armstrong modified the system over time—adding driver handhelds, revising the software, even experimenting with a truck-mounted system. Today, his 79,808 cylinders carry a permanent bar code on the cylinder neck. “Before the tracking system, disputes with customers over cylinders were fairly prevalent,” Armstrong says. “With bar coding, that’s been virtually eliminated.”

Growing Pains
Another early entrant into the world of cylinder management systems was Butler Gas Products Company (Mc-Kees Rocks, PA), which also began tracking cylinders electronically in 1986. Sandy Gobrish, executive vice president, was there from the start, helping the company incorporate cylinder bar coding and adapt it to changing needs. “In the beginning it was very exciting but also very difficult, because we were asking everyone from drivers to upper management to completely change their understanding of how we traffic cylinders,” Gobrish says. “Every cylinder had to be bar coded, store managers had to be on board, customers had to be educated—it was a major undertaking.” Butler experimented with different types of software programs over the years, separating the accounting and tracking systems, merging them, then separating them again two years ago. “Having separate systems for the accounting and the tracking has helped us tremendously with cross-checking our inventory,” Gobrish says.

Experimentation was also necessary with the bar codes themselves, which Butler programs with each cylinder’s serial number to cut down on tracking errors. “We tried plastic collars that fit over the necks of the cylinders, but customers kept taking them off or switching them between cylinders and messing up our numbers,” Gobrish says. “Then we went to just putting on labels.” Butler tried 15 different label types before finding one that could stand up to western Pennsylvania’s rollercoaster weather conditions. They eventually found it, and have been with the same bar code label now for five years.

A Three-Year Roller Coaster Ride
It’s no secret that the price of steel, specifically hot rolled coil steel, impacts the price of a stainless steel compressed gas cylinder. The chart below traces the monthly price per ton of hot rolled coil steel, in U.S. dollars, from August 2006 through July 2009.
What Cylinder Tracking Method Do You Use?

Despite the growing pains, Gobrish says that bar coding their 30,000-cylinder fleet has significantly enhanced business. The company is now experimenting with bar coding bulk tanks, dry ice boxes, pallets and other assets. “With bar coding, we know without question where our assets are, what type of service they’re in, how long they’ve been with customers and more. These are our assets; they’re our business. We have to guard them.”

A 75 Percent Solution
Metro Welding Supply Corporation (Detroit, MI), which entered the world of digital cylinder tracking in 1989, spent years running double systems—one for tracking cylinders and another for order invoicing. “It was terribly complicated,” says Gary Stoneback, vice president for operations. “In running two systems, we didn’t do as great a job of tracking serial numbers as we should have. So the information that was transferred over from one system to the other wasn’t always reliable.” At the time, the company was only bar coding for one customer, so in spite of the flaws of running two processes, they stuck with it. Then, roughly a decade later, the company found a managed database that could merge the two systems into one, and jumped at it. “The single system makes it a lot more efficient for customers, as well as for our employees,” Stoneback says. “It takes less time to process the information.”

Sandy Gobrish, Executive Vice President, Butler Gas Products Company (McKees Rocks, PA)
“Butler Gas is responsible for these cylinders from cradle to death, and it’s really important for us to know where these cylinders are.”

— Sandy Gobrish, Executive Vice President
Butler Gas Products Company
(McKees Rocks, PA)

After installing and getting comfortable with the new system, Metro Welding began offering bar coding to more customers. Today, the company tracks 75 percent of its inventory—about 20,000 cylinders—for its medical and specialty gases customers. “We don’t track cylinders on the industrial side because the end-users don’t request it. There’s a cost addition to do that for them,” Stoneback says. “But we are moving toward 100 percent, especially with new business, to set ourselves apart from the competition.”

By using the cylinder management system, Stoneback says his company has a much better handle on where its cylinder assets are, how those assets are being put to use and how often. It also enhances customer service: They can run inventory to identify cylinders that have been with a customer for a long period of time, and contact that customer to confirm whether they are actually still in use, or if the customer wants them returned.

The Transponder Experience
Haun Welding Supply (Syracuse, NY) has been tracking cylinders for more than 50 years; its original system consisted of drawers of 3×5 index cards with all information on customers and cylinder serial numbers recorded by hand. “That’s what my grandfather did from the moment he purchased his first set of cylinders,” says third-generation president Mark Haun. “Cylinder tracking is part of our culture. We grew up with it.”

Sandy Gobrish, Executive Vice President, Butler Gas Products Company (McKees Rocks, PA)
Deborah Lash, bar coding manager, for Cee Kay Supply (St. Louis, MO)
 

Cylinder, Come Home

There seems to be no end to the peculiar places distributors’ stray cylinders turn up. But thanks to cylinder tracking systems, it doesn’t take long before they are back with their rightful owners.

Often it’s simply a matter of a customer returning a cylinder to a distributorship, only to find, after a quick read of the bar code or transponder, that the cylinder was rented by another customer. This is common when several contractors are working at the same job site, and a worker borrows a gas cylinder and forgets to return it. With a tracking system, the original customer will get properly credited for it once it does return.

This is the most common example, but there are plenty of others that are truly unique:

Red Ball Oxygen Company has found its cylinders in pawn shops and being auctioned off at estate sales. “A bar code gives us an ironclad case to recover those assets,” says President Bob Ewing.

Ned Lane, president of Cee Kay Supply, has had his cylinders found by police on routine traffic stops. “Typically, the police find that it was stolen from a contractor,” he says.

A coworker of Wayne Brownson, vice president for information systems at Haun Welding Supply, once found a Haun cylinder lying on the side of the road. “We read the RFID tag and identified the customer,” Brownson recalls. “It had come unsecured from his truck, and he was shocked that we traced it back to him.”

In 1991, Haun moved to bar codes to cut cylinder tracking costs. It not only reduced man hours, but also gave employees more accurate, immediate information. But difficulty with bar code label reading and environmental conditions that resulted in frequent replacement of the adhesive bar code labels led the company to explore alternatives. After several years of bar coding, Haun switched to radio frequency identification (RFID), and has been using it ever since. “We had the software system written for us, and we experimented with it until it worked the way we wanted it to,” Haun says. “We cross-referenced the transponder number with the serial number of each cylinder in the computer, which gave us a way to double-check each asset.”

The upgrade required a sizable investment up front in RFID technology, but Haun felt it was a necessary expenditure. “We have 98,342 cylinders in service,” he says. “Multiply that by, say, $100 per cylinder, and that’s close to $10 million invested in cylinder assets. I want to know where those assets are. It also has resulted in cost savings in man hours spent moving cylinders and in cylinder audits, and in being sure we’re billing customers accurately.”

Right now, Haun Welding is in the process of changing over to a new RFID tag, after the company’s original supplier spun off its reader division and no longer provides scanners that work with the company’s current tags. “It’s a downside to having gotten involved with RFID technology early,” explains Wayne Brownson, vice president for information systems at Haun. “In the beginning, each company that produced transponders had its own frequency as well as its own method for triggering the transponder to transmit information from the tag. None of them was cross-compatible—if you had a scanner that read one company’s tag, it couldn’t read anyone else’s.” With their original supplier out of the business, Haun has been making do with the scanners they have as they transition to the new tag that can be read by new scanners. “The good news is that the RFID industry is starting to shake out now, there are standards being developed, and the frequency and method of triggering the read are becoming universal,” Brownson says.

Refining the Turning Process
For Ned Lane, president of Cee Kay Supply (St. Louis, MO), there was no question that a cylinder management system would enhance business. While his primary goal was to pinpoint where Cee Kay’s overall cylinder numbers stood at any given time (currently 64,137), he also recognized that as the system evolved, other uses would emerge. “We’re able to do branch inventories and monitor what each branch has in assets on its docks. We just didn’t have that information before,” Lane says. “We used to phone and ask how many cylinders the branch had. Now we check the computer and the numbers are right there. Without bar coding, we didn’t have that same visibility.”

Gary Armstrong “We tried a truck-mounted scanning system for a while, but that caused our receivables to be extended.”

— Gary Armstrong, President
General Air Service and Supply
Company (Denver, CO)
“If you’re going to go with a tracking system, you can’t just put your toe in the water. You have to jump in completely.”

— Gary Stoneback, Vice President for Operations, Metro Welding Supply Corporation (Detroit, MI)
Gary Stoneback
Bob Ewing “We’ve had great success with showing customers delivery reports and having them acknowledge that they need to pay for a lost cylinder.”

— Bob Ewing, President
Red Ball Oxygen Company
(Shreveport, LA)
“Bottom line is, I wouldn’t be without a tracking system. But every distributor has to make his or her own choice. It’s not free.”

— Mark Haun, President
Haun Welding Supply
(Syracuse, NY)
Mark Haun
Ned Lane “Those of us who have been through a lot of cylinder discrepancies realize that it is a very painful process for everybody involved. Bar coding really helps there.”

— Ned Lane, President
Cee Kay Supply, (St. Louis, MO)

Another unexpected bonus for Cee Kay, which has been bar coding since 1997, was the reduction in work hours spent by administrative staff in resolving cylinder discrepancies. “We have a lot of people in our accounts receivable department who are battling with customers over invoices,” Lane says. “When we’re code scanning, it’s so much cleaner, because we can tell the customer not only the date the cylinders were delivered, but also the bar code numbers, how long the cylinders have been at their facility, all kinds of details like that. It creates credibility and goes a long way in resolving disputes quickly and fairly.”

Operational Discipline
While proponents of these asset tracking systems have experienced significant improvements in overall inventory management, many agree that even with a tracking system in place, regular review with an eye toward process improvement is vital for long-term success. “Since we instituted bar coding in 2003, we have a lot more confidence in our records,” says Bob Ewing, president of Red Ball Oxygen Company (Shreveport, LA). “Our cylinder balances and inventory are accurate, which is how I know that we have exactly 68,365 cylinders, and our customers know that to be the case. But you still should do audits and inventories, and you really need to enforce ’scan discipline’—insisting that cylinders don’t get moved an inch without being scanned—throughout the organization. Those kinds of operational issues don’t go away just because you started bar coding.”

Ewing says that distributors contemplating moving into a tracking system must provide hands-on, executive-level involvement. “It’s not something you can hand off to operations,” he says. “The head of the company must take an active role so everyone understands failure is not an option. It will be painful and it will require discipline. If you aren’t prepared for that, then you are setting yourself up for disappointment.”

Mark Haun of Haun Welding Supply advises that if you are going to take on an asset management system, you can’t do so half-heartedly. “You have to invest time learning the system,” he says. “It’s not a matter of slapping stickers or transponders on your cylinders and being done with it. You have to train employees on the system and how to interpret what the data mean, and educate your customers. It’s a real learning process for everyone.”

“Instituting a tracking system is a very important business decision,” says Sandy Gobrish of Butler Gas. “Knowing what assets you have and where they are is crucial. It takes a lot of time and patience, and it will cost money, but you have to invest if you want your business to grow.”

“Cylinders are the single largest asset most distributors have on their balance sheet,” adds Cee Kay Supply’s Ned Lane. “How can you not want to know every possible detail about them?”

A Hot New Trend

Some GAWDA members indicate that the new wave in the cylinder world will be higher pressure cylinders and filling stations. Today, the typical U.S. cylinder fills to 3,000 psi, whereas European countries use higher pressure systems and cylinders that allow between 4,500 psi and 6,000 psi. This increase will have a huge impact on the market, as end-users would enjoy a longer life cycle per fill, and distributors would be able to expand their territory as their fills would be less frequent. For now, the largest problem holding back this change is that fill facilities don’t have the infrastructure in place to support filling to that capacity, and cylinders that would handle that much pressure are not in abundance in the United States.

Filling Station

Gases and Welding Distributors Association