Know The Count

Can you accurately answer the question, “How many cylinders do you have?”

“How many cylinders do you have?” may not seem like an important question at first, but not knowing the answer has a potential impact on your rental income and your relationship with customers. For close to 30 years, I have had the good fortune to work in the gases and welding supply industry, and I have long since lost track of how many times I have asked this question. But one thing I do know: The answer is almost always the same.

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.

A smaller distributor might say, “1,000 to 2,000 cylinders.” A larger distributor might say “15,000 to 20,000.” Distributors who know exactly how much their customers owe them often have a hard time answering this simple question about their cylinders.

Is not knowing a big deal? Think about it from an asset standpoint. Cylinders have different prices, but for the sake of discussion, let’s use an average of $200 per cylinder. A variance of even 1,000 cylinders represents an investment of close to $200,000! That is a lot of change in anybody’s book. Would you be upset if you went into your accounting office and the person responsible for accounts receivable told you that you had between $200,000 and $400,000 in receivables? Probably.

If Cylinders
Could Talk…

How old is your oldest cylinder? Whip Seaman, president of Corp Brothers (Providence, RI), reports that he has a cylinder dated 1911 (above). “Its shoulders are covered with retest dates every five years from then to the present,” he says. “Can you imagine the places that cylinder has been? Fab shops, hospitals, ambulances, factories, served our country through two World Wars, been to sea on a research vessel. How many times was it refilled? What customer kept it the longest time? What gases were pumped into it? Questions like that could go on forever!” Indeed they could. So what we want to know is, how old is your oldest cylinder? What is your best cylinder story? Let us know by e-mailing editor@ WeldingAndGasesToday.org. The best stories will be published in the next issue.

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

Identify the Problem
I know what you’re thinking right now. “I don’t make that many mistakes. It is not that big of a deal.” Perhaps not. But apply a little math to the discussion and see what happens. Let’s say you do 100 invoices a day. To keep it simple, let’s also say you ship two types of cylinders on every invoice, one oxygen and one acetylene. That is 200 cylinder transactions each day. But you are not just shipping cylinders, you also have returns. Since most shipments have returns, assume there is an equal number of returns. So now you have 400 transactions involving your cylinders for every 100 invoices you bill to customers. At 22 working days per month, 12 months per year, the result is more than 100,000 transactions each year involving cylinders.

Here is the eye-opener in this discussion. If you are way above average and hire really good people who are 99 percent accurate, you still will make errors on 1 percent of your transactions. In our simple example, if you only make one error out of 100 transactions, you still have made more than 1,000 mistakes involving your cylinders by the end of the year. Beyond that, consider these questions: Did the mistake involve one cylinder or ten? Was the mistake in my favor or the customer’s? With the potential for this many mistakes to creep into your system, you have to ask yourself, “Did the customer really lose the cylinders, or did I not record the returns properly?”

Solve the Problem
So how do you begin to solve this problem? First, put controls in place. Make sure your people are balancing the trucks each day to the orders that were taken or delivered. Take a physical inventory before the truck leaves and a physical inventory when the truck returns. The beginning inventory of cylinders plus or minus the cylinders that were delivered to your customers should equal your ending inventory. If you have too many cylinders on the truck, your driver probably did not record some returns. If you have fewer cylinders on the truck, the driver may not have written down that Fred’s Welding took an extra two acetylene cylinders. Catching the problem now keeps it from getting out of hand later.

Cylinder Task Force

The U.S. Department of Transportation says that a cylinder must be filled by its owner or by someone with express permission of the owner. As we all well know, the question of determining cylinder ownership has been a longstanding problem in the industry. To combat this issue, GAWDA Government Affairs and Human Resources Consultant Rick Schweitzer has been working with a handful of GAWDA distributors for the past several months as part of GAWDA’s Cylinder Task Force. The Task Force’s goal is to develop a policy template for GAWDA distributors to follow to resolve ownership issues. Six distributors have been comparing and contrasting their own internal policies on how they deal with cylinder ownership issues—be it bar coding, requiring a certificate of ownership or bill of sale, or some other method. As of press time, no final practices had been drafted by the Task Force, but the group expects to have some by the end of the year. Further information will be reported in GAWDA Connection and Welding & Gases Today as it becomes available.

Make sure you keep accurate records of cylinders shipped to your vendors. Vendors make mistakes, too. You don’t want to lose some of your assets because the vendor’s driver failed to record the correct number of shipments and returns between you and the vendor. And you certainly don’t want to pay rent to your vendor for cylinders you don’t have.

Be sure to keep track of empty and full cylinders on your dock. Keeping track of cylinders on your dock completes the picture of how many cylinders you have and where they are. Cylinders at customer sites plus cylinders on the dock plus those at your vendors will show you how many cylinders you have.

The suggestions above will do wonders for the accuracy of your records. But there is another important benefit. Not counting your cylinders says to your employees that cylinders are not important. If they think that you don’t find them important, they surely won’t find them important, and accurate cylinder records will be impossible to achieve.

Finally, take a closer look at tracking your cylinder assets by serial numbers using bar codes or RFID tags. Some situations are extremely difficult to resolve if you don’t track cylinders by serial numbers. A good example is when a cylinder is shipped to one customer and returned by a different customer. If this happens and you are not tracking cylinders by serial number, you now have two customers with incorrect cylinder balances.

The cylinders you shipped to the first customer have been returned, but since they were returned from the wrong customer, the first customer does not get credit for the returned cylinders. Your records show him with more cylinders than he has. For the second customer, you gave him credit for cylinders he did not rent. Depending on the specific arrangements with each customer, you may be losing rental income. This scenario also lays the foundation for a cylinder discrepancy meeting that no one enjoys.

Accuracy Is the Key
When it comes to your cylinders, accuracy really is a state of mind. You have to place as much emphasis on accurate cylinder records as you do on accurate bank balances. But the purpose of accurate cylinder records is not just to be able to answer a question or give you a number. The purpose is to help you improve customer relations by reducing the number of cylinder discrepancy meetings; to help you improve billing revenue by making sure all gases are properly billed for; and to make sure you receive all of the rental income for cylinders at customer sites. Accuracy is a state of mind, but it puts money in your pocket.

Gases and Welding Distributors Association
Meet the Author
Jim Broughton is president of DataWeld, located in Bossier City, Louisiana, and on the Web at www.dataweld.com. Broughton is a member of GAWDA’s Management Information Committee.