We work out of an office in our New York City apartment. Even though it’s just a two-person operation, we go through a surprising amount of supplies: paper, toner cartridges, file folders and so on. In order to save money and be more efficient, we buy in bulk.
Makes sense, right? The only problem is that we still run out of supplies (leading to sometimes loud conversations about who used the last black ink cartridge and didn’t re-order). Even when we haven’t run out of something, we frequently can’t figure out what file cabinet it’s in. So, we re-order. It’s our theory that if we ever leave this apartment, we’ll uncover four years’ worth of yellow legal pads.
This is hardly earthshaking news, especially to anyone who has ever been in our office. But it’s remarkable how many of America’s cities aren’t doing their jobs of inventory control a whole lot better than we are. For them, however, it’s a matter of big dollars, efficiency and even public safety.
Having a good inventory system completes the circle of financial management, Mike Mucha, director of the Government Finance Officers Association, says. “If you don’t know what you have, then it makes it much more difficult to determine the costs of your services. If you are a private-sector business, knowing your inventory is essential for staying competitive.”
As for public safety, Mucha says that from a police and fire perspective, “whether you have axes, chainsaws, breathing apparatus and other equipment, knowing how many you have and where they are is critical.”
One of the biggest problems among cities is that inventory information is disaggregated into different departments that don’t communicate with one another. Fire hydrants are an example of this. In many cities, if a car crashes into a hydrant and it’s disabled, the damaged device is reported to the department of public works for replacement. But does anyone tell the fire department? Not necessarily. “A lot of times,” says Cate Richards of IBM’s Smarter Cities, “firefighters don’t know that a hydrant is out until they get to the fire.”
The variety of unaccountable inventories can be significant. They can include large items like backhoes (Orlando has misplaced a few in the past) to smaller assets such as pens, paper, toner cartridges, cellphones, laptops -- even guns. A recent Philadelphia audit discovered that there were 11 guns missing from the police department (not a whole lot, but even one missing gun is alarming). The city auditor did a full inventory of every firearm. As of now, there are 10 guns for which they’ve painstakingly located the paperwork -- they just can’t find the guns.
Were the guns destroyed -- which is standard operating practice in many cities for guns taken out of commission -- or are they sitting in some Philadelphian’s private arsenal? Without a strong inventory control system, items such as harmless cellphones to menacing guns can easily walk out the door.
There’s also a need to analyze the times when available inventories are most necessary, and to manage them to avoid mismatches between capacity and needs. Washington, D.C., for example, has the fewest number of ambulances ready to go in the wee hours of the morning, just when there’s the most need for them. Moreover, it has far more fire truck capacity than ambulances. So, if a resident calls 911 complaining of chest pain, a fire engine may be dispatched because there aren’t enough ambulances available. In many instances, all the firefighters can do is call for one. The solutions here may cost money but it doesn’t make sense to spend a single dollar until there is a full understanding of the times when inventories are most needed, as well as what uses they best fulfill.
That isn’t the only organization issue. Pittsburgh Auditor Michael Lamb recently ran an audit of inventory controls and found that the city was losing a great deal of efficiency and dollars thanks to its weak systems. Managers had determined that they could expedite the procurement process by moving away from centralized purchases of things like weed whackers, lawnmowers, snowplows and chainsaws.
One downside of decentralization, Lamb notes, is that there are six divisions that maintain the parks and streets of the city. “We got away from buying a specific kind of lawnmower. That makes it much more difficult to keep inventories of parts.”
Even when an entity is buying a single commodity, its location can be a mystery. Let’s say Pittsburgh was purchasing parts for just one kind of lawnmower. If they’re stored in multiple warehouses around the city, it can be time-consuming getting the right part to the lawnmower in need -- if it can be found at all.
Decentralized inventories also make it a lot harder to buy in the kind of bulk that tends to save money on parts. It means that the city is often precluded from using so-called “mini-auctions” for many purchases. “Even if Pittsburgh saved only 10 percent by doing mini-auctions instead of relying on existing contracts for commonly used items, it could save 10 percent -- that is $20 million a year,” says Lamb.
The good news about Pittsburgh is that it has purchased a module to its giant computer system that will allow for better inventory controls. The bad news is that implementation of the system has been delayed for years. “We’ve built the house,” says Lamb. “Now, we’re waiting to move in.”