FIFO stands for “First In, First Out” and is usually associated with valuing cost of goods sold in inventory. For the purpose of this post, we will be using it in terms of scheduling and completing work at a machine shop.
Difference between FIFO and LIFO
FIFO (First In, First Out) and LIFO (Last In, First Out) are acronyms used to express when your workload enters the shop and when it leaves. In the case of many machine shops (and other service shops), they get sucked into a LIFO workflow. This means that they do not complete the older tasks before completing the newer ones.
Most often it is because a customer nags and pesters you to complete their work quickly. So, you accommodate their request and get their engine machined and out the door first. To do this, you have to postpone working on engines that have been at your shop for longer. While it is OK to do this from time to time, it is not a good practice to do this all of the time.
Your goal as a manager should be to schedule your work so that each product has the same priority. This makes it easier to schedule the work and plan for upcoming hurdles. You do not want to get in the habit of neglecting older work to appease newer work.
Why is FIFO better?
If you place all incoming work at the back of the line, you are better able to predict completion dates and give yourself a buffer for unexpected hurdles. You should work towards a goal of promising a completion date for most work and then finishing it before that deadline hits. The term “under promise and over deliver” communicates that idea and is something you should strive towards.
It is perfectly acceptable to tell every customer “Your work will be completed in two weeks (unless we find another issue).” Even if it is a quick job, you set their expectations in line with everybody else’s. If you actually complete the work in 2 days, the customer will be elated! If you complete it in 8 days, they will be excited! And, if it takes you 2 full weeks, you are still meeting your promise date.
Organizing your shop to facilitate FIFO can help you visualize the workflow. This also helps keep the FIFO mentality in place. If an engine needs 5 machining processes, you should be able to track it through each step both visually with the use of racks and electronically with the use of My Shop Assist.
By simply placing the workpiece at the end of the line for each step, you ensure that the priority stays in place. This helps you predict which tools will be needed and give you time to order any extra parts.
This process flow makes it extremely easy to delegate tasks to technicians because they just work the next thing in line. Having a detailed build sheet in My Shop Assist gives them the direction and instructions on what is needed for each engine. They simply grab it from the shelf, look up the build sheet, click the Finish button when it is complete, and place it at the end of the line on the next rack.
They will no longer be asking you what to work on next because all the tasks are in order and available for everybody to see. And if you use the Estimated Hours field in My Shop Assist, you can even track their efficiency for each step. This will help you evaluate their performance or adjust your pricing to better match the work.
Common Excuses for Justifying LIFO
It is easy to fall into the LIFO trap, so if you find yourself using some of the following excuses, try to work on eliminating them.
One particular customer is always bothering you
In the age of instant gratification, many customers do not understand the social and professional boundaries of letting you work. They will call, text, email, message, and stop by constantly asking for updates on their particular project. To get them of your back, you work extra hard to satisfy that one customer to get rid of them. But, doing so encourages that customer to continue this unprofessional behavior.
One thing to do is take a look in the mirror and see if you may be the underlying cause for these pesky customers. Make sure that you explain the work in detail and give them a realistic timeline for completion. It is also up to you to express how you expect to be treated and about the value of your time. Then, taking it upon yourself to frequently proactively update the customer about progress using My Shop Assist will help alleviate some of these non-essential communications.
Your last resort may be to just vow to never work with that customer ever again. Many customers are just not worth the hassle and it is ok to “fire” the customer.
You prefer to work on a particular task (and neglect the others)
Some things are fun, and some things are not fun. But, if you agreed to do the work, you need to complete it before moving on to the next project. Most certainly, there is that one project that you have pushed aside and neglected. It can happen for a multitude of reasons, but the simple fact remains that it is on you to get it done.
The best solution is to discipline your schedule. Set aside a specific period of time to tackle that project and actively work to get it completed. It will feel much better to get it finished and out of your sight. Then, you can use it as a learning exercise to not bring in similar jobs.
This job is quick, easy money
Quick money can cause you to make terrible business decisions. While we understand that you have to pay the bills and not all situations are the same, take some time to survey the work you have at the shop. While that $250 head surfacing job that can be done very quickly and sounds extremely enticing, it isn’t the best idea if you have 20 other engines waiting to be worked on already at the shop.
One way to accommodate the quick turnaround jobs is to under schedule your daily workload. If you work 8 hours per day, you may want to schedule 6 hours of work and leave 2 hours available for walk-ins. This way, you are not disrupting the promised dates you have given to existing customers.
We want you to think about your shop as an assembly line. Each task for a job must be completed before moving on to the next and other jobs are not allowed to jump places in line. Disciplining yourself to this mindset will allow for more accurate scheduling and more satisfied customers. Plus, it will free you from constantly answering inquiries about progress from each customer. If the customer trusts that you will deliver on your promise, they will have no reason to bother you.
While we used a machine shop for this blog, the theory applies to any sort of aftermarket shop. Situations will arise which force you to deviate from the optimal work flow, but the goal is to work towards a better flow for the work.
We have put a lot of emphasis on accurately scheduling jobs and proactively updating customers about the progress. Both of these points are key features of our My Shop Assist software. Please contact us today if you would like more information.