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F
ROUGH DRAFT
December 11, 1989 '€
Mr. Peter L. Holzmeister
General Manager
Truckee Donner Public Utility District
11570 Donner Pass Road
P.O. Box 309
Truckee, CA 95734
Dear Peter:
It was a sincere pleasure becoming familiar with the District and your staff during the
meeting at your office on September 13. Everyone was open and I appreciated the infor-
mation that was provided to me. During our discussions, we covered the issue of compli-
ance with AB 1600 and its relationship to day-to-day planning, scheduling and cost ac-
counting.
The following is a summarization of our thoughts and observations relative to the District
inventory, purchasing, work orders, etc., as well as a discussion of the relationship of Dis-
trict operations and compliance with AB 1600. We have also made preliminary recom-
mendations as to the next level of effort.
Interviews
After discussing the day's schedule, I met with some of the District staff to discuss their
areas of responsibility and perceptions on inventory, purchasing, methods of work and
related topics. I have organized the results of the discussions with Paul Colburn, Tom
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Buckouse, Jae Straub, Andy Hyde, Debi Black, Ron Reynolds and Mary Chapman into
the following categories:
1. INVENTORY
2. PURCHASING
3. WORK ORDER MANAGEMENT
4. MAINTENANCE MANAGEMENT
In addition to the above, we believe that a review of AB 1600 and its intent is also in order
and will present some ideas prior to our closing summary.
CATEGORY 1: INVENTORY
The District's inventory control and management system provides material support to the
water and electric departments. We have summarized our remarks about inventory into
the following areas: receiving operations, warehouse procedures, security, controlling cost,
and a summary of recommendations.
Receiving Operations
The following activities mare up the District's receiving operation for both inventoried
and direct delivery material and equipment:
Freight checking
Control of receiving
Marking the materials
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Control and scheduling deliveries
Receiving area
Freight Check. The District has a well run and organized receiving operation. This is
important to the District for two primary reasons. The first reason is that there is a critical
need for an effective audit trail for newly acquired material and equipment. The second
reason is that the effective use of space and labor, the reduction of back orders and the
ability to take advantage of prompt payment discounts is directly dependent on accurate,
and prompt processing of material received. Typically, the District's receiving operation
performs the following work elements:
Receiving
Opening
Checking
Sorting
Marking
Storing
Distributing
Control of Receiving. As materials are received, the District warehouseman checks for
overages, shortages, damage, etc., and notes any discrepancy on the freight bill (packing
slip) before receiving the shipment. Generally speaking, this activity appears to function
smoothly. However, as a refinement to the warehouse procedures, the District may wish
to institute more thorough procedures for the reporting and filing of claims when the
carrier is responsible for shortages, loss or damage. Such a procedure would include
charging the vendor for losses/damage in accordance with terms described on the Pur-
chase Order, photographing the problems, submitting claims, etc.
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. From a historical point of view, the tracking of the volume of material received is very
important. When the District has needed this information in the past, many different
sources have been used to determine warehouse activity. The use of a receiving report is
recommended. A sample form is provided in Appendix A, figure 1. If this form is used
daily, it will act as a warehouse barometer by indicating what areas (i.e., backlog) need
more attention. The data for this report could also be computerized, thus eliminating the
added paperwork that a daily report generates.
Marking. Marking of material for inventory is currently done using a preprinted label on
the bin where material is stored and on the material itself. There are other methods which
the District might wish to consider. Bar coding seems to be the most popular method
today. The advantages of using bar ceded labeling are mainly speed and accuracy that is
attained through electronic data input. Bar coding also allows for issuing inventory with
the same advantages. The chart below portrays the published bar code statistics. As
shown below, bar code is said to be four times faster with one-third of the errors of manual
systems. Therefore, the costs of an automated in system are normally amortized as a
result of avoided labor cost within two to three years. Whatever marking method is se-
lected, marking should continue to be done at the time that the material is received.
Examples of common bar code are shown in Appendix A, figure Z.
Deliveries. The scheduling and control of deliveries is another activity that was briefly
discussed with staff. Based upon the current volume and number of deliveries, there does
not appear any need for change. However, as the District grows and the volume increases,
it will probably be necessary to develop certain delivery hours and days when issuing pur-
chase orders. Early morning deliveries allow an adequate amount of time for receiving
operations. The scheduling of deliveries should be done from the data found on the
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Comparison of Data
Collection Types
HOURS per Week
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12
Al
2
0
Bar coded Key Entry Manual
Data Lolly:ction -yije
Data collection
purchase order. It would be useful to create a form which acts as a log of due in delivery
information. A sample form is found in Appendix A, figure 3. The data on this form
would assist the warehouse as well in special handling, rewarehousing and immediate
distribution items.
Receiving Area. Although the warehouse does not have a designated receiving area, there
does not appear to be a problem without one. The purpose of the receiving area is to
allow for an orderly and efficient processing of newly acquired material. Tables, tempo-
rary pallet racks, carts, etc. are very helpful to the warehouse when performing the various
tasks discussed above.
Warehouse Procedures
This area includes the following items which have been reviewed:
Basic facility designs and capacity
Inventory volumes
Locator system
Issuing methods
Inventory control
Annual inventory physical count
Basic Design. The District's warehouse is physically located within the main headquarters
building and is divided into two areas for the two types of inventory (exempt and regular).
We found ample room for existing and future inventory space needs. The location of
pallet racks, bins, etc. within the warehouse leaves sufficient room for forklift operations.
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It would appear to us that the District's overall space management has resulted in an effi-
cient storage of material. At the moment, inventory quantity does not appear to be signifi-
cantly fluctuating. However, there are some concerns regarding usage and other inventory
parameters which will be discussed in the following.
volume. There are approximately 725 individual inventory numbers accounting for over
$275,000 (as of 7/31/89) inventory valuation. Over 300 of the inventory numbers carries a
classification of"EXEMPT." We observed that exempt material is kept in a separate area
from regular inventory for immediate access by field personnel.
Inventory is accounted for in two categories - water and electric, and several examinations
were made to determine inventory distribution and monitoring ability. After reviewing the
July 31, 1989, valuation report, it would appear that there are less than 50 item numbers
with a unit price over $100. Of these, less than 10 are over $200. The highest unit price
found was $659 (fire hydrant). There are five major inventory titles (56 inventory num-
bers, approx. 15 percent) that represent over $100,000 or approximately 40 percent of the
total inventory value. Our conclusion is that the District can adequately monitor the total
high dollars items with a minimum of effort.
Locator System. The District's locator system employs an alpha and numeric combination
that references the bin number. This is certainly an acceptable method; however, the
District may wish to use a three-dimensional (3D) address to locating. This 3D address is
made up of an aisle designator position (left (odd #) or right (even #) side with bin
number) and shelf designator. An example of such a system would be address "13-17-C."
This item would be found in aisle 'B," in bin 17 on left side and on the top shelf (C). A
pictorial representation of this example is found in Appendix A40fVigre 4.
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The District may also want to do an analysis of physical locations of inventory. The ABC
stratification analysis is performed by sorting the total inventory by the item's value of its
annual usage. The result of such an analysis is a graph similar to figure 5, Appendix A. As
shown, the District's inventory items falling into the "A" classification should be stored
closest to the area where material is issued to keep the total travel time to a minimum for
the frequent trips to get the item.
Issuing Material. The next area concerns issuing of inventory and exempt material to
production departments.
All exempt items are available to the crews without going through the formal checkout
procedure. When the quantity of an exempt item runs out, the warehouse refills and
expenses the amount to a predetermined general ledger (GL) account number. All regu-
lar inventory items require issuance (i.e., work order to be charged and deplete ticket).
Work crews have unlimited access whenever material is needed. Exempt material is in a
separate area, always available. There are two areas of concern regarding exempt materi-
al. The first area focuses on the accuracy of expensing an item to a fixed account without
regard to where the material is actually being used. Typically, the District expends re-
sources, including inventory„ under one of four categories; operations, fee for service,
District construction and replacement. Since it is probable that exempt inventory could be
used on work effort in any of these categories, expenses may be understated or overstated
in the GL account where the exempt items are automatically expensed. This District
might consider revamping the system to either get more information at the time of issue or
develop a method of using percent of allocation to a given GL category, where appropri-
ate. The second area focuses on security for exempt material which will be addressed
later.
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At this time, uncontrolled access to the regular inventory is being justified by the need to
supply the material when needed by the production departments. The need for material is
generated daily by the production crews in the field. If the material is not supplied, the
crew either has to move to another job or wait. In either case, the result is lost time which
translates to additional costs. We recommend that the District consider limiting access to
inventory to the warehouseman and designate a backup person. Simultaneously, we
recommend that the warehouseman become responsible for issuance based on a requisi-
tion generated from advanced work order planning. Furthermore, the warehouse would
pre-stage the majority of material needed. Later in this report we will discuss how a
systematic work order management would help implement this change. The next area we
will review is inventory controls (or perhaps management is a better term).
Inventory Control. Admittedly, we have not done an extensive investigation of usage, but
a look at the audit shows inventory use ($90,000) yields a 3+ year turnover when corn-
pared to the District's $300,000 material budget. Very low usage was also confirmed on
the 7/31/89 valuation report where there were 11 electric inventory numbers used with a
total of $2,452.14 issued and six water for $366.63. The 8/17/89 stock status report
showed that a majority of the inventory has zero or very low usage (i.e., many items show
no usage for the history period. A report of District showing low usage is shown in
Appendix A, figures 6 and 7.
The District should, as soon as possible, perform an evaluation of the parameters (order
points and quantity) for inventory control. The quantities on hand and usages seem to
indicate that the majority of inventory is either overstocked or shouldn't be in inventory.
This has resulted in low turnover and probably lost investment interest revenue. We
should also point out that we could not determine which items are stocked for "emergency„
usage. These are items which are needed on a moment's notice in order to keep the Dis-
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trict in operation during a crisis situation.
Physical Count of Inventory. The District performs an annual physical count of inventory
on hand under the auspices of the District Auditor. This is a historic requirement of the
annual financial audit. Any differences in actual quantity on hand and the inventory
records becomes an adjustment in the audited financial statement.
The District might consider conducting physical inventory twice a year. If the second
physical was done at mid year, any obvious problems could be researched and corrective
actions taken. This could the alleviate additional workload at year-end physical when
other activities can put additional time demands on the staff. At this mid year review, the
District should also consider a review of high/low limits, frequency of usages, analysis of
accounts payable for possible new inventory, reorder quantity and reorder points.
Security
The discussion of security has been divided into the following areas:
physical security
fire prevention
safety
Physical Security. The District's warehouse area is essentially open and unsecured during
normal business hours. During after-business hours and weekends, the District, including
the warehouse, is locked up. Those employees on standby do have access in case of
emergencies. Although we have not been made aware of a problem, physical security of
the warehouse should be of concern to the District. An overwhelming majority of most
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District's employees are honest. Statistically, however, most companies have found that
warehouse pilferage is generally traceable to either dishonest or dissatisfied employees.
The District might wish to consider developing warehouse hours of "open" operation,
during which time the warehouseman would be present to check out and verify materials
being issued from inventory. Changing warehouse locks (rekeying, etc.) on a periodic
basis (say once a year) is also a good procedure to help minimize unauthorized distribu-
tion of keys. Some Districts have computerized their key systems using the latest technol-
ogy of magnetic key cards that help identify the employee who enters and leaves. Periodic
unannounced spot checking of packing slips against actual physical items is also an excel-
lent method of insuring security within the receiving area. Physical counts should be taken
by temporary hires or at a minimum by employees who are not involved in any manner
with inventory. Returns to inventory should be handled in the same way as materials
received from a vendor.
Fire Prevention. A discussion of fire protection is briefly included here, generally for
information purposes. We observed a very clean warehouse and although we did not
perform an actual fire inspection, we did not note any fire conditions which should be
brought to the District's attention. The following is a checklist of items which are suggest-
ed for informing personnel and combating fire hazards:
The storage arrangement within the warehouse affects the spread of fires.
Due to the increase heights of racks, there is a natural flue or chimney effect
between the stacks of merchandise within racks. This effect prevents water
from reaching the fire.
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Wide aisles help prevent fires from spreading and provide easy access for
firefighters. Main traffic aisles should be clear of obstructions for this
purpose.
Delayed discovery of fire leads to unnecessary damage.
Alarms or a regular water service is necessary to prevent unnecessary
damage and provide first alert to the fire department.
All District personnel should be aware of fire hazards and the need to bring
them to the District's attention when they are found.
Smoking in the warehouse should not e permitted.
"No smoking" signs should be widely displayed.
All personnel should be trained and familiar with firefighting equipment.
A sufficient supply of waste containers should be located throughout the
warehouse.
Keep heating equipment, lighting, and electrical appliances in top working
order.
For each 2,500 square feet of floor area there should be one fire
extinguisher in a well marked location.
13.
In addition to the above, it is suggested that the District request the local fire department's
. review periodically for hazards that only a trained fire prevention professional would find.
The inspection is also of benefit to the fire department because it gives firefighters an
opportunity to become familiar with your facility. In the event of a fire, it will help them
avoid serious injuries and help the District with lower losses from fire and water damage.
We would also suggest that an evaluation of susceptibility to earthquake forces be done as
soon as possible.
As a matter of information, OSHA standard 1910-141 recommends the following color
coding:
Red: Designates fire equipment, for example, extinguishers, no smoking signs,
pumps, hydrants, etc. It is also used for portable flammable liquid storage containers and
for designating stop buttons on machinery.
Orange: Used to denote moving, energized equipment or machine parts that can
be a danger because of cutting edges, crushing, electric shocks; or can otherwise injure the
operator or pedestrian. All exposed conduits and switches should be labeled with orange
signs.
Yellow. Used to signify hazards that might cause falling, tripping, or striking
against. Objects that could cause this type of problem should be labeled with the appro-
priate yellow signs, for example, stairwells, pillars, pots, or low clearing overhead obstruc-
tions.
Green: Identifies first aid kits and safety equipment, for example, emergency
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showers, eyewash stations, emergency oxygen, stretcher stations, and so on.
Blue; Identifies informational signs; signs that warn against starting power equip-
ment under repair, such as forklifts, machinery, and so on.
Purple: Used to designate radiation hazards.
Black/white or combination of black and white checkering; Used principally to
signify traffic and housekeeping areas. Examples are traffic aisles used for forklifts and
other materials handling equipment or housekeeping stations for brooms, mops, and trash
containers.
Safety. There does not appear to be a safety issue. However, the adoption of and publish-
ing of a set of basic safety rules and policy is recommended. Such a policy would include
ithe appropriate method for handling and reporting of accidents, unsafe
equipment/conditions and the guidelines recommended for lifting, climbing, apparel, etc.
Controlling Costs
The District's Auditor has made an independent report for the period ending 12/31/88.
In their report, the auditor recommended that the District reevaluate the resources
devoted to inventory in order that overhead be reduced. We concur but also recommend
that each side of the following equation be carefully reviewed before any action is taken to
reduce "resources."
Resources Required = Number of Transactions x Man Fours per Transaction
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As a general rule, if the current number of transactions (purchasing and inventory) are too
low and inventory turnover is too low (as we have stated under Warehouse Procedures),
then a recommendation would follow for reevaluation of the purpose of having inventory
as a function of the District. Simply stated, the warehouse function should be the support
activity assigned the organizational responsibility of economically procuring, receiving,
storing and distributing ull of the material needs of the District. Other small organiza-
tions, like Truckee Donner PUD, have grown larger with an unspoken acceptance and
belief that the warehouse exists only for certain items. This belief has provided the oppor-
tunity for the development of multiple purchasing agents (part time), multiple material
expediters (part time) and other procurement fractionalization. If a poll of all District
employees were taken, it would be possible to identify the total effort expended in the
requisitioning, purchasing and receipt of materials and equipment. The resulting cost of
all "part timers" would therefore be included in the cost of warehouse operations. The
total number of transactions would also be properly documented. If these numbers were
then compared to the published cost of operating the warehouse, the comparison would
show the published number has been understated.
The boundariesa rN esp nsibili# for purchasing, receiving, inventory, distribution, etc.
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should be carefully considered.
Assuming that the responsibility issue is clearly defined, the conditions under which the
warehouse is operated will also directly impact the warehouse cost. Let's examine a
couple of options, their respective objectives, and the results.
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Option #1. Option #1 could be described as a "one stop shopping mall." Almost
every conceivable and possible need for materials would be stocked on the shelf and bin.
This type of system has little or no turnover, but allows the work crew total flexibility to
perform new construction, maintenance, repair or replacement on a moment's notice.
This means that virtually all projects would be conceived with little or no advance planning
and executed at will. From a practical standpoint, this type of inventory offers a very
flexible tool that would be used as a substitute for advance planning. The cost of running
this type of inventory would be directly related to the volume on hand, turnover and
investment interest rate.
Option #2. Another option would be an inventory of parts which is perpetually
under review. The quantity and types are determined by what type of work is being done,
what parts will be used repetitively, and how often the work task will occur (i.e., daily,
weekly, etc.). The economic order quantity (EOQ) and reorder points are automatically
determined by a floating 12 month average usage. As the needs of the District change,
these parameters are also changed. New items will be added and some existing items will
be dropped. The goal of this option is fairly clear--to create turnover of the stock. That is,
the age of the oldest parts should not exceed a predetermined number of months. The
purpose of this type of inventory is to obtain the best possible price for the quantities that
the District will use during a given period and at the same time minimize the cost of
handling (i.e., the purchasing effort). However, if the part has been designated for
emergencies and would be needed at a moment's notice, the part should be coded
appropriately and not subjected to the tests of regular inventory. Adding parts to
inventory should be considered when the usage becomes frequent and/or when a
excessively long lead time will delay the work. When the need arises for parts that are not
on inventory, the purchasing agent would be given the work order documentation and
requested to go to bid and to then award a purchase order with required delivery date. As
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4 "
you might have noted, this option requires advance planning and work scheduling.
Data Processing. Figure 8, Appendix A pictorially represents the major areas of effort
expended by the warehouse. At the heart of the warehouse operation is the data process-
ing requirement. All of the information that is obtained by the warehouse must be even-
tually handled. Requisitioners continually want to know status of their material or equip-
ment. Accounting needs to know when to process and pay for goods received. The list
goes on. An efficient and effective means of data processing is mandatory if the flow of
information is to be maintained. The District should consider development of standard
reports which could be used by requisitioners, controller, etc.
Inventory Summary
iThe District has satisfactorily set up its initial basic inventory system. However, the
District should consider continuing the development of inventory enhancements.
Specifically, we recommend the following:
evaluation of what's in inventory by integrating with a work order
management system
development of a warehouse scheduling system to discontinue the 'open"
access to the warehouse
research alternate methods of data input (bar coding)
implement strict physical security procedures
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CATEGORY 2. PURCHASING
The category of purchasing included the following:
forms, methods and documentation
blanket purchase orders
scheduling
Forms
We have specifically reviewed the purchasing forms, methods and documentation. It
would appear that the existing standard specifications for inventory parts, the vendor files,
catalogs, purchase order form, requisitions, etc. are adequate for the District's existing
operation.
Blanket Purchase Orders
The District maintains over 80 blanket purchase orders (BPO) for a variety of goods and
services. Further review of vendor history files would be needed to determine how much
of the District's 1989 budgeted $300,000 (Tech services $160,000, elec. $62,000 and water
$68,000) for materials, supplies, etc. are purchased under these BPOs. According to a
spreadsheet provided by Accounting, inventory issues averaged $7,500 per month for 1988
(or $90,000 per year). At first glance, there may be a large number of purchases that are
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directly charged that should actually be under inventory and managed within the inventory
control system. This is an area that dramatically impacts the inventory usage.
Scheduling
Purchasing should be a support function. As a support function, purchasing should
complete the procurement within a reasonable timeframe to allow delivery time. In a
perfect world, the purchasing system should be given sufficient lead time to get the best
possible price and delivery schedule that is available. However, in an imperfect world,
priorities must be established in order for the work effort to continue. The District should
also consider reviewing the volume of"walk through" purchasing using the BPO process.
i CATEGORY 3: WORK ORDER MANAGEMENT
Work order management is the term that we are using to describe the process of
identifying and executing the tasks and services that are required of the, District. We have
found that the work order management system should be used to also identify the
requirements for the inventory and purchasing subsystems. Under a properly designed
work order system, specific materials and services are described in detail as part of the
overall work order documentation. After the work order is approved, the inventory and
purchasing subsystems are called upon to provide the materials/services within the speci-
fied time period.
Our understanding is that the District uses its existing work order system primarily for
billable work and capitalized construction. We feel that the District's financial resources
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(people and material) can be better managed by expanding the work order system. If the
work order system were expanded to include operations, maintenance, repair and re-
placement work; consistent and uniform procedures could be developed to plan, estimate,
budget, purchase and issue materials, schedule and execute all work effort. The now
diagram in figure 9, Appendix A pictorially represents this concept. As shown, a deliber-
ate step for materials acquisition and services is undertaken prior to the execution of any
work effort. The following organizational functions would be required to support this
work order system:
Work Order Input - responsible for receipt, logging and routing of work
order requests; maintains status of all requests; issues emergency and minor
work tickets; performs all of the administrative effort required for work
order management.
Planning and Estimating Work Orders - responsible for researching re-
quirements for work order execution including the development of a
planned and phased task list, trades required; preparation of material lists
and outside services (including specifications for same); estimating hours of
labor by trade, estimating material and services costs; preparation of annual
inspection (evaluation) of facilities and equipment; assembly and/or prepa-
ration of long-range (5-10 year) capital, repair and replacement cost pro-
gram; all other tasks related to advance planning.
Purchasing, inventory and scheduling - responsible for preparing annual
master work schedules, weekly trade/department schedule; all functions of
procurement to support work order execution; conducting weekly scheduling
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meeting; regulating flow of work into production work force.
Recommendations
Although there are benefits that will be derived by enhancements to the District's
inventory and purchasing systems, we recommend that the work order management system
described above be given serious consideration. The benefits of an integrated work order
and inventory/warehouse system would include the following:
1. Detail documentation of scope of work, materials and purchased services
needed for a specific job (See Appendix A, figures 10 and 11 for a sample
work orders). As these two figures show, it is possible to break down the
budget into very task-oriented estimates.
2. Management approval for both budgeted and non budgeted work effort.
3. Adequate lead times for competitive procurement of materials and services
for the majority of work orders.
4. Formal administration of work order opening, status and cost review, closing
and final cost report and analysis.
5. As figure 12 shows, a well designed work order management system be-
comes a "tool box" of procedures to allow management to plan and execute
the myriad of tasks assigned/required.
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AB 1600
All of the above subjects revolve around how work gets planned and executed. However,
our discussion and report would not be complete if we didn't address the issue of the rela-
tionship of work order management and funding the work. Before we hit on a few key
ideas, a brief review of AB 1600 is in order.
AB 1600 is a direct result of the trend of our industry toward user charges in responses to
Proposition 13 and the Gann initiative. Both Prop 13 and Gann forced many public agen-
cies to charge fees for new development in order to fund the construction of expanded
facilities. Concerned over the ever increasing charges, the building industry sponsored,
promoted and was successful in getting AB 1600 adopted two years ago. AB 1600 took
effect on January 1, 1989, and requires that explicit steps be taken when levying user
charges.
In essence, AB 1600 specifies that the charge for a particular service shall not exceed the
cost of that service, otherwise it would be come a form of taxation an subject to the vote of
the people. Further, there has to be a reasonable relationship between the cost and the
benefit provided as well as a reasonable relationship between the charges and the services
provided.
No longer is it possible to establish a fee or a charge for a service without a sound rela-
tionship to the cost of the service; be it a capital facility or operation service. However, it
should be noted that funds extracted for capital purposes have to be carefully segregated
and the use of such funds accounted for in a clear manner.
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It is our opinion that the intent of AB 1600 is to establish a direct relationship between the
cost of the functions (and/or service provided) of the District and the charge for that
function or service. The question that immediately arises is how does one accurately
determine the total cost of service. The answer to that question lies in the level of detail
found in the cost accounting structure. A typical comprehensive cost accounting structure
would include direct costs such as labor, material, purchased services, etc. as well as
mechanism for equitably allocating overhead costs to each particular function. In addition
to the cost accounting, the number of services provided, the volume of product delivered
or the number of transactions completed is also documented.
This detail provides the ability to develop an empirical database of costs per service pro-
vided or per unit of product (acre feet, kilowatt hour, etc.) which then can be used as a
foundation for establishing a user charge. This empirical database also contains complet-
ed construction data which can be used to establish future construction cost estimates.
By using this history, projected growth rates and reasonable factors for inflation, borrow-
ing, etc. the connection fee can then be calculated.
So, how does one go about building this very valuable database? The answer lies in the
work order system. The work order system is the critical component. As described previ-
ously, the work order should be the framework upon which the documentation for all
planning, estimating and scheduling takes place. Figure 13, Appendix A graphically por-
trays the above method of complying with AB 1600.
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CATEGORY 4: MAINTENANCE MANAGEMENT
It would be difficult for us to leave the subject of work order management without
discussing the issue of maintenance and its relationship to work orders and the like.
We have not investigated the condition of District facilities. Therefore, we are unable to
provide an evaluation of the District's maintenance management system. But from our
observations and experience with many special districts, there appear to be two (2) ex-
tremes of maintenance being performed. The following information is provided merely as
a point of reference.
Breakdown maintenance is the term we would assign to one extreme which operates its
facilities day to clay until the unit fails, then fix or replace it.
The other extreme is performing preventative maintenance (PM) on a continual basis.
Both extremes are represented on figure 14, Appendix A, which is a chart of the cost of
vehicle maintenance correlated with the frequencies of repair and PM. As this chart
shows, the cost of the vehicle maintenance is appreciably high at both extremes of mainte-
nance. A combination of repair and PM allows for a least cost. It is our opinion that
maintenance (at an optimum level) and construction should receive appropriate levels of
planning, budgeting and scheduling to insure total management of all District resources.
Summary
Although the scope of our work only covers inventory and purchasing, we believe that only
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modest gains will be made by focusing on inventory and purchasing. As the District con-
tinues to expand the number of electric and water connections it serves, it may be very
beneficial to adopt a uniform methodology for new construction, billable work as well as
operations and maintenance of its equipment and facilities.
We would suggest that the District consider a Comprehensive Resource Management
System (CRMS) which fully integrates the planning, scheduling, inventory, accounting and
asset management for all new construction, billable work, maintenance, operation, repair
and replacement. The CRMS would include a set of procedures for handling work input,
reporting, documenting, processing, planning, estimating, scheduling, cost accounting and
property record management. CRMS would provide management with a tool to control
the budget and cost; a tool for long range planning (O&M as well as capital); as well as a
tool for establishing appropriate staffing levels.
If the District is interested in pursuing the above concept, we recommend that we begin
with an educational workshop of some of the key staff. This is a comprehensive program
that requires "top clown" support and a long-term commitment form the Board, manage-
ment and staff.
The above is submitted for your review and comment.
Sincerely yours,
Gregg A. Lowry
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DAILY RECEIVING REPORT
BUILDING NO. DATE
BILLS OF LADING BAL. PREY. DAY
UNITED PARCEL TOTAL RECEIVED
PARCEL POST NUMBER PROCESSED •
TOTAL BALANCE ON HAND *"
TRUCKS RECEIVED NUMBER OF CASES
AMOUNT OF PURCHASE ORDERS ON HAND 16) (7)
CUMULATIVE
(1) (2) (3) (4) (5) PERCENT PERCENT
WORK TO BE IN NEED P.O. REQUIRING OF OF
DAYS SCHEDULED MARKING NUMBERS RESEARCH TOTAL TOTAL TOTAL
i 1
2
4
5 I
6
7
8
9
10
OVER
10
TOTAL » �
This amount represents shil]rnents received, marked, stocked in the warehouse or delivered to the
selling location with all documents forwarded to stock control and accounting.
—TOTAL MUST AGREE
A SAMPLING OF VARIOUS MARKINGS
F
BINARY CODED DECIMAL � DECIMAL
�'lh ilillif Hill:
1Z345 67890 I (��
,r34567690
DISTRIBUTION CODE— UNIVERSAL PRODUCT CODE . r . . t CODABAR
12345678
II II DIGITAL BINARY
1N456
INTERLEAVED "TWO.OF-FIVE" 1 PERIODIC BINARY yhtyl� TWO-OF-FIVE"
49,1
BI LEVELI I I� III I llll GEOMETRIC
+ 3 54998p6
"THREE-OF-NINE"
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WAREHOUSE INBOUND SHIPPING REGISTER
Receiving F'isrchase Yo. of. Freight
Date `'i ber Order Vendor Carrier Units Weight Bill Remarks
E
Locator System
Stock Location Sample
(Item is at address B-17-C.)
C
C
B - 17 _ C
1n in
S Aisle Left Top B
B Side Shelf
A
9 s'0
1 1�
1�
Because eacii item f.icing ow aisle has an exact address, all that needs to be
dome is to record tine addwss when storing items,and look up the address prior
to retrieving items.
f
V
ABC
a
0 STRATIFICATION
0
FOR
z
o OPERATIONS ANALYSIS
Q AND INFORMATION
Uj CONTROL
a }
60% - 70%p OF TOTAL VALUE
,i-207o - 30% OF TOTAL VALUE
tt /t 11 tt 11 "C
10% - 15%,-!� 10% - 15% 011' - -- REMAINDER 70 -80% 101
ITEMS RANKED IN ORDER OF DECREASING VAS IP
(The use of the 80-20 Rule)
I I
TRUCKEE DONNER PUD
€; INVENTORY USE JAN 88 thru JUL 89
�i
40 -- - 40
E
30 _ L 30
E E
l i 3
c 'i
20 -- I- 2 0
R 10 10
3 C C
I; 0 0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
Ei
i
;I
1� ELECTRIC
3
TRUCKEE DONNER PUCE
INVENTORY USE JAN SS thru JUL 89 „
12 — — 12
3
10 10 E
I
w I w
8 L8
I A A
I,
T 6 6 T
E4 4 E
a
R
E
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 r
r �
. L.
WATER ?
I;
i
STOCK
PNPLYS 1 S SSU NG
RECEIVING
OPERPTIONS NPTER I PLS
F7DDATAG e i � J
Z�
PURCHPSING REGUISITIONING
% POSTING OF
TRRNSRCTIONS
TRUCKEEIDONNEP INVENTORY '.
and WAREHOUSE OPERATIONS
i • i � �
INVESTIGATE,
PLAN,
ESTIMATE and
GET FUNDING
FOR EXTRA
WORK
SHOP RELIEVES
ISSUE TO SHOP EMERGENCY&
GENERATES
INSP'N REPORT
FOR FINAL
REPAIRS
YES
Is
WORK
RECEIVE WORK NO REQUEST NO INVESTIGATE, PURCRASE ISSUE TO SHOP,
REQUEST EMERGENCY MINOR IN PLAN, MATERIALS & AWARD SCHEDULE and
????? AMOUNT? ESTIMATE and SERVICE CQNTRRGTS COMPLETE
CET APPROVAL
& FUNDING
YES
GENERATE EVALURTE SDP
MINOR WORK LORD and PRIORITY
TICKET DF WORK
1
a
DOCUMENT
NO PROCEED YES CONTINUE WITH REASONS AND
WITH WO EXECUTION TAKE ACTION
CHANGES TO PREVENT IN
???? FUTURE
NO
WAS
EVALUATE PRIOR YES INVESTIGATE &
CHANCES, DOCUMENT APPROVAL AMEND WO FOR
REASONS GIVEN? ADDITIONAL FUNDS
YES NO
CHANCES NO D1111ITSS
FINAL COSTS WITHIN YES WO TRANSFERRED TO
REQUESTED COMPARED TO W.O. BUDGET??? HISTORY(propectq END
DURING BUDGET recordvj
:08?
BUDGET2
Truckee Donner P.U.D.
MAINTENANCE MANAGEMENT BUDGETING WORK ORDER No.
TYPICAL WORK ORDER FOR BUDGET
Description: [maintenance of Electrical Substation
Cost AccountCode: 564
Date opened: 1/1/90
Date Approved: 1/1/90
Work E S T I M A T E
Center DESCRIPTION Hours Overhead Materials Services Other TOTAL
ELEC See attached continuation sheets 250 $2,500 $1,000 $500 $4,000
Tech Sery 50 $500 $50 $0 $550
$3,000 $1,050 $500 $0
Requested by: Prepared by: Approved:
Truckee Donner P.U.D.
MAINTENANCE MANAGEMENT BUDGETING WORK ORDER No. �
TYPICAL WORK ORDER FOR BUDGET
CONTINUATION SHEET
WORK ANNUAL.
CENTER TASK DESCRIPTION/LOCATION FREQ HOURS
ELEC Perform annual PM in accordance with G.O. 95 annual 105
at the following locations:
(site name) #units
(site name) #units
(site name) #units
(site name) #units
(site name) #units
ELEC Provide Emergency repairs
annual 145
Total work center
Truckee Donner P.U.D.
MAINTENANCE MANAGEMENT BUDGETING WORK ORDER No.
TYPICAL WORK ORDER FOR BUDGET
CONTINUATION SHEET
WORK ANNUAL
CENTER TASK DESCRIPTION/LOCATION FREQ HOURS
Tech Sery annual 50
At the following locations perform site housekeeping, cleanup etc
(site name) #units
(site name) #units
(site name) #units
(site name) #units.
(site name) #units
ITotal work center
a
®� 4
Truckee Donner P.U.D.
MAINTENANCE MANAGEMENT BUDGETING WORK ORDER No.
TYPICAL WORK ORDER FOR BUDGET
Description: IMinor Repairs to Substations
Cost AccountCode: 564
Date opened: 1/1/90
Date Approved: 1/1/90
Work E S T I NI A T E
Center DESCRIPTION Hours Overhead Materials Services Other TOTAL
Tech Sery Perform miscellaneous trouble call 100 $1,000 $200 $0 $1,200
ELEC repairs to non functioning units. 20 $200 $200 $0 $400
Materials are lump sum.
THIS WORK ORDER FOR BUDGET PURPOSES ONLY
Minor repair ticket required for each transaction
Each ticket limited to 16 hours with a maximum of $500
1200
1 ion $o $a € -
$rFTO'�"AL $
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.................r......:............ ...._ .,say:-:..... ,.,., ..:.:-....�............ .
..........
.....,+.... -
.......... .. ....
..:....... .......:>:�•.r.......:::::::::.. :::::.
,...:.F--....... . ......:-,.:.e•:;.::::...:...:..::......................:.�:........:..s-::-::r:,•s}:;..:;:::>'Si;:_:_::�:.�.........:-., ...rr':%i•.'.c..........:`�ic:�::`.":..:%:f�:r......Lt...... ..:...�;z:5::�:::::...,.
Requested by: Prepared by: Approved:
BOARD OF DIRECTORS
GENERAL MANAGER
� STAFF
BPCKLOG
0 ojp mlf,�
BUDGET
TOOLS TO MANAGE ALL SERVICES / RE QUIR EMEN TS
IN SUPPORT OF DISTRICT ' S MISSION I�
1 s
AB1600 COMPLIANCE
D=M* Plan SC HECUL E
Estimate
�c�oo �c p Schedule
Need for '
sqr votes Process 0 FD E- N EXECUTE &
Q � C�� Doi � CD � K COMPLETE
0 F:z� O E F-D THE oRK
(C cffleo $$)
i
COST OF SERVICE
ANALYSIS
.— IMPACT FEE CREATE TRACK THE
STUDIES DATA ASECOSTS
r
m
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
MAINTENANCE MANAGEMENT versus
BREAKDOWN MAINTENANCE
'l
$ 1 .20
Cf
i
O $ 1 .00 LEAST COST, PER MILE
S E
T
� $0.8 0 -'
P
II $0.60
; COMBINED
M
1 $0.40
L �4E
<- E REPAIRS__ _
$0.20 PM
/ 3
--- $0.0 0
0 1 2 3 4 5 6 7
Thousands Of Miles
CARCQST
BETWEEN OIL CHANGES