For many fleets the parts room is an informational black hole. The data trail shows parts going in and parts coming out, but what's actually on the shelves is a mystery.
Let's face it, managing parts inventory is the most tedious job in the shop, a job that entails constant attention to detail and repetitive, boring tasks like counting parts by hand and reconciling results with previous counts.
Information technology is perfect for automating this type of work, and some fleets have invested heavily in systems to help them get a handle on their parts management. For most, however, the cost and constant effort required to set up those systems and keep them updated with accurate information seems to outweigh potential benefits.
Inventory ignorance, though, could be costing these fleets far more than they know, and given the recent development of new, simpler parts management systems, the solution could be far less painful then they anticipate.
Take the case of Skinner Transfer Corp., a mid-size truckload carrier with a small full-service lease business. With one main shop at its headquarters in Reedsburg, WI, and two small satellite shops, the company provides maintenance for 190 power units and 400 trailers.
Managing fleet operational chores has been handled for years by TMW Software's AS/400 system, but managing parts inventory was “one guy ordering parts here and there, and good luck,” says Billy Skinner, maintenance supervisor for the fleet.
SIMPLE SETUP
A little over a year ago, Skinner installed a standalone parts system developed by PACCAR Inc. and supplied by his local dealer, Wisconsin Kenworth. Offered by Kenworth as PremierCare Connect and by PACCAR's other truck builder, Peterbilt Motors, as TruckCare Connect, the system includes Windows-based PC software, as well as bar code printers and readers. The initial setup requires conducting a base inventory and attaching bar codes to all parts. As parts are removed, technicians scan the parts as well as bar codes on work orders, automatically adjusting the inventory in real-time, as well as assigning costs to a specific vehicle. With a network connection to a dealership, the system can also automatically reorder parts when they fall below levels set by the fleet, making it easier to keep low inventory levels without endangering shop productivity.
“We did the initial inventory by hand and immediately found $120,000 in overstock and obsolete parts,” says Skinner. With the ability to set reorder levels based on actual parts use, the fleet gradually reduced its inventory investment from to $120,000 from $277,000. “We know what we need now, instead of guessing what we need,” says Skinner.
The fleet is not using the automatic reordering function at this point, nor is it exporting data directly to its fleet management system, although Skinner says both would be useful enhancements it will consider as they get more comfortable with the system.
There are over 750 systems currently installed at fleets, according to David Danforth, national sales manager for PACCAR Parts. Many are smaller than Skinner, with typical inventories ranging from $50,000 to $75,000, although there are also larger fleets using the system to manage parts in multiple shops.
For smaller fleets in particular, this approach offers a reliable, low-cost way to actually outsource management of the parts room. “With automatic reordering based on actual usage, a fleet can let its dealer manage that inventory,” says Danforth. “That improves the service level for the fleet while also helping it get control of parts costs.”
Even if a fleet chooses not to use the automatic reorder function, it still gets access to reports that give it an accurate picture of the parts inventory on hand and its parts flow, as well as parts usage by work order or vehicle. In other words, information flows out of the parts room that can finally shed light on that portion of the fleet's maintenance operation.
ONLINE INVENTORY
While Skinner Transfer's results may seem unusual, indications are that such overage may be more the norm in parts operations without good inventory control systems. Freightliner LLC has recently released a Web-based system aimed at fleets looking to add information technology to their parts room, and they've found parts overstock and obsolescence running at 40-50% when they conduct initial inventories, says Michele Calbi, general manager of parts sales and marketing.
Using an ASP (application service provider) model, Freightliner Fleet Connect lets a user establish better parts-room inventory control with just a PC and an Internet connection, removing the need to install and maintain application software. The combination of Internet networking and ASP deployment “makes it easy to set up and easy to use for a smaller fleet or for a fleet with multiple locations,” says Calbi.
Installation of the system starts with a visit from Freightliner regional parts managers, who assess the fleet's operations and ensure a good fit, Calbi explains. Every part is then inventoried by the regional managers, bar coded and entered into the system.
“That initial inventory is often the first in a long time, and it brings to light the size of savings possible,” she says. “And as long as the system is used properly — if technicians simply scan bar codes as items are put in or taken out — then that's the last major inventory the fleet will have to do.”
Once the system is in place, the fleet and its local dealer agree on replenishment levels for automatic reordering. “We see automatic parts replenishment as the primary function of this system,” says Calbi. “That's how you lower fleet costs and improve service; it helps them reduce inventory carrying costs and re-deploy inventory personnel.”
Other benefits flow from easy access to accurate parts data, she says. Fleets can look up parts usage by part number, by vehicle or by groups of vehicles to identify potential problems, as well as monitor the actual value of their parts inventory in real-time. The system also tracks parts warranty information, automatically identifying claims that might otherwise go unnoticed.
And accurate records not only help bring down overall parts inventory numbers, but also “help expand the breadth of that inventory so you have better coverage for all of your trucks,” Calbi says.
Just knowing what's in the parts room has benefits that also flow down the parts supply chain. “With dealers monitoring usage, there are fewer emergency deliveries and most transactions become automated,” according to Calbi. Eventually she sees a similar automated link between dealers and Freightliner, and then a link from Freightliner to its suppliers.”
While OEM-based parts systems are well suited for small and mid-sized fleets, as the number of shops multiply and inventories climb, the complexity of accurately tracking and monitoring parts becomes proportionally more complex. Certainly establishing a control system for a large fleet may seem overwhelming, but the potential payback from good parts-room visibility is also too large to ignore.
The largest carriers have the IT resources to develop in-house systems to help them control inventories, but third-party systems have also entered the market that can automate the process for larger operations.
RUAN Transportation Management Systems is a full-service leasing company and contract carrier responsible for maintaining approximately 20,000 tractors and trailers. “We have 180 maintenance facilities, and on any given day we have $4-million in parts on our shelves,” says Chad Johnson, vp-maintenance.
Today that inventory is managed centrally at RUAN's Des Moines headquarters with a client/server system that automatically reorders parts, monitors inventory turns and provides all levels of management with access to data.
Developed by MRO Software, Maximo was originally designed to oversee factory maintenance. But with the help of RUAN it has been adapted for mobile assets. Although a full-featured maintenance management system, much of the system's functionality involves centralized control of parts in a large, distributed organization.
With thin client workstations at service bays, as well as in the parts room and service manager's office, bar code readers assign parts to work orders and remove them from inventory.
Driven by the shop-floor information, “the system automatically identifies parts that turn quickly and weeds out those that do not,” he says. “We don't have centralized suppliers, so we aren't using it to automatically reorder. Instead, it monitors usage and, when it hits reorder points, automatically generates purchase orders by supplier. Orders are reviewed at the shop and regional level before being placed.”
Reports are produced for use at local, regional and corporate levels, and each shop is measured by inventory turns, total dollar value of inventory and variation between the system's inventory and actual count.
“When a shop goes up on the system, they have to do monthly counts,” says Johnson. “As they get better at using the system, they can earn their way to fewer hand counts by lowering the variance between inventory reports and actual numbers. We already have 20 shops that have 0.5% variance levels, which means they only have to do counts every six months. Monthly counts also provide a strong incentive not to keep too much ‘just in case’ inventory on hand.”
Currently the system's 238 reports have to be requested from RUAN's IT department, but the developer is working to give the fleet's managers on-demand access to most reports.
“Inventory management is an art in itself,” says Johnson. With an automated, centralized IT system, RUAN has a practical way to bring expertise to bear on managing inventory while freeing shop managers to do their primary jobs, he explains.
Whether the fleet is large or small, and the parts system is simple or complex, information technology is finally available that can free shop personnel from time-consuming and/or inaccurate inventory chores. “Everyone will have good numbers to make good decisions when it comes to parts,” says Freightliner's Calbi. “They won't have to guess.”
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