Controlling inventory is perhaps the most important aspect of a parts warehouse/distributor operation. How well inventory is managed can often mean the difference between success and failure in the heavy duty parts business.
With that in mind, most warehouse/distributor operations use some type of inventory management system. Some of the larger concerns make use of systems in which the parts suppliers themselves have a hand in helping maintain the correct inventory levels.
"Virtually everyone in this market sector has an inventory management system," says Max Buchanan, director of automotive and heavy duty sales for Datalliance, Cincinnati. "Because of the nature of this business, if a warehouse/distributor doesn't manage their inventory, they can go out of business."
Most large warehouse distributors also use automated systems to communicate with their vendors and larger customers. "EDI has been a buzz word for some time, but now it has almost become a de facto expectation for many warehouse distributors," says Michael Mallory, president of AutoPower, Lake Mary, Fla.
Warehouse distributors, like other businesses, are under tremendous competitive pressures. Among these pressures, Mallory lists consolidation within the warehouse distributor segment, and those costs, such as fuel, over which operators have no control. Embracing technology allows warehouse distributors to "do more with less and stay profitable," he says. And, large fleets are requiring electronic capabilities from the warehouse distributors they work with.
AutoPower offers "tailored to fit" business systems for warehouse distributors and service providers in the automotive and heavy truck fields. On the heavy duty side, it offers products for single- or multiple-branch warehouse distributors, truck and equipment installers and service/repair facilities. AutoPower offers complete business management packages that include modules for such tasks as accounts payable/receivable, bar codes, buying group interfaces, core management, inventory management, e-commerce, electronic data exchange and vendor-managed inventory, among others.
In terms of parts management, Mallory says his company and other providers "fit in the center." Fleets want optimal parts availability and consistent pricing no matter where they have their truck serviced, whether it's in the fleet's own service shops or at independent shops. In the past, the fleet's mechanics in these various locations essentially had blank checks when it came to parts procurement, because the trucks had to get back on the road. Of course that kind of parts procurement was often counter to the fleet's profit expectations. So fleets want to establish relationships with parts providers in the areas they have service facilities to ensure they get consistent pricing. Warehouse distributor networks want to do business with these fleets. And the fleet service shops want to get the trucks serviced and back on the road while staying within cost guidelines set for their location.
Software providers such as AutoPower provide business systems to the warehouse distributor that allows it to tie these three elements together. "Our kind of software ensures the transfer of information between the WD, service provider and fleet," Mallory says.
The warehouse distributor provides the part, the service facility buys the part, and the fleet approves the transaction. In addition to smoothing the procurement and billing aspects, such software collects all sorts of data that is useful for the warehouse and for the fleet. "Maintenance, warranty and other data can be collected in a database that is accessible to the fleet for their maintenance management functions. We have this database deployed in a way that the fleet can access that database and generate the reports they need to manage the process."
On the other side of the business, many large warehouse distributors and marketing groups have adopted vendor-managed inventory systems, or VMI, which set up a link between distributors and parts manufacturers.
"The acceptance of VMI is evident, as many more warehouse distributors have shown the willingness to allow the VMI facilitator to suggest ordering levels," Mallory says.
Datalliance provides a VMI system for a number of industries, including heavy truck parts. The VMI system takes on the job of making sure a warehouse/distributor customer has the correct level of a manufacturer's parts in inventory by monitoring that inventory and generating automatic orders. Instead of the warehouse sending purchase orders to a supplier, it electronically sends a daily report outlining products sold, products left on-hand, products returned, etc. to the VMI facilitator. The VMI provider then uses specially designed algorithms to evaluate the data in the report and generate an order for the customer based on previously agreed upon stocking levels, order amounts, transaction costs and other factors. This order is then sent to the warehouse distributor for approval.
The result should be a more efficient inventory process that squeezes out unnecessary costs. "A lot of money can get tied up in the supply chain," Buchanan says. "It can be very inefficient." Automated systems help control some of these inefficiencies. "We see this type of supply chain management becoming an essential part of a successful business."
Such supply chain management is standard operating procedure in a number of business sectors, such as packaged consumer goods, grocers, electronics suppliers and others. It's becoming more so in the heavy duty parts business, at least for the large warehouse/distributor operators.
"Manufacturers love it because they have a peek into parts demand on a daily basis," Mallory says. "The warehouse distributor likes it because he doesn't have to pay attention to each and every supplier." Allowing a third party to work with suppliers to order inventory is something many in the industry resisted at first. But that resistance is fading.
"Some of the early adopters of VMI have demonstrated success, and there is another wave of people who want to follow these pioneers," Mallory says. While there are still some laggards, many warehouse distributors are pushing their suppliers not already on the VMI bandwagon to jump aboard.
At least one group is doing what it can to get parts makers, distributors, fleets and service shops linked on the electronic highway. In 2000, truck parts distributors, parts manufacturers, marketing groups and business system providers formed HDeXchange Inc., a non-profit, open e-commerce organization that develops standards, products and businesses practices for electronic commerce. The E-Business Study Force of the Council of Fleet Specialists came up with the concept and decided to form an independent entity to address these issues.
HDX's mission is to help ensure e-commerce solutions are adopted by a broad range of the heavy duty truck parts industry by helping develop non-proprietary standard guidelines and educating businesses on the types of e-commerce technologies available.
It offers several products, such as transaction sets for parts distributors and their vendors that include invoices, purchase orders, advance ship notices, product activity data for VMI applications and purchase order acknowledgement, also for VMI applications.
HDX also works with the American Trucking Associations' Technology and Maintenance Council, as well as the Automotive Industry Action Group, in developing guidelines for fleets that wish to purchase parts electronically.
Inventory systems are also marketed to truck dealers as well as warehouse distributors. Karmak, Carlinville, Ill., for instance, began marketing a business system to heavy duty truck parts distributors, truck and spring repair shops in 1982. Now, the company provides a range of business management software products to heavy duty truck deale