5 Keys to Best Parts-Buying Practices
Price is just one factor in the purchasing equation.
July 2014, TruckingInfo.com - Cover Story
The Internet as a Tool
The Internet provides another avenue for purchasing parts, or at least for researching parts and suppliers before making a purchase.
“One of the most useful ways the fleet can use the Internet is getting information about different products, and being able to compare similar types of widgets from a form and fit, and function standpoint,” says Bendix’s Conroy.
Stewart of FinditParts says fleets can use the Internet to streamline the parts procurement process, but adds that it is not a replacement for local distribution. “The fleet probably will get 80% of its parts from its primary local source.” Hard-to-find and legacy parts are good candidates for Internet purchasing.
Bill Wade, managing partner, Wade & Partners, says the Internet is a “fantastic tool,” but he says the Internet is not always the answer. “There are times when you need the diagnostic help of a good counter man or a good dealership mechanic.”
There also are times when if you can get a case of filters shipped to you, the price differential may be enough to make it worth your while, Wade believes. “The whole thing revolves around the issue of cost vs. value. If you don’t have the value, the cost is a stupid focus. Value is all about keeping the trucks running. To the extent that the supply chain can help it, great. To the extent that the supply chain gets in the way of that, then we have to rethink it,” Wade says.
Bambrick at Road Choice cautions fleets to research suppliers when purchasing over the Internet to ensure they are buying parts from reputable sources.
Vendor Managed Inventory
Once you have inventory, it has to be managed properly. Many suppliers are now offering to take that headache away from fleets by managing inventory for them. “Done correctly, [vendor managed inventory] takes excess working capital out of the supply chain, making the supply of parts more reliable with less inventory and hence less capital,” Bickford says. “It is essential that knowledgeable and experienced people manage the process and allow the system to do its work without unnecessary intervention.”
VMI improves the overall breadth, depth, and fill rates to end users by using daily demand to predict future demand and replenish sales on a more consistent timeline, Meritor’s Bauer explains.
Joe Laux, CEO at Wisconsin-based Freightliner dealer group River States Truck and Trailer, says another benefit of managed inventory is that it reduces obsolescence. “A dealer may run 5% to 10% obsolescence within a 12-month period, but fleets may have 50% obsolescence.” Having your parts supplier manage inventory can help control obsolescence.
John Wisdom, marketing technology manager, Paccar Parts, agrees. “The unfortunate thing that happens with a lot of the fleets is they become parts collectors because they buy a part and then it just sits on the shelf. That is money that is not being put to good use.
“You have to know why you are buying it, and then a good inventory control system will help you see you really don’t necessarily have a need for that particular part, but maybe you have a need for other parts you should have in stock.”
VMI systems should not just be allowed to run on autopilot. Parts ordering plans need to be reviewed in context of what is happening with the fleet.
“For example, if someone using VMI has a significant business win or loss, the algorithm will not know,” Bickford says. “If there is exponential growth of a product for some reason, the system will not pick up on the step change in demand as quickly as demand grows. This is why you must have competent people at the supplier and the customer engaged in managing the process.”
Ted Rose, vice president of customer support at Virginia-based Kenworth dealer Truck Enterprises Inc., says dealer managed inventory in theory is a great idea. “But if you didn’t have a person on the fleet side who is committed to it, it doesn’t work. You can put all the electronics you want in play, but it comes back to a warm body to make it work.”
Consigned inventory is another option some parts distributors offer. The benefits include having replacement products on the shelf at all times and only paying for the part that are used at the time of restocking.
“The challenges usually involve consistent tracking and replacement of parts used in a timely and efficient manner,” says Vipar HD’s Pennig. “Products that involve core-credits can be very difficult to keep accurate count of. Consigned inventory is becoming less common as Internet and e-commerce ordering/purchasing gains acceptance.”
The Value of Service
VMI is just one example of how the services offered by your supplier need to be considered alongside other parts-buying considerations.
River States’ Laux says the number one driver of parts purchasing should be availability. “The cost of a truck being down is estimated at somewhere between $500 and $750 a day. If you are able to procure that part the same day, fix the truck and get the truck back up on the road, there is a real value added.”
According to Yancey Bros.’ Terry, most customers tend to focus on the right part, at the right price, right away.
“When you start looking at why a fleet should buy from you vs. somebody else, it starts with, how good your people are on the counter? Are they able to identify what you need, source it, and then give it to you at a competitive price?” Terry says. Other things to look at, he says, include delivery, as well as how a supplier handles cores for remanufactured parts.
“If you provide a solution and you are fair and competitive in your price, if you offer some things like consignment or delivery and you have got a good approach to how you manage cores on behalf of the customer, those are some things that have got to transcend the price you are paying for the part,” Terry says.
Truck Enterprises’ Rose advises fleets that when a supplier comes in and says he is going to sell you a part for $10 less, “make sure you are armed with the right questions. How about the training? Do they come on site if you have your own techs and help train them and get them up to speed? If you really want to have all the rest of this quality and service, then there is a cost to that. If you want outside sales people coming to see you and helping you through things, if you want tech and spec [advice] from one of our folks to make sure that you get the right product, it is going to cost you.”
Wade advises fleets — whether it’s a single location or a multi-location fleet — to form relationships with their parts suppliers. “Whether it is a dealer, or an independent or a buying group, it does not matter,” Wade says. “What really matters is that you develop that relationship, because anybody will sell you an AA part on Wednesday at noon. You want the guy who will bust his butt to find you an obscure part on Saturday morning or Sunday night because you have a truck down.”
Choosing the right parts supplier and building a strong relationship with them is paramount to running an efficient fleet, according to DTNA’s Tuomi. “Not only can a reputable supplier help choose the right parts for fleets, but they can also alert customers of new parts, maintenance, or savings programs that will help to lower the total cost of ownership down the road.”
When choosing a supplier, Velocity’s Cueto says it’s all about uptime. “Fleets need to pick a parts supplier that is going to give them the maximum amount of uptime. They need to keep the trucks on the road. If they save $5 on a $100 part but that part fails, it isn’t worth it because they lose $700 when they are down.”