“It’s a tale of winners and losers,” says Kyle Treadway, dealer principal at Kenworth Sales Co., when describing what is happening with truck parts and service sales at truck dealerships. “Our urban areas are busier than last year, but our rural stores are seeing dramatic declines in business volume.”
Among Treadway's customers, so far the winners are refrigerated and food haulers, construction, last-mile delivery and fleets hauling medical supplies. He adds, however, “We are confident these healthy sales are short-lived.”
His confidence is backed up by MacKay & Co., which is forecasting parts demand to be down 19.6% this year over last. Speaking during a webinar on April 8, John Blodgett, MacKay’s vice president of sales and marketing, said he expects for-hire carriers to purchase 19.4% fewer parts this year, while private carriers will see parts sales drop by 17.8%. (See figure below)
MacKay recently began a weekly survey of fleets, dealers, distributors, component suppliers and manufacturers to gauge the effect of COVID-19 on the aftermarket. The first survey covered the week ending March 27, and 74% of distributors said their parts sales to fleets were down. That number was 71% for dealers. Interestingly, 7% of distributors and 5% of dealers said their parts sales were up.
On Jan. 27, MacKay’s forecast for U.S. parts sales for Class 6-8 trucks, trailers and container chassis was a slight uptick (1.2%) from 2019 levels. As of April 6, the company is now predicting a 19% decline in parts purchases.
What Are Dealers and Distributors Seeing?
“At this point it is too early to predict the true effect COVID-19 has had or will have on parts sales," said Jim Bland, vice president of TranSource Trucks and 2020 ATD/HDT Truck Dealer of the Year finalist. "Across the TranSource network it appears [fleets] are purchasing parts as needed for in-house repairs.” He has not tweaked his dealer management parts OEM’s ordering system for stock orders, but says he is “monitoring the situation regularly to ensure we react quickly when we see company part inventories building or part back orders rise beyond normal levels.”
Andy Robblee, president of Six Robblees’ Inc., a heavy-duty parts and service operation, says his sales levels are half what they normally are. “Our inventory is normal to high. We calculate min/max levels based on prior year or seasonality. As last year was fairly normal/good, our inventories are full as we head into our traditional high season.” He says he now is trying to cut back on purchase orders and basing his inventory on current usage rather than history.
On the other hand, Nick Seidel, vice president, Action Truck Parts, an independent parts and service operation, says his customers’ buying habits “have not noticeably changed at all, at least not from a replacement standpoint.” However, he says, the accessories side of the business is down.
Beginning in January, Seidel says he started “to take a hard look at the inventory at all our stores. We started to move products around each location to right-size each of our inventories and to prepare for what the industry was foreseeing as a slowdown for 2020.” This was before any impact from COVID-19. He says he will be keeping a close eye on fulfillment levels over the next few weeks. “As you are aware, this is going to affect everyone in all industries at some point. I do not want our inventory levels to rise and then have a slowdown in customer purchases, leaving us with excess inventory.”
Vince Mathews, president, Capital Clutch & Brake, an independent distributor, says that when the virus first became an issue, “the first change we noticed with [fleets] was that they wanted assurance that we intended to stay open.” However, “customers have not asked about whether we will be able to supply parts to them,” he adds. “I believe they have confidence in us as an essential business to the transportation industry.”
He says he is stocking about the same amount of parts as he was before the crisis began. “While sales are down approximately 25%-30% over the past few weeks, I think it’s important to keep my store stocked as I always do. No one really knows when this will ease or end, and I certainly don't want to be caught low on inventory when the normal customer demand returns.”
To determine whether fleets were stockpiling parts, Jim Pennig, vice president of business development at Vipar Heavy Duty, says he got some “street level intelligence” about what was happening from distributor-members. “Our members have not heard anything about over-stocking parts, although there is some concern on collecting payments for purchases.”
What Fleets Are Doing
Interviews with fleets seem to indicate a wide range of approaches to parts purchases during this time.
Gerry Mead, executive vice president of maintenance, The Hub Group, says, “Our buying patterns and inventory levels continue to remain the same with caution in mind.” He says the company has been in contact with its tire and parts suppliers “to ensure levels are appropriate to sustain our normal needs.”
Phil Howard, director of parts, Blaine Brothers, an independent parts and service operation, says parts sales are remaining steady. “Through our membership with HDA, some suppliers have extended show specials they planned to offer at the annual members’ show, while other vendors present discount programs to take advantage of. Some vendors have started offering better freight programs that allow us to replenish inventory faster by not having to wait to hit a higher dollar amount to make freight. Because of that faster replenishment, we can reduce our overall inventory value without compromising the offering to the customer."
Doug Lloyd, director of maintenance at Averitt Express, says he is not hearing anything about potential product shortages, and his parts-buying hasn't changed. “We are business as usual when it comes to parts.” This is because of the mix of customers with which the fleet works. “The automakers have shut down for two weeks and we have adjusted to that, but then there are accounts like Costco that are surging.”
Jarit Cornelius, vice president of asset maintenance/compliance, Sharp Transport Inc., has made inventory changes on a daily basis. “We have cut out a lot of the stockpiling of inventory. Where we had a min/max level set with a minimum of five of certain part on the shelf, we are taking it to the bare minimum of one or two.”
He adds, “We continue to go through obsolete inventory, which is something we have always done. However, before it was at 180 days, but now we are bringing that up to the last 90 days and trying to send more stuff back for credit to get money in hand.”
He also says he is staying in constant communication with Sharp’s primary vendors, “all of which are unanimous in saying they have not had issues with parts.”
On the other hand, Darry Stuart, president of DWS Fleet Management, has heard of several fleets that are significantly increasing their parts inventory. “I know of at least one fleet that called its tire dealer and said it wanted to buy every single tire in the dealer’s facility that fit the fleet’s trucks and wanted anything that was in the pipeline to be recapped to be processed and delivered.”
That same fleet went back and reviewed every part it had bought in the last two months, and then purchased the same number to have in its in-house inventory. “It wanted those parts in its possession because it is concerned about shortages,” he says. “Fleets want to control their own destiny.”
Capital Clutch & Brake's Mathews says one of the business’ significant customers bought a 60-day supply of brake products “just in case” Capital Clutch & Brake elected or was forced to close.
Parts Shortages Ahead?
While it is too soon to tell what long-term effect plant shutdowns by truck makers, tire manufacturers and component suppliers will have on parts availability, some industry participants are predicting shortages. Bill Wade, managing partner, Wade & Partners, recently surveyed 30 manufacturers, distributors and service providers about the post-COVID-19 aftermarket. Their consensus was: “Watch for a major parts shortage starting in July as field inventories are turned to cash as quickly as possible and not immediately replenished.”
Robblee is somewhat philosophical about the situation. “I’m fond of saying that God is giving us our daily manna — just enough to survive on for another day. This particular storm is no different. We are now sourcing N95 face masks. I am always open to selling what the customers want, but I sure didn’t forecast sanitary items as our breadwinner this year.”