Parts & Service Special
Tracking Inventory
It's Not Just For Big Guys
Tim Barton
Contributing Editor
Fleet size is not the decisive factor in determining whether a well-thought-out and well-maintained parts inventorying program can save time and money.
"It's much more about your business philosophy," says Jack Porter, a trucking consultant with Decisiv Inc. "If you have made the decision to do your maintenance, you need some kind of inventory control."
While the owner-operator with one truck might stock his barn with fuel filters, oil filters and a few parts that wear out on a regular basis – all of which he tracks in his head or on a dog-eared piece of paper in his tool box – even the addition of one truck will require a more standardized and comprehensive system.
Fleets of nearly any size require scrutiny of inventory if they're going to control costs-per-mile and bottom-line numbers. Charles Arsenault, owner of Arsenault Associates, which sells fleet management software, believes a fleet as small as 10 trucks can benefit from the use of a computerized program.
"Having 10 power units usually means there are many more vehicles actually being used in the operation – forklifts, pick-ups, trailers – that can be tracked by a parts inventorying program," he says. The problem is, smaller fleets may not have people with the technology background to implement and effectively use computerized inventory management. In surveys by Arsenault Associates, the primary reason given for not computerizing the fleet maintenance function is, "No time to implement and no one to run the software."
Using Software Effectively
Generally speaking, the first step in building a computerized inventory system is to acquire fleet maintenance histories. Once maintenance histories have been documented, a base line can be established for setting fill and turn rates at levels that provide for controlling obsolescence.
Dave Williams, vice president of equipment and maintenance at Knight Transportation in Phoenix, Ariz., uses parts inventorying software to reduce downtime, maintain a balance between lost operating costs and excess inventory and theft prevention. However, Williams says the company's program goes beyond these basic functions.
"It allows access to parts inventory from all terminals and gives pricing and status of back orders. Sometimes we can take advantage of volume buying discounts because our program tracks inventory and shows how many of a certain part we use."
But not all fleets take such full advantage of their software. The parts inventorying program is often used only as a means to track financials. But you'll get a quicker return on your investment if you use more of the software's abilities, notes Arsenault.
"A good parts inventorying program can become a very big money saver," says Rick Rosenberg, president of TMT Software.
Arsenault says that a sound first parts inventory done by fleets between 25 and 250 trucks will uncover about 30 percent obsolete or overstocked parts supply.
Beyond Basics
TMC's RP 531 says that, "the primary goal in managing parts inventory is cost-effectively having the correct part, in the correct place at the correct time."
But it is not realistic to keep every part in stock all the time. Indeed, the RP notes that "the relationship between dollar value of inventory and in-house availability is geometric," meaning that as in-house parts availability increases, the cost of maintaining that inventory rises faster than the simple cost of parts. Parts inventorying programs can release plenty of capital that might otherwise be tied up in inventory.
It also allows fleets to save by doing what Rosenberg calls power purchasing. Once the initial organization has been done and a program put in place, the number of vendors used can be reduced to those with the best pricing and service.
"Systems are designed to default to primary vendors," says Rosenberg, "and this allows a fleet with one or multiple shop locations to check pricing and auto fill purchase orders." This feature also flags exceptions so corrections can be made when necessary.
Steve Vardzel, maintenance director at PGT Trucking in Monaca, Pa., uses TMT software as part of his integrated fleet maintenance suite from TMW. "We use it to create bar codes for parts tracking and to track time and productivity of mechanics, among other things," he says. "We also set safe points that tell us what we need to stock on a daily basis, and all our purchase orders are sent automatically to accounts payable for payment. The system flags any errors in billing so that all our payables are accurate."
Warranty Information
Quite often, recognizing the potential in software requires drill down. But if a fleet's only objectives in implementing software solutions is to replace manual planning done with spreadsheets, much is left unconsidered.
For example, it might not be obvious that software could provide warranty information and a means to recapture warrantied parts costs.
"We have many customers who pay for their systems in 12 to 18 months based upon warranty recapture alone," Rosenberg says.
Steve Russell, president of Celadon Carriers in Indianapolis, recently upgraded his maintenance software to include more sophisticated use of warranty recapture functions. He cautions that no matter how good software is, it cannot reach its potential if accurate and complete data has not been entered.
"When we upgraded our software, we also did more training of our personnel and corrected a longstanding problem we had with inaccurate data," he says.
Taking such preliminary steps can make even the spec'ing of future buys more efficient. Once the Technology and Maintenance Council's Vehicle Maintenance Reporting System (VMRS) and a parts numbering system are in place, costs for each part can be tracked and compared.
"There is a 10 percent rule in effect in many fleets," Arsenault explains. "It shows that 10 percent of the worst units cost a fleet 30 percent of its maintenance budget. Having the ability to identify these units gives the carrier options at trade-in that he might not otherwise have considered. For example, a fleet armed with cost-per-unit information from an inventorying program can choose to base its life cycle decisions not on vehicle age but on the cost of units. Older trucks may prove to be less costly than some new trucks."
You can even go beyond the traditional definition of "parts." For instance, while fuel and tires are always among the highest cost items in fleet operations, tracking them as cost factors is often not done due to lack of time and manpower. If fuel is seen as an inventory item that can be tracked, parts inventory management can help control fuel costs. It is not necessary to have fuel storage capability to use fuel inventorying. Data can be gathered from fuel networks or from fuel receipts.
Celadon's Russell says the fact that his fleet is over the road makes the case for a complete software solution all the more compelling.
"Doing repairs in more than one place and fueling constantly on the road means we need a well-designed and well-run maintenance and inventorying program," he says.
As Change Accelerates
The future holds more incentives for fleets to begin using or to upgrade their parts inventory software. While installed software will continue to dominate in the near term, according to Arsenault, third-party providers that are not dealerships will emerge using web-based programs to service fleets. More on-board technology will be added to the hardware mix. Fleets will find it more and more difficult to run efficient operations without the use of software and standardized languages such as VMRS.
For example, VMRS coding will enable its users to more accurately identify problems that will inevitably arise in EPA '07 engines. For more effective warranty management, VMRS will allow fleets to identify and tag failed parts with a failure code to send back to the parts supplier. Many more developments are also being studied, such as tying tire management software to emerging technologies like Michelin's eTire system.
Perhaps there is a kind of tyranny in having an always-increasing number of choices. But staying ahead of the pack will mean having to embrace the ones that make sense for your fleet. To stay even, and perhaps to make operating ratios look just a little better, decision-makers will have to gird themselves to stay on top of the information tsunami.
Parts & Service continued...
