It's a tedious business keeping track of parts. Who has the time or manpower to take that initial inventory? If you manage to get an accurate count, how soon before various “just fix it” emergencies and creative shop shortcuts turn those inventory records into useless pieces of paper? And if you don't really know what parts you have on hand or how many you're using, how can you even think about creating a trustworthy reordering process?
If maintaining an adequate supply of parts for your shop is a necessary evil, “managing those parts is the ugly brother of that necessary evil,” says Charles Arsenault, the President of fleet management software developer Arsenault Assocs. In particular, parts inventory — the basic foundation of any management system — “has a habit of falling behind the other balls on the table,” he says. “We've seen more than a few cases where inventory was pile one and pile two.”
The irony is that this tedious job no one wants to tackle “offers the fastest return on investment in information technology,” Arsenault says. When fleets move to shop management software systems, “the first thing they want is vehicle maintenance tracking, then automated repair orders and PM scheduling,” he explains. “Parts inventory has a much lower priority.”
However, when a fleet performs its first inventory, “we normally see 30% or more of the parts are for vehicles they no long have or are so obsolete that they're scrap at this point,” according to Arsenault. “We saw one fleet with five locations that had over $200,000 worth of inventory that had not been used in over a year, and only 10% were long-wait parts.”
A 30% reduction in parts on hand is a fairly powerful ROI argument for implementing the parts management functions of your shop system, especially since it doesn't have to involve a great deal of time or manpower. And if you're still not convinced, it's also common for an automated parts management system to deliver “a 10% or more reduction in parts purchasing dollars,” Arsenault adds. “It's like going to the dentist with a toothache. You don't want to, but once it's over you're really happy.”
“There's no doubt that parts management is a chore,” says Rick Rosenberg, President of TMT Software, provider of the Transman maintenance management system. “And the largest hurdle is at the beginning in setting up the program.”
Better control of parts, though, “is at or near the top of the list for justifying the purchase of maintenance software,” he says. “When you look at purchase, inventory and warranty, you realize you have a lot of dollars tied up in parts.”
With purchase, an automated system not only helps set optimal reorder points and track prices, but also removes or lowers transactional costs without hurting shop or fleet efficiency, Rosenberg explains.
As for inventory, “dollars in the bank are better than dollars on the shelf,” Rosenberg says. Not only does an accurate, automated inventory system eliminate “dollars tied up in illiquid capital, but it also means there's less ‘stuff’ in the parts room to handle and work around.”
The right IT investment also makes it easier to take inventory and maintain accurate counts. “We saw one fleet that used to shut down the shop to take inventory,” Rosenberg says. “Now it only takes 16 man-hours and there's no disruption in the shop.”
As for warranty, a parts management system should simplify recovery for all three types that shops have to track — original bumper-to-bumper warranties from OEMs, extended warranties on various components, and aftermarket parts coverage. “A good [parts system] not only tracks coverage, but makes it as easy as possible to file claims,” Rosenberg says. “For example, it can print claim information and a shipping label right at the technician's work station so everything is ready to go for the warranty claim.”
Aside from a smoother running, more efficient maintenance operation, better control of all three parts functions — purchase, inventory and warranty — “deliver bottom line dollars,” Rosenberg says.
Once the program is up and running, fleets usually discover other benefits flowing from closer control of their parts. “For one thing, the system provides an audit trail for every piece of inventory,” says Rosenberg. “It's an electronic fingerprint that cuts shrinkage in the parts room and makes sure that parts are assigned to the proper vehicle and repair order, not just one that happens to be open at the moment.”
Accurate records also make it easy to document parts volumes and prices. “Whether it's negotiating volume discounts or setting up a consignment arrangement for some parts, you can show the vendor that you have good visibility on parts usage,” says Arsenault. “You can approach your vendors with real purchase numbers in front of you and talk about volume discounts. Just having the information to ask questions can have enormous returns that go right to the bottom line.”
Reordering not only becomes directly connected to actual usage, but historic records can help fine-tune that process to cut costs and improve efficiency, adds Marc Knight, assoc. director of transportation solutions for the Asset Solutions Div. of Maximus. “Reorder calculations can begin to consider many other variables, such as seasonal use, lead times to get delivery and so on,” he points out.
Despite the obvious cost advantages offered by parts management information technology, “we find that only about one-third of the fleets installing new management systems bite the bullet and implement [the parts-management functions] right out of the box,” says Arsenault.
“It's the drudgery factor,” says Knight. “You're talking about a lot of transactions with low individual dollar values.” That can make it seem like an enormous job to get a system up and running, one that no one wants to willingly tackle.
That excuse, however, is quickly going away as the need to reduce that initial hurdle has received a good deal of attention in recent years from both software and hardware developers.
Some of solutions are relatively straightforward and tackle the set-up problem head on. “We've created a global parts catalog,” says Rosenberg. “A fleet [setting up a parts management system] can use it to easily populate their parts database with the information they need and then populate the individual shop inventories, too. The universal catalog not only eases the initial data entry, but also cuts down on the data entry differences between shops that can lead to multiple parts entries for the same part.”
Properly implemented, bar coding support also simplifies initial startup, as well as pays dividends in everyday use. “Maybe two-thirds of our fleets use [bar coding] and we push it hard with features like automatically generating bar code labels on receipt of orders,” says Rosenberg.
Automated label generation is important, adds Arsenault, because parts suppliers have yet to agree on any consistent parts numbering system or standardized bar-coding for their packaging. “That makes it harder for a fleet manager [to track parts], but an automated system can simplify what's currently a complex situation.”
In any event, industry standards for parts bar codes may soon become a moot point. In the search to improve parts system efficiency and accuracy, most fleet software developers see such passive identification systems being replaced by an active one that actually tells the parts system when it arrives and when it leaves the parts room.
“We're not seeing RFID tags in the fleets yet, but it's coming,” says Knight. “Right now we're using wireless handhelds with bar code readers to make it easier to take physical inventories and update the system, but RFID even removes that step.”
“I see the day coming soon when we'll have RFID on the part level with stick-on labels,” adds Arsenault. “The system will automatically take the part out of inventory as the technician walks out of the parts room. You can also use RFID to automatically associate the part with a repair order without any manual data entry. That means you can automate inventory control and ordering as well as costing.”
While maintenance software was once employed as a standalone program in most fleets, today integration with other internal systems is common to automate the flow of information within the fleet. Moving that integration outside the fleet is the next logical step, and it will have a major impact on parts management.
DATA FOR EVERYONE
For example, third-parties supply many fleets with low-end parts like fasteners on a consignment basis, charging only as the parts are used. “We have an interface for those vendors” to automate the process, says Rosenberg. “In fact they can even download their catalog into our system. Now we're working [on a similar interface] for dealer consignment and OEM national parts programs.”
“Inventory consignment is already big in the U.K.,” adds Knight. “Fleets there have turned over their entire parts inventories to vendors. The issue is keeping the vendor honest. How many are in inventory and how many did we use?”
NAPA is already running the entire parts room for some fleets in Chicago, Knight points out. “By interfacing directly with their system, we not only track parts usage for the fleet, but also automatically update the NAPA system as parts are issued to a truck.”
Such external integration not only benefits the fleet by moving the reordering process into the background, but also has value to vendors, automatically creating pick lists for them for shipment to the fleet with minimal data entry for everyone in the chain.
“The real future is total integration with internal, external, onboard and third-party systems,” says Arsenault. This approach is especially valuable when there's more to managing a part than availability and location. “Tires, for example, are like a chameleon,” says Arsenault. “A starter never morphs into a steering pump, but a tire changes from tire to casing to recap as it moves through the fleet's system. They have to be managed for total life. An integrated parts system will identify those that have chronic problems like requiring frequent re-airing, let you know their exact position on a vehicle, and eventually give you accurate lifetime cost rather than just cost per mile per 32nd-in. of tread wear. That requires total integration of the parts system.”
NEVER TOO SMALL
Given the perceived complexity of getting a parts management system up and maintaining its accuracy, such systems are often seen as useful only for large fleet operations with multiple shops, high parts volumes and in-house IT support staffs. But parts management is an excellent fit for the web-based ASP (application service provider) model, putting the advantages of good parts management well within reach of small fleets as well. All the fleet needs is an Internet connection and a web browser, paying the provider a monthly subscription fee for the service, which is usually provided as part of an overall maintenance management system.
“A web-hosted service just makes it more practical for smaller fleets to have a parts management system for a monthly fee without any other IT investment,” says Rosenberg. “The fleet simply logs on [with a browser] to enter a repair order. Everything flows from that.”
In some operations the pay-as-you-go ASP model also works well for larger fleets. Maximus, for example, has one major regional LTL carrier with multiple maintenance shops using its ASP system. “And they've saved $1-million just in parts,” says Knight.
No matter what the fleet's size or IT preferences, “a decent parts management system can get complicated very quickly if you let it,” says Arsenault. “At minimum you need part numbers and names, min/max reorder levels, costing methods, basic warranty tracking and vendor details. Beyond that, a fleet can add any number of details that it sees adding value. The goal of developers like us is to make our systems as automated and easy to use as we can without compromising functionality. That's what lets a fleet operate at the least possible cost.”