|At A Glance:|
Some ways to improve the in-house parts room are:
The debate about which parts management method — in-house or outsourced — is more cost-effective and/or efficient is continually being fought. Many who have outsourced their parts rooms believe it’s the best move they ever made. Others haven’t had great experiences, and still others believe in-house staff, who don’t have to bring in profits, can do it better.
Kathy Beach, CAFS, fleet admin and parts supervisor for Arapahoe County, Colo., feels a sense of pride in the County’s parts room and its efficiency — she voluntarily took on the parts role in addition to her administrator role after the prior parts supervisor left on disability, overseeing $200,000 in inventory. She believes there isn’t savings in outsourcing, citing as an example a colleague who is now fighting to bring his parts room back in-house after outsourcing it. Only a vendor impropriety or employee theft should lead to parts outsourcing, Beach said.
Sam Lamerato, CPFP, fleet superintendent, City of Troy, Mich., has similar opinions about the parts room. He stresses that an efficient parts room is more cost-effective than an outsourced one. Lamerato has compared his numbers with those of parts management companies, and the City’s prices are lower, partially because they’re buying from the same warehouses, he said. An additional factor to consider is staff time, but Lamerato said, “If you have a good parts inventory program, your staff time is minimal.”
Chris Hoffman, CAFM, manager of Transportation Services for Oklahoma State University (OSU), is in the unique position of having brought his parts room back in-house after outsourcing it for two years. The vendor couldn’t provide the specialty parts he needed for transit buses. However, Hoffman is not against the idea of outsourcing and may consider doing it again in the future, making sure the vendor will carry all the parts he needs. The OSU parts room has about $300,000 in inventory.
Finally, John Clements, deputy director, Fleet Services, City of San Diego, previously worked at the San Diego County fleet, which had an outsourced parts room. The City chose to keep its parts operation in-house during its managed competition process — there are now 13 parts rooms, large and small, and the City purchases about $7 million in parts each year. Clements, having now worked with both types of parts rooms, hopes to be able to implement a hybrid approach — a single-source parts provider with an in-house parts staff.
For those with in-house parts rooms, continually looking at ways to improve them never hurts. These four fleet professionals discuss some of their best practices and new initiatives for parts room management.
1. Purchase from a Single Supplier.
The City of San Diego is currently working on a request for proposal (RFP) for a single-source contract. Clements hopes this will eliminate the time (and cost) of having multiple standing contracts and having staff members shop for a part. While getting quotes from various local vendors may result in a less costly part, the time and effort it takes staff to obtain that small savings is not always worth it, he emphasized.
“Only writing one check and only dealing with one parts vendor for warranty claims” are other benefits, Clements added.
Clements said these contracts are also available from cooperative procurement organizations, such as the National Joint Powers Alliance (NJPA). However, it’s up to the public agency whether its departments can use the contracts. Purchase from Warehouse Suppliers & Specify Requirements in Contracts. At the City of Troy, Lamerato said purchasing parts from national warehouse suppliers has helped improve procurement. Not only does this allow the City to get more discounts, but it also cuts down on the number of purchase orders staff have to write.
The City has a number of open contracts for various parts. It awards one primary and two secondary suppliers for a period of three years, with the chance to renew after three more years. The City requires winning bidders to provide factory and technical training to fleet staff, buy back obsolete parts at current cost, and help City staff rebox and relabel shelves. Suppliers also can’t raise prices for six months. After that, they can do so only if the manufacturers have raised prices, and the City has the option to reject the price increase and go with its secondary supplier, Lamerato said. In addition, the contract specifies that the City will not pay for shipping or restocking fees.
“If we order a part and we find out it’s a wrong part, we can ship it back and they can’t charge us a 20% stocking fee,” Lamerato explained.
2. Use a Purchasing Card.
Another provision in the City of Troy’s parts contract is that the vendor accept purchasing cards, or City-issued credit cards. The benefit for the City is that it pays the credit card once a month instead of issuing checks every time a supplier delivers to the parts room. The other benefit is cash back, which can be put back into the parts room, Lamerato said. For the suppliers, accepting credit cards does take a few percentage points off their total sale, but they’re paid immediately. In Lamerato’s experience, suppliers prefer this over waiting for up to 90 days for a check.
3. Work Closely with the Procurement Office.
Clements said one of the key ways to ensure parts procurement works well is to work closely with the purchasing or procurement office and to know the procurement cycle.
Purchasing departments often wind down at the end of a fiscal year, which means they don’t process purchasing requests. The San Diego fleet purchases about $1.5 million in tires alone each year, and any purchase that costs more than $1 million has to go to City Council for approval. The rounds of approval needed extend the purchasing time to about three months. Knowing this and the down-time of the purchasing department will allow fleet managers to better plan their purchases.
“Proactively, we work with purchasing,” Clements said. “You get the process going in advance… to make sure you’re not stuck without tires.”
5. Insist That the Vendor Always Deliver Parts.
“The most expensive parts runner in any program is a mechanic,” Clements said. While parts personnel are usually called to pick up parts, at times, technicians are asked to do so as well. As part of the contract the City of San Diego is looking to sign, Clements emphasizes that the vendor should deliver the part after parts personnel call in the order. Not only does it save fleet staff time, it also saves on fleet vehicle use. He added that many larger companies have extensive parts delivery systems that will allow them to easily deliver parts.
6. Put a Bin Outside to Facilitate Overnight Deliveries.
Hoffman with Oklahoma State University said being in the small City of Stillwater, the fleet has to have parts delivered from larger cities such as Tulsa and Oklahoma City. The University gets overnight parts deliveries (usually between 10 p.m. and midnight), and the fleet installed a secure bin outside where parts can be dropped off. When staff members get to work in the morning, all the parts are already there.
7. Train Your Parts Personnel.
Lamerato recommends fleet personnel take the National Institute for Automotive Service Excellence (ASE) certification program for parts specialists. Fleet managers can also send parts personnel to conferences or training programs on how to set up stock and how to set up minimum and maximum inventory for parts rooms. Parts personnel should be familiar with the manufacturers’ A, B, and C lists for parts so he or she can stay on top of what needs to be stocked. He or she should also be aware of slow-moving parts or parts that are suddenly being requested more than twice per month — and make sure they get on the shelves.
8. Assign Parts Personnel to Control Other Inventory.
Clements looks at the parts room as part of inventory control, and parts personnel can be assigned inventory control items that aren’t necessarily vehicle parts. For example, employee uniform and shop tool inventory control can be a function of the parts room. When he was managing the San Diego County fleet, he noticed the fleet was going through a high number of shop towels — either they were lost or technicians weren’t keeping track of them. He put the shop towels behind the parts counter, asking parts personnel to exchange used towels that technicians brought over for new ones. With this new accounting method in place, towel use decreased significantly.
9. Consider a Vending Machine.
San Diego’s parts manager is looking to install vending machines in the parts room, equipped with some parts, gloves, hearing protectors, and frequently used tools. These products can be accessed through various ways, including ID cards and account numbers. By automating these simple exchanges, the City can reduce the amount of work parts personnel have to do.
The City currently has a contract with Fastenal for use in all City departments, so implementing vending machines would be simple. However, Fastenal is only one vendor under consideration, and its limitation is that the company will only stock its machines with its own items, Clements said.
10. Use the FMIS System Effectively.
Beach said using the County’s fleet management information system (FMIS) effectively can help with inventory and management of the parts room. Arapahoe County’s FMIS, FASTER, has a parts module that allows parts personnel to keep track of inventory and identify surplus and obsolete parts easily.
She defines surplus or obsolete parts as those that haven’t been used in four seasons — excluding specific items reserved for snow events.
Lamerato said the FMIS system can also be used to run daily min/max reports that will show parts personnel what needs to be ordered daily. At the Troy fleet, this order form is sent out to vendors in the morning, and the fleet will have deliveries by noon or the early afternoon. He said reordering only takes 10-15 minutes every morning.
11. Count Inventory Monthly.
One of the reasons fleet managers cite for outsourcing their parts rooms is time savings with having to count inventory. However, this doesn’t have to be a laborious, all-day (or more) task. Beach’s and Lamerato’s fleets both count their inventory cyclically, dividing inventory into twelfths and counting one section every month.
“By December 31, you have, in theory, the entire inventory counted so you’re not shutting down an entire day to count the inventory,” Beach said.
For Arapahoe County, the Finance Department will accept these cyclical inventory counts. At the City of Troy, Lamerato said parts personnel count all inventory annually in addition to the monthly counts.
12. Constantly Identify and Sell Obsolete Inventory.
Lamerato stresses that the parts room is not a warehouse — parts need to cycle out frequently, about two or three times per year. If a part sits too long, it needs to go.
At the City of Troy, parts contracts specify that vendors must buy back obsolete parts at the current price. Since contracts vary for each agency, this isn’t always possible. However, fleets can still proactively work to clear their parts rooms of obsolete parts.
At Oklahoma State University, the fleet has become more aggressive with its aging and obsolete inventory, Hoffman said. In cases where the supplier won’t buy back the product, which happens more often with specialized parts for transit buses, staff is proactive in getting it out of the parts room, usually by selling it online. “We can usually recover our cost that way,” Hoffman said.
13. Barcode Parts.
Lamerato said barcoding parts has helped with inventory control and has reduced human error. With an FMIS barcoding module, parts can easily be assigned and charged out to work orders. In addition, reducing manual input reduces human errors, such as mixing up a “0” for a “O” or a “7” for a “Z.”
The cost of barcoding equipment, not including the fleet module, is minimal. Lamerato says he’s been using the same barcode printer since 1999. He’s gone through two scanners, which cost about $120 each.
14. Secure the Parts Room.
Securing the parts room is crucial to keeping accurate inventory. At Arapahoe County, the only people who have access to the parts room are the fleet manager, Beach, and two parts staff, Beach said. Lamerato said there should be only one door to the parts room, and anyone entering should have to pass a supervisor so he knows who is in the parts room at all times.
The City of Troy also has security cameras in the parts room. Lamerato said this isn’t just for internal security, but for break-ins at night as well. With thousands or hundreds of thousands of dollars of equipment stored in the same room, it’s wise to play it safe.
15. Consider Consignment Parts for Smaller Shops.
For the City of San Diego, Clements is considering consignment purchases for specific parts in smaller parts rooms. Since the City has 13 facilities (which will be consolidated into 11), many of the parts rooms are very small with limited inventory. For these smaller parts rooms, he’s considering asking a vendor to provide consignment parts — the part will belong to the vendor, who may bill monthly based on what the City has used. Since the part is on the City’s shelves, staff members don’t have to worry about running out to pick it up. Clements cautions, however, that vendors usually bill for any “missing” parts rather than parts claimed to be used by the fleet, meaning that if a part is not accounted for (and the City doesn’t have record of using it in a vehicle), vendors will still bill for it because it’s not on the shelf.
- Kathy Beach, CAFS, fleet admin and parts supervisor, Arapahoe County, Colo.
- John Clements, deputy director, Fleet Services, City of San Diego
- Chris Hoffman, CAFM, manager, Transportation Services, Oklahoma State University
- Sam Lamerato, CPFP, fleet superintendent, City of Troy, Mich.