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Jun 28, 2021
8 Ways To Better Manage Parts Inventory To really manage your parts inventory, you need data. Photo: Halvor Lines The trucking industry is seeing a parts shortage. Although it started with the truck makers having trouble sourcing computer chips and other parts and components for their assembly lines, it is now rolling into the aftermarket, and fleets are experiencing wait times for replacement parts needed to complete maintenance service or repairs. Having a truck waiting for parts is expensive. Each day of downtime costs a fleet $800 to $1,000, according to industry estimates. It’s more important than ever for fleets to carefully manage their parts inventories. This helps ensure they have the right parts in stock when they need them. Good inventory management also means they won’t have unneeded parts in stock that will never be used. Here are a few simple rules that will help fleets manage their inventories more effectively and even help them weather parts shortages. 1. Use VMRS To successfully manage a parts inventory, fleets need data. That’s where Vehicle Maintenance Reporting Standards come in. “Managing inventory is easier if we can use VMRS coding of all types of information,” says Pete Russo, senior vice president of product strategy and innovation for Decisiv, a provider of asset service management. VMRS codes “normalize data,” he says. The use of VMRS codes establishes standard part numbers regardless of the dealer or distributor the fleet uses to procure parts or the make and model of the vehicle. Denise Rondini “This makes it possible to more easily source needed parts,” explains Paul Reynolds, parts consultant and senior product expert at Karmak, a provider of transportation software, including parts-management systems. Russo adds, “Anyone who comes from the data world will tell you that you have to have some standards so you can compare information.” 2. Record all data With VRMS codes as a base, all data related to maintenance and repair events needs to be gathered in one place so a fleet can see all the parts it has ever used. “You need to know what you have, where it is at, what it cost, what you are using, and what you have on order,” Reynolds says. In addition to capturing information on the parts used, also include information on the vehicle year, make, model, engine, and the number of miles or engine hours. Also include the reason for the repair. Was it just a maintenance service, or was there a breakdown? Russo cautions, however, that including accident repairs may skew the data, as those are unplanned events. Maintenance records and vehicle makes/models are key data sources that can help a fleet keep rolling, says Terry Livingston, senior director of OEM and fleet sales at Meritor. “Knowing the age, miles driven per year, warranty coverage, and repair intervals for each vehicle will allow a fleet and their distribution partners to determine inventory and parts needs.” He says the repair process can be broken into two categories: wearable components and breakable components. The wearable components include braking components, for instance. “These wearables can be predicted, and their replacement is often time-based,” Livingston explains. “This can help in the predictability of service and the need for inventory. “The breakable components include engines, drivetrain and drivelines. These are often sudden issues, and fleets should work with their distribution partners to have a plan and a process in place to have the parts in the shop within 24 hours or less to get the vehicle operating.” Karmak’s Reynolds stresses the importance of “recording accurate demand history on all parts you are using.” Remember to account for lead times so they reflect current trends. Fleets may have to adjust order frequency and days of stock to maintain reasonable stocking levels during shortages. 3. Make records clean and accurate Fleets should maintain clean and accurate computer inventory records. “Part numbers need to be formatted consistently and match vendor’s part numbers,” Reynolds says. “VMRS numbers need to match VMRS standards. Quantity on hand and quantity on order need to match what is on the shelf plus open purchase orders. Part numbers need to have current bin locations. Costs need to be correct.” Fleets also need to regularly perform a physical inventory count. “We preach the importance of counting fast-moving parts weekly at least on a monthly basis,” says Jacob Findlay, founder and CEO of Fullbay, provider of heavy-duty truck repair and shop management software. Fleets need to determine the number of days of stock they have for each part. “This is a simple math formula where if you use a part 10 times in a month, and your in-stock quantity of that part is 10, you have a one-month supply on hand,” Findlay explains. “If you have 20 in stock, you now have a two-month supply on hand.” However, he cautions fleets to be careful not to stock too much. “The carrying cost of parts is upwards of 15% to 20% annually. You don’t want to start spending all your cash on inventory that has a negative ROI to it.” In addition, Reynolds advises fleets to “post parts to repair orders as soon as they are pulled from inventory, so demand is current.” Also note parts that were needed for a repair but were not in stock. Monitor open purchase orders and close them once the parts are delivered to ensure there is an accurate record of what is on order. 4. Set minimum stock levels Each fleet should have a proactive plan to have critical parts on hand during good times and bad, according to Livingston. “This minimal stock level will ensure against issues of the day, which will lead to more productivity and greater uptime for vehicles,” he says. “Work with your distribution partners to determine those critical parts needs and minimal level you should have. This inventory should be customized to your in-service vehicles.” 5. Forecast and make predictions Two or three years ago, it was possible to look at the data captured from maintenance and repair events and spot breakdown trends. Today, thanks to artificial intelligence and machine learning, it is possible for fleets to look beyond trends to forecasting and predicting parts needs based on more variables. “AI and machine learning allow fleets to take different variables into account and come up with better predictions about what parts they are going to need and when they are going to need them,” Decisiv’s Russo says. Work with parts suppliers, such as dealers and distributors, that have the technology to find parts you need that aren’t on their own shelves. Photo: Jim Park Information about parts shortages can be one of the variables included in the analysis. This can drive decisions about whether to stockpile a part (if possible), look for alternative sources for the part outside the fleet’s normal vendor list, or consider a different replacement part than what is usually used. 6. Work with vendors Parts vendors, whether dealers or distributors, can be a great asset in establishing ordering and delivery schedules. “There is a general idea in the aftermarket channel that inventory may not be on the shelves at [local] brick and mortar locations,” says Daniel Griffin, senior director of aftermarket/digital solutions at Dana Aftermarket. However, the reality is — that at least in some instances — the part may exist in other locations. New technology allows suppliers such as Dana to give customers visibility into other places where a part may be. “For example, we could have that part in one of our distribution centers or in our manufacturing location,” Griffin says. Technology such as API is making it easier for suppliers to communicate that they do in fact have the part available somewhere in their network and can work to get it to the customer. Fleets should consider working with vendors that can automatically communicate the location of the part they are looking for. It is best if this can be done in real time so that information is up to the minute. “When you see that we have 50 parts at our distribution center and 12 at our manufacturing site, that is real-time information,” he explains. Fullbay’s Findlay believes suppliers can help by opening up their stock levels to fleets. While some distributors have this information available on their websites, “for the most part we are still in the days of getting on the phone and asking, part by part, ‘Do you guys have this?’ Today, he says, “modern APIs allow parts distributors to open up and share this information with the fleets. It is not just the parts distributors; it is the suppliers, too. The distributors tell the suppliers transparently exactly what is being used and when. The suppliers tell the distributors what is coming down the pike, what their forecasts are, and what they have in stock at their different warehouses. Distributors can then share with fleets what they have in stock at their various distribution centers.” Findlay believes having this type of information about the entire supply chain is critical for fleets when making stocking decisions, especially about mission-critical parts. 7. Start small It can seem daunting to undertake a technology project, but Decisiv’s Russo advises fleets not to bite off more than they can chew. “Start small and build confidence and expertise off of one project,” he says. For example, a fleet might pick a certain application, region, or make of truck to gather and analyze data about a limited set of vehicles. Once the fleet gets initial results, Russo suggests relying on an industry expert to tell them if the results make sense and to validate their findings. Once results have been validated, the fleet can be assured it is collecting the proper data in the proper form and can be comfortable expanding the scope of the project. 8. Review periodically Set-it-and-forget-it is not a good strategy when it comes to managing inventory. While it may initially be time-consuming to set up the database that allows the fleet to manage inventory, once it is in place, it becomes a simple matter of “reviewing it on a quarterly basis to look for exceptions and anomalies,” Russo says. Needed inventory levels for wear parts, such as brake friction, can be more easily predicted, because replacement is often time-based. Photo: Paul Hartley During a review, a fleet manager may notice that a certain type of breakdown is occurring more frequently, so stocking levels for parts associated with that repair may need to be changed. However, fleets should not have to make wholesale changes to what parts they keep in inventory and how many of each they have unless they make changes in their asset base. Fleets also need to have some inventory controls in place to make sure “parts are not walking out the door,” Findlay says. “There are ways to minimize the 15% to 20% carrying costs through some common-sense fraud prevention controls.” In addition, if fleets are only keeping in stock the parts they actually need, that goes a long way to reduce the carrying costs, “because you have less obsolescence; you have less parts sitting on the shelf that never get used,” Findlay explains. However, in a time like this where there are constraints on the supply chain, fleets need to look at increasing their safety stock levels because the lead time to get parts may be extended. “If the lead time is same day, then you almost do not need to keep a lot of parts in stock,” Findlay says. “But if the lead time becomes two days or a week or two weeks, then you have to look at keeping some in stock that you did not have to before.” Meritor’s Livingston says proactive management techniques, such as pre-positioned inventory, customized inventory, and working with OEM manufacturers and distribution partners, “can help individual fleets maximum uptime and minimize the amount of inventory they need to stock.” This article first appeared in the July 2021 print issue of Heavy Duty Trucking.