Going Beyond Price For Fleet Business
“I hate inventory.”
Ed Roeder’s comment seems strange when you consider the volume of parts that he maintains to keep Muir’s Cartage and its 1,000 trailers on the road–the maintenance manager stocks $230,000 in fast-moving components such as tires and rims–but he has steadily slashed the amount of inventory stored onsite. His suppliers are expected to stock the rest.
Roeder’s push for more “just-in-time” deliveries is part of a growing trend among fleet customers. Trucking companies have faced a growing list of such demands from their own customers since the 1980s, when manufacturers began to shun warehouses in favour of deliveries that arrived as they were needed.
Why should a fleet expect anything less from suppliers of its own?
“Every fleet manager would like to invest the least amount in overhead, but they want the parts as quickly as possible to minimize downtime,” says Steve Plaskos, manager of fleet services for the City of Toronto. His distributors now need to guarantee that they will have 80% of identified parts in their inventories at any given time. Smaller deliveries are expected to arrive the day that they’re ordered, while components for seasonal equipment–perhaps a snowblower to fit on a front-end loader–must be delivered in one to two weeks.
The importance of prompt deliveries leads Bill Arthur, fleet maintenance manager of Southwestern Ontario’s LE Walker Transport, to seek jobbers who keep schedules that match his own early-morning shop hours, rather than forcing him to wait for a late-morning delivery or pick up the parts on his own.
“Every time you head out the door, I put a figure on that of $100,” Arthur says. Seem steep? Begin adding up the cost of the fuel, the cost of operating the vehicle, and a two-hour return journey. “We ask, ‘What is your route?’ We don’t expect anyone to bow down to us, but if you ask those questions, [jobbers are] usually accommodating.”
The quick service has allowed him to trim onsite inventories to about $50,000 in fast-moving items such as lights, filters, and brake chambers.
“If GM has a load for Texas, they expect it in 48 hours,” observes Bob Gibson of International Freight Systems in Oshawa, Ont., referring to why requests for tight shipping times are reasonable. He already stocks $80,000 in parts such as tires, bearings, wheel studs, fittings, hoses, and belts to maintain 40 trucks. Why should he need to stock more than that?
The need for speed doesn’t end there. A fleet shouldn’t have to wait three months to receive a credit for a clutch that’s deemed to be defective when it’s pulled out of a box, he adds, noting how jobbers are expected to support the request for such credits.
There is a common thread to all of these observations. Ultimately, the heavy-duty business of large accounts and valuable orders will hinge on service.
It is a factor that can give even the smallest jobbers the opportunity to secure such accounts. For example, International Freight Systems is located on the outskirts of Toronto, but Gibson still likes to deal with distributors located in outlying communities.
“They’ll pick the telephone up and get the information now. It’s more personalized. You go to a small company, you get satisfaction,” he says.
A Peterborough-based distributor located an hour away can actually feed him with engine parts more quickly than an engine distributor in his own community. Even if the smaller distributor doesn’t have the parts, it will drive into Toronto, pick up the components, and deliver them before the larger company’s scheduled delivery.
It’s why Arthur also requires access to local representatives who will deal with him directly. A faceless contact in the U.S. isn’t likely to discuss issues with a troublesome clutch that has just clocked more than 160,000 km of service.
“All we do is fight warranty, warranty, warranty,” Roeder agrees. “It becomes an accounts issue. It’s frustrating.”
As much as fleets want to have quick access to parts, some are wary about the commitments that would emerge with Vendor-Managed Inventories (VMI).
“We have tried a few times, but often there is too much overstock,” says Ryder Truck Rental fleet purchasing manager Ken Ferguson. “Also, we do not like outside vendors in our parts department. Pricing and product from all vendors is confidential.”
Gibson is among the maintenance managers who believe such agreements can work, although he limits Vendor Managed Inventories to selected offerings.
Suppliers need to be able to guarantee prices for a year if such deals are going to be effective, he says. And fleets have responsibilities of their own: “You don’t change back and forth [between suppliers] week to week.”
Steve Malmberg of Ottawa-based Malmberg Truck Trailer Equipment suggests the same is true with consignment inventories.
“A few of the larger fleets want consignment inventory, but they want to change their consignment partners every six months,” he says. “It hasn’t built in the stability either side would like. The long-term relationships don’t seem to be there. They’re tempted by the deal of the day, or the week, or the month.
“You maintain inventory, do 10 times as much work, and the deal you think is good for a long period of time expires after a year or six months.”
Emphasis on True Cost
Of course, access to the parts is only part of the equation. The competitive nature of the trucking business–particularly among fleets serving cross-border routes in the era of a high Canadian dollar–is placing a greater emphasis on the price of these goods as well.
Jobbers will find little surprise in that; name a customer who doesn’t look at a price tag. But progressive fleets may be looking at the prices in a different way.
A growing number of well-run truck fleets are measuring maintenance budgets as a cost per ton-mile, and place less emphasis on the initial purchase price of a component, insists Paul Raymond, president of Parts for Trucks in Dartmouth, N.S. “Obviously, the reliability of the products in that case is a huge issue.”
The need for such reliability is leading maintenance managers such as Arthur to balk at distributors that want to sell grey-market products.
“They’re sub-standard to what we’re taking off the vehicle. I like to see the same parts go back on,” he says, noting that he uses four distributors who are committed to offering brand-name components. “You got to kind of walk lightly around all of that stuff [from Mexico or China]. You’ve got to watch for the look-alikes.”
Malmberg knows the challenge all too well. His company once decided to work with a shipment of marker lights that were set into zinc housings. In addition to being affordable, the housings could withstand the heat associated with the welding of a dump box onto a chassis. Everything seemed like a perfect fit, until it was discovered that the bulbs were sitting too low in the housings.
“It was the same lens, same colour, same light bulb,” he says, “but you need to have the ‘DOT’ stamp on your light [to be legal].”
Roeder learned his lesson after ordering a seemingly innocuous strap for the barn doors of his trailers. The $6 replacement seemed like a good deal, until a Muir’s driver almost fell into traffic because one of the poorly woven straps ripped apart in his hands.
It will ultimately be up to fleets to identify their own standards for components, Raymond says, referring to the products that will be chosen. “It’s more a question of a good wholesaler-distributor being able to supply information they can use.”
The information needs do not end with the choice of products, either. An increasing number of fleets also want suppliers who can report on purchase-related data in a variety of ways, whether it’s sorted by garage, cost, or product category–even though the orders are submitted through traditional means such as phone and fax.
Raymond lists off a litany of
questions a fleet may have: “How many wheel seals have we bought from you? Is there a balance between wheel seals, bearings, and brake kits? How is my friction standing up?
“A fleet is expecting a distributor to get involved in [the warranty] process–certainly to go to bat for them,” he adds. The relationship also involves tracking past orders, and flagging any concerns. Perhaps a starter was installed on the same vehicle just two months ago. Does the fleet realize that?
It comes down to a matter of service, and those who can deliver that service can expect a larger share of the heavy-duty sales.
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