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Fine Tuning your Parts Inventory

7/14/14

“One extra part on our inventory shelves is one part TOO MANY!”. This ought to be the battle cry of fleet operations managers everywhere, whatever you’re hauling freight or school kids.

Business owners don’t venture into the transportation business to operate a repair shop or manage maintain a parts inventory. These critical activities are just a necessary part of a much larger picture. However, if you don’t pay attention to them, they can eventually hurt your bottom line!

Let’s look at your maintenance and repair parts inventory: How many idle parts do you have just sitting there on your shelves? Inevitably, despite your best efforts, your parts inventory has grown over time and will continue to grow with excess and obsolete/inactive maintenance and repair parts.

What’s the story with excess parts? Well, run out of a particular part in the shop just when you need it enough times and instead of re-ordering the two or three that you might actually need, your guy orders a whole bunch of them. There! That’ll fix the problem! I won’t run out of those again! Of course, it’s not how many you order that will fix the problem. The answer is to order the absolute minimum at the right time to keep you from running out. With technology, this is now possible.

Let’s look at the obsolete parts problem. You have inventory on hand for certain makes and/or models of a vehicle. When you trade your older vehicles, you don’t return to your supplier all of the vehicle-specific maintenance and repair parts for the traded vehicles. Over time, this stuff adds up.

This excess and obsolete inventory is useless to you! It’s just sitting there:

  • Tying-up your capital
  • Taking-up valuable space
  • Eating-up payroll time to periodically count it and record it
  • Turning your stock room into a virtual junk pile

OK! So, what can you do about it? How can you free-up the money you have invested in this useless inventory and move that money directly to your bottom line?

First, you have to identify this useless stuff and to do that, you need some good data. Don’t worry if you don’t have all of this information at your fingertips. This is the kind of stuff that the Truck Tracker Maintenance & Inventory Management program will produce, record and organize for your analysis.

You’ll need to know, on a part number basis:

  • What you have in inventory
  • What you have paid for your inventory
  • What the demand-trend for this inventory has been
  • What your re-order rules are for your parts inventory
    • How your re-order point is determined
    • How your re-order quantity is determined

Without good data, you probably don’t stand a chance of identifying the extent of your useless inventory or changing what you’ve been doing in an effort to prevent a re-occurrence.

Truck Tracker to the rescue! With the tools built into the Truck Tracker parts inventory management program, over time you can build a good data set to help you fine tune your parts re-order calculations by:

  • Automatically determining the trend of the demand for each part number in your inventory over a 90-day period. Is the demand trend increasing or decreasing over time as with a seasonal item or is it static? Truck Tracker calculates a 30-day weighted-average demand-trend number. This is a key component of you re-order calculation.

  • Allowing you to modify the 30-day weighted-average demand number to match your supplier’s normal delivery time after receiving your order, thus specifying the exact number of days-supply you want to keep on hand for each part number based on your actual demand-trend and your supplier’s delivery performance.

With Truck Tracker, you’re working with facts and not “guesstimates”. Truck Tracker gives you the data and tools you need to be able to successfully manage your parts inventory. Here’s your payoff:

  • Optimum stocking levels- Using Truck Tracker’s unique demand calculations will keep your inventory levels at an on-going “Goldilocks” level. Not too many. Not too few. Just right!

  • Excess inventory reporting- Running a report in Truck Tracker for all inventoried part numbers with an on-hand quantity in excess of the trend-based recommended stocking quantities will identify your excess inventory items by quantity and dollar value. These parts are candidates for return to your suppliers.

  • Obsolete/inactive inventory reporting- Running a report in Truck Tracker for all inventoried part numbers with no movement for your specified time period will identify your obsolete/inactive inventory items by quantity and dollar value. These parts, also, are candidates for return to your suppliers.

And here’s a word of advice. To some, all of this may seem a bit daunting. Yes there is some work involved. It will take time and some effort to get your inventory under control. But the payoff can be huge. It’s not unusual to have our fleet customers tell us that after using the management tools in Truck Tracker for a month or two, they were able to reduce their inventory dollars by 20% to 30% without running themselves out of needed inventory.

I heard someone, one time, telling a story to make a point. It was about a guy who was in such a hurry to get his firewood cut that he didn’t have time to stop and sharpen his axe. Every once in a while, probably all of us could benefit by stopping what we’re doing, looking at how we’ve been doing things and questioning how we could be doing things better.

  • Could we be smarter about how we manage our parts?
  • Are there tried and true methods out there that could save us money and improve our through-put time?
  • Is it time to employ technology to help us?
  • Is it time to sharpen that axe?

If we always do what we always did, we’ll always get what we always got!