When FedEx Freight received an invitation from the Technology & Maintenance Council (TMC) to help develop new Recommended Practices (RP) for parts purchasing and inventory management, the company happily answered the call. If you've developed a system to efficiently distribute parts for over 9,500...
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When FedEx Freight received an invitation from the Technology & Maintenance Council (TMC) to help develop new Recommended Practices (RP) for parts purchasing and inventory management, the company happily answered the call. If you've developed a system to efficiently distribute parts for over 9,500 tractors and 26,000 trailers to 100 different maintenance facilities nationwide, as the parts team at FedEx Freight has, you're going to have some good ideas to share with your colleagues.
"FedEx Freight was selected for being on the cutting edge of the ordering, inventory and payment process out in the industry," says Alex Billings, FedEx Freight's maintenance supply chain manager. "I was just one of the few that were selected from some of the different fleets to gather information, to provide input for the RPs."
TWO IN ONE
FedEx Freight's parts efficiencies are all the more amazing when you consider that the company started out as two separate companies in two different parts of the country. "The corporation was formed through FedEx acquiring two companies: one being Viking in the west, and American Freightways in the east," explains Dennis Beal, vice president of physical assets.
"We operate as one organization now," he says, "and we've been able to streamline operations. Our purchasing and billing process has improved and evolved to where we believe we are leading the industry in parts procurement and inventory management."
The system begins with the company establishing an accurate definition of the total consumption cost of parts. Billings explains that FedEx Freight's consumption costs start with the "pre-negotiation," and go on to include the selection of the vendors, the request for Price (RFP) process, the awarding of the contract, and all the associated paperwork. The final figure also include an obsolescence report that we run for parts that haven't been used for a specified period of time, to turn in for credit to keep the inventory current.
COST OF PARTS
Before FedEx Freight enters into a partnership with a parts supplier, the company qualifies that vendor as part of its pre-RFQ (Request for Quote) process.
"It wouldn't make good business sense to send an RFQ out to John Q. Public, not understanding their business practices and whether they could meet FedEx Freight's needs," Billings explains. "So establishing a qualified vendor selection is the first part of an RFQ strategy. The key points obviously are your product availability, your product need, the customer support, and the new equipment that you are bringing into the fleet."
Because it operates 100 maintenance facilities across the country, FedEx Freight does business with multiple parts vendors, but maintains strict company-wide standards.
"We define the total cost as the total consumption cost of the part," Billings explains. "I would say it starts with the pre-negotiation, with the selection of the vendors, through the RFP process, the awarding of the contract, through the paper process, and to also include an obsolescence report that we run for parts that haven't been used for a specified period of time, to turn in for credit to keep the inventory current."
"The price auditing for product delivery is very important," he says. "The daily summary invoice billing process is very important; warranty absolutely is in that mix, a central ordering point, and open report communication."
How much information is enough information?
To Billings, the whole parts operation succeeds or fails on the amount of information he has access to. At one time, it may have been enough to get a monthly billing audited by a third-party billing service, but not any more.
"Whenever you start forecasting or projecting budgets, you need timely information-timely, accurate information," Billings says. "So we started looking at a better way, a cutting edge, and looking for a process that would supply us with this information in a timely, accurate manner."