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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That translates into less downtime in the shop, according to Rick McSheridan, fleet maintenance manager at FedEx Freight's year-old maintenance facility in Aurora, IL.
"Every day the computer generates a stock order," he explains. "And that goes off of min/max set-ups. In other words, whatever we use, the computer calculates it, and then it will automatically reorder that. And that's on a daily basis."
With the old weekly order system, McSheridan's technicians might order one needed part, but by the time the order was delivered the following week, they could easily need more of the same part.
"Now," he says, "we can do it daily. If the guys are working on a tractor and they come in and say, 'I need this, this and that,' and I know my stock order's going to be in the very next day and that truck's going to be down anyway, instead of cutting an emergency purchase order (PO), I can go right into my daily stock order, add it, and it'll be here the next day."
As a backup, McSheridan will call the vendor to make sure the needed part is in stock. If it's not, he may have to cut an emergency purchase order to get the truck back on the road delivering freight.
"An emergency PO is something we're going to put on a truck immediately," he says. "A stock order is generally going to sit on my shelf, but? if I can get it in and the truck is here I can put it on the truck and charge it out.
"My daily stock orders go to our national qualified vendors, and if I cut an emergency PO I may have to go to a local supplier, and I may have to pay a little more for that part," he explains. "Those are judgment calls we have to make on the floor: is it worth a few dollars extra to get the truck rolling? Generally, yeah."
But the extra dollars spent on the occasional emergency only emphasize how perfectly the system works on a day-to-day basis. "Daily stock orders reduce our cost, our overhead, and it also relates into the retail world as 'inventory turn,' and it generates a positive relationship between vendor and customer," Billings says.
Those relationships are crucial, as parts inventories are handled separately at each of the company's maintenance locations, and those locations rely heavily on vendor inventories to supplement their own, especially when demand levels for certain parts start to change.
"As the needs start arising, we get in and negotiate and try to project usage by looking at the type of equipment that was purchased, what part is being used," says Billings. "If you bought 500 tractors and it's a preventive maintenance part, you start using two or three, you can predict that you're going to need 500.
Essentially, the company has shifted from a central delivery system to a system based on product availability at the location where it's needed, the day it's needed. This has led to a significant reduction in inventory carrying costs, which is, ultimately, the point.
"Today we try to keep product on shelf for the technicians to use at the time of need, to keep their efficiency up, and to replenish that supply on an 'as used' basis," says Billings.
Of course, the most sophisticated purchasing and inventory process can fall apart the minute a part leaves the shelf in the hand of a technician.
Billings points out that FedEx Freight's parts are issued through a repair order process using a bar code and a scanner for accuracy. When that scan code is downloaded in the system, it releases the inventory and issues it to that asset unit. "That way we can get accurate, immediate costs on our cost-per-mile for the operation of the vehicle," he says.
"The way we've got it set up, before a part is installed on a truck, it gets charged to the RO," McSheridan says, "because once they install it, there's a good chance they're going to forget they put it on and they're not going to charge it out. So what we preach to the techs is, if you pull a part, you go straight to the scanner before you ever install it.
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