Should The Parts Room Be Outsourced?

The purpose of the parts room is to support the maintenance and repair side of a fleet/shop operation. How effectively and cost-efficiently the parts room does this has a sizable impact on the operation’s overall costs, productivity and vehicle downtime. However, the parts room is not typically a core function, yet it requires staff and resources to handle parts ordering, receiving, issuing, etc.

Evaluating the parts operation and considering alternative methods and options for opportunities for efficiencies in the process can often considerably improve the complete maintenance and repair operation. Outsourcing the parts room function is one alternative that can provide a number of advantages. Among them: labor hours saved, maximizing resources, increased efficiency, greater productivity, improved customer service, lower maintenance costs and potentially lower acquisition expenditures.

Fleet Maintenance’s editor, David A. Kolman, interviewed Elizabeth B. Linck, CFM (Certified Fleet Manager) from the Wharton School of the University of Pennsylvania, and retired fleet director for the Fleet Department of the Town of Greenwich, CT, about her successful implementation of outsourcing the Fleet’s parts room operation, as well as other fleet maintenance and management programs.

Linck, who has been involved in fleet management for more than 30 years, served as the Town’s fleet director from 1990 to 2009.

Q: Tell me about your experiences in Greenwich when you took over the Fleet Department?

A: That is a very encompassing question and covers a volume of issues.

Let me start at the beginning. My prior fleet experience was with a Fortune 500 company, so I was making the change from the private sector to the public sector and operating a maintenance facility. Those were challenging times and I owe a great deal of my success to being a member of NAFA Fleet Management Association – the world’s premier not-for-profit association for professional fleet managers – and to my colleagues who I could call for advice.

I took over the Fleet Department and the newly built Fleet facility. The Town had purchased a fleet maintenance program and an automated fueling system, neither of which had been fully implemented.

The Department was mainly manually operated, so my first objective was to implement computerization, activate the fleet maintenance and automated fueling programs and establish comprehensive programs for preventative maintenance and perpetual inventory.

At the time, the fleet consisted of 500 vehicles and pieces of equipment for all of the Town’s departments, including Fire, Police, DPW, Parks/Recreation, Board of Education and administrative departments. The vehicles and equipment had to be classified and inventoried. Additionally, a vehicle replacement program, with specific criteria for replacement at optimum intervals that focused on the unit’s job function, was initiated.

Staffing also needed to be addressed, and this was accomplished by reclassifications.

One of most satisfying achievements was the National Institute for Automotive Service Excellence (ASE) Certifications of the Fleet technicians and the Fleet facility becoming a part of the ASE Blue Seal of Excellence Recognition Program – a program that identifies highly qualified repair facilities. There were pay-grade increases for the participating technicians.

To insure that all the policies and procedures that had been implemented would be followed with uniformity, a 23-chapter Departmental Operational Manual was developed that included forms, data entry processes, building operations and user department interaction.

To measure customer service satisfaction, a TQM (Total Quality Management) program was developed. (TQM is a management system for a customer-focused organization that involves all employees in continual improvement of all aspects of the organization.) We achieved a repair/service satisfaction rate of 97.7 percent.

After implementation of the fleet maintenance program, it was upgraded to include workstations for the technicians. The automated fueling system was also enhanced with the installation of fully automated devices in each vehicle.

Another proud achievement was the Fleet Department earning a Top 100 Best Fleets award – a program that recognizes and rewards peak performing public sector fleet operations in North America. We were number 15 when I retired.

Also implemented was an outcome-based budget – a budget system built on measurement of those key outcomes that are determined to be of most importance to a department.

For the Town of Greenwich’s Fleet Department, we measured the Fleet’s performance to projects and defined results and achievements to outcome measures and program statements. The evaluations of the results indicated areas where the Department was on target, while others were plus or minus original projections. This data was also useful in benchmarking.

Other successful projects were the purchase of hybrid vehicles, establishment of a car pool program, the long-awaited construction of a truck washing facility and compliance with environmental rules and regulations.

One area that required serious improvement was the operation of the parts room.

Q: Why did you decide to outsource the parts room function?

A: Of primary importance was having to do more with less and needing to maximize the available resources. The operation of the parts room had become burdensome and time-consuming.

The Fleet Department was already subletting some specific repairs and tasks/jobs that were performed more efficiently and effectively, like accidents repairs, towing, air conditioning work and alignments. This practice allowed the Department to be more cost effective.

I had been looking at alternatives for the parts room operation, and outsourcing the function looked to be a viable solution.

Among the challenges faced was that due to the bidding process for purchases mandated by Greenwich, and the different types and age of our vehicles and equipment, it became harder to obtain parts. There was more than $300,000 worth of parts in the parts room. Being a union facility, staffing was another issue.

Too many resources were being used, and vehicle downtime due to delays in obtaining parts had to be reduced. Plus, there were many other services that could be provided by a vendor and the parts room operation is not a core function.

Q: How did you justify and implement the project?

A: First, we had to define the issues and the objectives. Among these were:

  • Increase productivity in the parts room operation.
  • Increase parts-on-demand availability.
  • Reduce related parts downtime and establish parts on demand average.
  • Increase technician work hours to actual repair work and core functions.
  • Reduce paperwork.
  • Better monitor parts room activity.
  • Reduce administrative functions related to parts room activities.
  • Eliminate current inventory, physical inventory counts and variances.
  • Pay for parts as used.
  • Eliminate obsolete parts.

Then, we needed to develop an implementation plan and timeline. This encompassed:

  • Contacting other municipalities that had outsourced the parts room operation to learn from their experiences.
  • Listing pros and cons from input received and user departments, as well as addressing their concerns.
  • Identifying costs involved and projected savings.
  • Analyzing the time and cost needed to implement.
  • Preparing a Request for Proposal (a document needed to solicit bids from potential vendors) to include all contingencies and added services.
  • Defining network and non-network parts and markups.
  • Establishing parts on demand average that had to be achieved by vendor.
  • Coordinating with other Town departments.
  • Developing procedures and policies pertaining to parts outsourcing operation.

Q: How did you get buy-in from stakeholders?

A: Surprisingly, that part was easier than anticipated.

Once we learned about the areas of concern that were the most important to the stakeholders we were able to address them. These included:

  • Current physical inventory.
  • Cost during change over.
  • Cost projections versus actual costs.
  • Emergency coverage and staffing hours and personnel.
  • Current personnel in parts room.

We detailed the implementation and timeline process and kept the employees, user departments and town officials informed on a regular basis.

Once the stakeholders were convinced the program objectives were being addressed and their concerns were being met, there was no resistance.

The current inventory placed under the vendor’s control was separated, procedures to measure costs were put in place, coverage and staffing was addressed and the current personnel involved with parts were transferred to another department. The outsource vendor and Fleet became partners in providing parts for the town’s vehicles

Q: Was the project successful? How did you monitor and measure the success of the project?

A: Once the vendor was selected, details – like insurance, entrance into the Fleet facility and hours and personnel – were addressed. We then prepared for the parts room physical inventory that would place the parts under the control of the vendor. The Request for Proposal (RFP) spelled out the inventory of network parts to be kept in stock.

After the first three months, a comparison was made to compare to the cost analysis, projected savings and increased productivity.

After six months, the parts-on-demand averages where calculated using a special calculating form devised specifically for this purpose. Each month, tabulations were made to insure that the vendor complied with the parts on demand average.

Outsourcing the parts room function was implemented in 1999. When I retired in 2009, the average monthly parts-on-demand and network and non-network parts exceeded the requirement by more than 2 percent. In the first year alone, more than 4,400 labor hours were redirected to our core functions and administrative paperwork was significantly reduced.

Q: Do you have any advice for those contemplating outsourcing the parts room function?

A: Times have changed. Now parts room outsourcing vendors are on approved vendor lists, eliminating the need to do extensive RFPs. This would have avoided many of the problems we encountered in 1999.

The most important recommendation I would offer is that you know the reasons you want to outsource the parts room. Clearly understand what your objectives are, as well as your expectations.

Perform an analysis to determine if outsourcing is the best way to go for your organization.

If it is, develop a detailed implementation plan and timeline for accomplishing the project and be certain to keep all stakeholders informed and involved. Knowing the results you expect, and how you will monitor the progress, is critical for the success of this project.