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Using NAPA IBS, Sarasota County, Fla., has a\u00a0higher parts stock rate, allowing technicians to perform services faster. Photo courtesy of Sarasota County<\/em><\/b><\/p>\n The parts room is the unsung hero of a fleet\u2019s shop. How well it operates has a direct correlation with how quickly technicians can get the materials they need and how swiftly they can get vehicles out the door and back on the road. When it\u2019s not working efficiently, technicians aren\u2019t working efficiently, and downtime rises.<\/p>\n Fleets that have outsourced parts rooms for a few years have seen the following results:<\/p>\n Knowing how important the parts room is, would you hand management of it off to a third party? That\u2019s the question some fleets have asked themselves as they\u2019ve considered parts outsourcing.<\/p>\n Parts outsourcing means a fleet contracts with another company to step in and run its parts room. That includes buying and ordering the parts, monitoring inventory, managing the invoicing process, and staffing.<\/p>\n Often, fleets opt for outsourcing their parts operations to reduce the time technicians spend on the parts ordering process, leverage the buying power of their parts provider, reduce administrative time spent on purchase order processing and invoice tracking, and improve the cost and availability of parts.<\/p>\n Ultimately, the goal is to help the parts room run more efficiently while operating at a lower cost than when managed in house.<\/p>\n But outsourcing the parts room can be a sticky subject. If a fleet outsources this work, what will happen to the staff currently running the parts room?<\/p>\n Bringing in a third party to a fleet\u2019s shop can affect technician morale, too. With fears about losing their jobs \u2014 and the implication they\u2019ve failed at parts management \u2014 it\u2019s possible staff members will resent the parts vendor.<\/p>\n Hiring a vendor to run the parts room also means paying them management fees, and fleets must place trust in their vendor to properly honor their contracts and responsibly manage expenses. Further, will the parts supplier provide quality parts? Will it balance cost with that quality?<\/p>\n And ultimately, will the costs really be lower?<\/p>\n A few years following their decision to outsource, three fleets share their experiences \u2014 and the numbers they saw as a result of their choices.<\/p>\n Sarasota County, Fla., operates three shops, each with its own parts room. When parts management was done in house, the fleet encountered challenges related to inventory, audits, staffing problems, proper separation of duties, obsolete parts, pricing of parts, parts availability, and parts delivery times. \u201cOur parts inventory was huge due to the vast variety of assets supported,\u201d said \u00adGregory \u00adMorris, CEM, fleet manager. \u201cAssets were down awaiting parts for too long, and manpower to operate the parts room \u2014 two each per parts room \u2014 was a constant problem.\u201d<\/p>\n So in September 2011, the county hired NAPA IBS to manage the parts for its nearly 1,600-unit fleet of vehicles and equipment. NAPA now owns the county\u2019s inventory, and a NAPA IBS parts manager operates out of the main shop.<\/p>\n Within three months of the transition, the county\u2019s expectations had been met. \u201cWe\u2019re understanding of each other\u2019s responsibilities, and they are familiar with the assets we maintain and the parts required. Plus, they implement constant process improvements; for example, when we order a new asset, the NAPA representative is informed of what is being ordered,\u201d Morris said. \u201cWe are exceeding the 80% \u2018first-time\u2019 goal at the counter. The shops all agree it was a great decision and do not want to convert back to in-house.\u201d<\/p>\n For the City of Dublin, Ohio, it\u2019s been more than two years since the parts room was outsourced to NAPA IBS. Prior to outsourcing, managing parts for the 400-unit fleet was a shared duty between the technicians on the floor and their supervisor. That meant valuable technician time was being spent managing parts \u2014 and productivity suffered as a result.<\/p>\n When outsourcing became a consideration, the fleet saw a chance to keep technicians focused on their core roles on the shop floor. \u201cWe wanted to see an improvement in technician productivity and a reduction in invoices that we were processing,\u201d said J. Darryl Syler, fleet manager. \u201cWe have seen a savings of over $60,000 by having someone from IBS on hand and not losing the technician time spent picking up parts. We\u2019ve also seen a reduction in the amount of invoices the staff has to process.\u201d<\/p>\n Dublin\u2019s parts provider also bought back stock that was obsolete to the fleet and replaced it with relevant inventory at the same value.<\/p>\n Syler said outsourcing has been a good choice for the fleet, but noted it may not be a fit for every fleet. \u201cFor us, it was a good decision. It may vary with other organizations, though; they will have to do a cost analysis to see if it would fit their needs,\u201d he said. \u201cWe are a small fleet, but we do a lot of work. It works for us. At this time, I would leave it the way it is.\u201d<\/p>\n Parts outsourcing began in October of 2012 for Palm Beach County, Fla., which operates three repair facilities \u2014 one large central site and two satellite facilities.<\/p>\n The first step in the county\u2019s agreement with NAPA IBS was for the company to purchase its inventory, which totaled $370,960. \u201cIn the start-up phase, NAPA had several employees at our operation for about a month before the official change-over happened, \u00adgetting our information system to sync with theirs, learning our operation, and getting their staff trained and ready to go,\u201d said Douglas Weichman, CAFM, director, Fleet Management Division. \u201cThey now own all the parts inventory at all our facilities and what we keep on our shop trucks.\u201d\u00a0NAPA also provides the staff needed to manage parts at all three shops.<\/p>\n When Palm Beach County first considered outsourcing parts management, the county was exploring ways to increase efficiencies and reduce its budget \u2014 but without disrupting service or impacting employees. \u201cWe had good employees and a well-run parts room compared to any government operation similar to ours,\u201d he said. \u201cIt was the system and process of government purchasing that really led to outsourcing the parts room.\u201d<\/p>\n The county was also looking to increase the available parts on hand and cut out administrative time maintaining and taking responsibility for inventory and shrinkage, core charges, or applying for parts rebates. The county also hoped to reduce purchase and delivery time without having to maintain nearly 60 contracts related to parts and service purchases. This would prove to be especially helpful, as sometimes the county didn\u2019t have current contracts in place for specific parts, which resulted in additional time and manpower to establish contracts and acquire parts. By cutting out so many administrative tasks, the county aimed to increase technician productivity as well.<\/p>\n Now, NAPA operates like an on-site parts store. When a technician needs a part, he or she simply makes the request. The team also approves the inventory NAPA has on hand each month. \u201cWe have a good relationship, and they will stock anything we ask for. But what really matters is, per the contract, they need to meet an 80% fill rate,\u201d Weichman explained. \u201cTo do this, they need to do a good job of stocking inventory.\u201d\u00a0In the past three years, NAPA has produced fill rates of 90.08% in \u00adFY-14, 89.92% in FY-15,\u00a0and 91.4% so far in FY-16. Prior to outsourcing, the county\u2019s fill rates averaged closer to 60%.<\/p>\n \u201cOutsourcing was the\u00a0best thing we did \u2014 and we should have done it sooner,\u201d Weichman said. \u00a0\u201cIf I have problems, I hold NAPA IBS responsible and they will correct the problem. They have many more resources to pull from than I did when we ran the parts room. We also don\u2019t have to worry about personnel problems, as parts room employees are now their responsibility.\u201d<\/p>\n To hear each fleet tell the story of parts outsourcing is to hear the story of successfully handing over parts management. But what tale do the numbers themselves tell?<\/p>\n Syler said the City of Dublin has saved more than $60,000 when calculating lost technician time and parts cost. That\u2019s about 8% of the fleet\u2019s operation and maintenance budget.<\/p>\n At Sarasota County, parts availability has resulted in significant savings. Currently, 80% or more of the parts the county needs are available right away \u2014 and 90% of other parts are in stock by the time the team arrives to work the next day. With greater parts availability, the county is returning assets to service two days sooner than before. Likewise, preventive maintenance on large equipment happens in less than a day, thanks to parts availability. \u201cCustomer service improved due to quick turnaround,\u201d Morris said.<\/p>\n Morris compares parts pricing throughout the year and has found savings there as well. \u201cNAPA IBS-branded parts are less expensive than other branded parts, and agreements they have made provide significant savings,\u201d he said.\u00a0\u201cNAPA has a huge amount of buying power that we benefit from.\u201d In addition, the county no longer worries about (or pays for) obsolete or incorrectly ordered parts \u2014 those are a thing of the past.<\/p>\n In total, the costs for six full-time employees and a parts runner Sarasota County previously relied on to manage the parts room exceed the management fee the county currently pays.<\/p>\n For Weichman, the savings are more a result of efficiencies than they are about more affordable parts. \u201cEveryone has the idea that you now get parts cheaper; that\u2019s really not the case \u2014 you are going to pay about the same,\u201d he said.\u00a0\u201cYour savings come from opportunity cost related to efficiencies, less work required to maintain contracts, not having to maintain inventory at your cost, [and] better productivity from your technicians.\u201d It also comes from processing one payment instead of many payments to multiple companies and from administering one contract instead of multiple contracts.<\/p>\n As a result of outsourcing, Palm Beach County eliminated four technician jobs, totaling savings of $229,600. By eliminating administrative tasks such as issuing purchase orders and checks, processing contracts, and managing one contract versus 56, the county calculates its savings in indirect annual transaction expenses at $161,672.<\/p>\n In terms of inventory management, including expenses related to cores (handling broken and misplaced parts), defective credits on parts, inventory not posted to work orders, priority freight expenses, and shrinkage, the county has saved another $14,700.<\/p>\n \u201cWhen looking at the overall cost for our operation related to delivering parts to our technicians, with all related overhead, when we were doing it, it cost about 50% in overhead related inefficiencies,\u201d Weichman said.\u00a0\u201cWith outsourcing, the overhead is more in the 30% range.\u201d<\/p>\n When including improved technician productivity estimated at $232,128, the county estimates its annual savings at $354,864.<\/p>\n As demonstrated by Palm Beach County\u2019s calculations, technician productivity is one of the areas in which outsourcing can make a big impact. At the same time, technicians who play a role in running the parts room may fear they\u2019ll be let go as a result of outsourcing. This can be a very delicate matter, so fleets must proceed carefully \u2014 especially when working with labor unions.<\/p>\n Sarasota County did reduce three parts positions, but the county handled this through attrition \u2014 two employees retired and one quit before the contract was put in place.<\/p>\n In Dublin, no jobs were cut. Technicians, however, became much more productive. \u201cWe have gone from less than 50% productivity to, on average, 78% and improving,\u201d Syler said. \u201cThe staff enjoys not having to go to parts stores and get parts.\u201d<\/p>\n Four auto parts counter positions were eliminated at Palm Beach County, but no employees were let go: one position was already vacant and wasn\u2019t filled, one employee moved away, another was promoted to another position in the department, and a fourth was hired by NAPA, per the county\u2019s contract, which included language about county employees having first right to work for NAPA IBS.<\/p>\n Even though Palm Beach County had counter employees, the fleet has seen a rise in technician productivity as a result of outsourcing. Weichman attributes this to better fill rates. With the right parts available, technicians don\u2019t have to stop working on a repair because they don\u2019t have the right part; likewise, they don\u2019t have to move vehicles from the bay and get reassigned to another job. Technicians don\u2019t even have to spend time walking to the parts counter; NAPA IBS staff brings parts out to the floor.<\/p>\n \u201cWe track productivity very closely,\u201d Weichman said. \u201cWe did a comparison of our technicians\u2019 billable hours a year before outsourcing and then a year after, and our productivity or billable hours went up approximately 3%.\u201d<\/p>\n Outsourcing parts isn\u2019t for every fleet, and when it goes poorly, it can have costly and complicated effects. But proceeding with caution, ensuring a well-\u00adwritten and thorough contract, and effective contract management can lead to beneficial results.<\/p>\n Sarasota County, the City of Dublin, and Palm Beach County all plan to continue outsourcing parts room management for now. As for whether it\u2019s the right step for other fleets, Syler said they should take time for careful consideration before taking the plunge. \u201cDo your research and make sure that this is the right thing for your fleet,\u201d he advised. \u201cWe spent 12\u00a0 months before we felt like this would be beneficial to us.\u201d<\/p>\n by Shelley Erns<\/a><\/p>\nEvaluating Parts Outsourcing by the Numbers<\/h3>\n
\nAt a Glance<\/strong><\/h4>\n
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Sarasota County:\u00a0Reducing the Wait for Parts<\/h4>\n
City of Dublin:\u00a0Improving Technician Productivity<\/h4>\n
Palm Beach County:\u00a0Reducing the Budget,\u00a0Increasing Efficiency<\/h4>\n
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What the Numbers Say<\/h4>\n
Where Do the Jobs Go?<\/h4>\n
Is Outsourcing the Way to Go?<\/h4>\n
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I\u00b4m\u00a0a Fleet Management expert, and the manager of\u00a0