Innovative Concepts in Inventory Management - Jeff Hansen, Major Accounts Director, Uni-Select, Ray Melleady, Vice President, Neopart LLC
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From the New York Public Transit Industry 2010 Fall Conference & Trade Show.
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Innovative Concepts in Inventory Management - Jeff Hansen, Major Accounts Director, Uni-Select, Ray Melleady, Vice President, Neopart LLC
- 2. Session Agenda Introductions Is the OEM really the OEM? Jeff Hansen Sourcing Options Jeff Hansen What has gone wrong? Jeff Hansen Making inventory work for you. Jeff Hansen Partnering Solutions Jeff Hansen Industry Challenges Ray Melleady VMI as a Solution Ray Melleady Supply Chain Silos Ray Melleady The Real Cost of Inventory Ray Melleady Open Forum – Questions & Discussion All
- 3. Uni-Select By the Numbers An Industry Leader…40+ Years of Continuous Growth • 2009 Sales $1,410M • 40 Distribution Centers • 250 Company Stores • 3,500 Customer Locations • $400M Available Inventory • 350,000 products • 4,800 Employees
- 4. Is The OEM truly the OEM Parts Strategy: OEM and Aftermarket…Same or Different? • Auto, Truck & Bus Manufacturers Core Competence • Who are the Manufacturers… • If this is True…. • What Drives customers back to OEM? • Selecting the proper Products & Distribution • Opportunity for Savings
- 5. Sourcing...You Have Options Sourcing Parts: You Have Options… • What are your Objectives & Expectations • Advantages & Disadvantages of: – Single Source Supplier – Multitude of Suppliers – Buying on Price – Buying on Delivery • What’s the Best Choice?
- 6. Inventory Management • What Goes Wrong & Why – Application Platforms – Inventory Obscurity – Inventory Obsolescence – Part Proliferation – Complex Cataloging – Supplier Overload – Systems Integration
- 7. Inventory Management • Vehicle Tailored Parts Management • Vendor Provided Inventory • Parts Operation Outsourcing – Controlled Operating Expenses – Eliminate Inventory Burden & Responsibility – Reduced Admin. & Transaction Expenses – Controlled Personnel Costs – Accountability & Efficiency – Improved Facility & Tech. Productivity – Systems Integration
- 8. Industry Challenges Economic Lead Times Obsolete Parts Buses Down Parts Availability More Inventory More Risk More Spares More Space Delivery lead times Inventory levels Value SKU’s Warehouse Space Obsolescence Spare ratios Availability Bus down Non productive tech time Symptom or Cause?
- 9. Inventory Optimization Ordering Costs Holding Costs Qeoq Order Quantity (Q) Total Cost Holding + ordering costs = total cost curve. Find Qeoq inventory order point to minimize total costs. Cost
- 10. Supply Chain Silos Suppliers Warehouse – Logistics TransitStockroom Sub- Assembly DEMAND INFORMATION DIRECT SUPPLY FROM SOURCE Assembly
- 11. Why Vendor Managed Inventory? Just in Time or Just in Case Maximize Availability Minimize Inventory Availability Savings Risk Management Inventory Reduction A well structured VMI Program can mitigate Conflicting Objectives
- 12. Supply Chain Evolution Transit relied on suppliers who increasingly failed to keep sufficient stock To improve availability transits purchased deep inventories “just in case” Neopart technology and sourcing expertise enables efficient access to the best suppliers Need Generated Production Large inventory Costs Long Lead Times High Obsolescence Costs Result Less Inventory Many Buses Down WFP Still large number of buses down WFP Better Bus Availability Large amounts of Idle Capital Reduced Overall Costs Supplier/ Bus OEM-Dependent Era “Just in Case” Era Supply Chain Era
- 13. Measuring Cost & Savings Cost as a % of Total Inventory Warehouse Expense 1-3% Physical Handling 1-3% Administration 3-6% Cost of Money 4-6% Obsolescence 6-12% Cost of Parts 6-8% Capital Utilization Rate 1-3% Total Cost 22 – 41% Source of Savings for VMI Programs Warehouse Expense 1% Physical Handling 1% Administration 3% Cost of Money 5% Obsolescence 6% Cost of Parts 6% Capital Utilization Rate 1% Savings Potential 23% Estimated $ Savings with 5 million inventory Warehouse Expense $50,000 Physical Handling $50,000 Administration $150,000 Cost of Money $250,000 Obsolescence $300,000 Cost of Parts $300,000 Capital Utilization Rate $50,000 Savings Potential $1,150,000 “For every dollar of material we consume, our internal handling costs amount to an additional 18 cents.” – NYMTA Jan. 2010
- 14. Organizational Overview • NEOPART is a long established parts provider to the transit industry • Management team with more than 100 years of experience • Providing parts to more than 90% of US transit systems • Superior knowledge of bus parts supply chain • Global Sourcing on axle parts, disc brakes, slack adjusters