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5 steps to a stronger supply chain

By Keith Sheardown

Where cost management is a critical responsibility for every transit agency, only a few transit managers fully grasp the true cost of a supply chain and the potential impact throughout the organization.

Do these four scenarios sound familiar?

The morning meeting discussions focus primarily on parts shortages and the fact that maintenance cannot repair the equipment because the necessary parts are unavailable.

Technicians remove, or cannibalize, parts from other vehicles, as the agency does not have the materials in stock to get equipment back in service.

A steady stream of people line up at the parts storeroom throughout the day to retrieve parts and materials.

The purchasing department is smaller than before and now takes weeks to get materials on order.

These situations not only increase the costs of doing business, they also negatively impact reliability. A great number of transit agencies fail to realize that where parts and materials are not readily available for repairs, the maintenance department uses work-around plans to get the job done.

Virtually every maintenance organization will take parts off, or cannibalize, shopped equipment in hopes it will work as intended on the failed unit. The initiative may seem commendable, but in actuality that borrowed part may be 10 years old. Not only that, removing a part off of another vehicle doubles the labor costs and increases the chance of failure because the replacement part is essentially used.

Here is another very common and inefficient practice that can cause the supply chain to break down. Maintenance organizations will typically order more material than they actually require. They do this because they may have limited confidence they will get parts when they need them, so they order extra material and store them for later.

This practice essentially makes for a worse situation. Material costs have raised dramatically, space requirements increased, and by the time a technician needs the parts they very likely will be hard to locate and no longer tracked in an inventory system.
Here are five simple steps to reduce costs and improve the utilization of all maintenance and materials resources.

Plan the work and work the plan
It is simply not possible to predict failures in every instance, and have all the necessary parts and materials on hand, ready for deployment when the vehicle rolls into the shop. The maintenance department can do much to improve the degree of work actually planned. It can analyze common repairs and work activities, and ensure the plan includes giving advanced warning to the parts department as to the required materials.

Every maintenance management software program provides a field called Work Order Type. Use this feature to identify two types of work orders — planned and unplanned.

The goal is to increase the amount of planned work orders by first measuring and then improving upon the number of such orders.

Improve communication channels between maintenance and materials
With more planned work the maintenance department can now better coordinate with the parts and materials department. Preventative maintenance inspections conducted every 90 days, or at a fixed mileage interval, may require routinely changing out a specific number of consumable parts such as filters. For many transit agencies this can typically result in the replacement of 20 or more different components.

The parts and materials department in leading agencies knows when the equipment is scheduled for inspections, as well as the number of inspections it will carry out each week, month and year, allowing more efficient scheduling for purchases and deliveries that connect with the specific needs of maintenance at a particular time.

The maintenance and materials departments must agree on the bill of materials (BOM) to ensure the necessary parts are available at the time of the scheduled repair. This simple task adds value and must start with clear communication with departments working as a team.

Reduce the number of manageable items
Assume technicians change out 20 items every 90 days and those 20 items come from 16 different suppliers. The cost and complexity lies in the effort to purchase these items, receive them, and then pay the particular vendors. Most major transit agencies carry in excess of 30,000 items in stock. These stock-keeping units (SKUs) drive costs. Reducing the number of SKUs requires a focused effort to lower costs and increase the availability of the materials.

Begin simply by addressing the periodic inspections. Validate with maintenance that the list will not change.

Agree on the specification for the parts and then buy the entire list of parts as a kit from one supplier. Procurement rules require competitive bidding, but these rules do not require an agency to buy 30,000 parts from 30,000 separate suppliers.

A transit agency can plan many of its parts kits requirements over an entire year or longer. An RFP for one year with scheduled release dates now reduces the number of POs issued, the number of needed items and the amount of inventory to cycle count. The overall cost will be lower because the number of parts the agency purchases will be on a one-year blanket order.

Last year, New York MTA issued a report called “Making Every Dollar Count,” which identified the fact the agency spent 16 cents on every dollar to manage the parts and materials it purchased.

Efficient parts management in a transit environment requires the supply chain to begin and end with the person making the repairs. The process must allow technicians the capability to determine the parts they need, and have those parts at their stations as quickly as possible after delivery to the department.

Storeroom salaries are far less than those of maintenance technicians. Such a delivery service only maximizes wrench-time and eliminates waste of parts. Reducing the number of SKUs in inventory is the most effective means of reducing these costs.

The supply chain ends in the hands of the technician
When looking at the management of materials in a transit environment it is essential to know that the supply chain begins and ends with the person that needs to repair the equipment. Actions need to be taken to ensure that technicians are able to define what parts they need, and also get those parts as rapidly as possible.

While some would argue that technicians should go to Stores to get the material they need when they need it, I suggest that Materials should be delivering all material to the technicians where and when they need them. The investment at any transit agency in storeroom salaries is far less than the cost of salaries for technicians. You will only maximize wrench time by having a delivery service to your technicians, thereby allowing them to stay focused on repairing equipment.

Create a scorecard and drive improvement in the numbers
Such a strategy to drive continuous improvement involves establishing goals, measuring progress, and keeping score. The Scoreboard must not be a secret report that only management gets to see, but be highly visible with everyone held accountable for helping achieve the desired results. BRM
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Keith Sheardown serves as president of MTB Transit Solutions, Toronto, ON, Canada, a provider of bus overhaul services.

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Posted by on Sep 1 2012. Filed under Maintenance. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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