APTA Vendor Managed Inventory Presentation October 4, 2010 San Antonio, Texas. Raymond Melleady - Neopart, Vice President, Parts Management

Transcription

1 APTA Vendor Managed Inventory Presentation October 4, 2010 San Antonio, Texas Raymond Melleady - Neopart, Vice President, Parts Management

2 Industry Challenges Parts More Availability Space Lead More Inventory Times Economic Buses More Spares Down Obsolete More Risk Parts Symptom or Cause? Delivery lead times Inventory levels Value SKU s Warehouse Space Obsolescence Spare ratios Availability Bus down Non productive tech time

3 Questions to Consider How much inventory per bus do I carry? How often does this inventory turn? How many buses are out of service waiting for parts? How many purchase orders per year are processed? What is my cost per purchase order? How much do we write off per year in obsolete materials and parts?

4 Why Vendor Managed Inventory? Availability Savings Risk Management Inventory Reduction Maximize Availability Just in Time or Just in Case Minimize Inventory A well structured VMI Program can mitigate Conflicting Objectives

5 Inventory Optimization Holding + ordering costs = total cost curve. Find Q eoq inventory order point to minimize total costs. Total Cost Cost Holding Costs Ordering Costs Q eoq Order Quantity (Q)

6 Supply Chain Evolution Supplier/ Bus OEM-Dependent Era Just in Case Era Supply Chain Era Transit relied on suppliers who increasingly failed to keep sufficient stock Need Generated Production To improve availability transits purchased deep inventories just in case Large inventory Costs Neopart technology and sourcing expertise enables efficient access to the best suppliers Long Lead Times High Obsolescence Costs Result Less Inventory Many Buses Down WFP Large amounts of Idle Capital Still large number of buses down WFP Better Bus Availability Reduced Overall Costs

7 Supply Chain Silos DEMAND INFORMATION DIRECT SUPPLY FROM SOURCE Transit Stockroom Suppliers Sub- Assembly Warehouse Assembly Logistics

8 Measuring Cost & Savings Estimated Source Cost $ of Savings as a % of with Total for 5 VMI million Inventory Programs inventory Warehouse Expense $50, % 1% Physical Handling $50, % 1% Administration $150, % 3% Cost of Money $250, % 5% Obsolescence $300, % 6% For every dollar of material we consume, our internal handling costs amount to an additional 18 cents. NYMTA Jan Cost of Parts $300, % 6% Capital Utilization Rate $50, % 1% SavingsTotal Potential Cost $1,150, % 41%

9 Current VMI Customer Experience SEPTA Philadelphia, PA (2009) 5 Year, $15 Million Contract 1300 Bus Fleet with 10 Bus Depots Core Inventory Items RGRTA Rochester, NY (2010) 5 Year, $16 Million Contract 300 Bus Fleet with 1 Central Division 15,000 SKU s

10 VMI Business Models SEPTA Bin Management Both unique customized models using core supply chain management concepts. RGRTA Stockroom Model Onsite Service Neopart cycle counting Bar-code reader with wireless upload Shelves can be stocked within 12 hours Daily delivery from local Neopart stock Ownership upon delivery 4 Hour emergency stock-out response Neopart manages entire stockroom Neopart owns all core inventory Cost-plus pricing with incentives for savings Ownership transfers when part is delivered to technician

11 SEPTA Deployment Challenges Data (always the case, even with very strong transit organizations) 10 bus depots spread over metropolitan geographic area Very high service levels required with significant consequences for underperformance liquidated damages Highly diverse range of parts (and part values) Lead-time (NTP delivered 21 days prior to first depot implementation) Union environment (purchasing, mechanics, etc.)

12 Implementation Success Factors Clear plan of implementation, well syndicated and communicated Phased roll-out (e.g., 1 depot every 1-2 weeks) Communication on issues or exceptions Internal Champion Joint problem solving

13 Steady State Success Factors Joint problem solving No excuses Key metrics Frontline Staff Flexibility Commitment to performance Communication

14 Steady State Success Factors Access to Data Decision Support Controlled Process

15 Organizational Overview NEOPART is a long established parts provider to the transit industry Management team with more than 100 years of experience Provides parts to more than 99% of US transit systems

16 The Competitive Advantage Creativity Willing to create mechanism to generate maximum value for the customer - obsolete parts, warranty, etc Leadership Emerging and proven leader in providing transits with VMI/Parts Management Solutions Experience NEOPART history gives it deep transit parts knowledge Adaptive Current position allows maximum flexibility to tailor solutions to unique needs

17 APTA Vendor Managed Inventory Presentation October 4, 2010 San Antonio, Texas Raymond Melleady - Neopart, Vice President, Parts Management