OPERATIONS manager Bob McHugh looks at Heil's Parts Central facility in Fort Payne, Alabama, and sees an efficient operation that is meeting the goals the company set 18 months ago when Heil began consolidating its parts businesses.
Eight Remstar Shuttles — floor-to-ceiling motorized parts bins — are retrieving parts from specific shuttle locations, saving legwork and maximizing on warehouse space with a vertical approach. Inventory has been streamlined to ensure that the right parts are available when customers need them. Personnel have been reassigned from other locations to further enhance the employee knowledge base and centralize customer service. Warehouse employees have made suggestions to improve appearance and cleanliness, including painting all racks the same color and creating a uniform color scheme for all parts buggies.
Best of all, Parts Central is more effectively leveraging its extensive distribution network to provide haulers with a one-stop shop for all their replacement-parts needs, including Heil OEM parts and aftermarket parts for other refuse collection vehicles. As a result of these efforts, haulers can easily get all of their parts from one local source, so they can concentrate on their core business — collecting refuse — without devoting time and resources to maintaining parts inventories and tracking parts orders from a variety of suppliers.
Parts Central brings together two product lines: Heil Certified OEM Parts and Parts Inc Aftermarket Parts by Heil. The consolidation means that Parts Central distributors now are the only source for Heil OEM replacement parts, as well as aftermarket parts for Heil and other brands of refuse collection vehicles. And that means that parts can be obtained quickly, minimizing customer down time.
Parts Central offers replacement parts for virtually every make and model of refuse collection vehicle through its nationwide network of more than 50 distributors and parts and service centers. Many hard-to-find parts for older vehicles are also available through Parts Central distributors for next-day delivery.
“We brought together operations from four different locations, and consolidations of this magnitude always involve a number of challenges,” McHugh says. “But with proper planning and an intense focus on the details, we were able to integrate the businesses with minimal disruptions to our day-to-day operations and make the transition invisible to our customers. At Heil, we focus on continuous improvement, not just in manufacturing, but in our other operations, as well. So even though the consolidation has been successfully completed, we are continuing to look for opportunities to improve Parts Central regularly.”
Resolving potential conflict
Previously, Heil had four facilities for parts. On the OEM side of the business, Parts Central in Fort Payne and its branch in Phoenix sold Heil Certified OEM Parts. On the aftermarket side, Parts Inc had distribution locations in Greenville, South Carolina, and Phoenix, both selling aftermarket parts for Heil and other brands of refuse collection vehicles.
McHugh says the Parts Inc facilities represented the potential for conflict because they were competing with Heil's distributor network for those end user sales.
So in May 2003, Heil closed both Phoenix operations and brought them to Fort Payne. In September 2003, it closed the Greenville branch. Between then and February of this year, all the businesses were consolidated in the single Fort Payne location.
“Our long-term goal is to offer a level of service to haulers that more closely fits their own business objectives,” McHugh says. “One key area we believe we can impact is increasing equipment uptime. To accomplish this, we are moving to a local distribution model.
“We made a strategic decision to sell solely through distributors. This will benefit customers, because we truly believe that local distributors can serve customers better than anyone else. Their inventories are tailored to the needs of their specific market areas. Turnaround times are often shorter because of the distributors' close proximity to their customers. And distributors offer a number of value-added services, including technical support, training, pick-up and delivery, and maintenance/repair.
“Let me put a number on this for you. We've had some national hauling companies tell us they are keeping $20,000 to $30,000 of inventory at each of their locations, and they have five to 10 locations in a 500-square-mile area. That means they have $150,000 or more in capital tied up in replacement parts! That's big money. Their business is hauling trash and our business is parts. Instead of stocking all that inventory, we recommend that customers rely on their local Parts Central distributors. Our distributors can get customers the parts they need, when they need them. A lot of people see distributors in a negative light as ‘middlemen,’ and it's a trend in a lot of industries to sell direct. But good distributors like ours can add enormous value, because they can save customers money by minimizing the need to invest in inventory.”
One step at a time
How did Heil accomplish the consolidation? Step by step, McHugh says. There were concerns: Did they have enough space? Did they need to add to the 17,000-square-foot facility in Fort Payne? Initially, Heil was headed in that direction. But as it began to improve its operational procedures by reorganizing inventory, going vertical with the shuttles and using smaller parts in them, Heil found that it had plenty of space.
The company also made some personnel enhancements to improve efficiency and customer support. Company veteran Lloyd Banowetz was placed in charge of customer service (with four people reporting to him) after running Heil Arizona; David Posey, who had worked in the warehouse, was made warehouse manager; David Lee is now in charge of purchasing and all sourcing for parts; and Steve Maddox was brought in from Parts Inc to be channel development manager, working with distributors to help ensure that they're keeping the right parts on the shelves and bringing in competitive intelligence.
“I'm really proud of the whole Parts Central team,” McHugh says. “It has taken a lot of work over the last year to get this business in the position we planned for it, but everyone has pitched in to do their part. It's really paying off through the improved service we can now offer our distributors and customers.”
Of the eight Remstar Shuttles, five originally were in Fort Payne and three were moved from Phoenix as part of the consolidation. They are 62.2" wide, 105.3" deep, and 240.16" high, with 185 trays per shuttle and a tray capacity of 500 lb. Shuttles can be spaced from 2.56" to 16.33" to accommodate different sizes and a variety of parts.
“A guy can go over to a shuttle and, without a lot of legwork, punch in numbers and it will retrieve parts from the specific shuttle locations,” McHugh says. “It frees up warehouse space. While the shuttles can't handle huge parts, we have funneled a lot of the smaller parts we've brought in to them. This has reduced the amount of parts we've had to have in boxes and racks. It just makes sense to go vertical. These shuttles are almost to the top of the building.”
McHugh says it was a challenge to get the three shuttles to Fort Payne because all the parts had to be taken out and the trays removed before they were shipped and reassembled in Alabama.
“It's critical that they are calibrated to run correctly in the tracks, that they're level and the trays fit in correctly,” he says. “We've worked out those issues, and now they're really good. The uptime is excellent and the maintenance is low, once you get them working properly. And we still have a lot of shuttle space available, so there's room to pull even more parts out of racks to put them in the shuttles. We're trying to free up more warehouse space so we can grow the business into other areas.”
McHugh says Parts Central is stocking over 8,000 SKUs.
“We've put in systems to identify what we call ‘stocking parts.’ Our goal is to have these parts all the time,” he says. “We have also developed stringent measurements for the business. We found out that the measurements we used before and what distributors thought they were getting were two different things. There was a disconnect there. One of the first steps we took in the consolidation process was to sit down with our distributors and ask, ‘How should we be measuring this business?’ We have a council team that meets with Heil distributors. That has helped immensely. We're all on the same page. It's gaining momentum because we're all moving in the same direction.
“A lot of people think inventory accuracy is a financial deal. They think, ‘Well, if you have an inventory bust, you lose money, or if you have an inventory pick-up, you gain money.’ But we look at inventory accuracy as a customer service issue. If our computer says that we have something in stock and we tell the customer that, we need to be able to deliver that part when the customer orders it.
“From a measurement standpoint, a lot of people look at inventory and say, ‘Well, our inventory accuracy is 95% because we accounted for 95% of aggregate dollar value when we took an inventory. But we look at it from a parts number basis. If I go out there and do a count, and my computer says there are four in a bin and there are five in a bin, that's inaccurate inventory.”
McHugh says along with the increased emphasis on organization, cleanliness has taken the forefront. He says that while the employees' decision to color-coordinate the racks and buggies may seem simple, it has had a visual impact and has galvanized morale.
“We've consistently focused on, ‘Everything has a place, and everything should be in its place,’” he says. “I always tell the warehouse manager that in the parts business, there are three things you've got to do, and if you do these three things, it's simple: You have to know how many parts you have; everything has to have a part number on it; and you have to have a location for it.”
McHugh says Heil is looking for value from its distribution network.
“The quicker distributors can turn parts out to their customer base, the less down time the customers have,” he says. “This is a logistics business. The foundation is truly logistics, and it's operational. You can have the greatest sales strategy in the world for parts, but it all starts on the operations side. And the smarter you make your internal operations, the better the business is going to be, and the more potential you have. It's all about satisfying customers.”