ONE of the parts manager 's biggest challenges is knowing when enough is enough. Specifically, how much inventory is needed to achieve the desired fill rate?
Thermo King Northwest is one of five dealers in North America to participate in a new program designed to give parts managers the tools required to optimize their parts inventories.
“It's a long way from Portland to Thermo King's parts distribution center in Minneapolis,” says J R Zundel, executive vice-president of the Portland branch of Thermo King Northwest. “We never want to be out of stock of our A and B parts, but neither do we want to carry more inventory than necessary. We now have a better handle on inventory — especially when it comes to the seasonality of the parts we sell.”
Thermo King Northwest, along with four other dealers, is using Demand Flow Replenishment software from Thermo King. The five dealers represent a cross section of markets, further helping establish fluctuations in seasonal and regional demand for parts. The system was developed by corporate IT personnel at Trane, which like Thermo King, is a subsidiary of Ingersoll Rand.
“We started with these five dealers about a year ago,” says Ray Pittard, president of Thermo King. “Our goal is to get 75 dealers on the system. We are convinced that the program will be good not only for our dealers but also for Thermo King. Ultimately we are here to please our customers. We need to have the parts available when the customer needs them. When that happens, the customer is satisfied and we all benefit.
“Likewise, this program helps our dealers reduce obsolete parts throughout the dealer network. We believe we can save our dealers millions of dollars across the network. That in turn will allow our dealers to reinvest those savings in other areas of their business.”
The program also links manufacturer and dealer.
“There is a big need to improve connectivity between us,” Pittard says. “Both need information associated with service and diagnostics.”
To test the effectiveness of the program, Thermo King chose five dealers that represent a cross section of North America. From dealers in the Midwest, South, the desert Southwest to Thermo King Northwest — which is responsible for customers all the way to Alaska — the program is being evaluated. The results have been encouraging.
“Our fill rate, inventory turns, everything has improved,” Zundel says.
Thermo King Northwest began by providing three years of data to the system. This included sales of A, B, and C parts. Based on that information, the Demand Flow Replenishment system calculated stocking levels for each of the company's five locations: Seattle, Pasco, and Spokane, Washington; Missoula, Montana; and Portland, Oregon.
Thermo King Northwest has approximately 8,500 part numbers in its history. Of those, more than 1,000 flow regularly through each location. The exact number varies by location.
“It depends on the mix,” Zundel says. “Each location has a different mix of APUs, trailer parts, truck refrigeration units, and trailer refrigeration units. We also handle parts for Ingersol Rand golf carts. It doesn't matter to the computer. As far as the system is concerned, it's just another part number.”
After crunching all the numbers, the system calculated stocking levels for each part for various times of the year.
“It identifies seasonality,” Zundel says. “It ramps up stocking levels when needed and dials us down as things begin to slow. We understand our cycles a little better now. Customer service is better because we have what the customer wants when he wants it.”
A surprising start
When it first went live, the system actually bumped up inventories slightly.
“That's because we didn't stock enough of our fastest-moving parts,” Zundel says. “But over time, as we sold off D and E parts, we have been drawing down our inventory.”
Fill rate for A parts is now at 99% for the Portland location, and inventory turns are up.
“Every metric that we track has improved now that we have been using DFR,” Zundel says.
The program also has benefited Thermo King.
“We have implemented a lot of lean tools to improve our performance,” Pittard says. “Knowing the needs of our dealers has helped us with our suppliers and has helped us have what we need when we need it. We are at 97% now, compared with the low 90s a year ago.”
A lot to track
Managing inventory levels at Thermo King Northwest can be a challenge. In addition to having five locations in three states, the company must manage the inventories in each of the mobile service trucks that it operates.
“We have recommended stocking requirements for each truck,” says Brandon Pugh, president.
On top of that, the distance between customers in parts of Washington, Oregon, and Montana can be substantial. The trucks can go days on end without returning to the branch where they are based.
“One of our trucks goes north of here,” Zundel says. “Another covers the territory to the south. It's not always convenient for them to come back to Portland if they run out of a part, so we have set up lockers at some of our customer's locations. Our office can put what's needed in the locker, and the truck can pick it up from there.”
Covering the territory
Thermo King Northwest literally covers the northwest corner of the United States — including Alaska.
Most of the work with Alaska is conducted with companies based in Seattle. But for Thermo King Northwest's share of the Lower 48, the company relies heavily on mobile service trucks.
“We operate six of them just here in Portland,” Pugh says. “Hours of service regulations have fleets managing drivers very tightly. In an environment like that, mobile service is really growing. Fifty percent of our technicians are in mobile service trucks.”
Two of the trucks in Portland are stationed in outlying parts of the branch's territory and are dispatched out. The other four operate out of the branch.
“I would add more if I could,” Pugh says.
While many dealers and truck equipment distributors complain about the shortage of good technicians, a mobile service truck operator for a transport refrigeration dealer requires a skill set that is even more difficult to find.
“We require them to have good people skills,” Pugh says. “For many of our customers, they are the face of our company.”
Thermo King Northwest mobile service technicians also need to have good administrative skills. They are responsible for a truck loaded with thousands of dollars worth of parts and also must manage time and their work effectively. And, by the way, they need to know how to fix reefer units.
When it comes to working on transport refrigeration units, Thermo King Northwest is looking for mechanics with advanced degrees.
“We want our technicians to have a master level of certification from Thermo King,” Pugh says, “especially if they are working out of a mobile service truck.”
To get that, the technician attends classes at Thermo King headquarters in Minneapolis. Thermo King offers certified technician courses — the most basic level available. With additional study, technicians can receive professional and master certifications.
Pugh says most of his technicians have their master certifications. The rest have been certified at the professional level.
“It's very difficult to find a good refrigeration unit mechanic,” Pugh says. “Technicians have to know the refrigeration side of the job, the electrical side, and must be able to work on diesel engines. It really does take a special person to be able to master all of these areas of the job.”
Thermo King Northwest has nine of them in the Portland branch.
And then there are trailers
In recent years, Thermo King Northwest has begun to offer trailer repair. To promote this capability, the company gave it a distinct brand name — Top Rail Trailer Services.
The idea is to provide customers with one-stop service shopping. This includes pick-up and delivery, mobile roadside assistance, and 24-hour emergency staff for parts and repairs.
“We have been offering this for the past several years,” Pugh says. “We even offer wreck repair for trailers, something that isn't very common for a Thermo King dealer.”
While Thermo King Northwest may fix trailers, the company will not sell them.
“We don't sell trailers because we view trailer OEMs as our customers,” Pugh says. “We don't want to alienate them.”