If a kingdom can be lost for want of a nail, certainly a trucker's livelihood can be lost—or at least seriously compromised—by want of an axle housing. PACCAR Parts' end customers —drivers of the company's Kenworth and Peterbilt brand trucks—are mostly independents or small fleet owners who are scrambling to make ends meet (80 percent of truck owners in the United States are owner-operators or own fewer than 10 trucks). For these small players, which may haul anything from cantaloupes to flowerpots anywhere for whatever price they can negotiate, survival depends on staying out of the breakdown lane.
Darrin Siver, who is general operations manager for PACCAR Parts in Renton,Wash., is well aware that the company's ability to keep dealers nationwide stocked with parts for repairing (and maintaining) trucks is directly tied to the livelihood of their customers. And he's bent on making PACCAR's distribution system the most high-tech in the country—an extraordinary ambition in the notoriously low-tech business of parts supply. True to type, PACCAR Parts' suppliers are a pretty varied bunch. Many are real craftsmen, the only ones able to fit the spec for molding a particular bracket or machining a gasket, but few could be considered supply chain leaders. "We have 800 vendors that ship from 1,600 locations and many of those vendors are pretty small and the level of sophistication is not very high," says Siver. Some, for example, can't handle PACCAR Parts' electronic ordering system and must resort to fax communications. Others are still living in a pre-bar-code world: 60 percent of the parts Siver receives into PACCAR's five U.S.-based warehouses and six international facilities arrive without bar-code labels.
But Siver is pressing ahead with plans to push inventory handling into the 20th century—if not the 21st. While the company's distribution centers all have the capacity to print and stick bar codes on the parts that arrive unlabeled, he expects to persuade all of PACCAR Parts' suppliers to use bar-code printers and electronic order handling in the next few years. "We want to eliminate printing bar codes so we can carry the same bar code through from the supplier to the dealer to the final customer," Siver says. The success rate so far is impressive: last year alone, PACCAR Parts was able to drive the percentage of parts that arrived with bar codes to 60 percent from 30 percent.
That may not sound like a rapid ascent to the giddy heights of technology, but consider that a majority of PACCAR's suppliers are also now capable of sending an electronic advance ship notice (ASN) and have begun participating in a Webbased transport planning system from Manugistics. Through that system, suppliers go online and notify PACCAR of what they're sending to different facilities—the number of pallets and their weights and dimensions. Siver's team uses the system to select the most economical inbound transportation lane and carrier, and even to create multi-stop pickups. "Now we have trailers making three or four stops to bring the freight in to Atlanta," says Siver. "Where it was four shipments before, it's one trailer load now." Siver says outbound shipments from the distribution centers are also being consolidated in this way, when possible. The long, difficult haul toward electronic sophistication is already paying off in terms of lower freight costs.
But there's a long way to go. "We still receive packing slips from suppliers. We'd like to eliminate the paper and we're working on that," he says. At present, PACCAR Parts uses radio-frequency technology to read bar codes, but the company is looking into the possibility of having suppliers apply RFID tags to inbound freight.
Yet there's nothing heavy-handed about these efforts to bring technology to the parts distribution business. When asked how the company is broaching the subject with suppliers, Siver replies: "Very gently. We have good relationships with our suppliers, and we conduct a lot of meetings with them in order to get compliance."
Dealing and wheeling
Meanwhile, on the other side of PACCAR's business, the company has also been busy bringing demand and supply into more perfect alignment at the dealerships. This is where the crunch really comes, working with the 550 dealers in North America who look after the truck owners. "If a truck is down," says Siver, "getting a driver back on the road is priority number one, and if we don't have the right part in the right place, then it's going to take longer."
To help speed things along, PACCAR keeps an electronic parts catalog on the Web that allows dealers to go online, call up three-dimensional images of the parts they need and order them instantly, without having to fiddle with multidigit product codes. Electronic orders from the dealers come in via a private network, accessed through personal computers.
However, nothing beats having a part already on hand at the dealer when needed. With that in mind, PACCAR has taken the unusual step of managing its own dealers' inventory. "We take their sales data and their demand history and use a sophisticated forecasting system that does a much better job than a local dealer's demand forecasting system can," Siver says. After wrestling the data through the system, PACCAR recommends orders to its dealers. Though they have the option to decline or to change the quantities, Siver says it usually works best for everyone if they don't exercise that option. "What we've found is that the most successful dealers are not modifying our recommended orders because they're finding them more accurate and as a result, their on-shelf availability has gone up and their inventory turns have gone up."
PACCAR Parts now has 92- to 93-percent parts availability locally for delivery the next day; and 98-percent availability nationally for any part ordered, with a two- or threeday delivery time. "Support for the vehicle is something a customer considers when deciding what vehicle to drive," Siver says, "and the parts service is certainly a factor in that decision."
A place for everything
Whatever improvements are made at the supplier or dealership level, the heart of the operation remains the distribution center. In the end, Siver says, the operation's success depends on what he sees as the basics: "receiving the parts and putting them in the right place, processing sales orders and getting them shipped out and delivered on a timely basis, keeping track of inventory, getting orders shipped in one day or less delivery time and staying close to the customer." PACCAR Parts recently completed an overhaul of the distribution center that serves the Southeast, based in Atlanta. (Other DCs are located in Rockford, Ill.; Lancaster, Pa.; Las Vegas, Nev., and Seattle, Wash.—as well as in Canada, Mexico, the UK, the Netherlands, Spain and Australia.) The Atlanta warehouse's revamp, which was accomplished without closing the facility for a single day, has almost doubled its capacity and has driven up productivity 10 percent—measured by the number of order items received and shipped through the facility hourly.
PACCAR enlisted the help of Peach State, an Atlanta-based systems integrator, for input on changes to the racking and storage systems. Part of the challenge was dealing with an immense range of parts—around 20,000 SKUs, ranging from washers and fasteners to entire cabs with upholstery. "With the exception of tires, batteries and engines, you could just about build a truck from our inventory," Siver says. Part of the problem was simply finding parts—limited space meant some pieces were even stored outside, and in many cases, several kinds of parts had to be crammed into a single storage unit. Peach State helped PACCAR Parts position the fastest-moving parts in readily available spots and determine the right space cube for different parts. Now, all of the different parts have their own individual indoor storage spaces.
That's fine for storage, but the huge variety of parts also makes order fulfillment a bit tricky. "We don't have case picking. Most of our products are unsuitable for packaging because of their dimensions," Siver says. Suspension pieces, he points out, don't lend themselves to rolling down a gravity conveyor like a packet of shirts. The picking process is heavily manual, but PACCAR Parts uses radio-frequency bar-code reading technology to help make sure the right pieces are being pulled, and the greater elbow room at the expanded facility has made all of that easier, Siver says. On top of that, the facility has improved its regional fill rate from 92 to 93 percent because it now has the room to store all the parts that are in demand in the Southeast. "With additional space, we can expand our use of 'warehouse-within-warehouse' and slotting strategies," Siver says.
On the software front, PACCAR Parts' warehouse management system, designed in-house, is connected to the company's order management and accounting systems. PACCAR Parts now has automatic invoicing too—the moment a part's bar code is swiped at the shipping dock prior to loading, an invoice is automatically generated to send to the dealer. Once the invoice arrives, the dealer knows the part's not far behind—welcome news to a trucker anxious to peel out of the mechanic's bay and onto the open road.