Learn about how expanding your supplier network can help deal with the overwhelming parts shortages.
Episode 182: The trucking industry has seen many challenges over the last couple of years. One of them being parts shortages. How can you overcome these parts shortages by expanding your supplier network? Recently we hosted a webinar that dove into this very topic. This is a replay of that webinar.
My guest today is Andres Ochoa of SAP.
Guest Website: SAPCORP.net
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Transcript of Episode:
You are listening to The Heavy-Duty Parts Report. I’m your host, Jamie Irvine. And this is the show where you get expert advice about heavy-duty parts that keeps trucks and trailers on the road longer while lowering cost-per-mile.
Welcome to another episode of The Heavy-Duty Parts Report. If you’re watching on the video version, you’re gonna notice that we’re in our new studio, we’ve recently relocated to a new location and upgraded our studio. We’re very excited about it. We got a few things that we still want to do to make sure that the sound quality is perfect. If you’re just listening on a podcast app or on heavydutypartsreport.com, you might not even notice that things have changed, but we are excited about that new studio. Speaking of things sounding a little different, today’s episode might sound a bit different to you because it wasn’t completely recorded in studio. It was a webinar that we did recently with a partner of ours, SAP Truck and Auto Parts. They’ve been in business now for nearly, forty years, they’re gonna celebrate their 40th anniversary next year.
They know how to source parts globally, how to distribute parts. And the theme of the webinar was Overcoming Parts Shortages by Expanding your Supplier Network. You can’t just go out and add new suppliers, there’s some best practices that you have to follow. And the conversation was very concise. And I thought that it’d be very be beneficial for the audience of The Heavy-Duty Parts Report to get a chance to hear it, even though you might not have attended the webinar in person. So I hope you enjoy this episode. I hope that you can take something of value from our guests almost 40 years of experience in the business. And we will, we are looking forward to continuing to add this kind of programming to our show from time to time, especially when we’re covering important subjects that are affecting the trucking industry, like the part shortage.
All right. Enjoy today’s episode. We’ll talk to you soon. Bye. Welcome to our webinar today. The theme of today’s webinar is Overcoming Parts Shortages by Expanding Your Supplier Network. I am very happy to have our main sponsor of today’s webinar, Sap Truck and Auto Parts. They’ve been in business since 1983. And we’re gonna have a great conversation today. This part shortage issue is something that is facing the industry, it doesn’t really matter what segments you’re working in, you’ve been impacted by it. So we’ve gotta overcome it. We’re gonna talk about some best practices with expanding your supplier network. Our presenters today, so of course, you know, me, my name is Jamie Irvine. I’m the host of The Heavy-Duty Parts Report. I’m the guy with the beard and the glasses and our guest today is Andres Ochoa. He is the Vice President of Sap Truck and Auto Parts. Andres, welcome to our webinar today. So glad to have you here.
Thank you, Jamie. Thank you. I’m excited to be here and share the knowledge that we have and get some feedback as well from the participants.
For people who are maybe not aware of Sap and your background, let’s just talk about your company for a little bit. So, first of all, established in 1983, you got a big anniversary coming up next year. That’s exciting.
Yeah. 40 years, 40 years in business and 40 years of serving the global market of truck and auto parts. We’ve been at it, here we are.
You’ve learned a few things in forty years and 43 countries globally with distribution centers around the world. This really puts you in a great position to talk about our subject today of overcoming part shortages and expanding your supplier network. So we’re really looking forward to getting to kind of some of those things that you’ve learned over that time period. Your brands, talk a little bit about your house brands.
Yeah. Our house brands here, we have five brands. Each one has like its own specialty. The Sap brand, which carries the name of the company is a air brake line. We do it all the way from after the compressor from the governor all the way down to the foundry of brake, which is a drum. And we got the clutch, the replacement clutches for Japanese and American trucks on the Eden side. On our driveline, we have some u-joints and center support bearings. We carry u-joints all the way from the steering u-joint. That’s maybe an inch and a half long, all the way up to the big Caterpillars that are almost a foot long, going both ways on the u-joints. On our Buffalo line, it’s a full line of suspension and steering. We have our shock absorbers, tie rod ends, kingpin sets, as well as drag links. Our rotating electrical line, which is Gamma. It has started alternators in the respective components and our T&J New Pumps, which is water pumps and our cooling. It’s manufactured here in the US, the cooling, and some of the pumps are sourced globally.
And so in addition to your house brands, you’re also a distributor of a lot of high-quality brands that people would recognize. So you’ve got a full line of products available. Now let’s get to what we’re here to talk about today, the big problem, and really when we look at overcoming parts shortages, it’s been such a difficult couple years and parts suppliers and fleets. They have been struggling. Repair shops as well. This is some interesting data that we pulled from the recent state of Heavy-Duty Repair Report that was issued by TMC and in conjunction with Fullbay. And in their report, it shows that 84% of repair shops are facing increased delays. But here’s the statistic that jumped out at both of us. Andres, maybe you wanna talk a little bit about this statistic?
Yeah, 45% of shops looking outside their normal channels. That was really worrisome for me to read because, or actually, I actually see it as an opportunity for us that are in the distribution and trying to find a new customer base. And the phones are starting to ring. So you’re gonna have shops looking around for new suppliers, but this also means that your retention is gonna have to step up its game a little bit, because you’re gonna be losing customers if you’re not the one going out there trying to source parts for them. So you need to have this awareness of this number, which is, this is rounded off, it’s 50% of shops are looking around. They used to call you, they call up a new supplier, that new supplier has the part. Next time they might just call that new supplier again. And if they hit a couple times, you might be losing a customer. So we need to be very aware of this statistic because it could influence us. It could influence the entire industry and how we’re we were accustomed pre-COVID that, you know, the customer would always come back and just simply always ring the same call or hit the same clicks and order away his parts. With the scarcity, it’s creating some opportunities. I believe in every challenge an opportunity to shine. So that’s what we see in that number.
Yeah. I agree with that as well. And really when you think about it, this is unprecedented. Never before has so many people been willing to step outside of their comfort zone and their existing supplier network as right now. So it does represent a big opportunity, when we talk about the impact of these parts shortages, one thing I think of is something as simple as a sensor or switch can cause unscheduled downtime. And when I’ve talked to people in the industry, I hear stories just like this reports of trucks being down for weeks. Not days.
Yeah. Yeah. I have a particular story that it hits home closely. We have a local trucking company and he bought a new unit. He bought a new Peterbilt unit, probably bought in Kansas city. He was bringing it down and he started having issues with the DEF quality sensor, which made him have to get the unit towed pretty much. And they towed it all the way down to Miami, cost him an arm and a leg. Once it got here, he was in shock that he wasn’t able to get the part. He went to the dealer for the warranty and the part was out of stock. He calls me up saying, Hey, you know, could I find this? Do you have this part? I’m like, no, that’s a dealer only item.
It’s a very difficult part to source. And I kind of went out there and just tried to help them out. And I found online, they had that sensor. This is a sensor that cost I think it was about $180 from the dealer, but it was on national back order. It was going for $6,500 on eBay. And I was just shocked. I was like, I cannot believe that they’re trying to gouge at such a level of product that I guess whoever was selling it on eBay just knew that it was on national back order and he could charge whatever he wanted, which I mean, I’m not in agreement with that, but I mean, everyone has runs their business how they like, but it’s one little sensor. It pretty much brought them down to a halt. Everything else was fine. It was just the quality of the DEF is what was in, it bought the truck down five miles per hour. You had to get towed. So a little sensor, just a little quality DEF sensor. It wasn’t anything to do with the engine. It had nothing to do with, they couldn’t override it in the dealership because it would affect the EPA regulations that they have. So the truck was down for quite some time.
And this is something that when we look at the impact on fleets, they’re in a tough spot because if you like, for example, decide not to replace a part, just risk it. Then you break down, it could be $400 to $800 bucks just for the roadside assistance and towing. If you have downtime, like in the case, where it’s weeks, you think about an average cost of a thousand dollars a day, or more depending on the situation, for example, the vehicle is loaded. So really, if we are supplying part, there’s an opportunity for us to step up and buying the products on time for the fleets is virtually priceless and we have the opportunity to be the hero in the story and have the right part in stock. But in order to do that, we have to have an expanded supply network so that we can actually get access to the part.
So let’s talk about that, about how you overcome the parts shortage. It’s simple to say this, go out there and expand your supply network, but there’s some concerns that people have to have when they are looking for new suppliers and there’s some best practices that they should follow. So, Andres when someone’s looking at a new supplier, there’s some questions that they ask. So for example, are the parts gonna be quality? Are they gonna be on time? Is the supplier gonna be able to meet their needs? And what happens after they buy the product for the first time? Is there any after sales support from this new supplier, like these are the things that when I talked to you, you said were the most important. And what I’m interested in learning about is let’s just continue with our example of the sensors and switches. How do you at Sap make sure that the products you’re selling are of a quality that is gonna meet the needs of customers who are maybe buying from you for the first time?
Well, when we talk about the example of sensors, you want to make sure that the manufacturer actually is a sensor manufacturer for the automotive industry. And there’s a standard in the industry, which is an IATF 16,949, which is a specific ISO certification that says that they have their ducks in a line in regards to manufacturing a quality component, or at least have a quality system in place. And we go out there and we want to make sure that these sensors there’s many factor that make sensors for many different industries and they could make these sensors as well, but they’re not in tune with going out there, having a specific sensor tested on vehicles with the different variations that that could exist in the marketplaces, ambient pressures and all types of different things that could be tested on a sensor.
They don’t really think that way if they’re not specific to our automotive industry. So with a sensor, we look for that. If they don’t have that, not on the sensors, you might be able to get away with that with something a little bit more of a mechanical part, something that’s now a foundry part or something that’s gonna be machined that it could be made by someone that’s not specific to the automotive industry and there’s quality controls that have to be in place. We as a company, always go to our suppliers to learn where they should check the quality and everyone in an industry will typically walk you to the end of the line production and show you, here’s where we run our test on the product. We make sure everything’s okay. And then we package it. And we’re really not interested in that.
We like going all the way from the beginning of the line, which is where did this raw material that you are using? Where are these components that you’re using? How are they coming in? How are they being tested? Because the longevity and the life of a product really depends on the components and the type of raw material that’s being used to assemble it. Because you could assemble a product, go get to the end of the line, it could test out fine, but the life expectancy is gonna be based on the quality of the components that we’re used to assemble the product. So we go all the way to the beginning. You know, how do you bring in these components? What are your quality controls to bring them in? How do you test that? How often do you guys re-certify your own suppliers? Because other than our drum manufacturer, which only has one component, which is, you know, steel and mixing it and whatnot, every factory has other sub-manufacturers or suppliers that put into the supply chain. So it’s important to check out these quality management systems that every manufacturer has. That’s how we do it here.
And you’ve used the word automotive, but this is both applicable to the automotive and the commercial truck and equipment markets. And one thing that I know, I mean you’re involvement with the manufacturers and you actually physically going to the plants and being a part of that and having your own internal quality control. This is what enables you to be able to sell these products with confidence, not only in your house brands, but also of course, then your work in conjunction with some of the tier one manufacturers that are supplying the heavy-duty truck market. We’re gonna take a quick break. We’ll be right back. Don’t have a heavy-duty part number and need to look up a part? Go to parts.diesellaptops.com or download the app on Apple or Android to create your free account.
Looking for high quality fuel injection for heavy-duty applications? Having one supplier for fuel injection allows you to better serve customers by providing them with a complete line, which increases your sales and profitability. Learn more at ambacinternational.com/aftermarket. Quality is such an important part. And when you’re going to a new supplier, you need to be able to establish whether or not they have these processes in place and whether they’re following them, but there’s more to it than just the part, there’s also really the timeframe. So how do you make sure that your customers get the parts they need on time? Because again, the highest quality part in the world doesn’t do anybody good if we don’t get it when we need it?
Absolutely. Absolutely. I mean, well we always talk, we take it from very general perspective with the distributor or let’s call it the manufacturer, both of them for sake of this call conversation. We should always be asking, what is your fill rate? And they’re gonna give you a number. Then you’re gonna ask them, what’s your specific fill rate on this type of product. They’ll probably give you another number. Then you have to start asking a little bit more harder questions. And this is where you could differentiate the boys from the men in regards to asking, Hey, do you keep track records? Do you keep a record of how many times you guys stocked out, your lost opportunities? Are they being kept into a data where it could be reviewed? I want to see that data and if they don’t have that data, that means that they’re not keeping track of that.
And that’s important. We also go to the suppliers and we wanna learn their supply chain as well. We learn from them. You know, what is a sole-sourced component that you guys are using in the manufacturing? Do you have multiple suppliers? How do you prefer one supplier of the other? If they’re giving you the response that, you know, the preference is because this one’s cheaper, that might not be a supplier that’s gonna be delivering product on time. In today’s market, price is secondary to delivery. We need to put our customers first. We need to make sure that the product is available. As in, we always see things in the long-term, we’ve been in business for 40 years. We look at it as maybe this year we’re not gonna be hitting our numbers in regards to the gross margin because air freighting things in might hurt us, but we’re gonna have the product available and it’s gonna be ready for the customer to be able to take advantage of that.
And we don’t look at it as this one component cost me this much to bring it in, but we look at it more as how much satisfaction was given to the customer of being able to get it at the time that he needed. So open communication, the very simple one would be just, you have to maintain a constant communication with your suppliers. You can’t just issue, write a PO and forget about it, set it and forget it, how we used to, you know, pre -COVID and expect it to show up. There’s too many hiccups right now in the supply chain to just do that. So we have daily follow ups with our manufacturers, with our distributors and informing them this is what’s happening, this is what we’re doing. If they tell us they have a problem, we have to become part of the solution as well.
So sometimes they’re, you know, Hey, look, I have this issue. I know I quoted you at this price. I could get it a little bit quicker, but we have to pay a little bit more, okay, go ahead. Do it. I approve it. So communications is critical in these moments of scarcity of products. And that goes from your supplier also onto your customers. You can’t just take customer POs in and not be informing them the moment that you get a delayed, because in the wholesale side of it, if a customer has a hundred pieces, you know, he might be able to source 20 locally, that very high price, at least he could get them. If you can’t get him those hundred pieces on time, you should be informing him. So he could go, you know, sustaining himself with those 20 pieces locally and paying a little bit more. But you’re informing him, not having him break his inventory. A guy walks in and all of a sudden, he doesn’t even have the parts to source it. Then you didn’t communicate that you weren’t gonna be shipping on time. So that’s critical.
It’s one thing to get it done once. It’s another thing to be able to accomplish this multiple times. So what steps does Sap take to support your customers after the sale is made?
Well, one of them, and it sounds really simple, but it’s based on the data. We tell our sales guys, when they’re out in the field, first of all, we love to have our guys out in the field face to face, we’re back at it. We really didn’t slow down too much during COVID, we were still going out wherever they accepted us. And we were just showing them the data to the customers like, hey, look, you purchased this part number from me. I see that you haven’t purchased it again. Why not? So sometimes they might come to you, hey, we haven’t put it into the system. We haven’t put it through marketing yet. We had a problem with the first part that we bought out of five. So you’re training the counter guys. You’re training the the guys on the phone, trying to explain to them that, you know, we’re only interested selling your part that you’re gonna buy again.
You’re only buying it once that’s not a sale. I mean it sounds good. Yeah. It’s exciting. It’ll bump up your numbers, but you really need the consistency. So we use the data that we have of that first time sale to make sure that it’s a recurring sale. Are you marketing correctly? Are you putting the correct attributes, the weights, the dimensions? Are you putting out the correct application for the unit? Are you putting the correct description on your price sheet to make sure that the product actually goes out and it sells more than one time because for us to sell it once it’s okay, but that’s not a long-term relationship that we build on.
Right. And really, I mean, right now we’re using sensors and switches as just one example, but because you have this wide breadth of product, your main goal is to have your customers be successful, because that means they’re taking care of their customers, which are the end users of the product, the fleets, the owner operators, the repair shops. And so if your customers are successful, then of course you’re going to be, and I love that about your approach. You know, one thing about depth of product and width of product, it’s important to kind of get a visual of what we’re talking about with your company. So I’m just gonna throw up a few slides here, and we’re just showing the, the sensors, just these, this is just sensors and switches, all the part numbers that you stock and have in stock, as well as these switches.
And then you start to think about all these SKUs, and then you start to think about your house brands with heavy-duty truck parts, drive lines, suspension, and steering, electrical components, cooling. You start to think about your other brands that you distribute. You know, there’s a whole list here for those that are just listening in and not watching, but there’s Grote and Goodyear and Haldex and Horton and Hendrickson, and the list goes on and on and on. So Sap is really in a great position to be able to support additional customers in the US market, in the Canadian market. And you’re there to expand people’s supplier network and you’re putting all of these best practices in place. So I think that is fantastic. Andres, if somebody wants to become a customer of yours, what’s the first step that they should take?
Visit our website at sapcorp.net/become-a-distributor/. As you’re putting it up right there. If you visit our website or you guys give us a call, we’ll send you guys a link. We want to get you guys set up and have product available. And for them to have a visual of volume or quantity, just so that people grasp it at any given moment, Sap carries over 10,000 pieces of brake chambers in stock, just brake chambers, over 10,000 pieces. So it’s not something that we carry, you know, 50 of this or 20 of that, or a hundred of this, we carry on the popular items, thousands of pieces, because we service 43 different countries. We are a wholesale to our distributors that have, you know, they typically have their 1, 2, 3, 4, 5 different locations and they purchase from us and we have to be able to service them with volume.
Yeah, for those just listening at sapcorp.net/become-a-distributor/ and I will make sure that links are in show notes and on all the pages. So it’s just a one easy click and that will put you right through to the Sap team. And I highly encourage you to include Sap in your supplier network. They are a friend to you in helping you get the parts from the heavy-duty parts report. My name is Jamie. I thank you so much for listening to this webinar and Andres, thank you for taking some time sponsoring this webinar and sharing your best practices. I think it was very, very educational and beneficial for our audience.
Thank you, Jamie. Thank you for having me and thank you for everyone participating in the webinar. We’re here to serve. That’s the name of the game, we’re here to serve you guys.