Learn about the guidelines for parts purchasing that fleets and parts distribution companies can follow to lower total cost of operation for the fleet.
HDPR Live #72: The guidelines for parts purchasing heavy-duty parts have changed. Digital technology and global supply chains have changed the business of buying heavy-duty parts.
What are the new guidelines for purchasing parts for fleets? That is what we will cover in this live stream. You can also get access to the Recommended Practices issued by the ATA’s Technology and Maintenance Council by becoming a member today. Visit TMC.Trucking.org.
If you would like to have a consultation about how to improve your parts system, visit HeavyDutyPartsReport.com/Consulting.
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Complete Transcript of the Episode
Welcome to The Heavy-Duty Parts Report. My name is Jamie Irvine, and today we are live! Very happy to have you with us today. We are back in studio. Last week of course there was no live on The Heavy-Duty Parts Report because we were in Las Vegas at the AAPEX show. Had a great time there meeting with clients and also expanding our network with meeting some new companies that we’re going to be working with very soon. Also had the great opportunity to be on Wrench Nation while in Las Vegas with Frank Leutz. And that episode of his show will be going live very, very soon. So happy to participate in his show and expose the automotive sector to some of the issues that we are facing in the commercial truck industry today. Being a live episode, of course, we want to incorporate you in the show so if you’d like to make a comment or ask a question, please do so, and I’ll do my best to get you on the show.
What are we going to be talking about today? Well, today we are going to be talking about fleet guidelines for parts purchasing. The parts world has changed the supply chain issues that we’re facing today, an acute impact of the pandemic, as well as the digital sales channel and the move to more digital technology as a more macro move inside of the industry with parts purchasing effecting both parts distributors and manufacturers, and also the fleets who use the parts. So things are dynamic, things are changing.
And today I wanted to talk about some of the best practices that have existed traditionally and how this new digital technology and supply chain issues are changing things just a little bit. So hopefully at the end of this episode, if you are a parts distributor, if you’re selling parts, you’re going to have a better understanding of what fleets are looking for and the process that they go through in order to make a decision as to who they’re going to buy parts from. If you’re a fleet, hopefully you’ll be able to pick up on some best practices that you’ll be able to incorporate in your business. So glad to have everyone with us today. Today, I do not have a guest, it’ll just be yours truly. So let’s get started.
So at the beginning of the entire process to look at, okay, we to buy specific parts for our fleet, one of the best practices that we talk about a lot on this show is to not just look at the purchase price, but to look at the total cost. And what does the total cost of buying a part involve? Well, of course we have to look at the purchase price first, but that is by no means the entire cost. There is also freight, handling, the cost of money, the space that part will take up on a shelf, utilities, things like that, all of those factors come into purchasing the part, handling the part, stocking the part. Then there’s the cost of installing the part. And then it’s like, how long does that part last? And if it fails prematurely, what is the cost of fixing that problem a second time? So this is where we’re always looking at purchasing high quality parts that are going to last a long time so that you don’t have additional labor and downtime, which by far costs the absolute most.
So that is really the starting point of a fleet who’s looking at purchasing parts. They’ve got to take into all of those things into consideration. If you’re selling parts, just understanding that should help modify the way that you go about presenting your solution to your customers. So you need to talk about the challenges that your customer experiences and you need to incorporate all of these factors into your value proposition, to the fleet. Now, when a fleet is ready to request a quote or issue a RFQ, they really should do some work ahead of time. So they need a clear understanding of the ground rules or requirements prior to committing to any one supplier. And so this is on the fleet to be able to develop this criteria. They want to get the perspective of vendors who know the process to help them maybe develop the requirements because there may be some blind spots. I mean, fleets are good at what they do. If there are transportation fleet over the road, that’s what they do. If they’re a vocational fleet, they’re logging or construction or agriculture, that’s what they know.
So getting vendors input on the RFQ before it is issue is something that can be very valuable. But of course the fleet has to realize that the vendor themselves are going to be competing for that business and therefore may be biased in some way. So we have to make sure we address that. And it is important for fleets to understand once they have the requirements of the parts, they have the requirements of the specifications of what they’re looking at the outcomes they’re looking to achieve, that they align those with vendors that are capable of being able to actually fulfill those. So vendor selection criteria then becomes very important. And regardless of whether we’re talking traditionally or we’re talking now, and in the future as digital technology is transforming the way parts purchasing is executed, these fundamentals are going to stay consistent and they are going to be something that is not really going to change moving forward the method by which we order the parts and how those parts are delivered and the way that we track parts and maintain visibility throughout that entire process is being changed by technology. But these fundamentals are going to stay the same.
Again, if you’re selling parts, you need to understand this perspective from the fleet. You need to understand what they’re looking for in the way of requirements and making sure that you’re aligning your value proposition in such a way that you are attracting fleets that are putting out these RFQs to include you in that list of people who will have a chance to quote. So some of the things in selection criteria that are very important to fleets is a volume discount based on the size of the fleet, fewer points to manage single payment options and, ways to leverage the relationship. This is the perspective of the fleets. This is what they are often looking to accomplish when they are selecting new vendors. And so one of the things that fleets also need to do is they have to be careful about locking themselves in with one vendor who then for whatever reason is unable to fulfill the requirements of the fleet leading to downtime. So there’s some big advantages to having multiple suppliers, including being able to leverage vendors against each other.
I remember my one of my mentors in parts, he always said that he had this fleet who would give a portion of the business to one vendor and a portion of the same business to another vendor. And the reason why really was that if one vendor let them down, they were able to shift purchases over and they had that flexibility. So oftentimes fleets, it’s very important to leverage relationships with more than one vendor, an aftermarket supplier, a dealership group, and maybe a third aftermarket supplier, just in case.
Now, once a fleet is ready to issue that RFQ, there’s some things that they are very concerned with. So one is parts identification and specifications. And with digital technology, this is going to become an even more important factor also with the technology of trucks and trailers themselves so rapidly changing parts identification is going to be of primary importance and from a digital perspective, how can those parts be identified accurately? And do they meet the specifications laid out in the RFQ? So this something that if you are selling parts, you need to really think about how you’re going to update your system, to allow the fleet, to check to make sure that the parts that they are ordering, meet the specifications and are identified correctly. So this is important to the fleet, and of course it’s important to the parts company.
And then now we’re talking supply chain issues, parts availability is of top of mind of everybody right now, this isn’t going to change in the future that much, yes, the supply chain issues may ease. And some of the acute pain that we’re feeling right now is hopefully going to ease as we finish out 2022 and move into 2023. But again, parts availability is of prime concern because the last thing you want is a truck to be down for five or six days, because that part where they’ve lost visibility of that part, and it hasn’t arrived on time for whatever reason. So fleets are concerned with this people who sell parts need to try to think about how they’re going to create a system where their customers can maintain visibility of their parts at all time. This is a very, very important factor and is going to be leveraging technology in combination with some innovative approaches that are going to be able to enable parts distributors to do this for their customers.
Brand specification is also very important. So if a fleet specs one item and then that particular brand is not available, is there an alternative brand that is acceptable, that has been detailed inside of that RFQ? That is something that a fleet should do because it will enable them to maintain more uptime and it will give them options should there be further supply chain disruption. So one of the things too, that’s important is parts history. This is where the digital technology is really helping, parts distribution companies to provide fleets with more information at their disposal. So if you have the ability to go to your supplier as a fleet log in and see your history, that can be very valuable. It can save a lot of time. And that is something that in the past, historically, it had to be done almost manually. You’d have to phone your sales account manager or the parts department, and you’d have to say, Hey, listen we’re having an issue with this turbo. I seem to remember that a few months ago we changed a similar turbo on a truck that was the same year/make/ model, can you check that for me? With digital technology, that information should be available to the fleet on demand 24/7. It’s very important to move towards that.
And of course, shipping locations is something that fleets are very concerned with because if they are operating regionally or nationally, they want to partner with suppliers who have locations that can serve their needs too, regardless of where the equipment is, as it travels and does the job that it does. So this is something from a parts distribution perspective. If you’re a company that sells parts, you’ve got to know what your limitations are on service locations, and you should really be targeting customers who you can serve in that region. I’ve seen in the past salespeople spend a lot of time trying to get business that maybe is national with no capacity to serve nationally in hopes that if they get it, they’ll somehow be able to rise to the occasion, but that rarely ever happens. So it’s important for parts distribution companies to understand their limitations and to go after customers that they are able to serve at a high level. If they are national, how does that program look from the fleet’s perspective?
One of the big considerations of course is warranty, especially if they’re going to use aftermarket parts, how does the warranty work nationally if they leave the region where the repair was done? So these are all important things. And of course, with digital technology, the visibility of your locations and the ability for drivers to be able to find your locations easily and to order parts when they’re on the road, or if there’s a mobile repair event, there’s a roadside repair that’s needed. Is all of that information available to your customers? I think the big shift with digital technology is just making more information available, making the buying experience, not just at the RFQ level, but then downstream as things happen in real time, trying to remove friction from the buying journey for the customer.
Another big issue is core. If there’s a reman product involved and there’s core charges and the return how do you get those cores back to the right location? What are the requirements to return those cores? Is it easy for the customer to return the cores and are there core charges being refunded in a very quick and timely manner that is something that one of the biggest complaints I hear around cores is I get charged right away, but it takes 60 days to get my credit. So what’s the strategy there, fleets are considering this, and as a parts distribution company, if you’re selling to those fleets, if you’re competing on an RFQ, think very carefully about the core strategy, that’s an area where you may actually be able to win some business just simply by making that process easier for your customers.
What about a dedicated account representative? One of the things that I hear a lot of salespeople say about digital sales channel and e-commerce and things like what’s that going to do to my job? Well, the reality is, is that major accounts that are being serviced by a parts distribution company should have dedicated staff to manage that account and make sure that post being awarded an RFQ, the promises made by the parts distribution company are kept, and it’s not if there’s going to be a problem, but when there’s a problem, there’s someone that can address it quickly. This is very, very important. What about your return policy? That is another area where you can remove friction from the buying experience for the fleet, and you might be able to differentiate yourself for being a supplier to a fleet because you have made the core return and the return policy very easy.
And also when we talk about payment and credit terms, and we talk about access to your system all of that is becoming a major pain point for fleets. There is a problem where we just don’t have enough people anymore. So if you, as a parts distribution company can make that information accessible to the customer electronically, on demand. If they can get access to all of that information, if the credit terms are favorable, if all of these pieces are in place, these are the things that, that fleets are encouraged by people like the TMC, the Technology Maintenance Council with their recommended practices to consider when preparing to change vendors or bring on a new vendor.
So inventory management is another factor that is of big concern. And of course, at one point it was really electronically, it was just EDI technology, but now things are changing. There are APIs, and there are other means by which to allow a fleet to get access to inventory levels pricing, and to be able to purchase electronically without ever talking to anyone in person, you know, before the pandemic, 49% of heavy-duty parts were still purchased with a phone call according to McCain company. But I think as the pandemic has worn on, those numbers are changing. It’ll be interesting to see what the new data is. And certainly as time goes on, that is just going to increase the amount of parts that are purchased electronically. So connectivity, the systems by which you’re using, how easily is it for the fleet to connect with the parts distribution company, what software is available. Those are all big considerations.
So you can see we’ve been talking now for 17 minutes. We started at the beginning of our conversation talking about the purchase price. And then we said, that’s not the only thing that is considered. And now we’ve talked for 16 minutes about all the other kinds of things that fleets should be considering as, as a best practice for when they are selecting vendors. And so as a vendor, when you’re trying to sell heavy-duty parts to a fleet, you should be considering all of these things in, and incorporating, all of these things into your value proposition and be able to articulate that in such a way that it allows you to win more business. There’s other factors that we can talk about warranty, technical assistance training. This is all support after the sale. And I think that that is a huge opportunity for many parts companies to be able to differentiate themselves is it’s one thing to be able to have a competitive price and have the service locations and be able to deliver the product. It’s another thing to create a frictionless buying experience where the customer never loses visibility of the parts they order and are well-supported after the sale with technical assistance and training. This is something where it is very important to the fleet to consider all of those factors and not just look at the purchase price. So as much as I’m encouraging parts distribution companies to really think about this fleets, you’ve got to resist the urge to just look at the purchase price and consider all of these additional factors that create cost for you if they are not handled correctly.
So I hope that this has given everyone a few things to think about. This is some of the consulting work that I do as a heavy-duty parts consultant working in the heavy-duty truck industry. If you would like to talk about working together on helping you develop your value proposition as a heavy-duty parts company, whether a manufacturer or if you’re a distribution company, maybe you’re looking at ways to improve your processes and your systems, and be able to attract more customers. If that is you and you would like to work with me directly, then I would love the opportunity. Head over to heavydutypartsreport.com/consulting. And we can have a meeting. You’ll learn more about my consulting offer there, and you can easily schedule a video call with me so we can talk about your specific situation. I would love the opportunity to talk to you.
Next week we are going to be live again on Friday, but we will have a guest. Cody Skinner is coming back from HTS Coatings, and we’re going to have a really in-depth conversation about the circular economy and what that circular economy not only is, but how it can impact our society in a very positive way, dovetailing into the concept that the trucking industry is the backbone of society. So how does that all come together and benefit society at large? That’s the conversation we’re going to have next week. Have a great weekend. Thanks for tuning in, and we’ll talk to you later. Bye.