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The Impact of Parts Shortages on Fleets

Learn about how current supply chain issues and the impact of parts shortages are affecting commercial fleets.

Episode 108: The COVID-19 pandemic has created widespread shortages for many things including heavy-duty parts. How big of an impact is this having on fleets and what can they do about it? Gerry Mead is our guest, he is the Executive VP of Maintenance and Equipment at Hub Group, and he provides us with the perspective of the fleet because he is experiencing it first-hand. This interview was originally aired as a livestream on HDPR Live.

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Complete Transcript of Episode:

Jamie Irvine:

You’re listening to the Heavy-Duty Parts Report. I’m your host, Jamie Irvine. And this is the show where you get expert advice about the heavy-duty parts you buy and sell and keep you informed about what’s happening in the industry. Did you know that every Friday we go live at 10:00 AM MST, 12 PM EST? You can follow us on YouTube, Facebook, or LinkedIn to watch our live broadcasts, but you can also head over to heavydutypartsreport.com to check out the replays of our live presentations.

Today on the podcast I’d like to share with you one of the live interviews that we’ve done recently because I thought that it was something that would be of interest to you. I hope you enjoy this replay of a live interview we did not that long ago. And I’m excited about having a conversation about the shortage of parts and how that is impacting fleets. I’ve still got my email open here because I just got the email from our guest today with his bio. I want to go over it a little bit.

Gerry Mead is a maintenance and equipment executive vice-president for a company called Hub Group. And he’s here to really represent the fleet’s perspective on this important topic. So let’s talk about this issue of the impact that the shortage of parts is having on the fleets. And as I said, our guest today is Gerry Mead, executive vice president of maintenance and equipment at Hub Group.

Gerry is started his career in the Marine Corps and he proudly served his country for eight years, both in the U.S. and abroad. Gerry has received a lot of accolades, including the international service diamond club award in 2002, fleet maintenance magazine maintenance scholarship in 2012, HTT magazine fleet heavy-duty trucking innovator of the year 2016, and Tennessee trucking association maintenance professional for 2017.

Gerry also earned a certificate in maintenance management for the University of Kansas, and he is a graduate of the executive leadership program for the University of Tennessee. So Gerry is someone who has a wealth of experience, a wonderful track record, award-winning, and we’re so very happy to have him on the podcast. Gerry, welcome to the Heavy-Duty Parts Report. So glad you’re here.

Gerry Mead:

Hey, thanks, Jamie. I appreciate the invite. This is a great program and I like to listen to it and I’m glad to be participating for you today and all of our listeners.

Jamie Irvine:

Well, thank you very much for that. So let’s get into it. COVID-19 has created all kinds of different problems for the world and in trucking, we have not been exempt by any means, but before we talk about that, for those who don’t know how many units does Hub Group manage, just to give us a perspective on the size of your fleet.

Gerry Mead:

Well, I’ll tell you Hub Group, we have a lot of solutions out there and it takes a lot of assets. So that includes about 38,053 intermodal containers. We have a network of 4,000 drivers, so that translates to, you know, that many trucks we have about 6,000 units of trailing capacity and really with 27 terminals that keeps growing and we really have a growing fleet of temperature control containers also, Jamie. There’s a lot of equipment we have floating around out there to support our mission.

Jamie Irvine:

So with that much equipment anything that’s happening in the industry, you guys feel directly and COVID-19 has had a tremendous impact on the supply chain. And we’ve seen this everything from things being shipped from overseas to also just the availability of goods, you and I were talking about that before we went live. So I’m kind of curious what impact has this had directly on the fleet’s ability to maintain its equipment.

Gerry Mead:

You know, fleets, most of them, it all comes down to operational impacts first, but to me and everyone out here, you know, when it comes around parts and equipment, it translates to the equipment assets side and really encompasses a few things. New equipment delivery delays, which also boils down to your current equipment availability.

And we get affected, we’re starting to see national back-ordered parts and really seeing, you know, making a change in PM interval because, you know, the lubrication side, believe it or not, is starting to feel some impact from some of its additive packages.

So there’s some, some allocations going on there and there’s been situations Jamie, where we had to fall back to some secondary product choices. But you know, one thing it’s done to us is really let us become more agile and more proficient, we’re re-looking at everything and we’re trying to squeeze out every bit of waste. And that’s really what the impact COVID 19 is having, is really a re-look at things.

Jamie Irvine:

You know, as you talk about that, and you’re describing all these different areas, I mean, there’s the macro of an entire unit not being available, like you said, new, that means you got to hold onto older equipment longer, but that creates this trickle-down effect. And I’ve heard of, you know, I hadn’t heard of additive shortages, but I’ve heard of resin shortages, which means that manufacturers are having difficulty putting out products with plastic.

There’s so much plastic and so many different parts. And as you’re making these decisions and you’re having to reevaluate what you’re doing, when you bring in a secondary source, how disruptive is that to the system that was already established with those maybe national suppliers that you were using before?

Gerry Mead:

It’s really disruptive. I mean, it can affect some relationships if you don’t have this secondary relationship. A lot of times your primary supplier may have a secondary solution or they may not, but it changes a lot of things. I mean, like you said, you said there’s a trickle-down, but it comes down to you make choices in the beginning for a reason, it could be safety reasons, it could be a quality issue. And that’s where you start getting nervous. You know, techs are used to certain things.

I mean I used to be a tech, so we’re a creature of habit and that’s where the effect comes in, or even a driver. I mean, a simple change of your glad-hands, you know, especially the handles and they’re used to one kind and now you’re going to switch to another because of availability and that creates some issues in their mind and really now you have a whole lot of questions you have to answer, which you really didn’t want to, but you know, you have to at this point, so you can keep equipment on the road.

Jamie Irvine:

And there’s some of my friends over at Grote they were telling me the resin shortage means that for one particular year Grote lights may have a different color rear cover because they had to change the resin composition and the color because they ran out of what they normally use. That’s not really that big of an impact, but a missing sensor, and now that truck is stuck in your shop for three days because you’re waiting for it and it cannot go without it. That’s a totally other kind of economic impact.

Gerry Mead:

And you’re exactly right because what people think is yes, downtime has huge effects on your ability to generate revenue. But when you look at it and you understand what’s going on, I mean, there’s a lot more things that people don’t think cause it, because like you said, it’s macro and that could affect a driver, you know, equipment availability and driver shortage comes into play.

You have to keep those guys happy. And anyway, one of the main things to keep them happy we can do on our side is to keep the truck rolling and generate revenue because that also equals a paycheck to that driver at the same time. And you gotta think of those things as you make choices back to that secondary supplier, you gotta make sure that quality is still there because you’ve got to mitigate the events that occur over the road every day and keep that driver rolling.

Jamie Irvine:

Yeah. When I was a sales account manager, I was telling you, I worked at one time for Truck Pro and I remember we were working with a fleet and they had a transmission issue that we were able to solve quickly. And I got a note from the driver’s wife because of the economic impact it had on her husband and their ability to provide for their family. So, I mean, it’s one thing to look at the P and L statement for the company. But it’s also to think about the human factor in all of this, of the people that are impacted.

Gerry Mead:

And that’s correct. What people don’t look at is, you know, they think of downtime of, you know, if your truck’s under warranty, I hear a lot of dealers say, ‘well Gerry, it’s under warranty’. Well, let’s talk about the other items. I have to repower a load. So that tells me to get a truck in there. I gotta move a driver around, you know, or put them in a hotel that’s cost there, that there’s a lot of other undocumented costs. And they’re just looking from a short side in anything from a fleet perspective is we’re looking at the whole picture.

You know, we have a person involved, we have a load, which is a customer, which when you think about the demand because we created it by e-commerce of saying, ‘hey, I want this product, I want it now’, now that product’s late, there’s penalties there, you could lose a customer. So a down piece of equipment causes a whole lot of issues, besides that it’s just down and we have to pay for something where it’s under warranty. And that’s, we try to explain it and say, hey, it’s a lot more than just, I don’t have to pay for repair. There’s a lot of other costs involved or possible issues that creates for a fleet.

Jamie Irvine:

I’ve been saying those kinds of things for a long time, but I’m so happy to have you on the show from the actual fleets perspective and backing me up. So I know I’m on the right track. Would you like to advertise on the Heavy-Duty Parts Report? Head over to heavydutypartsreport.com/contact and fill out the form. Spots are limited and on a first come first serve basis.

You mentioned earlier how important relationships have been. We don’t want to just talk about the problem. We also want to talk about how to deal with it and anybody watching, hopefully, you can take something away from this. So who do manufacturers, when I say manufacturers, whether it’s the truck or the parts for the truck, who do they prioritize when there are shortages? Because this plays into how important relationships are.

Gerry Mead:

Well, I can tell you, I mean, tier-one suppliers are going to prioritize OEMs first. I mean, that’s just the fact. They’re going to go, because the competition there is so fierce to make sure you get that standard position as we call it in the industry. I want to be standard on that vehicle because that generates a lot of aftermarket sales, right? You get the standard that this goes to a lot effects, a lot of WMDs and across, but in the end, after that, it still comes down to relationships in my opinion.

I had a good friend of mine, he’s in the aftermarket, Pete Joy, I don’t know if you’ve ever heard of his name before, he said one thing and I just believe in it. And some people will argue, is people will buy from people and they always will. Even when you think about the shift to e-commerce, you know, if I’m making an e-commerce load today or an order today, and I push it and say, Hey, I need a NOx sensor.

Well, that’s going to go to somewhere and it goes through, and you’ll say, I need a knock sensor, but that doesn’t get me expedited. I mean, talking to that person, like you said, you worked for TruckPro and if I needed something, okay, I have an e-commerce platform, I ordered it, but that’s not gonna get any faster. But if I need it fast, I’m gonna pick up the phone, say, ‘Hey, Jamie, I really need this and I need it in the next hour.’ And that’s the next shift that people don’t understand, is downtime used to be measured in days.

Today, it’s measured in time. And it’s the same as when we look at receiving a product, we’re pushing a button in some cases, or we’re on our phone in an app saying, ‘Hey, I want to order this’. And we’re pushing a button there. And our expectation is today that it’s going to show up in 24 hours, right. Tomorrow, our expectation is it’s going to show up in hours. That’s how we’re at with trucking.

I’ve seen it in my time in the industry, expected on time was 90%, today our expected on time is 99%. So we have to be that flawless, and any breakdown or event along the way where I have to wait on a part or there’s something that they don’t have, be it a labor shortage, that all becomes very critical because a lot of the loads, if you’re not a truckload, you can have several stops if you’re doing an inland delivery. And once you miss one stop it’s probably more than likely you’re going to miss a lot.

So now you’re late on a lot of different loads and that just puts you in a precarious situation. And that’s why the relationships and that people from people, even when the e-commerce, which I believe is going to happen, but you’re still going to have a people proponent to this business, always in my opinion, and that to me is one of the most important things to have, is those relationships with the folks, with the person you’re buying from or dealing with.

Jamie Irvine:

Yeah, a hundred percent, Steve Hoke is the CEO of Diesel Emission Service. They own the Red Line Emissions products brand and filter Therma DPF cleaning equipment. He is appreciating our conversation. Thanks for following us, Steve, I appreciate that. As you’re talking about that, it makes me think of my mentors who were in sales in parts, and they would go on a road trip and this is maybe 40, 50 years ago.

They would go on a road trip. And when they got back from the road trip, they would call the office on Friday and get their messages and then fax machines came in and cell phones. And by the time I started in the industry, if you didn’t get back to someone that day, you lost the sale and now we’re talking minutes or, or just a couple hours.

And so technology definitely has been used to speed up the expectation as you brought out. But the relationship behind that is still important. And I see that all the time, you know, people will buy recurring things e-commerce but then, like you said, when they have a problem, when I was a sales account manager, I spent half my day just running parts because some of my best customers had, you know, equipment down. I need that part, can you get it to me? And it’s like, absolutely. Because that’s what’s gonna win the day and keep that customer happy.

Gerry Mead:

And you’re right. So I mean what are you represented? Because, I mean, that’s the type of service that I want to get the guys. I mean, there’s several guys and they are the best and they are the ones you get repeat orders and repeat business. And that’s the people part is that guy that’s willing. I mean, I’ve had guys Jamie and really it’d be on a Sunday and you’re having conversations, right? Because trucking is 24/7 and you’re making a call and I’ve had guys leave Sunday night and go grab something from a PDC or from a warehouse and then have it there by the next morning.

And that’s the type of folks that you want to deal with because you know, it don’t matter what product you have or tool you buy you’re going to have an issue, but it’s true, who’s by your side when you’re having that issue? Those are the people that I aligned with and that I want to do business with. And then I’m willing to reach in my pocket and give some dollars to because they have to make a living too, but they understand my part of the business and what we need to do to make a living and how they get paid. And really that’s the true partnership, is when I look across at a guy and he’s basically an extension of my team, that’s when you know, there’s a seamless relationship. And you’re going to have arguments too, but it’s how you come out of those arguments that matters the most.

Jamie Irvine:

Yeah a hundred percent. Don’t have a heavy-duty part number and need to look up a part? Diesel Parts is a cross-reference and parts lookup tool that makes it easier to identify heavy-duty parts than ever before. Go to parts.diesellaptops.com or download the app on Apple or Android to create your free account. One thing we can count on is things are always going to be dynamic and are going to change. And you know, really the transportation industry is usually the precursor to what’s going to happen economically. How long do you think it’s going to take for the supply chain to catch up? Because really COVID is this like once in a hundred year kind of event, it created such a unique situation in the last year and it’s affected every level of the supply chain. When will this normalize, what’s your thought on that?

Gerry Mead:

You know, when you think about it and we were chatting about this before the show a little bit, but you got to look at a few things. In my opinion, one is to take rates and what the capacity is going to be, that manufacturing side because that’s going to dictate what you have, what you have going on is how you’re going to get that catch-up mode. Because if the take rate, the new equipment remains high, manufacturing doesn’t pick up, well, they’re going to feed there first. So your aftermarket is going to suffer. And like you said, you look at it holistically. Now I’m running the equipment longer, that leads to more issues. And that’s going to take a while to catch up. And I think just now, as I’m looking at some items is we’re just now getting close to the inflection point.

So we’re about to get to that point where things are going to cross and something’s going to give. And when that happens, I think we’ll be more likely to predict when we’ll catch up. And right now, if you would ask me what I think, I think we’re well into the second quarter of next year before that catch-up even occurs. Some people will say third quarter of this year. I don’t know, from what I’m seeing because there’s new items that are hitting like the oil items is new. I mean, we just had that call last week with the oil manufacturers about the additives that go into all brands of oils and, and really how that’s only at a certain capacity, which now is going to affect the amount of oil hitting the market. And there’s other items hitting every day.

That’s the troubling part is you can’t really predict coming out of this one. And really, I just think we’re getting to that point where, okay, now we’ve hit it, well, then we can predict more adequately at that point.

Jamie Irvine:

So what advice do you have for your fellow fleet maintenance managers out there on how they should move forward from here? I’d love to hear your perspective on that.

Gerry Mead:

You know, most everyone at this point has dealt with some key words, right? You know, we’re programmed six Sigma Kaizen principles, whatever you want to call it, it’s basically comes down to everything, has a place and everything should be in its place. I mean, it’s pretty normal, but you need to really take a look at your operations again, a really hard look, even though you went through all these steps, you need to look at it if you want to do five Rs or whatever you want to do is this step back and say just because that’s what we developed or that’s how we’ve always done it is that really what’s right. And I’ll give a key example is really when you think about a technician’s time, everything comes down to direct labor, idle time basically or training time.

So how do you get more in the direct labor output and how do you manage his time? So every step he takes away from actually turning a wrench is a waste of time. So how do you look at reducing those steps? And one of the things that we saw in that we changed is usually you have the technician with his repair order. He goes to a parts counter. He gets his parts.

Well, now we did it opposite, we said, Hey, we got a parts person why can’t we know what he needs or where he’s at and then make sure the parts are there. So now instead of him walking all the way to the parts room, to where, we’re human, I’m going to stop by, I’m going to chat with you, right? I say, ‘Hey, Jamie, what’s going on? How’s the kids’. Well, that’s minutes right? And I’m going to stop by and see someone else. But now if I limit those steps, how much more productivity do we gain?

And that’s just a simple thing or you know, where you place your tools, which everyone has done that already, but are they in the right place truly? How far do I have to go to get something? Do I have a cart with all the tools I need for a PM on there in each PM bay? What are some things that you haven’t done and just re-look at it, position of your parts? Do you got all your parts and the parts room, but now do you know how many PMs you’re going to each day? So do I stage those kits in that PM bay? So I can limit that walking and capitalize on that time.

And I think that’s one of the key things and then train. You’d be shocked on besides training on how to make repairs or, how to use a tool. I mean, how about training on really on lean itself? We as managers, we do the training, but do we really trickle that down to team? Because what they need to realize is they have some of the greatest ideas.

They are doing it every day and we’re not, and what they need to know is even a small change that you would think is simple, you know could save time. And that could translate to the less downtime, which then less downtime equals more revenue. I mean, that’s how you gotta look at is it’s everything goes back to revenue. If you’re not making money, you’re not getting paid and everyone likes to get paid, I’m sure.

Jamie Irvine:

Continuous improvement is the name of the game. You’ve been watching the Heavy-Duty Parts Report. I’m your host, Jamie Irvine. And we’ve been speaking with Gerry Mead, executive vice president of fleet maintenance at Hub Group. Thank you, Gerry so much for being a guest today on our show.

Gerry Mead:

You know, I appreciate it, Jamie. And you know, you’ve got a great following and like I said, I like to listen to your show and I hope everyone else tunes in. There’s a lot of things you can learn here on your show. I mean, I watched the DPF version you had which was a fantastic version which is one of the key issues, I think for those fleets, you know when they came out. But I appreciate you having me and hopefully, you’ll have me back again one day on some other topic, and thanks from the bottom of my heart. And I wish everyone luck out here and let’s get through the pandemic and let’s get the economy and the things back on the shelves and improve trucking and let’s keep the wheels rolling, man. Thanks.

Jamie Irvine:

You’re always welcome back. Thanks, Gerry. We’ll talk to you later. Thank you so much for tuning into this week’s episode of the Heavy-Duty Parts Report. I’m your host, Jamie Irvine. And I just like to remind everyone to focus on cost per mile. Let’s keep those trucks and trailers rolling.

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