Today’s savvy contractors are well aware of the critical role parts purchasing and management play in fleet up time. The economics are very complex. Operating cost associated with parts is very high, but many fall short in creating efficiencies because of the pressures of keeping their fleet running and performing. Mistakes are costly and time-consuming.
In fact, the total operating cost and potential revenue loss associated with parts purchasing are significant and have a direct impact on bottom-line revenue and profit. Negotiating better deals with suppliers, adding new suppliers, and adopting best practices, can shave several percentage points off parts procurement, which significantly lowers the annual cost of fleet ownership. The recent rise of smart technologies that integrate with current operational “tech stack” are having a significant impact in decreasing overhead, on-hand inventory, increasing technician “wrench time” and making parts administration staff far more productive.
Depending on fleet mix and number of pieces, owner operators typically spend 3% of original acquisition cost on parts annually. You might not be able to lower the annual percentage spent on parts, but lowering overall acquisition cost is possible.
Costs associated with parts procurement don’t exist in isolation but are directly tied to other operating expenses – most notably service departments and technicians. Collectively, annual service costs typically add another 3% with servicing the fleet.
Parts purchasing relies on a mix of local knowledge, expert service technicians, a network of suppliers, internal finance & accounting staff, as well as efficient work order and inventory management applications.
Each step of the part procurement process is prone to errors. Especially if done manually without technology or innovation. Errors cause delays. Delays cause equipment downtime. Downtime increases operating costs and decreases revenue.
How can you reduce expenses in parts procurement & administration?
It’s easier than you might think. Owner operators can’t necessarily buy cheaper parts. The challenge is to buy better by trimming the inefficiencies out of the entire parts procurement process. Utilizing web-based e-commerce technologies that offer a single sign-on platform and current OEM content reduces cost by compressing the time spent on research and part identification. These platforms make it easier for the techs, fleet and parts administration, and the supplier to do business with fleet owners, which has a profound impact on lowering the annual cost of ownership.
As one fleet operator put it recently, “I can save $10 by purchasing $75 of parts from an alternate supplier. Or I can save $150 by shaving three hours of service technician time, which will additionally allow me to put equipment back out on the job more quickly.”
That’s 150 dollars in savings on a 75-dollar purchase, plus an increase in equipment productivity! What other form of purchasing can offer that kind of 200%+ “discount”?
SmartEquip is the only technology on the market today that enables manufacturers to electronically publish parts, service, and diagnostic information and intelligently thread this information into the current process and workflow of their customers. It ensures that technicians have the most up to date content and part numbers and are automatically fed the correct content for the machine they are working on, while simultaneously showing the equipment owner’s their suppliers’ relevant parts stock levels under their terms of service and pricing all in one place tied back to the work order and ERP systems. All of this information in one place integrated to the current process saves critical time and expense.
Now let’s make your whole business less expensive.
Because of SmartEquip, manufacturers and their dealers have helped make their customer’s operations more efficient in many ways. They have moved from simply shipping equipment and parts to delivering operational efficiency, increased technician “wrench time”, reduced errors and wrong parts by removing inefficiencies out of the “equipment lifecycle”, as well as lowered the overall back office costs of doing business.
Technologies like SmartEquip that support and enhance part transactions continue to save fleet owners more via service cost reduction and reclaimed productivity thereby reducing the annual cost of fleet ownership.
Trying to carve a few percentage points off your parts prices by looking for cheaper deals never works and never lasts. Using technology that works the way fleets operate will have a dramatic and positive impact on bottom line annual revenue and profits.
Reach out to SmartEquip today! Schedule a demo or make a plan to stop by CONEXPO booth S-60707 during the AGC Convention.