When Bedford Genuine Parts, a truck after-market supplier, wanted to streamline its supply chain, it recognized the need to address issues of cost reduction and improved speed of response if it were to continue to compete effectively in the fiercely competitive commercial vehicle market.
Bedford, though no longer producing commercial vehicles, remains one of the most enduring brands in the UK truck scene and currently supports a 160,000-strong vehicle fleet worldwide. This also includes a British Army vehicle fleet of 9,000 for the UK’s Ministry of Defence (MOD).
Bedford’s previous logistics processes had been somewhat disjointed with differing systems managing separate stages of the process. “As a result, this caused blockages and a lack of visibility to key decision-makers,” explains Phil King, General Manager of Bedford Trucks. “This slowed down the decision-making process, which meant we had to maintain higher inventory levels. This drove up cost.”
Bedford’s task is to effectively service its established network of dealers, distributors, and major customers in the UK and export markets. “It was important to find a company that could both streamline the logistical processes of storing and distributing automotive parts and understand how to handle replenishment and inventory control,” he adds.
Another requirement for the provider was to be able to effectively manage the demand chain between dealer and export house to enable Bedford to receive and service orders quickly and easily, which King says is no simple task given the large number of alternatives and part number changes involved.
“In short, for us a top quality end-to-end logistics infrastructure was essential,” King explains. A key to the choice of supplier was the fact that Amethyst had experience working with the MOD and came on strong recommendation, he reports.
Reducing Inventory Levels
Much of the early discussion, which took four months, centered on Bedford’s desire to create a coordinated supply chain with stock flowing from replenishment through to consumption. “Changing the replenishment parameters has improved significantly both stock turn and service levels, and the level of customer credits have similarly dropped dramatically,” says Fred Potter, Managing Director of Amethyst’s Logistics Division.
Bedford had benefited from a better flow of information and faster order turnaround. King says, “Through its streamlined management of our database of over 8,000 individual parts, Bedford has been able reduce inventory levels and to drive down costs.” For example, previously, the MOD had to carry large stocks of spare parts. Now, Bedford holds the top 250 parts, guaranteeing permanent and immediate availability. This saves the MOD — and the taxpayer — considerable cost.
He explains that Amethyst’s support systems provide the efficiency and cost savings of a modern, high-quality shared-user facility, yet are flexible enough to meet the needs of each individual client. “We get the benefits of commonality without our identity being diluted within a generic logistics solution,” he says.
This includes the setting of service delivery parameters for each buyer, which the parties review annually. For example, Amethyst can flag critical parts to ensure those stocks are permanently maintained.
According to King, another area in which Amethyst’s inventory and supply chain management expertise has proved valuable has been in sourcing parts from tier one and tier two suppliers from the UK and overseas.
Under a Post Design Service contract with the MOD, Amethyst provides additional technical support, sourcing, and initial trials of any new technologies or equipment that may be required to be fitted to the existing fleet.
Like all businesses, Bedford has to manage fluctuating demand, but King says that Amethyst’s ‘pay for what you use’ approach is ideally suited to Bedford’s needs.
Only Paying for the Storage Space It Needs
With Bedford’s footprint in Amethyst’s warehouses already minimized by improved inventory control, the company only pays for the storage space it occupies at any one time; it is charged at a ‘per meter’ rate which appears on a regular systems-generated report. Other charges, such as labor for receiving, picking, or repacking, are similarly charged on actual activity rates.
“As a result, the proportion of fixed charges is low,” confirms King, “This would not be the case with many third-party logistics suppliers, or if we maintained our own warehousing facilities.”
Looking ahead, both companies see increasing opportunities for outsourcing. “Swapping fixed for variable costs makes sense in today’s roller-coaster business world,” argues Potter. “It enables companies to concentrate on what they do best.”
King agrees: “For many customer-focused businesses, managing the marketing and sourcing is quite enough — it makes sense, therefore, to let specialists handle the logistics hassles in the middle.”
Bedford is joining other UK companies who are outsourcing their inventory and warehouse management. Research published in August 2003 by Nelson Hall, the Berkshire UK-based BPO research firm, found that 80 percent of organizations in the UK require assistance in both supporting and optimizing supply chain systems. “Since 2001, businesses are either moving towards optimizing existing supply chain management technology investments, or outsourcing these functions. BPO capabilities are becoming increasingly important,” says John Willmott, a senior analyst with the firm.
Lessons from the Outsourcing Journal:
- Third-party logistics expertise offers buyers improved information flow and faster order turnaround–things they could not do themselves.
- Streamlining the supply chain allows customer to rapidly analyze their stock profile and significantly improve both stock turn and service levels.
- Eighty percent of UK organizations need help in optimizing their supply chains, according to Nelson Hall.