For any business, fleet consolidation involving customers of yours can be both exciting and scary, particularly when it comes to parts. Obviously this could lead to increased sales and profits, but you aren’t sure that you will be able to stock enough parts to handle the extra business. Maybe you have concerns that a larger fleet may mean you have to work with parts you aren’t as comfortable with. For that matter, maybe you are worried that this consolidation will mean that you will lose that fleet’s business altogether, possibly leaving you with obsolete parts on top of the lost revenues.
For better or worse, dealing with this issue is a reality these days. Fleet consolidation seems to come in cycles and right now, we are in a period where there is quite a bit of consolidation. So it is important that you do everything in your power to position your business to be a beneficiary of consolidation and not a victim of it.
The items highlighted below will get you thinking about areas that you may want or need to address to prepare your parts department for when you are faced with fleet consolidation.
This additional volume should afford you some bulk purchasing opportunities that you don’t currently have. With this buying power you might be able to get some business that you currently can’t compete with. Could this buying power allow you to increase margins on business that you already have?
Calculate what these opportunities could mean to you in actual dollars. You might be able to price more aggressively with this one customer than you think, allowing you to become more profitable in your overall operation.
This consolidation could bring in some units that are somewhat unfamiliar to you. There might be different makes and models, or they may just contain certain components that you haven’t dealt with before.
Where will you get these parts? Will the pricing from your source allow you to be competitive? Is there an opportunity to source parts from a different supplier based on this new volume of business?
Be sure to think about stocking parts for this possible increase or change in business. Since these new parts may not be parts that you normally stock, it’s easy to make the decision that you should not stock them. But that may not always be the best decision. Track inventory turns specifically for these new parts. This will help you determine if you should stock them or not. It is very expensive, both in terms of money and time, to source parts as they are needed rather than pulling stock from the shelf. By stocking parts for this new opportunity, you will be able to turn the work faster for this new customer, reducing their down time and increasing your profits.
With the potential increase in stock, you may need to take a look at your facility. Is this an opportunity to add on to your facility? Maybe you couldn’t justify it before, but now with an influx of new parts business, you can move forward with plans to increase the size of your warehouse.
There is nothing that can change the fact that fleet consolidation involving your customers will cause some uncertainty. But what is in your control is properly preparing your business so that you can take advantage of consolidation rather than letting it take advantage of you.
Karmak, Inc. is a leading provider of business management solutions for the commercial transportation industry. With more than 30 years of heavy-duty experience, we offer a unique approach combining innovative technology, strategic advice, and best practices. Our success programs produce measurable results by improving ROI, mitigating risks, and achieving operational excellence.
Serving more than 1,800 locations across North America, Karmak is an employee-owned company with headquarters in Carlinville, Illinois.