Motor Coach Industries Conquers the Complexity of Service Parts Planning

Motor Coach Industries (MCI), headquartered in Schaumberg, Illinois, is the largest manufacturer of coaches for the tour, charter, line-haul, scheduled service, and commuter transit markets in the U.S. and Canada. To support its growing business and wide geographic presence, the company operates numerous sales and service centers across North America.

MCI is also the industry’s leading supplier of aftermarket parts for most makes and models of coaches. Effectively managing MCI’s parts, and ensuring that proper stocking levels are maintained at all times, is therefore critical for maintaining the company’s well-known reputation for high quality product reliability and customer service.

The Challenge
MCI’s parts inventory is extensive, consisting of more than 200,000 individual items. Of those, 40,000 parts are active, meaning that they have associated sales activity sometime during the calendar year.

"The sheer magnitude of our inventory is staggering," stated Stan Dzierzega, director of supply chain at Motor Coach Industries Fleet Support. "Planning is especially challenging when you consider that we have 13 distribution centers, each with high service level expectations."

An industry veteran and long-time supply chain consultant with deep knowledge in parts management and planning algorithms, Stan Dzierzega was hired by MCI about seven years ago to bring order, efficiency, and predictability to a challenging and struggling parts management function.

"The planning tool we were using at the time of my arrival was designed for a hub and spoke distribution strategy," said Dzierzega. "The solution had its merits and was excellent for environments with high volume transactions, but for us, that wasn’t the case."

Dzierzega started by changing the planning strategy to focus on correctly forecasting and planning slow-moving parts in more of a hybrid regional distribution network. "We were experiencing just a few turns a year per product, and the demand for most of our parts was unpredictable and intermittent," said Dzierzega. "The challenge of forecasting parts with intermittent demand using the old planning software meant that we were yielding breakeven results at best."

This problem was manifested in overstocking some times, and under-stocking at other times, which meant increased transportation ‘rush’ charges, delivery delays, and compromised customer service. "In addition, most of our parts forecasting processes required manual intervention and overrides," continued Dzierzega. "That wasn’t good enough for me. My philosophy is that the system must guide and serve humans - not the other way around."

The Solution
Realizing the shortcomings in the current planning tool--and taking a hard stance--Dzierzega recommended decommissioning the old implementation, and began investigating alternative forecasting and planning solutions in the marketplace.

"We are a world-class company, and we require world-class solutions," stated Dzierzega. His research led him to Smart Software and its industry-leading demand forecasting, planning and inventory optimization solution, SmartForecasts®.

SmartForecasts includes patented technology that not only provides accurate forecasts of items with intermittent demand, but also accurately estimates safety stock and inventory requirements for any desired service level and specified lead time. In addition, SmartForecasts integrates directly with major ERP and SCM systems and host databases, such as Oracle, SQL Server, and IBM DB2, as well as PC databases like MS Access.

"SmartForecasts was a perfect match for us," said Dzierzega. "It excels at forecasting and planning slow-moving inventory. We didn’t need to know when we would sell a product, but rather how much safety stock we should have in our SKUs and on the shelf to accommodate service levels."

The Results
The results at MCI were impressive for Dzierzega and his team. "SmartForecasts predicts the right level for intermittently demanded items, and, consequently, has saved us hundreds of thousands of dollars in inventory (avoiding under- and over-stocking situations), improved our fill rate performance, and increased overall productivity. In addition, we benefitted immediately from using SmartForecasts as a standalone tool."

While MCI achieved these initial results importing and exporting data in Excel files, it has now integrated SmartForecasts with its database management system and, moving forward, plans to integrate the solution with its ERP systems, permitting the automation of purchase orders for approved forecasts.

In summary, generating proper stocking levels using SmartForecasts has dramatically improved the life of Stan Dzierzega and the fortunes of MCI. Service parts forecasting is a difficult, challenging function. Its complexity requires balancing both the science and art of planning. The science is now supported with realistic, system-generated stocking levels produced by SmartForecasts; the art is enabled by MCI’s professional planners who are trained to fine-tune qualitative feedback into forecast results. As Dzierzega concludes, "Giving our professionals the right forecasting and planning tools makes all the difference in the world."

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