Spare Parts Planning Software

for Public Transit Agencies

Optimizing Parts Management at BC Transit

BC Transit’s vision statement is to be Your Best Transportation Solution. BC Transit accomplishes this by transporting 57 million annual passenger trips in over 130 communities across British Columbia.  Transit is becoming a key part of the solution for many of the complex challenges that communities face across the province, such as climate change, affordability and congestion, and as a result transit service is expanding quickly (9 per cent growth in the past five years). Delivery of this service in a safe and timely manner is paramount. BC Transit’s fleet of 1,185 buses require regular maintenance and rapid repairs to ensure they are as effective and efficient as possible.  Having the right part in the right place at the right time is essential.  Eric Nelson, Director of Supply Services, discussed the challenges of meeting this responsibility and how their use of Smart Software technology is helping make BC Transit the best transportation

The Challenge

BC Transit was preparing to centralize warehouse operations around a new central distribution center, just as the organization was preparing to upgrade to a new version of its JD Edwards Enterprise Resource Planning (ERP) system.  They needed to determine the right stocking levels to serve the entire BC Transit network with 35 active branch plants under an aggressive timeline.  In a matter of weeks, the transition would begin to their new ERP and wholesale system updates would be barred.

This was no small matter as BC Transit manages 30,000 discrete skus. Space in the new consolidated Provincial Distribution Centre would be at a premium, and parts planning was a highly manual, qualitative process.  Reorder points were set manually, based on weekly requisitions and the buyers’ knowledge and judgement.  The move to the new CDC model would require setting optimal reorder points for all stocked parts.  The existing process would not be able to do this – there were just too many parts.

Compounding the challenge was the highly intermittent nature of BC Transit parts demand.  Rather than following a routine, easily forecastable pattern, service parts often experience highly sporadic, seemingly random demand.  Qualitative methods and intuition would not ensure the 95% service level that BC Transit required.  The organization needed a better solution.

The Solution

BC Transit turned to Smart Software.  Nelson was aware of Smart’s work with other transit systems and was drawn to Smart Inventory Planning & Optimization for a number of reasons:

  • Service level-driven planning methodology with probabilistic modeling, enabling ‘what if’ scenario development. and cost vs. performance trade-offs;
  • Proven ability to plan for intermittent demand, demonstrated across multiple transit customers;
  • Cloud-based suite of web applications, providing anywhere access and eliminating the need for IT infrastructure; and
  • Automated data integration and analytics, providing the continuous flow of data from and the return of optimal Min/Max drivers to JD Edwards to drive replenishment.

Smart and BC Transit worked through an accelerated implementation process to get their initial system up and running within two months.  BC Transit was able to establish stocking policies to get the new warehouse and central distribution system up and running.  Once initial policies were set, they used the first year of operations to monitor and refine reorder points.

“The big change,” says Nelson, “was to shift from the qualitative, manual establishment of reorder points to a highly automated system of setting Min/Max values for all active parts.”

Year 1 focused on getting the process working and relating the new capabilities to overall supply chain operations.  The experience established confidence in the system.  Their enhanced planning process now treats new items manually until they experience three incidents of demand.  At that point the demanded parts transition into production planning and are included in the routine, monthly automated process.  Plans are now underway to push Min/Max planning out to the 28 regional transportation systems and all 35 stocking locations.

Results

“We could not have consolidated central distribution into one facility without Smart,” says Nelson.  “During the transition we discovered a need for 3,000 additional SKUs.  There just wouldn’t have been room.  It is difficult to put a monetary value on this.”

Using Smart IP&O, BC Transit was able to internalize the impact of centralizing all external shipments.  They were able to consolidate demand for all regional transit systems and foresee required stocking levels.  Nelson added, “we did not see any instance of incorrect forecasts.  And we were able to set policies effectively for parts with exceptionally sparse demand.”

BC Transit values its newfound ability to forecast the financial impact of stocking decisions.  They are able to balance capacity against criticality and the cost of inventory.  They have been able to reduce the number of orders, determine optimal order quantities, and deal with variability of lead time – especially long lead times.  “Smart IP&O has enabled us to utilize service level as a driving KPI, essentially risk adjusting our inventory to address the criticality of not running out, and to deal with the thorny challenges of seasonal and intermittent demand.   It is helping us keep our buses on the road, so we can be the best transportation solution for our partners across British Columbia.”

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    Public Transportation Railroad Metro Service parts

     

    “Smart is the only one out there that has really licked the intermittent demand modeling challenge. We get accurate information and more importantly at the lowest dollar. Without Smart, I think we would have seen continued growth in our inventory and not necessarily gotten any greater benefit for service.”

    Chief Material Officer, Metro-North Railroad

     

     

    “Smart IP&O enabled us to model demand at each stocking location and, using service level-driven planning, determine how much to stock to achieve the service level we require.  By running and comparing different scenarios we can easily define and update optimal stocking policies for each tech support rep and stockrooms.”

    Purchasing Manager, Seneca Companies

    BC TRANSIT

     

    “Smart IP&O allowed us to transform our manually maintained stocking levels to a service level-based model that drove significant improvements in fill rates while optimizing total inventory on hand.  The accurate forecasts of stocking levels provided fact-based data that allowed us to strategically phase the consolidation effort where warehouse space was at a premium.”

    Manager Part Supply and Logistics, BC Transit

    Reduce Excess Stock

    Optimal Inventory Levels

    Reduce Excess Stock
    Improve Service Levels
    Minimize Buyer Transactions
    Maximize Return on Assets

    Identify Stockout Risk

    Organizational Consensus

    Balance Service Levels
    Identify Stockout Risk
    Identify Overstocks
    No Finger Pointing

    Inventory Warehouse Connectivity

    Operational Connectivity

    Align Process with Strategic Objectives
    Empower Team to “make it so”
    Optimize as conditions change
    Pass Results to ERP

    Who is Inventory Optimization for?

    Smart Inventory Optimization is for executives and business savvy planners who seek to:

    • Yield maximum returns from inventory assets.
    • Address the problem of highly variable or intermittent demand.
    • Broker the service vs. cost tradeoffs between different departments.
    • Develop a repeatable and efficient inventory planning process.
    • Empower the team to ensure operational plan is aligned with strategic plan.
    What questions can Inventory Optimization answer?
    • What is the best service level achievable with the inventory budget?
    • What service levels will yield the maximum return?
    • If lead times increased, what would it cost to maintain service?
    • If I reduce inventory, what will the impact on service be?
    • If order quantity increases, what will the impact on service and costs be?
    • What is the order quantity that balances holding and ordering costs?
    Inventory forecasting for the inventory executive

    Smart Inventory Optimization empowers you to:

    • Predict service performance and inventory costs.
    • Assess business impact of “what-if” inventory policies.
    • Align inventory policy with corporate strategy.
    • Establish an operational framework that guides the planning team.
    • Reduce inventory and improve service.

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