Improving Inbound Logistics in a Dealership Parts Department
Organizations face various logistic challenges. Whether an organization faces inbound or outbound logistic issues, each poses a unique set of causes and consequences. Identifying the issues causing logistic issues can reduce costs, improve efficiencies, and improve customer satisfaction. This paper will evaluate the logistics change recommended for a medium sized General Motors dealership, Wynn Buick Pontiac GMC. The focus of this paper will be on inbound logistics found in the parts department. This paper will explain the change that needs to be made, why the change is necessary, how much the change will cost, what the risks are involved with the change, what the risks are if change is not performed, and what the plan is to implement the change.
The Change That Needs to be Made
Wynn Buick Pontiac GMC has an issue with receiving parts orders and then quickly routing the parts to the appropriate location. A change in inbound logistics in the parts department is required. Inbound logistics encompasses the receiving, storing, and disseminating the incoming goods or material for use. Currently, parts are delivered but cannot be used due to delays in moving the parts from the dock to their appropriate location or final destination. Focusing on changing and improving inbound logistics will assist in improving parts handling issues like: receiving orders, separating stock parts from special order customer parts, and setting up new or modified warehouse locations for incoming parts. Stacey, Natarajarathinam, & Sox (2007) comment, “Inbound inventory routing is an important problem for any business” (p. 484, para. 1). The recommended manner to achieve this change is with the purchase and implementation of bar code scanners and interface computer program with the dealership’s current dealership management computer system.
Why Does the Change Need to be Made
Implementing a bar code system is necessary for several reasons. Currently the inbound parts process lacks quality, accuracy, and timeliness. Parts remain on the dock after a parts department employee signs for the delivery until an employee has sufficient time to bring the parts inside the receiving area. In most cases the receiving area is full of parts from previous deliveries and a mixture of returns and awaiting outbound freight or outbound logistics. Because “customers on average return about 6% of everything they buy,” one can quickly realize the amount of parts moving inbound and outbound in the parts department receiving area (Jayaraman & Luo, 2007, p. 56, para. 1). With smaller and more shipments being received, the parts are becoming backlogged in the receiving area. Customer special orders are not identified quickly and separated from normal stocked parts. However, General Motors parts and packing slips are bar coded resulting in the ability of properly equipped dealerships to quickly and efficiently receive parts and move them to appropriate locations.
Without bar coding technology, the result is the inability to maintain just-in-time deliveries of parts for customers who have requested the particular parts. Marujo (2006) comments, ‘Key tasks and processes for a more efficient supply chain include management of inbound and outbound transport, administration of customer orders, materials management, and management of inventories” (p. 167, para. 1). In addition to failing to meet customer demand by delays in distinguishing customer parts from stock parts, bar coding will allow better inventory control. Bar coding will permit the efficient tracking of parts inventory by reducing parts obsolescence. Moreover, the bar coding technology allows the dealership to maintain product variety as the dealership attempts to maintain a breadth of inventory but not a depth of inventory. As Miemczyk & Holweg (2004) reiterate, “Automotive logistics emphasize the importance of product variety in the decision to implement Just-in-time (JIT) strategies” (p. 176, para. 2).
Reduced cost can be realized when using bar coding technology. Direct costs as a result of delays, wasted resources, lost or miss placed orders, and growing parts obsolescence can be reduced when proper technology is used. Indirect costs like increased rental bills and overnight charges also can be reduced with effective use of bar code technology when minimizing inbound parts errors. Therefore, to achieve these goals, the dealership must “assume responsibility for organizing inbound logistics” (Jones, 2005, p. 23, para. 4).
How much will the Change Cost
Any technological improvement will have an initial outlay of capital investment. The bar coding scanners and interface program for Wynn Buick Pontiac GMC is no different. Initial investment will be approximately $25-35,000. The warehouse management system offers the ability to “control the movement and storage of materials within an operation by controlling inventory management, product receiving, and determining storage locations” (Murphy & Wood, 2004, p. 314, para. 2). With any investment, organizations want to know when the system or process will provide a return on its investment or pay for it. In many cases technology or warehouse management systems payback period is between one-two years. Many large purchase decisions require a decision to be made whether to purchase a product outright or lease a product for five-ten years depending on the dollar figure in question.
Implementing bar code scanning technology will reduce costs because of improved employee productivity. With the limited number of parts employees, each employee can perform more work within the daily work schedule. Fewer errors will result from the use of bar coding scanners by minimizing double checks and wasted resources. An often hidden benefit of technology like bar coding is the ability to transfer quickly parts inventory dollar figures to the accounting department by way of the dealer interface software. The use of bar codes scanners will improve the parts warehouse design and human intervention process to meet customer demand by receiving the right part, at the right time, at the right place.