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Cutting parts prices

2003-07-21 18:07

Parts are ordered from the 'virtual warehouse'

Dubbed DNI - Distributed National Inventory - the new system sees all Mercedes-Benz, Chrysler, Jeep, Mitsubishi and Smart parts owned by Daimler Chrysler, although they will still be stocked at individual dealerships across each region.

DNI will mange the inventory through the creation of "virtual warehouses" managed by a team of experts using a R35-million custom-designed system.

Parts needed by a customer will be sourced from the dealer closest to the customer - whether this be a franchised dealership, a panel-beating shop, or a fleet operation.

DNI has been rolled out first in the Western Cape, which will be used as a guinea pig to fine tune the programme and sort out any problems before making it national. The Eastern Cape is expected to have the system by the end of November this year, with KwaZulu Natal going live in July 2004, the Free State in October, and Mpumalanga by December.

Gauteng - which uses more than 50% of all Daimler Chrysler parts - will get the system by September 2005, and Northern Cape will be last, rolling out in December 2005.

Daimler Chrysler chairman Christoph Kopke said total investment was R50-million, but the system would save the company around R47-million a year because dealers would not have to carry so much stock, and there would be less need to use the company's central warehouse in Pinetown, KZN, to source parts.

"We don't foresee that parts prices will drop straight away, but, given the rand's current strong levels we will at least be able to halt price hikes, and later we expect parts prices to fall," he said.

The way the system works is that parts stock will be allocated to dealers according to their needs based on a database of parts useage by each dealership over the past four years.

The system is administered from DC's head office in Pretoria, and instead of the 11 000 parts numbers items available before DNI was instigated, the Western Cape now has 27 000 line items available.

Slow moving

Kopke said the net result of this would be that a staggering 95% of parts needed for service and repairs within the Western Cape region would be available within two hours, with the rest - usually slow moving parts - available within 24 hours from Pinetown.

This is significantly better than the previous system, where parts were owned by individual dealers.

"Even our very best dealer under the old system could not ensure better than 76% availability," said Kopke. "And it often took up to two days to get the remaining 24% from Pinetown, resulting in customers having to wait for their vehicles to be fixed."

The savings would be made because fewer parts would need to be held by each dealer, since parts would be sourced by the computer from within the region. A customer requiring, say, five gaskets, could find that they come from three different dealers.

To source parts, each dealer simply logs onto the system and orders them. All paperwork and ordering is done by the computer, the parts picked at the nearest dealer to the customer who needs them, and distributed via a separate courier company which is contracted to DCSA.

Kopke said the project had taken six years to develop.

'"We have cut the waste out of the old system, and taken away the need for dealers to have parts expertise and stock holdings," he said.

"Ultimately the vehicle owner will be the biggest beneficiary of DNI.

"He can look forward to: getting his vehicle back from a service at the promised time; more convenient maintenance scheduling; and reduced maintenance costs as costs are taken out of the supply chain.

"For commercial vehicle owners the list of benefits are even longer, with additional elements such as less revenue-earning time lost while commercial vehicles are in workshops; increased vehicle reliability as a result of improved servicing quality; and improved vehicle load planning as a result of honoured workshop completion promises."

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