The forklift industry may appear to be centred around new products, but for more end-users, it is the availability of parts that is paramount. Christine Cranney looks at developments in the spare parts sector.

Downtime can be very costly for a forklift customer. Many forklifts operate in tough conditions, inevitably accumulating extensive wear and tear over time, resulting in the need for replacement parts to extend the machine's lifetime. An efficient parts supply is therefore paramount to the success of a forklift owner.

Tarjei Isaksen

Tarjei Isaksen, director of marketing for Swedish materials handling giant Cargotec, says customers with large forklift fleets and those who understand the concept of total operational costs take into account a manufacturer's parts supply capabilities when deciding on a forklift.

"It can be said that a salesman sells the first truck, but the performance of the manufacturers' parts and service organisation sells the second unit, the third unit and so on. If your parts and service operation fails to deliver, a customer will not come back to you for more trucks," Isaksen says.

Tony Unsworth, Linde Material Handling Australia's general manager after-sales, agrees: "Parts is the key area to provide complete customer satisfaction and uptime."

Unsworth stresses that the benefit of having parts available for technicians when they arrive on site, cannot be understated. "Efficiency increases customers' uptime, essential in today's business climate."

Parts operations organised for efficiency

From engines and transmissions to tyres, batteries and hydraulic fluids, forklifts are the sum of the many parts that make it function as the useful materials handler or mover in many a warehouse and worksite. So how do the forklift manufacturers manage their parts distribution?

Linde Material Handling in Sydney, Australia boasts an impressive service record. Unsworth claims that about 95.4% of all parts orders were filled and dispatched on the same day in 2010.

Linde Australia's service vans are well-stocked to meet its customers' needs.

Parts for Linde forklifts in Australia are distributed in two ways: Firstly, stock in Linde technician vans are tailored according to the historic consumption relative to the truck population and model mix in their "patched area", enabling technicians to have all fast-moving parts on hand. Using an auto-replenishment system that activates once a specific level of stock for an item is reached, new stock is delivered before the item has been completely depleted. Secondly, urgent parts not held in the vans are sent directly overnight or by courier on the same day.

"We also operate a VOR (Vehicle Off Road) procedure that means we will take the part of a new stock unit if on the rare occasion we do not have the part in stock," Unsworth says.

Haulotte Group in Lorette, France has implemented logistics platforms under Haulotte Services for spare parts activity in different continents. Jacques Dufieux, services sales and marketing manager, says Europe benefits from the central logistics platform near Lyon, which is conveniently located to reach the countries of Western Europe. Parts are distributed through local subsidiaries and a few local dealers. This approach, Dufieux says, guarantees the final quality to end-users when a repair involving parts is done.

Cargotec, meanwhile, has invested heavily in its parts operation and claims to offer "very high parts service and availability".

Isaksen says the company has a network of warehouses around the world and its main parts warehouse is in Metz, France, which serves most of its subsidiaries, dealers, distributors and customers. There are also regional hubs in Sweden and Finland to cater to the Nordic markets where it has many customers operating large fleets of its equipment. The warehouses are linked so that a part that is not available in one hub can be ordered from another location.

At the regional warehouse hubs in the US, Brazil, Germany, Singapore and China, Cargotec stocks fast moving items and key parts that are vital for regional operation. It also has stock at many of its subsidiaries.

Isaksen explains that different approaches are taken as no two markets are the same. However, the same logistics planning tools are used to optimise stock at each warehouse to fit customer profiles and buying patterns in each market.

Like Linde Australia, Cargotec has an automatic replenishing system set up to ensure a high rate of availability.

"We are committed to providing reliable parts service and in many markets we even offer an after-hours service where the customers can contact us 24/7. Our aim is to deliver to the customer in 24 hours, if needed, and we manage to do so throughout large parts of the world," Isaksen says.

Merlo Group spokesman Peter Grant says the Italian telescopic forklift manufacturer believes the only viable solution for supplying the right parts quickly is through local dealers or distributors. "At the customer level, only the local dealer has the experience of the customer and he should be driving the parts supply process."

Merlo's parts distribution system is organised geographically. In larger territories where the market is mature, Merlo has a subsidiary or associate companies acting as importers, supplying to a network of national dealers. The importers have their own parts warehouses and parts personnel that handle only Merlo parts. Merlo aims to give a same-day service from their parts warehouses and staff have been trained directly by the company, which has subsidiaries or associate companies in the UK, France, Germany, Spain and Australia.

In newer territories, Merlo normally has a separate company acting as an importer and will sometimes have a national dealer network.

"Their parts department will hold stocks of Merlo parts as required by their distribution agreement but these will not necessarily be of the same quantities of dedicated importers," Grant says.

All the importers have access to Merlo's main parts department in Cuneo, Italy.

Grant says Merlo's parts department will undergo a major change in 2011 with the completion of a new logistics building, of which 30,000 sqm will be a dedicated parts store.

Facing challenges with technology and skills

One of the challenges of sourcing the right forklift part can be locating the right part number. A forklift manufacturer does not make all of the individual parts of the forklift. Some parts are made by other companies. For example, the diesel motor of an internal combustion Mitsubishi forklift is usually made by another company like Cummins. There may be more than one part number for a single part - in this instance, one for Mitsubishi and one for Cummins.

That is why Fred Märtsoo, board member for TVK Baltic, a specialist forklift parts and attachments company, lists "finding the correct parts quickly and for the right price" among "keeping needed parts in stock, not overstocking and having the right employees" as challenges for his industry.

"Employees need a lot of experience in finding the right parts," Märtsoo says.

TVK Baltic co-operates closely with TVH Parts, meeting regularly to improve on their partnership. Märtsoo praises the Belgian company's online parts catalogues and electronic ordering system. "Something similar should be done by other parts suppliers, especially manufacturers. Today, (most) forklift manufacturers have picking times for stock orders up to five working days. This is incredibly slow and it seems some manufacturers have not understood (the) parts business at all."

He suggests that manufacturers which do not simplify the parts ordering process with the latest technology could give their parts business to professionals who are equipped to provide a quick and efficient service.

Cargotec's Isaksen acknowledges that parts distribution is "fast becoming one of the most complex areas" of a forklift manufacturer's operation.

He explains that a forklift manufacturer must manage a huge number of parts as a single forklift can be built with "tens of thousands" different parts. "So for a big forklift manufacturer like us, several hundred thousand part references are necessary, requiring a significant investment in stock to reach a high level of parts availability."

Hence, Cargotec has a sophisticated inventory planning tool and has invested in worldwide warehouses to rapidly respond to its customers' needs. The company claims it can still supply parts for models that went out of production over 10 years ago.

"This can present a challenge as over time it can be difficult to find the right items. Still, as a manufacturer, this is expected of you. [We are] committed to ensuring the continuous operation of our machinery," Isaksen says.

Komatsu Forklifts Australia manages its spare parts distribution using Pronto ERP software. The subsidiary of Japanese equipment maker Komatsu has a distribution centre in Sydney which supplies 12 satellite warehouses in Australia. The distribution centre provides inventory to the branches based on usage and forward commitments to internal and external customers, ensuring Komatsu does not overstock or have insufficient stock in any area. The parent company, Komatsu Utilities Japan, ensures the same standards are implemented globally to provide consistent supply, not only to its subsidiaries but to its customers worldwide.

National parts coordinator Richard Aldersey says Pronto enables the company to complete daily tasks, movements and transactions in a more efficient manner than traditional systems for inventory like Cardex systems which work well for smaller businesses."When you are receiving, dispatching and managing thousands of SKUs a day nationally over 13 warehouses as well as supplier deliveries into central stores, you need a more automated approach."

He adds that having correct policies and procedures in place is also important. "Staff need to be aware of not only how to interact with an ERP system but also why and when they need to interact with it and have a good working knowledge of the connection between policy, procedure and inventory management."

There are many challenges in the daily life of parts distribution, Komatsu Australia's Aldersey says, and "one of the greatest challenges is planning for consistent and timely supply from both overseas and local suppliers".

He explains that it is difficult to forecast necessary stock levels three months ahead to cater for lead times and freight times.

"Our business from a parts perspective is service and repair, where service part levels can be calculated as it is preplanned work. However, repair is unforeseen. Therefore, you cannot always be sure of what parts you need to carry."

Consistent investigation of parts usage over a certain period of time as well as looking for seasonal changes in usage based on individual items and communicating with the service departments are allnecessary to help forward plan for future commitments and stock levels, Aldersey says.

Linde Australia's Unsworth describes the geographical size of Australia as a challenge for his company.
"[That] is why Linde has a parts department operating out of each of its five branches in Australia. Stock is tailored to truck population and model mix along with historical consumption data, but more and more rural customer sites are in need of maximum uptime."

Linde holds consignment stocks in the rural customers' premises and other strategic geographical locations.

"Inventory control and re-ordering could have been an issue; however, Linde has invested heavily in its after-sales infrastructure where all parts usage is recorded in real time with the use of our IVT (in-vehicle terminal) which talks directly to our ERP system via satellite," Unwsorth explains.

Dirk Von Holt

SMH vice president sales and marketing Dirk Von Holt says equipment manufacturers increase the number of new models they introduce to the market every year, creating a larger variety of replacement parts as well as the need for better parts distribution and availability.

"To support the dealers and service companies repair vehicles faster and more economically, fill-rates, logistics and efficient worldwide procurement methods have to be the focus for everyone in the industry,"
Von Holt says.

TVH/SMH claims to be the world's largest supplier of replacement parts and accessories for materials handling and industrial equipment. The company was founded in 1969 by Paul Thermote and Paul Vanhalst. Headquartered in Waregem, Belgium and Olathe, Kansas, USA, it is committed to providing a one-stop-shop experience. It has subsidiaries and sales representatives worldwide.

Opportunities amidst an economic downturn

While the global economic downturn has reduced business drastically for forklift parts suppliers, some non-OEM parts suppliers like Donald Martindale have found the silver lining in the stormy clouds. Martindale is the founder of Canadian parts company Panacea Aftermarket Co, which he says has a well-established customer base in the US.

Donald Martindale

He explains that one of the company's recent advertising materials was titled "Why waste a perfectly good recession", where customers - current and potential - were challenged to relook at their current supplier base and evaluate the deals they were getting.

"Our feedback from those that checked was not surprising to us, but a real eye-opener for them," Martindale says.

Martindale started his company after working at a forklift dealership for over 30 years. He saw an opportunity in the market and went for it.

"We have brought significant change to the market with our Costco type of pricing policies. Our success has been based on the fact that we are not just another parts supplier coming to market at prices just slightly lower than our competition. All we are looking for is to make the same margins as a typical dealership makes, but we offer the industry's best warranty."

He wants to form a co-op-type purchasing group to get better deals and pass on his savings to his customers.

TVK Baltic's Märtsoo says the financial crisis has reduced sales volume by up to 50%. "Stock levels that were needed pre-crisis were too high and there was pressure to sell out stock with low or no margin."

Märtsoo adds demand dropped so quickly that the company could not adapt to the new situation fast enough. "However, we managed to keep the majority of staff, so experience has not been lost."

During the downturn, TVK Baltic found ways to make quicker and more frequent deliveries while keeping prices at a reasonable level to ensure demand.

The global recession has worked in Canada-based used forklift wholesaler Jamco's favour when it comes to parts. "With the downturn in the global economy, factories from China began to directly offer spare parts we require at competitive prices with very minimal order quantities needed," vice president Tim Jamal says. Apart from China's offerings, Jamco sources its parts from aftermarket suppliers in the Greater Toronto area and OEM forklift dealers. Jamco purchases spare parts for some of the used forklifts it wholesales to forklift dealers worldwide.

Marcel VandenTop is the general manager of Intella Liftparts Inc. The company was set up in the US in 2007, just before the recession.

VandenTop says the recession was an "opportunity to challenge people's loyalties" and help them understand that buying parts from other sources could help improve their profits. "The reason most people look towards aftermarket suppliers for parts is that we are a competitive balance to high OEM parts prices. Often OEMs set their parts prices to high levels until customers complain and then they may reduce prices."

"If the aftermarket did not exist, customers would definitely pay a higher price from their OEMs on a variety of items," he says.

SMH's Von Holt says lower demand forced the company to review its inventory to reduce stock levels while it continued to focus on developing and providing parts for new equipment.

"Although the overall market contracted dramatically in 2009, the development of new equipment did not slow down. Also there were more Chinese equipment manufacturers starting to export into the Americas and Europe, increasing the demand for replacement parts for those brands."

"We focused on increasing purchasing cycles via smaller individual orders," von Holt says, adding that his company's main goal is to keep availability of its replacement parts at pre-recession levels.