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Behind the Parts Counter

March 26, 2011
By: Dan Anderson, Farm Journal Columnist
AGCO warehouse packing 003 resized
Warehouse workers prepare shipments to send to individual dealers.  
 
 

Consider your fleet of machinery and the hundreds of parts and pieces that work together to get the job done. When one of those parts or pieces breaks, the last thing you want is to wait very long for a replacement. In most cases, if your local farm equipment dealer doesn’t have the particular part in stock, he can tap a few computer keys and have it sitting on the counter for you to pick up in 12 to 18 hours.

Now consider the hundreds of thousands of unique parts used on thousands of models of machines on farms across North America. The ability to identify, locate, ship and deliver a single part in a matter of hours is pretty amazing. But it’s everyday business for the parts distribution divisions of major ag equipment manufacturers such as AGCO, Case–New Holland (CNH) and John Deere.

Simply deciding which parts to keep in their warehouses is a critical call for equipment manufacturers. If they keep too many slow-moving parts, interest payments will skyrocket, crunching corporate profits. Failure to keep enough fast-moving parts risks not having those parts available when customers need them.

Then there’s the challenge of efficiently storing in bins and racks everything from tiny O-rings for hydraulic valves to massive subframes for four-wheel-drive tractors.

When you consider the logistics necessary to quickly locate one specific part within multiple warehouses scattered across North America and to determine the quickest, yet most economical, way to ship that part to a specific location within 12 to 18 hours, the magnitude of the ag parts distribution system comes into clearer focus.

With these challenges in mind, here’s a look inside the complexities of the parts distribution systems of the big three ag equipment manufacturers.

AGCO

AGCO parts are distributed from eight regional warehouses located in Batavia, Ill.; Dallas, Texas; Harrisburg, Pa.; Independence, Mo.; Stockton, Calif.; Stone Mountain, Ga.; and two locations in Canada: Kitchener, Ontario, and Regina, Saskatchewan.

The Batavia depot is the central warehouse and headquarters for AGCO’s parts distribution network, with more than 220 trucks leaving the facility daily. The warehouse in Independence, part of an immense commercial warehousing complex in a converted underground limestone mine, is the company’s largest facility and handles larger parts, such as tractor cabs and subframes for combines and tractors.

"Our parts books list more than 1 million individual parts," says Joe DiPietro, AGCO’s senior manager, strategy and performance implementation. "Of all those parts, we keep around 300,000 [individual part numbers] on hand at any time. We constantly manage the inventory so we don’t unnecessarily stock excess out-of-season parts."

DiPietro says AGCO uses sophisticated computer programs, weather forecasts, historical demand data and common sense to predict how many parts to put in inventory in anticipation of planting, haying, harvest and other seasonal demands.

"In addition, we know how many certain models of machines—say, combines—are in a specific dealer’s territory and can use histories and other data to know how many and what kind of parts the dealer should have to service those combines," he says.

AGCO dealers can access parts in eight ways, from seasonal orders for large volumes of parts (field cultivator sweeps, combine belts, etc.) to emergency overnight orders.

"In many cases, a dealer can send us an order in the evening and we can get it shipped by midnight and have it at that dealer’s store the next day," DiPietro says.

The ability to locate hard-to-find parts within AGCO’s network has been enhanced by a new dealer
locator program that enables dealers to identify other dealers who have and can share parts that are unavailable within the tradi-tional parts system.

One of the big challenges facing AGCO’s parts distribution system has been integrating the parts systems from the equipment companies that have been acquired in mergers in the company’s history.

"We’ve been very fortunate that a lot of talented and experienced folks came with each acquisition," DiPietro says. "They know the heritage of their companies, they know their product lines and we’ve been able to incorporate their knowledge into our overall parts system."

The heritage of multiple companies now under AGCO’s banner challenges DiPietro and his crew to provide "vintage" parts for a variety of equipment lines.

"We support parts as long as there is significant consumption of those parts," he says. "If demand drops so we can’t justify maintaining an inventory of certain infrequently used parts, we work with a variety of machine life-cycle partners to keep parts available for our customers after we no longer offer those parts."

Case–New Holland

CNH services agricultural and construction customers through 11 parts depots: Atlanta, Ga.; Cameron, Mo.; Carol Stream, Ill.; Dallas, Texas; Lebanon, Ind.; Mountville, Pa.; Portland, Ore.; and San Leandro, Calif., in the U.S. and Regina, Saskatchewan; Sas-katoon, Saskatchewan; and Toronto, Ontario, in Canada.

Sizes of individual warehouses range from 230,000 sq. ft. to 842,000 sq. ft., with a total of 4,332,033 sq. ft. dedicated to CNH parts. That equals 99.5 acres of warehousing dedicated to red, blue and yellow parts.

"We service more than 1.2 million parts in our depots," says Anu Goel, vice president of North American parts operations for CNH. "Of those, 600,000 are what we consider active parts, that were used in the past year, which we keep in inventory at all times. We average 8,000 to 10,000 shipments per day to deliver 50,000 ‘lines’ per day from our various depots."

A "line item" in parts lingo is an individual part number on an order from a dealer. There may be six of a particular bearing on an order, as well as one bearing with a different part number. The six bearings with one part number and the one bearing with another part number would constitute two line items on the order.

CNH dealers have three basic ways to order parts. Daily stock orders, placed by 4 p.m. each day, are filled and then delivered to dealers before 8 a.m. the second day after the order is placed. Emergency orders, placed by 8 or 9 p.m., are delivered to the dealer the next morning. The third
option, seasonal orders, is designed to bring in large volumes of parts in anticipation of the planting and harvesting seasons.

CNH also offers a breakdown assistance program that partners local dealers with a special breakdown assistance team that can deliver urgently needed parts, provide technical support or identify an alternative solution to get customers’ machines up and running as soon as possible.
Goel says that predicting which parts to stock and how many of those parts to stock is actually more of a "backcast" than a "forecast" because CNH parts managers consider the past when predicting the future.

"We use algorithms that look at demand as far back as four or five years, weighted more toward last year’s demands," he says. "We incorporate dealer input after each season to identify demand, factor in long-range weather forecasts and economic predictions, and then top it off with actual feet-on-the-ground human experience to decide which parts to stock, and how many."

Acquisitions and mergers between equipment manufacturers have added to the challenges of CNH parts managers. Those managers have made a concerted effort to provide parts for multiple generations of equipment that is now in the CNH family.

"In general, CNH services parts for at least 10 years after [those parts] are last used in production, and will continue to service [those parts] beyond those 10 years to meet ongoing demand," Goel says. "CNH also works with its dealer network to provide service [for parts] that may be temporarily out of stock, as well as with Vintage Parts, an aftermarket parts vendor in Beaver Dam, Wis."

John Deere

John Deere’s parts distribution system serves dealers and customers in North America from 10 locations: a central parts distribution center (PDC) in Milan, Ill., and regional distribution centers/emergency depots in Dallas, Texas; Denver, Colo.; Lathrop, Calif.; McDonough, Ga.; and Portland, Ore., in the U.S.; Edmonton, Alberta; Grimsby, Ontario; and Regina, Saskatchewan, in Canada; and Monterrey, Mexico.

"We have more than 4.6 million square feet [of parts warehouse facilities] in North America," says Gail Leese, John Deere’s vice president of worldwide parts services. "More than half of that space, 2.7 million square feet, is at the central PDC in Milan, with the equivalent of 60 acres solely dedicated to parts warehousing and distribution."

John Deere’s computers track more than 800,000 individual part numbers. Counting the duplications in multiple warehouses to keep fast-moving parts close to customers, Leese says, the system inventories more than 1.8 million "locations" for parts across all John Deere’s warehouses.

Simply figuring out how to locate and pull parts from miles of shelving requires computerized planning.

"Once all our dealers’ orders are in our computers each night, a software program ‘maps’ where all those ordered parts are located in the warehouses and arranges ‘pick trips’ to pull those parts without unnecessary backtracking," Leese explains. "Some of the parts are pulled manually, some are pulled robotically, and big parts are pulled with forklifts. The computers also decide the number and size of [shipping] boxes needed to hold the various parts going to specific dealers."

Larry Ziegler, John Deere’s director of North American parts operations, says the company’s parts managers constantly try to predict the future.

"We look at demands for parts over the past 10 years, with special attention to the past four to 12 months," Ziegler says. "We’re constantly looking at economic and weather forecasts for the coming 12 months, then add human inputs to tweak computer forecasts in order to anticipate what we need to stock for peak times."

Ziegler says John Deere’s parts system focuses on filling customers’ needs, even if extreme measures are necessary. "If there’s an unexpected demand [for parts] and we run short, we’ll pull parts off a factory [assembly] line if we have to, to get a customer up and running."

All of the John Deere dealerships have the option to survey the inventories of other dealerships across the country to allow for dealer-to-dealer transfers of hard-to-find parts in the event of an emergency situation.

John Deere dealers use seasonal and daily stock orders as their normal stocking procedure. Seasonal orders allow dealers to order larger volumes of seasonal parts, often at discounts that are passed on to customers.

Daily parts orders are delivered to dealers two days after they are ordered.

"Flash Plus is our ‘hottest’ order," Ziegler says. "Dealers can place Flash Plus orders 24/7 and generally receive the part the next day."

So-called "vintage" parts are still common in John Deere’s modern inventory. Individual parts numbers will stay in John Deere’s warehouses "as long as there’s demand for them," Leese says. "We still have parts in our computers and on our shelves that were originally in the 1920 paperbound John Deere parts catalog.

"Agricultural parts distribution is unlike any other parts distribution system," Leese says. "Farmers have very tight windows of time available to do field work. Our goal is to have the parts they need, when they need them, or figure out a way to get them those parts as quickly as possible."


At a Glance

AGCO

Central depot: Batavia, Ill.
Regional depots: Dallas, Texas; Harrisburg, Pa.; Independence, Mo.; Stockton, Calif.; Stone Mountain, Ga.; Regina, Saskatchewan, Canada; Kitchener, Ontario, Canada.

Case–New Holland

Central depot: Lebanon, Ind.
Regional depots: Atlanta, Ga.; Cameron, Mo.; Carol Stream, Ill.; Dallas, Texas; Mountville, Pa.; Portland, Ore.; San Leandro, Calif.; Regina, Saskatchewan, Canada; Saskatoon, Saskatchewan, Canada; Toronto, Ontario, Canada.

John Deere

Central depot: Milan, Ill.
Regional depots: Dallas, Texas; Denver, Colo.; Lathrop, Calif.; McDonough, Ga.; Portland, Ore.; Edmonton, Alberta, Canada; Grimsby, Ontario, Canada; Regina, Saskatchewan, Canada; Monterrey, Mexico.

 

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FEATURED IN: Farm Journal - Early Spring 2011
RELATED TOPICS: Machinery, Magazine Features, Shops

 
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