“Fapco purchases parts direct from vendors to become the exclusive Tier-One supplier to the OEM,” states Fapco President and Founder, Larry Gardiner. “To increase service standards and better serve our OEM customers, Fapco not only buys parts direct, we run quality assurance once they arrive, execute the custom packaging and small parts kitting, and then warehouse and ship the parts for distribution or aftermarket business as needed. Our OEM customers are very pleased with this innovative consolidation program.”
When OEMs implement vendor consolidation practices with a full service contract packager such as Fapco they utilize one of the most progressive vendor management models available in logistics today. OEMs consolidate parts purchasing from multiple suppliers into one supplier and streamline their supply chain to better control quality and improve parts flow during peak demand periods.
Four Key Benefits of Consolidating Parts Purchasing to One Full Service Contract Packaging Firm
1. Consolidation with a Tier One contract packager lowers transportation costs.
Transporting parts to and from one location is more cost efficient than transporting freight from multiple locations. Freight is a key aspect of inventory. More volumes shipped to and from Fapco translate to lower per unit freight cost on parts.
2. OEMs improve quality and lower costs through parts inspection with a tier-one parts suppler/contract packager.
Fapco’s in-house parts inspection team (see article page five) assures that OEMs with tough expectations benefit by improving quality assurance. Fapco’s quality assurance managers follow the same procedures and guidelines as your in-house quality assurance department. Receiving all vendor parts at one location and inspecting and rejecting parts with Fapco’s team, assures that parts sent to the OEM for distribution, aftermarket or even production are virtually flawless. Fapco’s parts inspection process reduces cost of receiving, inspection and inventory of bad parts for the OEM. It’s important to remember this is not a parts consignment and fulfillment program. As the Tier One supplier, Fapco owns the parts and has a high stake in making sure the parts are right.
3. Consolidating vendors to Fapco’s Tier One program results in reduced soft costs of management, administrative and accounting functions.
Take the burden of dealing with multiple parts suppliers off the books. Fewer bill payments and fewer vendors to pay reduce cost associated with cutting checks. At an estimated cost of $100 just to open a P.O. number in-house, OEMs save a bundle with Fapco purchasing the parts. Fewer vendors also translate to fewer mistakes in accounts payable to improve the OEM’s credit rating. There are also soft cost savings in terms of procurement–not having to handle and track so many different vendor orders pays off.
4. Control capital management and the cost of parts ownership until parts ship using Fapco as your Tier One parts supplier.
With Fapco as a Tier One parts supplier, OEMs control the cost of ownership until the part is actually distributed. OEMs eliminate parts staging and warehousing. OEMs save additional revenue related to the incidence of returns and delays at the manufacturing facility or distribution centers. The result is lower overall inventory and cost of ownership. With Fapco having Tier One contract packaging services in place, manufacturers benefit from virtual JIT parts ownership. Fapco owns the inventory from the vendor until fulfillment time.
Wrap it Up
- This consolidation model allows for immediate soft and hard cost reductions across the supply spectrum for the OEM.
- Over time, this model may even move vendors to improve pricing because of increased volumes, more predictable production schedules and regular shipping to one Tier-One supplier–Fapco.