The success of Tier One Parts Consolidation with Fapco relies on one very important element: Creating an effective partnership.
Fapco doesn’t just service their clients. They become a key player on their team.
This theme of partnering was an important factor in the success of one of Fapco’s construction equipment manufacturing clients.
Investing in Clients
“There’s a sizable investment we make with our Tier One clients,” said Fapco President and Founder Larry Gardiner. “With this particular client we’re currently running at about $550,000 in inventory that we’re turning about 10 times in a year. Your inventory turns play heavily into what your costs are. You’ve also got a carrying cost to cover overhead and to maintain the inventory.”
“Typically when a new business starts with us, they have never thought before about all of the idiosyncrasies associated with parts inventory that they’ve got to deal with. With this equipment manufacturing client we had over ¾ of a million dollars in inventory. They only had two or three hundred thousand dollars. We had to work together to determine the appropriate levels and inventory turns. It’s a real partnership.”
“Our role in the partnership is to be the project leader. It requires a lot of meetings where everybody involved sits down around a table and we determine what is going well and what isn’t going so well, and if necessary, what we can do to fix it.”
“During the process with this equipment manufacturing client, we worked out the bugs for several months, and I think the general manager of this particular company would say that now we’ve got things working pretty smoothly. Once it starts to smooth out — you’ve got about six months of negotiations and working through the logistics of the whole thing — then you start running the program. This is when they started to see real savings in costs.”
“This project wouldn’t have made sense if there wasn’t a cost savings to the client. They simply wouldn’t have done it. There are several factors to consider. For instance, you will always have price increases on components and the client will have to approve the price increases before we can buy. You’ll also have suppliers that won’t perform and we’ll have to go back to them and negotiate a lower price or suggest an alternate supplier.”
Dealing with Change
Other ways Fapco partners with clients is by recognizing when their business changes and making the proper adjustments. “When we first took on this client, they gave us lead times that were different than what we had set up in our business model for them. They also laid off some staff, so they lost some of their knowledge base. We were able to work through these issues and resolve them.”
“Once everybody is on the same page, it all begins to work. As you fine tune this big animal, the costs go down and down and down. And what we’ve found is their customers are usually happier, too, and they’re consistently getting their parts on time. How do you quantify that? The client we’re talking about in this case was getting new orders and word of mouth advertising to buy more of their new equipment. That’s true customer satisfaction.”