Multispares continues to dominate Australia and New Zealand’s truck and bus parts supply
In every industry there is a clear leader, and not just because the publicity machines or media spin doctors say so.
In the bus parts and accessories supply business, the clear leader is Australian Securities Exchange (ASX)-listed entity Supply Network, known widely in the trade as Multispares.
Multispares Managing Director Geoff Stewart shuns publicity, preferring to take a back seat and calmly steer this large ship with branches at every major centre across Australia and New Zealand.
How Multispares can be deemed the industry leader is not by their stockholding but more from reputation.
Each of the major bus parts and accessories suppliers in Australia see Multispares as the company to watch, and Stewart is aware of his company’s position in a highly competitive market.
“Our volume to the bus industry is substantially greater than anyone else’s,” he says.
“And if you are small and specialised you have to compromise what you have to do – that’s the reality.”
Multispares has been dealing with bus parts since opening its doors 40 years ago, led for the first few decades by founder Harry Forsyth through to Australian stock exchange listing in 1989.
The business has consistently divided its interest between truck and bus parts along a 70-30 percent split, which reflects the emphasis Multispares places on bus parts supply, given the trucking industry is ten times larger than bus.
“When we say 30 percent of our turnover is bus, that’s a substantial proportion,” Stewart says.
It becomes apparent that Multispares is not simply a heavy vehicle parts supplier feeding bus as a tacked on part of the supply chain.
“The bus industry is different to the truck industry in that it is fairly concentrated, so fleets tend to be large and therefore more complex, and our national sales managers get directly involved in these accounts,” Stewart says.
“Bus is a very different operating regime and they do have very different service requirements, but there is one enormous advantage in us being involved in both the truck and the bus industries and that’s scale.”
Stewart says that if Multispares attempted to service the bus industry alone, there wouldn’t be branches in regional centres including Mackay, for example.
Mackay is one of 10 Multispares branches across the network, soon to number 11 with Kwinana in Western Australia about to come online.
“The scale of our operation ensures a consistent flow of product, and it’s that flow of product, well-procured at low prices, that allows bus companies to keep their costs of parts down, and to have very good service levels,” Stewart says.
“We order on all of our major suppliers every month, some by container lots, and others by consolidated shipments. And that regular flow of product out of our major suppliers keeps coming in consistently topping up our usage, enabling us to maintain our service levels and respond to fluctuations in demand.
“You could not maintain the service levels we provide around Australia and NZ if you were only dealing in bus parts.”
PORTAL TO THE FUTURE
Just short of four years ago, Multispares found itself at the start of an innovative supply chain strategy – built around some smart technology – that has embedded its operation at the heart of some of Australia’s largest bus fleets.
Working in collaboration with Trapeze, formerly Bacchus Management, Stewart has overseen the development of the aptly named ‘B2B’ portal, which connects Multispares with its bus fleet workshop clients through the Transport Integrated Management System (TIMS).
In a nutshell the business to business B2B portal is a stock replenishment system working on the basis of stocking parts at the depot workshop in anticipation of being used later, but not paid for by the bus company until such time as needed for a maintenance or repair job on a bus.
As an item comes off the depot’s workshop store shelf, the part number barcode is scanned, an invoice then generated, which goes back to Multispares. The account is paid ‘as you go’ and the fleet owner doesn’t need too much inventory on hand or pay extra costs for parts they might not otherwise need. The IT system through TIMS automatically messages Multispares’ enterprise resource planning (ERP) software to replenish parts as they are used.
The system is not unique to other industry sectors, but is the only example of IT-based ‘just in time’ stock replenishment in the Australian and NZ bus industry.
The B2B idea came from Grenda Corporation’s Finance Manager Mel Pecen, who was looking for a paperless system for parts consignment at Grenda’s bus depots in Melbourne.
“We were looking at our parts supplies and I said to Geoff Stewart, ‘yes I do want to use technology to get some gains’,” Pecen says.
“That’s when we sat down, the three parties Multispares, Bacchus – back then – and Grendas, and we came up with a framework.”
Pecen sees the project as a partnership.
“I have a good knowledge of how TIMS works, and having that insight gave me some confidence in what could be achieved,” he says.
The Multispares B2B portal is progressively being patched through to all Grenda bus depots, and will progressively be introduced across all depots operated by parent company Ventura.
“It’s a major project,” Pecen says.
Grenda’s fleet counts to 650, Ventura also 650, which takes the total fleet to 1,300 potentially requiring Multispares-supplied bus parts.
“It’s the biggest fleet in Melbourne, and we are one of Australia’s largest private operators,” Pecen says.
“Being big we need this system, but I can see this working in smaller operations.”
To get the project off the ground three years ago, Pecen started slowly in smaller Grenda depots.
“We have depots which range from 70 buses to a couple of hundred, and the system works in all applications.”
While the concept accounts for each depot store holding parts on consignment, reality has it that not all parts held at a depot is part of that consignment.
“There is a part of the store we own and a part that’s consignment,” Pecen says.
“That’s the beauty of the system which, as far as the mechanics and the workshop managers are concerned, they treat every spare part in the storeroom the same.”
The B2B system separates ownership of stock.
“As far as a mechanic or a workshop manager is concerned they don’t have to worry about what’s what,” says Pecen.
After scanning and the invoice is raised, Pecen ‘tests’ the invoice pricing.
“We have the authorised prices in our system, and if they’re okay they get processed,” he says.
Currently the invoices come back to Pecen by email as PDFs, but alterations are being made where by the end of this year invoices will come back as data.
“The invoices will go directly into our accounting system, and that’s what we had in mind in setting it all up,” he says.
“We want to fully integrate this so we get efficiencies all along the process.
“After Christmas our invoices from Multispares will come in electronically, they will go straight into our accounts payable system, and through our authorisation system they will be paid without anyone touching it.”
By November, Pecen also aims to have two of the largest Ventura depots running with Multispares B2B.
Not only is the system leading to less inventory items held at Grenda-Ventura bus depots, but site workshops have progressively ‘cleaned up’.
“It got rid of our obsolete stock, cleaned up our operation and gave us more structure,” Pecen says.
“We are actually reducing the amount of stock that we hold, and spare parts held by a depot could be dead money.”
Pecen sees stock holding starting to shrink across the network.
“We are still getting the buses out on the road per normal – we don’t miss a beat.”
In supply chain parlance, the system is categorised as ‘just in time’ management, and rather take the stress of implementing and running parts procurement, Pecen passes that back to the ‘experts’.
Trapeze Australia & New Zealand General Manager Mark Woodhead says operators tend to carry much more stock than necessary, particularly now when times are a bit tougher.
“The operator feels they must have stock at hand so they can repair the bus, get it back on the road and meet service requirements,” he says.
“But they need faith and confidence in real time and the logistics chain management which is happening world-wide in many industries.
“We will supply you the parts ‘just in time’.”
Woodhead says the savings are obvious, but to realise the cost advantages requires re-thinking how parts are procured by the depot.
“Operators need to be confident that the system works, and to get through the psychological barrier of ‘I don’t need to own the stock’,” he says.
“Even where existing clients have TIMS, the mindset they first need to get around is that they don’t own the stock anymore. And the beauty of it is that it frees up so much capital for the bus operator.”
Currently, TIMS is used at about 40 bus operations Australia-wide, interfacing with the Multispares B2B portal at ten fleet workshops with two more committed to coming online in October.
TRUCK V BUS
Stewart says the B2B system was designed specifically with bus operators in mind, and would not be immediately practicable in truck transport, based on different models of vehicle ownership and repair.
And while 70 percent of Multispares’ expansive enterprise enjoys close relationships with freight operators, the truck industry works in a different way to the bus sector in terms of how parts are used in the vehicle maintenance regime.
Representing core business at 70 percent of Multispares’ annual turnover, the truck industry – as viewed by Stewart – is essentially divided into three groups of customers, being owner-drivers, independent workshops and fleets.
“A lot of truck repair work goes through independent workshops, so these are mechanical yards with a number of mechanics servicing a very broad range of trucks,” he says.
“It’s a very different situation to a bus fleet which buys a bus and expects to keep it for 20 years.”
Stewart knows how the bus industry organises itself.
“They need to be well-organised to make sure their costs are controlled,” he says.
“It’s not only the cost of the parts, but the cost of transacting and managing that vehicle.”
Stewart says it’s not possible for independent workshops in the truck industry to organise in the same way.
“Truck fleets don’t keep their trucks for anything like 20 years,” he says.
“There are some types of truck fleets where a lot of investment goes into the body, keeping them for a bit longer, but it’s still nothing like 20 years.”
Stewart adds truck operators are not driven by the same sort of whole of life costs that the bus industry recognises as critical.
“Truck operators are still very conscious of service costs generally, but the repairer probably keeps almost nothing in the store because it would be a pointless exercise. Spare parts are identified when the truck comes in.”
Nevertheless, Multispares run a fleet of utes taking spare parts to truck repairers – and bus owners – at least twice a day in the ten metropolitan regions where outlets are located.
“Parts supply is a very innovative industry and what we seek to do is complement the way any of the operators – truck or bus – seek to run their business,” Stewart says.
“And we don’t say there is only one way to work. With most of our customers we work in slightly different ways because we adapt our service to suit the way they want to run their business.”
That also comes down to stage of the life of the vehicle, whether original equipment manufacturers (OEM) parts are required, or for trucks and buses past warranty, genuine parts or high quality substitutes are supplied to operators on preference.
AFTER-MARKET NOT AFTERTHOUGHT
Stewart ensures Multispares has all conceivable needs covered, and it’s not ‘spin’ when the claim is made that all manner of vehicle parts can be sourced and supplied, from tail lights to turbo chargers.
Stewart insists upon transparency to the customer, particularly when the source of a new product might be little known to the customer.
A situation recently arose when a large bus company wasn’t aware of the Beral brand of brake pads for late generation buses, supplied to Multispares by Federal Mogul.
“We work to provide information about the company – in this case Federal Mogul – and their credentials,” Stewart says.
“Everyone knows ZF, but not everyone knew Beral – so we have to educate them.”
Multispares regularly fields approaches from parts makers touting new product, and similarly Multispares is globally scouring the sources of new supply.
“Since the [global financial crisis] a number of OEMs have sought to extend their customer base in after-market because of the stress placed on them when the vehicle market collapsed,” explains Stewart.
“So they have actively sought the steadier after-market business, which means OEM parts makers come to us when their circumstances change.”
Stewart says the Multispares network is such that when parts makers come looking for a distributor, they get the referral.
“Historically OE parts have been very expensive, driving the need for after-market alternatives,” he says.
“But the after-market hasn’t always been capable of guaranteeing a certain service level.”
Stewart says the future for Multispares is to work with customers to identify the service needed, and to guarantee service levels.
“And through that, drive down corporate costs, not just the costs of parts,” he says.
“We are dealing with companies that are very professional and we need to understand their interests. If we are not helping them to achieve their interests they won’t buy from us.”
Meanwhile, Multispares continues to grow and expand year on year, according to Stewart.
“We are profitable, our shareholders are happy, and we re-invest a substantial portion of our earnings each year in upgrading our services and our capability,” he says.
And to stay profitable, Multispares has steered clear of owning property such as a warehouse facility, although head office and central warehousing will likely remain into the foreseeable future at Guildford in Sydney’s west.
“We lease our buildings and invest our money in stock,” Stewart says.
“But we are very long term tenants wherever we go. This gives you flexibility because as the business changes – and grows – site requirements change.”
And as with SNL’s long term shareholders, estimated at 90 percent Australian-based and loyal to the Multispares masthead, there is confidence in Stewart’s steady hand on the company tiller, steering the industry’s biggest ship through new business to business spare parts portals.