Lessons From the Parts Shortage

Diesel Connect was full of interesting panels and presentations, so we’re hesitant about calling any one presentation out as more interesting than the others. Still, we have to admit Keith McMaster’s “Lessons From the Parts Shortage” was pretty darn compelling—partially because it’s a situation almost every shop is grappling with, and partially because Keith himself is pretty entertaining.

The presentation, facilitated by Fullbay’s Co-Founder and Executive Chairman Jacob Findlay, quickly became more of a discussion, with shop owners from all over the continent chiming in and sharing their issues.

Keith owns Fireweed Heavy Truck & Equipment Repairs up in Alberta, Canada. His shop is in an interesting position, parts-wise; he has physical repair bays and a 24/7 roadside repair service, so he has to keep both stocked up—and being in Canada adds an extra bit of difficulty to, well, almost everything (sorry, Canucks). “Canada is a smaller market, so it’s harder to get parts in general,” Keith explained early on. That difficulty was compounded by the pandemic.

Hey, there’s a great place to start.

HOW DID THE PANDEMIC MESS WITH PARTS?

Verily we all recall the unprecedented turn of events…

Ugh, sorry. We won’t lead with “unprecedented” again, we promise. Nor will we rehash the last few years. But yeah, the pandemic screwed up the supply chain. The fragility of “just-in-time” parts sourcing—which had until then kept everyone fairly happy—was revealed and things have not been the same.

And while the situation has improved a bit, it’s by no means resolved. Different parts will be harder to get at times than others: “We had a tough time with brake drums,” Keith told us. “Who has a tough time with brake drums?”

“We did,” someone called out from the audience. Conversation haltingly began as shop owners (and perhaps a few parts managers) discussed the ripple effects of various port closures. Someone else pointed out that sometimes products didn’t come in even if the ports were open: “There were 5-8 loads [or parts arriving from overseas] a week coming in; now it’s 1-2.”

You don’t need to be great at math to see that’s a huge reduction in the parts available. What makes it worse, the shop owners agreed, is that there isn’t a ton of forewarning about which parts will be less or not available this week or next week. Shop owners can’t really prepare, although several of them are apparently envying the guy who has the market cornered on brake pads.

So, the scene is set. Parts are still tough to find. The question is, what are shops doing about it?

WHAT ARE SHOPS DOING DIFFERENTLY?

Keith admits to the unthinkable: he’s started keeping secrets from his guys.

As we mentioned, his shop has a mobile element (often it’s Keith himself) and a brick-and-mortar shop. So…he sometimes keeps certain parts on his truck and doesn’t tell his in-shop techs that he has them (although they may know it now if they read this blog). The rationale is simple: he doesn’t want in-shop work poaching parts he’ll need for a mobile rescue.

If a truck is in the shop, the owner knows it’s there and may end up staying there for a long time. “If it’s a mobile response,” he added, “they need [the truck] back up ASAP.”

Thus, he keeps mobile parts separate.

He’s also started charging for those hours he spends on a field call searching for a part—something he may not have always done pre-pandemic. These days, it takes much longer to source a part, so yeah, he’d better be charging for it. A tech working in a shop can be doing other things while the parts manager hunts down what they need. That’s not the case for someone in the mobile world.

The conversation with the audience continued. One owner volunteered that his parts managers are instructed to question their vendors about what seems to be running low (at the moment) and what their bosses are telling them. “If three people tell us there’s about to be a shortage on something, we take it seriously and try to stock up,” he said. “Like brake drums…everyone started telling us a year ago, get brake drums. Then there was a period when no one could get filters!”

WHAT IS THE PARTS SHORTAGE DOING TO YOUR BOTTOM LINE?

“There’s a bottom line?” Keith asked.

The audience chuckled, though there was a nervous edge to it. Turns out the bottom line has dropped for everyone—and yes, for Fireweed too, as confirmed by Keith’s wife, Hayley, who also does the shop’s accounting. “Sometimes we’ll quote the customer on something, but someone else snaps it up,” she said, and the audience murmured in sympathy—this was obviously something they’d all dealt with more frequently. “[Then] we have to pay more to find another…so we’ve eaten a lot of that.”

Fireweed has had to come up with new strategies to stay in (or near) the black as far as parts go. Keith told us he uses Fullbay to quote out to different vendors—basically price shopping. Usually, OEM parts are more expensive (how much more expensive will depend on the part, the region, and whether it’s in a crunch right now, among other factors)…but the OEM parts are usually on-hand or nearby.

It works out like this: “[I tell the customer] ‘I can get this OEM, it’s here right now. Or I can get it aftermarket and it’ll be a lot cheaper…but I’m not gonna guarantee it. It’ll be here tomorrow.’”

And what happens?

“More often than not, the customer tells you to get it now. Trucks down is money out of your pocket.”

Many shop owners chimed in with stories about parts getting snapped up from under them. This has led to many of them leaning more on customers to make up their minds quickly when they receive an estimate. The parts situation changes so quickly, and parts can vanish so fast, that customers often need that little push: “If you don’t get on this now, we can’t guarantee [anything].”

They also reported vendors have regularly been raising their prices. Hey, we get it: supply and demand. The more people need those brake drums, the pricier they’re gonna get.

Keith and Hayley have also used Fullbay to set up their own pricing matrix, so he can add a particular margin to any part that he gets in. In a nutshell, you can set up a parts pricing scale and change it based on the vendor a part comes from.

(Here’s how it works: Let’s say you have an awesome relationship with a particular manufacturer, to the point where they sell you parts at a lower rate. The margin you assign to parts from that manufacturer helps you ensure a profit while still providing your customers with a fair price—so you and your clients are benefitting from that relationship. In addition, the higher margin on these parts can offset the lower margins you’ve got on parts from other vendors—the stuff you’re barely breaking even on.)

“There’s lots to it,” he says, acknowledging—shameless Fullbay plug here—”we don’t use the system to its potential at all.”

PEOPLE DO CRAZY THINGS TO GET PARTS

When it comes down to it, shop owners want their customers to walk away happy. That sometimes means sourcing a part by any means necessary.

No, we don’t mean breaking into the Freightliner warehouse at midnight to free all the turbos. But almost everyone in the audience had done at least one thing to get a part that would raise an eyebrow. For example, Keith needed to get a wiring harness out to a customer. So he bought it a plane ticket.

Yes. His customer needed a Cummins X15 wiring harness and we assume the cargo hold was beneath its standards.

Actually, it happened this way: “No one could get it out to us,” he said, “no one had it in Western Canada. I wasn’t able to get it out of the States fast enough, so I phoned Toronto and bought it a plane ticket.”

“They buckled it in?” Jacob asked.

“Yep. They put it on a chair. I bought a seat for it and it came back on that seat.”

Oh, to have been seated next to that wiring harness on that flight. I hope the flight crew offered it a snack.

Another audience member related a story where a manufacturer had literally pulled names out of a hat to determine which dealerships would receive a part that was finally being released.

And then there’s the current craze around wrecks. Not that it’s totally unheard of to pull working parts off wrecked or junked vehicles; it’s been done for years, usually for a lesser (or no) warranty.

“We had a Cummins 4-banger,” Keith began. “The #3 pressure line from the pumpout? None in existence anywhere. I could get one. It’s a $14 part. I could’ve got it for about $1,000. The customer choked and said ‘I can wait.’ It was almost 3 months and they said we’ve got one.’ ‘Oh cool where’d you get it?’ ‘Well the guys found a wrecked engine, so we’re just gonna see if it works.’”

SO HOW DO WE SOLVE THIS MESS?

Keith thinks bringing manufacturing back to the U.S. and Canada could go a long way in alleviating the parts problem, but even if we decided right now to restart those operations, it would very likely take years to implement.

In the meantime, shops will have to develop their vendor relationships. They’ll use price matrices to make sure they’re staying somewhat close to the black. And they’ll sniff out what parts might come up short next.

“Wait till you run out of grease tubs,” Keith said.

The audience laughed.

“Already have,” someone called out.

Hey, maybe there’s still a market for parts hoarding.