Fleet companies deal with unpredictability every day. Large demand spikes and dips, often driven by seasonal fluctuations and economic conditions, make it difficult to accurately forecast needs and buy motor oils and lubricants at the right levels.
The materials that you have now may address current needs, but what happens if your company takes on a new contract? What if a global slowdown stifles demand and leaves you sitting on excess inventory? Procurement is an evolving, adaptive process, starting with the unpredictable nature of demand itself.
Why Demand is Unpredictable
Several factors contribute to demand volatility in the fleet industry:
- Seasonal fluctuations: Fuel costs can vary between seasons, with the highest consumption typically occurring in the summer months.
- Economic impact: COVID-19 demonstrated the extreme volatility in demand that can occur from economic shifts. This sudden drop significantly affected the demand for fleet-related supplies.
- Maintenance variability: Maintenance and repair costs can increase dramatically, especially after a vehicle's first few years of operation.
- Regulatory changes: The implementation of the Electronic Logging Device (ELD) mandate in the U.S. decreased truck utilization rates in the short term, according to a study by the OOIDA Foundation.
- Weather-related disruptions: Severe weather can lead to sudden spikes in demand for certain materials, as fleets rush to recover from weather-related delays and increased wear on vehicles.
Traditional, as-needed ordering methods might work for some of these issues. But if you’re consistently struggling to match material needs with fleet demand, you could risk increased costs and operational disruptions.
Adapting Ordering Strategies to Demand Changes
To address these challenges, dig into your procurement data and determine consumption patterns and trends. Then, try different methods of inventory management–at Keller-Heartt, our B2B Account Program allows you to quickly adjust orders to match demand spikes and dips.
You can also try forecasting tools that incorporate machine learning algorithms, which can help predict future demand based on economic indicators, industry trends, and weather patterns.
Once you’ve dug into the data, you can then develop multiple demand scenarios across various potential outcomes, ensuring you can respond effectively to different situations.
Exploring Inventory Management Methods
Scenario planning is helpful for predictive action, but you’ll also need to manage your existing inventory effectively. Here are some tips for tracking and maintaining material stock and needs:
- Safety stock: Maintain an appropriate level of safety stock to help buffer against unexpected demand spikes. This helps reduce the risk of stockouts and operational disruptions.
- Just-in-time (JIT) inventory: Implement a JIT approach to help minimize carrying costs during low demand periods. However, you may need to adjust upward during sudden demand increases.
- Vendor-managed inventory (VMI): Partnering with reliable suppliers, like Keller-Heartt Oil, can help you manage inventory levels efficiently and receive timely deliveries, reducing the burden on your internal procurement teams.
The Case for an Account-Based Ordering System
Managing and maintaining fleet materials needs is hard enough. Trying to adapt when outside factors impact demand can feel impossible. For some fleet companies, it helps to have a consistent, reliable supplier source for material delivery and demand adjustments. That’s why we offer the B2B Account Program.
An account-based ordering system offers a sophisticated and efficient approach to managing material procurement in a fleet environment. Here's why it's beneficial:
- Improved forecasting: By centralizing ordering and consumption data, you receive a comprehensive view of usage patterns, enabling more accurate demand forecasting.
- Automated reordering: The system can automatically trigger orders based on predefined inventory thresholds, reducing the risk of stockouts and eliminating manual monitoring.
- Optimized inventory levels: With better visibility into real-time inventory levels across the fleet, you can optimize stock levels, reducing carrying costs while ensuring sufficient supply.
- Data-driven decision making: The wealth of data from the account-based system enables better inventory allocation across different locations.
- Improved compliance: An account-based system can help ensure adherence to procurement policies and regulatory requirements, standardizing ordering processes and providing an audit trail.
- Scalability: As the fleet grows or demand patterns change, an account-based system can easily scale to accommodate new requirements without a complete overhaul of procurement processes.
As the fleet industry evolves, account-based ordering systems will help fleets stay competitive and operational as demand needs change. For more information on the B2B Account Program, contact your Keller-Heart procurement specialist.