Click for next page ( 2


The National Academies | 500 Fifth St. N.W. | Washington, D.C. 20001
Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement



Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.

OCR for page 1
I. INTRODUCTION AND RESEARCH APPROACH 1.1 ME NEED TO BETTER UNDERSTAND, EVALUATE: AND MANAGE INVENTORY IN PUBLIC TRANSll ORGANIZATIONS Dunng the past several years, many private sector organizations have responded to competitive pressures and financial constraints by expanding their view of inventory as a potential source of cost reduction and as a measure of production efficiency. More recently, public sector organizations, including public transit agencies, have also begun to focus on improving the management of their inventories. Unlike many other industries, public transit embraces a diverse mixture of maintenance activities resulting in complex material demand patterns. These activities consist of a combination of preventive maintenance, breakdown maintenance, unit (component) repair/rebuilds, and maintenance projects for a mixture of rolling stock (both revenue and non-revenue), track and structure, and physical facilities. In addition to focusing on the quantity and mix of inventory materials, increased emphasis is being placed on the effect of inventory service levels on the property's ability to meet goals, the impact of carrying costs on inventory value, and the importance of turnover. Also integral to increasing the ability of transit agencies to more effectively manage inventory, is the recognition of several constraints that may cause unanticipated fluctuations in inventory levels. These constraints include a mixture of fleet senes, technologies, and configurations; mandated procurement regulations; federal and state mandates for new technologies required by such legislation as the Americans with Disabilities Act (ADA) and the Clean Air Act; and issues associated with custom equipment, such as long lead times and the lack of available life cycle and component mean time between failure history. Materials managers have always been faced with dealing with the two conflicting objectives of inventory management, namely, to provide maximum parts availability while keeping inventory investment low. To farther exacerbate the problem, different organizations within the transit agency such as maintenance, accounting, and operations, also Dequently monitor inventory performance, oRen using different measures. In order to improve service quality and efficiency, managers are increasingly looking at "new" inventor,, management concepts such as "materials requirements planning', (MRP), "just-in-time" (JIT), "total quality management" (TQM), and "total cycle time management". In order to finely understand and measure the impacts of inventory management on the organization as a whole, increased attention is being paid to identifying new and better ways for measuring performance. Traditionally, many performance measurements have been used to measure inventory efficiency and effectiveness in absolute terms. Examples of this type of

OCR for page 1
performance indicator are inventory value and number of stockouts. However, experience has shown that agencies can gain even greater efficiencies when inventory performance is measured in relative terms, or when one measurement of performance is presented in relation to some other measure. Examples of relative performance measures are the number of backorders as a percentage of inventory and percent of obsolete and excess inventory as a percentage of inventory costs. The implementation of new and more meaningful indicators of inventory performance, coupled with a focused emphasis on utilizing materials management concepts adapted from the private sector, present substantial opportunities for transit organizations to improve inventory management and operating efficiency. A review of published literature and research over the past ten years (Appendix A) has identified very little new information on inventory management, specifically as it relates to the public transit industry. Indeed, our literature search found that very little research that has been conducted in the area of maintenance inventory management for any industry. Most of the information found has been included as an adjunct to fleet maintenance or information systems. Nonetheless, the research findings resulting from this project indicate that significant gains can be made even within the constraints discussed above through innovative adaptation and application of the appropriate inventory control techniques. 1.2 RESEARC}] OBJECTIVES The objectives of this research are to identify and describe those inventory control techniques appropriate to the public transit industry, to establish benchmarks, and to create a decision modeling guide that can be used by transit professionals for better inventory management. Strategies used in this research to accomplish these objectives include (~) identifying those inventory management practices and techniques that wait best assist transit agencies in meeting inventory management objectives; (2) determining the effects of different organizational structures, policies, and practices used for inventory management on satisfying inventory management goals and inventory service objectives, and; (3) defining the conditions and developing the strategies necessary to ensure the most effective and efficient implementation of inventory control techniques, decision-making techniques, and performance indices appropriate to the transit industry. 1.3 SCOPE OF THE STUDY Public transit systems maintain inventories of parts and supplies to support their operations. Successor! inventory management requires a comprehensive understanding of how such things as modes, fleet size, fleet age, organizational structure, funding sources, and budgetary constraints impact the type, quantity, usage, and other characteristics of a transit agency's material assets. A wide variety of inventory management practices and techniques are used in the public transit industry, some with greater success than others. However, there is a 2

OCR for page 1
lack of consensus on inventory performance measures. Not until those inventory measures are identified that truly provide valuable infon nation to those responsible for managing inventory, will transit managers be able to evaluate the impacts of inventory management on the entire operation. The identification of the most useful inventory performance measures, coupled with performance indices for comparison and a useful decision modeling guide, present substantial opportunity for transit organizations to improve inventory management. The primary product of this study is a readily usable reference guide to assist transit professionals in better understanding, evaluating, and managing inventory. This Inventory Management Handbook summarizes inventory control techniques appropriate to the transit industry, decision-making techniques, and benchmark references. Because of the wide variance in the size of the transit agencies studied and the services provided, the information presented in the Handbook should be construed as a framework for improving inventory management and customer service. 1.4 RESEARCH APPROACH The approach followed in conducting this research project consisted of a national mail survey of transit properties followed by data analysis. The survey and data collection and analysis tasks consisted of the following: (1) a national survey of transit agencies; (2) analyses of the relative meets of the field range of orgaruzational structures. Dolicies and practices used for - invento~ management; (3) the development and definition of indices useful for inventory management including but not limited to stockouts, turnover ratios, inventory cost per vehicle, demand satisfaction, stock-keeping units (SKUs), shrinkage, and carrying costs based on such qualifying factors as scale, fleet size and standardization, fleet composition, mileage, etc., and; (4) identification of significant relationships between performance indices and organizational profiles. The critical issues addressed throughout the data collection and analyses tasks included: How do fleet demographics (age, size, mix, etc.) affect inventory levels? What methods are used in the industry to define, categorize and account for inventory? What inventory performance measures or benchmarks are used? Where is the inventory control function located in the organization? Is there an inventory manager and to whom does he or she report? Who is responsible for inventory accountability? Who sets inventory levels and stocking policies? Who has access to inventory? Who is responsible for security? Who is responsible for material budgets? What are the hours of storeroom operation vs. maintenance? Who is responsible for forecasting inventory requirements? 3

OCR for page 1
Other issues addressed included the role of automation in inventory management and projects or activities undertaken by agencies to optimize inventory control over the past two years and the planned activities for the next two years. I.4.l Transit System Survey All 300 plus public transit systems that were members of the American Public Transit Association (APTA) during calendar years 1993 and 1994 were surveyed. Salient points addressed in the survey and subsequent data analysis focused on the following areas: I. Profile of agency service area and operating characteristics; 2. Profile of the agency's vehicle fleet including size, composition, age, number of models, etc.; 3. Organizational structure, responsibilities and reporting relationships; 4. Inventory management practices including definitions of inventory, security responsibilities and measures, and storehouse networks and storekeeping practices; 5. Inventory management and replenishment including methods used, accountability practices and procedures, and composition; Inventory management performance including values and levels, transactions, information available, common issues addressed, and performance measures, and; Technology and information systems currently in use. The purpose behind the survey was to develop a database of the current inventory management practices employed by a representative sample of the transit industry. A copy of the survey is included in Appendix B. 1.4 ORGANIZATION OF TlIE REPORT Chapter 2 presents a generally accepted definition of inventory and the inventory management issues identified in the survey. Chapter 3 presents a discussion of the different organizational structures, policies, procedures, practices, performance measures, and organizational goals and objectives utilized by the transit systems examined. The Chapter also presents an evaluation of the relative merits of the different organizational structures, policies and practices relative to their ability to meet inventory management goals and service objectives. Research findings on the performance indices used for assessing inventory management are contained in Chapter 4. Included in this chapter are discussions of the various indices used, relationships between values of various indices and a decision modeling guide for identifying benchmark values. In Chapter 5, the relationships between performance measures and orgaruzational profiles are presented. Included are discussions of the appropriate thresholds for modifying organizational structures or taking other steps to increase accountability and control. 4