National Academies Press: OpenBook

Inventory Management for Bus and Rail Public Transit Systems: Final Report (1995)

Chapter: III. ORGANIZATIONAL STRUCTURES FOR TRANSIT SYSTEM INVENTORY MANAGEMENT

« Previous: II. CRITICAL ISSUES IN INVENTORY MANAGEMENT
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Suggested Citation:"III. ORGANIZATIONAL STRUCTURES FOR TRANSIT SYSTEM INVENTORY MANAGEMENT." Transportation Research Board. 1995. Inventory Management for Bus and Rail Public Transit Systems: Final Report. Washington, DC: The National Academies Press. doi: 10.17226/6352.
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Suggested Citation:"III. ORGANIZATIONAL STRUCTURES FOR TRANSIT SYSTEM INVENTORY MANAGEMENT." Transportation Research Board. 1995. Inventory Management for Bus and Rail Public Transit Systems: Final Report. Washington, DC: The National Academies Press. doi: 10.17226/6352.
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Suggested Citation:"III. ORGANIZATIONAL STRUCTURES FOR TRANSIT SYSTEM INVENTORY MANAGEMENT." Transportation Research Board. 1995. Inventory Management for Bus and Rail Public Transit Systems: Final Report. Washington, DC: The National Academies Press. doi: 10.17226/6352.
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Suggested Citation:"III. ORGANIZATIONAL STRUCTURES FOR TRANSIT SYSTEM INVENTORY MANAGEMENT." Transportation Research Board. 1995. Inventory Management for Bus and Rail Public Transit Systems: Final Report. Washington, DC: The National Academies Press. doi: 10.17226/6352.
×
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Suggested Citation:"III. ORGANIZATIONAL STRUCTURES FOR TRANSIT SYSTEM INVENTORY MANAGEMENT." Transportation Research Board. 1995. Inventory Management for Bus and Rail Public Transit Systems: Final Report. Washington, DC: The National Academies Press. doi: 10.17226/6352.
×
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Suggested Citation:"III. ORGANIZATIONAL STRUCTURES FOR TRANSIT SYSTEM INVENTORY MANAGEMENT." Transportation Research Board. 1995. Inventory Management for Bus and Rail Public Transit Systems: Final Report. Washington, DC: The National Academies Press. doi: 10.17226/6352.
×
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Suggested Citation:"III. ORGANIZATIONAL STRUCTURES FOR TRANSIT SYSTEM INVENTORY MANAGEMENT." Transportation Research Board. 1995. Inventory Management for Bus and Rail Public Transit Systems: Final Report. Washington, DC: The National Academies Press. doi: 10.17226/6352.
×
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Suggested Citation:"III. ORGANIZATIONAL STRUCTURES FOR TRANSIT SYSTEM INVENTORY MANAGEMENT." Transportation Research Board. 1995. Inventory Management for Bus and Rail Public Transit Systems: Final Report. Washington, DC: The National Academies Press. doi: 10.17226/6352.
×
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Suggested Citation:"III. ORGANIZATIONAL STRUCTURES FOR TRANSIT SYSTEM INVENTORY MANAGEMENT." Transportation Research Board. 1995. Inventory Management for Bus and Rail Public Transit Systems: Final Report. Washington, DC: The National Academies Press. doi: 10.17226/6352.
×
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Suggested Citation:"III. ORGANIZATIONAL STRUCTURES FOR TRANSIT SYSTEM INVENTORY MANAGEMENT." Transportation Research Board. 1995. Inventory Management for Bus and Rail Public Transit Systems: Final Report. Washington, DC: The National Academies Press. doi: 10.17226/6352.
×
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Suggested Citation:"III. ORGANIZATIONAL STRUCTURES FOR TRANSIT SYSTEM INVENTORY MANAGEMENT." Transportation Research Board. 1995. Inventory Management for Bus and Rail Public Transit Systems: Final Report. Washington, DC: The National Academies Press. doi: 10.17226/6352.
×
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Suggested Citation:"III. ORGANIZATIONAL STRUCTURES FOR TRANSIT SYSTEM INVENTORY MANAGEMENT." Transportation Research Board. 1995. Inventory Management for Bus and Rail Public Transit Systems: Final Report. Washington, DC: The National Academies Press. doi: 10.17226/6352.
×
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Suggested Citation:"III. ORGANIZATIONAL STRUCTURES FOR TRANSIT SYSTEM INVENTORY MANAGEMENT." Transportation Research Board. 1995. Inventory Management for Bus and Rail Public Transit Systems: Final Report. Washington, DC: The National Academies Press. doi: 10.17226/6352.
×
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Suggested Citation:"III. ORGANIZATIONAL STRUCTURES FOR TRANSIT SYSTEM INVENTORY MANAGEMENT." Transportation Research Board. 1995. Inventory Management for Bus and Rail Public Transit Systems: Final Report. Washington, DC: The National Academies Press. doi: 10.17226/6352.
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III. ORGANIZATIONAL STRUCTURES FOR TRANSIT SYSTEM INVENTORY MANAGEMENT A review of the venous organization structures, policies, procedures, practices, performance measurements, and organizational goals and objectives utilized by the transit agencies responding to the mail survey showed five distinct organizational structures. All of the survey respondents, regardless of the size and complexity of the functional units responsible for the management of inventory, could easily be classified into one of these five structures as characterized below: (1) No formal inventory management function -- inventory responsibility is located in the Maintenance Department; (2) Formal inventory management function -- inventor management responsibility located in a department other than maintenance at the sub-department level; (3) Formal inventory management function -- inventory responsibility is located in the Maintenance Department; (4) Formal inventory management function -- inventory management responsibility located in a department other than maintenance, and; Formal inventory management function -- a single dedicated inventory management group at the department level. Each of these organizational structures are profiled below in the context of the organization, inventory management practices, and performance measures utilized by the transit systems examined. The relative meets of the different organizational structures are also evaluated relative to their ability to meet inventory management goals and service objectives. 3.1 ORGANIZATION PROFILES Organizational characteristics of seventy-five of the eighty-six agencies responding to the survey questionnaire are summarized in the charts on the following pages. For the eleven respondents not included in the organizational profiles, eight either contracted outside the organization for maintenance and inventory services or maintenance was done under the auspices of another organization such as the city or county. An additional three respondents either could not complete the questionnaire or have no inventory management function at all. 13

Agency and Organization Characteristics Organization Category 1 2 3 4 5 Number of Respondents 8 6 36 9 16 Number of Buses (Average) 23 29 149 262.5 1,222 Number of Buses Comedian) 19 29 78 217.5 847 Number of Rail Vehicles (Average) 0 0 26 48.5 1,177 Number of Rail Vehicles (Median) 0 0 26 48.5 859.5 Number of Inventory Organization Employees (Average) 0 1 4 9 104 Number of Inventory Organization Employees (Median) 0 1 3 8.5 47 Number of Total Inventory Employees (Average) 2 2 6 9 118 Number of Total Inventory Employees (Median) 2 2 4 8.5 47 % with a Full-time Inventory Manager 0°/O 0°/O 50% 100% 100% % with a Separate Planning Function 0°/O 0°/O 8% 11% 81% % Including Purchasing 0°/O 17% 39% 56% 6% % Decentralized 0°/O 17% 6% 0% 6% Inventory Management Practices Characteristics Organization Category 1 2 3 4 5 Number of Respondents 8 6 36 9 16 Number of Storehouses (Average) 1 1 2 2 16.5 Number of Storehouses (Median) 1 1 1.5 2 11.5 Average Percent Stockouts Per Week 1% 7% .5% .1% 2% Average Percent Safety Stock 22% 25% 19% 14% 17% Percent Setting Target Inventory Levels 38% 83% 56% 78% 69% Percent Setting Target Service Levels 38% 0% 22% 33% 81% Percent Authorimng Direct Purchases 100% 67% 64% 67% 50% Percent with Written Procedures 25% 33% 44% 56% 75% Average Inventory Management Performance Characteristics Organization Category 1 2 3 4 5 Number of Respondents 8 6 36 9 16 Average Bus Inventory Turnover Average Rail Inventory Turnover Bus Inventory Dollar Level Rail Inventory Dollar Level 1.57 1.22 1.61 1.21 2.6 N/A N/A N/A .48 .76 $114,713 $184,611 $733,496 $1,286,254 $9,380,930 N/A N/A N/A $2,368,677 $27,152,955 14

Bus Inventory DolIar/Vehicle $3,175 $7,612 $4,948 $4,403 $5,341 Rail Inventory DollarfVehicle N/A N/A N/A $60,303 $34,696 Bus Inventory Fill Rate 84% 90% 86% 91% 96% Rail Inventory Fill Rate N/A N/A N/A 80% 94% % Obsolete/Excess Mat'} 03us) 6% 22% 6% 15% 13% % Obsolete/Excess Mat'} bill N/A N/A N/A I% 9% °/0 Items Out of Balance 4% S.5% 6% 15% 10% In the following sections we discuss each of the five orgaruzation structures in terms of the agencies' organization characteristics, inventory management practices, inventory management performance, and relative meets. 3.1.1 Organization Profile #1: No Formal Inventory Management Function-Inventory Responsibility is Located in the Maintenance Department Of the five twes of organizational structures identified, only one has no formal structure in ~ cry ~ place for the management of inventory. As shown in Figure 3-1, responsibility for managing, evaluating, and controlling inventory in these agencies rests within the Maintenance Department one hundred percent of the time. In most cases, while the Maintenance Manager has overall responsibility for inventory, a maintenance foreman or mechanic has primary responsibility for the day-today-management, organization, and planning. All of the transit systems utilizing this type of organizational structure are single-mode bus systems with fewer than 60 vehicles. _ - . ~ ~ . ~ .s 3.1.1.1 Organization All of the eight transit systems included in Category 1 share the same organizational characteristics. In each case, the Maintenance Department is the organizational unit responsible for inventor management. While all of the organizations have at least one individual responsible for the inventory, none have an individual whose primary responsibility is inventory management. In most cases, management of the inventory falls to either the senior maintenance manager, a lower level maintenance manager or the foreman or mechanic. None of the agencies have a separate planning Unction and none include purchasing as part of the inventory management organization. Finally, all of the organizations are centralized. 15

3.1.1.2 Inventory Management Practices Two of the eight Category 1 agencies have two storehouses, the remainder have one. Safety stock levels range from a high of sixty percent to a low of 0. Average safety stock is 22 percent. According to the survey participants, stockouts average only one per week. Slightly more than one-third of these respondents set target inventory levels. Slightly more than one-third of the agencies responding in this category set target service levels. In three of the eight cases, those agencies that set target inventory service levels also set target service levels. Another three agencies set neither. For the remaining two agencies, one sets target inven- tory levels but not target service levels and the sixth agency does not set target inventory levels but does set target service levels. Each of the transit systems authorizes the direct purchase of material and supplies but only two agencies use blanket purchase orders. Two transit systems have a written procedures manual while the remaining six do not. 3.1.1.3 Inventory Performance For many of the agencies included in this group, turnover figures were not available. However, for those agencies where we were able to calculate turnover rates, the numbers ranged from less than one turn per year to three and one-half turns per year. The inventory dollar level for the six agencies ranged from a low of $5,900 to a high of $325,000 with an average of $114,713 and a median of $89,543. Discussions with the agencies indicated that one reason for the low end dollar figures may be the policy of management to keep inventory dollars low and the ability to purchase many items as needed. When looking at inventory dollars per vehicle, the largest of the transit agencies in this group maintains an inventory value of $5,702 per vehicle. The lowest figure for this category was $281 per vehicle. For all Category 1 transit systems, the average dollars per vehicle was $3,175 with the median at $3,598. Fill rates for the group average 84 percent. Obsolete and excess inventory items average 6 percent with a maximum fill rate of 10 percent and a minimum of 2 percent. Three of the agencies provided information on percent of items out of balance with the high end being 10 percent and the low end .5 percent. Items out of balance averaged 4 percent, the lowest percentage for the five organization profiles discussed in this chapter. 16

3.1.1.4 Relative Merits For small transit systems (those with fewer than 60 vehicles), location of the inventory management function within the Maintenance Department does provide some benefits. For example, many of these agencies operate with a small number of total staff. many of whom wear several hats. In some cases, operations and maintenance may be combined under the same organizational unit. In other cases, purchasing and maintenance may be combined. With a small operating budget and inventory levels that are manageable, it may be appropriate for the Maintenance Department to also plan for and monitor inventory usage. Since in all cases for Category 1 transit systems, inventory is located within the Maintenance Department, formal measures of target inventory levels and target service levels may not be necessary. Even though these transit agencies may not be as sophisticated as those in some of the other organizational structures profiled later on in this chapter in terms of formally measuring and tracking inventory performance, the small, intimate nature of these organizations may make this less necessary. Also, inventory transaction volumes may not support filil-time inventory personnel. 3.1.2 Organization Profile #2: Formal Inventory Management Function ~ Inventory Responsibility is Located in a Department Other than Maintenance at the Sub- Department Level As is the case with our first type of organizational structure, all agencies falling into this category are single mode bus systems with fewer than 60 vehicles. However, unlike Category 1 transit systems, responsibility for inventory management is a formal function located outside of the Maintenance Department. As shown in Figure 3-2, the inventory management function for these systems is located at the sub-department level. Six of the 75 transit agencies fell into this category. Figure 3-2 . 17

3.1.2. 1 Organization As shown in Figure 3.2, and again similar to Category 1 transit systems, none of the Category 2 agencies have a full-time manager of inventory. In addition, none have a separate planning function. When looking at purchasing as part of the inventory management function, five out of the six do not include purchasing within the inventory management function. Five of the six agencies are also centralized. Of interest, the transit system that includes purchasing in the inventory management function is also the only transit system that is decentralized. Three of the six agencies have the inventory management function reporting to Finance and the remaining three report to Administration. When looking at the total number of staff involved in managing inventory, only two of the transit systems in this category have all inventory management responsibilities located within the inventory management function. The average total number of employees with inventory management responsibilities is 2.33. Both the median and the mode for these agencies is 2. Four of the six agencies have some employees with inventory management responsibilities located outside of the inventory management function. For these agencies, approximately 43 percent, or nearly half, of their employees are located outside of the inventory management function and one of the agencies has no employees Filly dedicated to inventory management. 3.1.2.2 Inventor Management Practices When looking at the storehouse network, all of the transit systems have one storehouse. For the five agencies reporting safety stock levels, the average percent of safety stock at the storehouses is 25 percent, with three of the agencies reporting safety stock levels of 10 percent. Category 2 agencies reported average stockouts of seven per week, the highest of any of the organizations profiled. However, this figure may be slightly skewed since one of the agencies repotted a weekly stockout figure of 20 percent. The number of stockouts were reported by four of the six agencies. Stockouts ranged from less than 1 percent to 20 percent with an average stockout rate of 6.7 percent. The median stockout rate for Category 2 transit systems was approximately 3.5 percent. Target inventory levels were set by five of the reporting agencies, however, none of the agencies reported setting target service levels. Direct purchase authority is authorized at four of the agencies. Two of the six agencies reported having a written procedures manual. 3.1 .2.3 Inventory Performance Data was available to calculate turnover rates for bus fleets for five of the agencies. Bus inventory turnover ranged from slightly more than two turns per year to one turn approximately every four years. Average turnover for bus inventory was slightly more than once per year. For inventory dollar levels, the five agencies reported a low of $32,418 and a high of $296,000. The 18

average inventory dollar level was $184,611. The median inventory dollar level was $220,585. Inventory dollars per vehicle (bus) were also calculated for the same five agencies. The range for these figures was a low of $1,351 to a high of $15,385 inventory dollars per vehicle. Average dollars per vehicle were $7,612 with a median of $7,345. All but one of the five agencies reporting inventory fill rates were 90 percent or above. One agency reported a fill rate of only 75 percent. The average fill rate was 90 % and the median and mode for fill rates was 95 percent. Only two agencies reported the percent of items out-of- balance. These numbers were 2 percent and 15 percent resulting in a average of 8.5 percent. This organization category also had the highest percentage of obsolete and excess material at 22 percent. However, the median for this group was three percent. While three of the reporting agencies had percentages of five percent or less, a fourth agency reported obsolete and excess material at 60 percent. 3.1.2.4 Relative Merits The major advantage of this type of organization structure for the management of inventory is the establishment of a formal inventory management function located outside of the Maintenance Department. An independent inventory management Auction provides the most effective option for balancing the conflicting objectives of financial control and material availability. Category 2 transit systems appear to do a relatively good job at monitoring target inventory levels. However, because none of the agencies track target service levels it is difficult to assess how well inventory management is meeting the requirements of Maintenance. 3.1.3 Organization Profile #3: Formal Inventory Management Function-Inventory Responsibility is Located in the Maintenance Department Our third organization profile represents the largest group of public transit systems with 36 survey respondents, or almost half of the agencies profiled. Thirty-five of the agencies report bus only fleets. The thirty-sixth agency also has a light rail system in addition to a large bus fleet. Fleet size ranges for a low of 7 vehicles to a high of over 900 vehicles. Average bus fleet size for the group is 149 vehicles with the median and mode at 78 and 59, respectively. 3.1.3.1 Organization Similar to organizations profiled under Category 1, responsibility for inventory management is located under the Maintenance Department as shown in Figure 3.3. However, unlike Category 1, a formal inventory management organization is in place. The size of staff engaged in the management of inventory is significantly larger than either of the organization 19

structures profiled above. This is consistent with the larger sizes of the Category 3 agencies and the formalized inventory management stn~cture. The average num ber of total inventory employees is six with a median of four. For inventory management employees located within the formal inventory man agement organization, the Figure3-3 average drops to four and the median to three. Twenty-two percent of employees with some responsibility for the management of inventory are located outside of the formal organization. Fifty percent of the 36 organizations employ a fi~ll-time inventory manager. This individual devotes 100 percent of his or her time to the management of inventory. The remaining fifty percent spend at least some portion of their time managing other functional areas such as purchasing or maintenance. Only 8 percent or three of the thirty-six Category 3 organizations have a separate planning function within the inventory management organization. Thirty-nine percent or 14 of the organizations include purchasing in the inventory management organization. Only one of the organizations has both a separate planning and a separate purchasing unit within the inventory management organization. Two of the organizations are decentralized. 3.1.3.2 Invento~Manacement Practices The largest of the Category 3 properties has a storehouse network consisting of six separate storehouses. The smallest property maintains a single storehouse. Average size of the network is two storehouses. Average stockouts per week are lower than stockout rates for either Category 1 or Category 2 transit agencies. Similarly, the average safety stock percent (19%) is lower than the other categories discussed thus far. Inventory target levels are currently set by 20, or 56 percent, of the thirty-six Category 3 properties. Inventory service levels are set by eight, or 22 percent of the Category 3 agencies. Of these agencies, only four measure both of these indicators. Sixty-four percent, or 23 of the agencies, permit direct purchases. Less than half of the transit systems (16) utilize a written procedures manual. 20

3.1.3.3 Inventory Performance Turnover rates for the bus vehicle fleets average slightly more than one and one-half times per year. Maximum turnover was 4.6 turns per year and minimum turnover was once per year. The maximum bus inventory dollar level for Category 3 transit systems is 4.89 mIlion. The minimum dollar level was $115,238. The average inventor dollar level for bus fleets was $733,496 with the median at $466,850. When booing at inventory dollars per vetches, the maximum value was $12,709 and the minimum was $1,013. Average dollars per vehicle were $4,948 with the median at $4,424. Fill rates averaged 86 percent With both the average and median at 95 percent. The percentage of obsolete material is significantly lower at 6 percent than Category 2 agencies and is at same level for Category 1 agencies. Items out of balance averaged 6 percent, the second lowest percentage of the five organization categories profiled in this chapter. 3.1.3.4 Relative Merits Even though this organizational profile includes responsibility for inventory management under the Maintenance Department, and thus is not as effective as Category 2 transit systems in balancing the conflicting objectives of financial control and material availability, the establishment of a formalized, separate inventory management organization does provide some degree of dissociation from other Maintenance Department activities. When comparing Category 3 transit agencies in terms of orgariization, inventory management practices, and inventory management performance to transit agencies in the other four categories, some merits are apparent. For example, close proximal to maintenance personnel may account for the low rates in the percent of obsolete and excess material and the percentage of items out of balance. While these agencies as a group are not the highest in the numbers setting inventory target levels and target service levels, proximity to maintenance "customers" may not make these two indicators as crucial as when the inventory management Unction is located outside of the Maintenance Department. Conversely, while bus inventory fill rates average near the bottom of the five profile categories, this may be a reflection of the overall inventory management policy set by the Maintenance Department. 3.~.4 Organization Profile #4: Formal Inventory Management Function-Inventory Responsibility is Located in a Department Other than Maintenance Category.4 organizations average a bus fleet size of 262.5 buses. Fleet size ranges from a high of 560 buses to a low of 134 buses. Two of the properties utilize rail cars in their fleets. Both the average and median for rail car fleets is 48.5. As shown in Figure 3-4, the organizational structure of Category 4 organizations includes a formal inventory management function reporting to the department level outside of the Maintenance Department. 21

, .. .-~r.on-ma~rt=~:s . ~.~.l,`~. - ski , ~- ~ . . ~ a.: ::-2~2 :~ ~ :~2~.~.,~.~.~.C~. ~1111 _ ~ ~ n.Jng ~ Figure 3~4 3.1.4. 1 Organization The fourth category of organizational profiles includes those transit systems employing a formal inventory management function reporting to a department other than Maintenance. Of the nine transit systems in this category, three report to Materials, three to Finance, two to Administration and one to Purchasing. The number of inventory organization emDIovees and the number reef tntn' inventors management emDIovees are v~rtuallv the same ~ For both groups, the average number of employees is nine with a median of eight. The largest of the transit systems in this category employs a total of sixteen individuals to management inventory, all of who are located within the inventory management organizational unit. Similarly, the smallest of the transit systems employs four inventory management employees, all of whom report to the inventory management organizational unit. One hundred percent of the Category 4 transit systems have a full-time inventory manager. In addition, all of these transit systems are centralized with respect to a single location for management of the inventory. Five of the nine transit agencies include purchasing within the inventory management function. Only one transit agency has established a separate planning Unction. 3.1.4.2 Inventory Management Practices o The storehouse network for Category four transit agencies is similar to Category three agencies. The average and median number of storehouses is two. The largest of the transit agencies in this category has a network of four with the smallest transit system utilizing one. Of 22

the five organizational types profiled in this chapter, this category has the lowest number of stockouts per week (] percent). This group also has the lowest percentage of safety stock (14 percent). Seven out of the nine Category 4 transit agencies set target inventory levels. As is the case with the other organization types profiled thus far, only three out of the nine transit agencies set target inventory service levels. These three agencies utilize both types of measurement. Sixty- seven percent, or six of the nine transit agencies authorize direct purchase for inventory material. Written procedures are in place at 56 percent, or five of the agencies. 3.1.4.3 Inventory Management Performance Differences in bus and rail turnover rates exist for both Category 4 and Category 5 properties. The average bus fleet turnover rate for Category 4 agencies is slightly more than once per year, For rail inventory' the figure is approximately once every two years. The difference between the two rates may be explained by such factors as longer lead times for ordering rail fleet parts and material and higher costs for safety stock and insurance items. The inventory dollar level for bus fleets ranged Dom a high of nearly $3 million to a low of $222,000. The average and median for the group was $1.3 million. When looking at bus inventory dollars per vehicle, the average was $4,403, the second lowest figure for all organizational types profiled. For the group, the maximum dollar level was figured at $7,661 and the minimum at $1,586. Both of the Category 4 rail fleets provided information on inventory dollar levels. The average and median inventory dollar level for the two rail fleets in Category 4 was $2.4 million since the total inventory dollars were very close for both agencies. However, when looking at rail inventory dollars per vehicle, the two figures were $82,771 and $37,835. The average bus inventory fill rate for the group was 91 percent with a high of 99 percent and a low of 85 percent. For rail, the fill rates were both 80 percent. The percent of obsolete and excess material was much higher for the bus fleets than the rail fleets. Obsolete and excess material averaged 1 5 percent for bus fleets and only ~ percent for rail fleets. The percent of items out of balance for all Category 4 rail systems was 15 percent. This number represents the highest percentage of items out of balance for all five organizational types profiled. 3.~.4.4 Relative Merits Like the organizations profiled in Category 2, the major advantage of Category 4 organizations in managing inventory is the establishment of a formal inventory management function located outside of the Maintenance Department. Unlike Category 2 agencies, however, these agencies' inventory management functions report to a department level, rather than a sub- department level. 23

Category 4 transit systems appear to do a relatively good job at keeping both the number of stockouts and the percentage of excess and obsolete inventory items low. This group also does well in setting target inventory levels and providing staff with a written procedures manual. Inventory turnover for both bus and rail were the lowest for all five organizational types profiled and percent of items out of balance was the highest. However, bus inventory dollars per vehicle and bus inventory fill rates were among the highest of the groups. 3.1.5 Organization Profile #5: Formal Inventory Management Function-A Single Dedicated Inventory Management Group at the Department Level Sixteen out of the 75 organizations profiled have a single dedicated inventory management group located at the department level as shown in Figure 3-5. Category 5 organizations average a 200 buses with a median of 847. Ten of the sixteen properties have rail car fleets. Rail fleets range in size from 84 to 5,806. Rail car fleets average 1,177. The median size for rail car fleets is 859.5. 3. 1.5. 1 Organization All of the 16 Category 5 organizations employ a fil11-time inven- tory manager. Thirteen (81%) of the agencies include planning within the organization but only one includes purchasing. Sirn'- larly, only one of the organ- izations is decentralized. Figure 3-S For total number of staff involved in managing inventory material, 89 percent of all staff are located within the inventory management organization. Within the inventory management organization, staff sizes range from a high of 913 to a low of 6. Staff sizes average 104 with a median of 47. When looking at all staff involved with the management of inventory, staff sizes range from 978 to 7. Average staff size is 1 1 8 and the median is 47. Within the transit agency, six of the inventory management organizations in this category report as part of administration, five as part of purchasing and the remainder as part of materials, finance or operations. All of the organizations report to the executive level. 24

Be l 5 2 Inventory Management Practices Category 5 transit agencies have, by far, the most extensive storehouse network. Average size of the network is ~ 6.5 storehouses. The median is ~ ~ .5 storehouses. For the ~ 6 properties in this category, storehouses networks range in size from 75 to one. Stockouts per week average higher than any other organization type profiled except one. The average stockout rate is 2. Average percent safety stock is better than most other profile categories with a percentage of 17. Sixty-n~ne percent' or 1 1 transit agencies, set target inventory levels. Eighty-one percent' or ~ 3 transit agencies, set target seduce levels. Of interest, is the fact that all transit agencies who set target inventory levels, also set target service levels. Only 50 percent of Category 5 transit systems authorize the direct purchase if inventory parts and material. This is the lowest percentage of the five organization types profiled. Conversely, this category has the highest percentage (75%) of transit agencies with written inventory management procedures. 3.1.5.3 Inventory Management Performance Category 5 transit systems have, on average, the highest inventory turnover rates for bus fleets. These transit systems turn over inventory approximately 2.6 times per year. The highest level of turnover in the category was 7.36 and the lowest was .63. Category 5 transit systems also turned over raid inventory quicker than those in Category 4. The rate for Category 5 transit systems was .76 as opposed to .413 for CategoIy 4 transit systems. Average inventory was approximately $9.4 million for bus fleets and approximately $27 million for rail fleets. Inventory dollars per vehicle averaged $5,341 for bus fleets with the median at $4,875. Highest for the group was $13,246 and lowest was $959. For rail fleets, inventory dollars per vehicle averaged $34,696 with a median of $19,684. The range for the group was a high of $139,286 and a low of $6,7~35. Inventory fill rates for both bus and rail were the highest of all transportation modes in all five of the organization types profiled. Bus fill rates averaged 96% and rail inventory fill rates averaged 94%. The percentage of obsolete and excess bus material averaged 13%. Two of the other organization types profiled were higher and two were lower than the average. Obsolete and excess material for rail inventory averaged 9 percent, eight percentage points higher than Category 4 rail fleets. Finally, Category ~ transit systems averaged 10 percent items out of balance. Only category 4 transit systems had a higher percentage (15%~. 3.1.5.4 Relative Ments A dedicated inventory management group at the department level gives the most complete control over the management of inventory. Such an independent inventory management organization provides the most effective option for balancing the conflicting objectives of financial control and material availability. 25

Category 5 transit agencies appear to be the most successful in managing safety stock levels, setting target inventory and service levels, and in formalizing written inventory procedures in a written manual. Category five agencies also appear to have the best inventory turnover and fill rates for both bus and rail fleets. In the next chapter, we define the inventory management performance indicators commonly used by the public transit industry. Chapter IV also examines the effects of agency and Deet characteristics and presents the values of the performance indicators, based on the survey responses. Finally, the chapter compares the values of some of the performance indicators used by the public transit industry th those found in other ~ndustnes. 26

Next: IV. PERFORMANCE INDICES FOR ASSESSING INVENTORY MANAGEMENT »
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