Bruce Smith
(All photos: Honda)Bruce Smith, assistant vice president, Honda's Parts Division, says the program has been in the works for five or six years. It took that long for the company to make changes to its infrastructure, such as a $25 million upgrade to its warehouse management system, and to set processes in place that more efficiently get parts to its dealers. Surveying activity in the company's Torrance warehouse, Smith concedes that parts delivery was not always Honda's strong point. "A few years ago, I'd say our fill rate for our facing warehouses was around 88 percent," he says. "Now we're at around 94 percent for facing warehouses." The fill rate for the entire Honda delivery system, which includes two hub warehouses, is 98.5 percent, he adds. Prior to the DSO system, dealerships placed stock orders on one assigned day during the week. Those orders took at least two days to arrive. While dealers had the option to order parts for next-day delivery, they incurred the added cost. In fact, Smith explains that some dealerships would delay ordering parts until their assigned stock order date because of the costs associated with next-day orders.
"This way, the products are ready for the dealers to use when they arrive in the morning," says Smith. Products are delivered in steel, rolling cages that take up slightly more than 50 cu. ft. of space. Honda paid $6.3 million for 8,700 cages for the DSO program because they reduce the possibility of damaged products and allow for efficient use of space within each delivery truck.
Martin Luna, parts director for two Scott Robinson Honda locations in Torrance, says the overnight delivery process has helped eliminate the amount of inventory he must keep in his facilities - and has improved service for his wholesale accounts.
"They know the parts are going to be here by 7 a.m., so some shops stop by in the morning and pick up parts on the way to their shops," says Luna.
Scott Robinson Honda did have to go through some process changes as a result of the DSO program. For example, the company added dedicated parts employees who arrive at 5:30 a.m. to check-in the orders. But any costs associated with additional manpower are recovered by increased sales, and the fact that the dealership does not have to carry as much inventory, says Luna.
"We don't have to turn away business because we don't have a part. We know we can get it the next day," he says. "Shops expect parts in three days. When you show up the next day with a complete order, you're like a hero."
