When we think of a supply chain, we tend to think of a chain of activities that starts with sourcing, then manufacturing, and ends with goods arriving at a store. When we think of a logistics fleet, we tend to think of big trucks hauling goods between plants, distribution centers, and stores. Otis Elevator Company has a nontraditional supply chain, a project-based maintenance supply chain, supported by a nontraditional fleet.
The Otis fleet in North America consists of 4,000 units! Ten percent of the fleet is cars, but it also includes light pickup trucks, vans, and trucks up to Class 6 (up to 26,000 pounds gross weight).
These diverse vehicles support three business lines for Otis: installation of new elevators, routine elevator maintenance, and elevator modernization (gutting an existing elevator and putting in new parts). Eight thousand elevator mechanics are needed to staff these business lines. Each mechanic is employed at one of 180 field offices, each with its own small warehouse. One large warehouse in Bloomfield, Connecticut supports all the small warehouses. Mechanics are allowed to take the trucks home at night, and they drive to their first job from their home location.
And who manages this fleet? Just one person, Phil Schreiber, the North American Fleet Manager, who is ultimately responsible for making sure this large line item expense is managed efficiently.
It would be impossible for one person to do this job without a high degree of outsourcing. Fleet maintenance, for example, is outsourced. Phil works with the PHH Corporation in the areas of truck leasing, a fuel card program, and to help with the complex logistics of “upfitting” (outfitting) the vehicles with the specified bins, racks, cranes, lift gates and other accessories needed to do the job. This outsourcing also makes sense because the individual service centers do not support enough vehicles to warrant maintenance departments or fuel dispensers.
Phil’s duties fall into three areas. First, as mentioned earlier, he manages the tasks associated with procuring and outfitting trucks. The goal is to have all the components arrive on a just-in-time basis to minimize inventory costs. Further, the same types of unexpected events, like Hurricane Katrina, that disrupt traditional supply chains can also impact Otis’ supply chain (e.g., delay the delivery of new trucks, shipped via rail, to mechanics). PHH collects data from OEMs, outfitters, and various component companies and makes the status of different truck procurement and outfitting projects visible to Otis via a private internet portal.
On the procurement side, the trucks themselves are purchased in collaboration with colleagues from other United Technologies divisions in order to leverage the corporate buying power. However, Phil is solely responsible for the procurement contracts with outfitters and the various suppliers of the necessary components needed to “upfit” the trucks. These contracts are typically worth several hundred thousand dollars, and they can sometimes run into the millions.
His second set of duties can be described as financial and analytic. Otis has metrics in place – such as annual cost per vehicle – and Phil has policies and processes in place to meet these targets. He is also responsible for determining (using a mathematical analysis) when a mechanic gets a company vehicle versus just being reimbursed on a per-mile basis for using their own vehicle. At some point, it becomes cheaper to procure a mechanic their own truck.
Phil also sets and enforces policies (available to mechanics via the Otis intranet) for the use of these vehicles. Mechanics, as drivers, are expected to achieve a certain level of performance when it comes to bringing the truck in for maintenance, fuel consumption, what to do when accidents occur, and other areas. To help in enforcing these policies, each mechanic is given a handheld device that includes special software developed for opening and closing jobs, sending messages to and from the service center, and to help with fleet maintenance and monitoring.
In conclusion, what strikes me when I think about the Otis supply chain is that there has not been enough thinking, research, and writing on the topic of project-based maintenance supply chains!