The Big Fix: Growing A Spare-Parts Logistics Business

Makers of the vehicles and equipment that fuel China's economy have a problem: getting spare parts when a truck, car, or machine breaks down. The logistics providers that can help must deal with the challenges of poor roads and railways, difficulties crossing provincial borders, and limited IT infrastructures.

"Cars sit for up to a week before they're fixed because the parts aren't available," says John Hafferty, VP of Europe and Asia for UPS Supply Chain Solutions. "The parts are in China. The problem is physically getting them to the repair shops." UPS Supply Chain Solutions plans to get into the aftermarket parts business this year to help local vehicle retailers and dealers quickly get parts from major automakers.

Caterpillar Logistics Services Inc., a subsidiary of Caterpillar Inc., the maker of construction and mining equipment, has been providing aftermarket parts service for 15 years to its own dealers and retail outlets in China. Now it's being asked by more than 60 manufacturers to handle similar services for them in the country.

The company's parts-distribution center in China will use a combination of commercial and proprietary tools, including customized SAP software for warehouse management. The SAP system will integrate with Caterpillar's proprietary tools for materials management, order management, and financials, says Bill Gordon, director of supply chain in Asia-Pacific at Cat Logistics. The company plans in the future to use a new release of SAP that incorporates intellectual property from Cat Logistics' proprietary tools. The company also uses i2 Technologies Inc.'s Transportation Modeler to develop optimum distribution routes.

Choice Logistics Inc. expects that by 2006, Asia-Pacific will account for 10% of its customer base, up from 1% this year, with the bulk of its business coming from network, telecommunications, and storage companies. The company is bringing its spare-parts logistics model and technology, which lets customers communicate using either XML or EDI links, to China, says Choice Logistics' president Rob Kass.

With offices already in Beijing and Shanghai, Choice Logistics is opening offices in additional cities to avoid having to make spare-parts deliveries across provincial borders and employing couriers rather than freight forwarders to handle deliveries from its warehouse hubs to customers within two hours.

Photograph by Michael McQueen

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