January 2010, Fleet Financials - Cover Story
LKQ Lean Fleet & Telematics Boost Productivity & Cut Costs
LKQ Corporation keeps fleet operations lean and uses telematics to increase daily fleet delivery stops, dramatically reduce overtime costs, improve driver safety, and trim fuel costs.
By Cheryl Knight
As one of the largest nationwide providers of aftermarket collision replacement, recycled OEM products, and refurbished OEM collision replacement products, LKQ Corporation serves tens of thousands of collision-repair businesses, mechanical service shops, and vehicle dealerships throughout the United States and Canada.
The company, also a leading distributor of paint and body shop supplies, was formed in 1998 and is headquartered in Chicago. LKQ seeks to provide the national reach, strict quality standards, knowledgeable sales, and fast delivery customers demand. The company also strives to achieve profitable growth and increased returns to its shareholders by:
- Providing total customer satisfaction.
- Striving for operational excellence and continuous improvement.
- Promoting a culture of professionalism, teamwork, and environmental, health, and safety compliance.
- Acting as a good corporate citizen where employees work and live.
LKQ Fleet Team Strives to Adapt to Market Conditions
With more than 10,000 employees, the $2 billion dollar (2008 figures) company operates a fleet of 2,900 vehicles, including trucks, tractors, and trailers from Isuzu, Freightliner, International, Kenworth, Volvo, Great Dane, Wabash, Strick, and Fruehauf.
LKQ's logistics management team, which operates with a lean philosophy, includes the director of logistics, director of fleet, a fleet committee, several regional distribution managers, local dispatchers, and traffic managers. The team helps manage delivery of parts for LKQ and all shuttle work between warehouses and regions.
"We try to do as much next-day service as possible to our customers, as well as provide timely, cost-effective, and damage-free deliveries," said Mike Lahr, director of logistics for LKQ. "Our team has the ability to quickly adapt and change to market conditions and provide quicker service as need be."
When assessing the company's fleet financials, the team measures costs as percent of sales. During the past year, LKQ experienced double-digit sales growth. However, distribution costs as a percent of sales had dropped 0.5 points 3Q 2009 - 8.9 percent compared to same time previous year.
The company's costs by the same time in 2009 were $4 million less than 2008, while the company continued to grow with more locations and increased sales.
"There are so many variables we are constantly looking at," Lahr said. "Luckily, we have a team of people devoted to cost reduction and customer service. We also try to watch our maintenance costs as much as possible and compare them to other fleets operating around the country."
Last, but not least, the team measures its shuttle operations and determines if operating them in-house is most cost effective or whether outsourcing should be considered.
Telematics Creates Significant Savings & Efficiencies
One recent initiative allowed the company to decrease accidents and vastly improve productivity. In 2009, LKQ won a productivity award from fleet management company PHH for utilizing telematics in its fleet. The program led to an increased number of stops fleet drivers are able to make per day, dramatically reduced overtime costs, improved driver safety, and reduced fuel costs.
The company chose PHH's system after experimenting with several different vendors.
"We wanted to use only one system, and we liked what PHH had to offer. Plus, we could jointly use it with their maintenance and fuel programs," Lahr said.
To assess its effectiveness, the fleet team tested the system for four months, then compared before-and-after system implementation data. According to Lahr, the results were staggering and caught the fleet team off-guard regarding several issues, including:
1. Drivers' speed.
2. Out-of-control idling.
3. Vastly improved productivity resulting from quicker start times and more deliveries. Also, drivers returned to dispatch faster at the end of the day because they were monitored.
"We have seen a decrease in accidents because of the controlled speed," Lahr pointed out.
In addition to the PHH award, LKQ has been honored by a number of other vendors and partners, including several customer service awards.
"We appreciate each and every one of them and consider them an honor," Lahr said.
Not only is LKQ a close corporation internally, the company is very "fond of" and "greatly values" its relationships with vendors and partners.
"We have vendors we have used since the inception of the company," Lahr added. "They come to our meetings and give us guidance where they can."
Whether trucks, packaging, LTL (less than truck load) services, small package services, pallet design, liftgate design, box van design, racking systems, truck load services, outsourced shuttle runs, leasing companies, rental companies, tractor spec'ing, telematics, or maintenance, the company values vendor input and involves them as often as possible.
"We feel that because of them, we are where we are at today, although we are constantly looking for improvements," Lahr said.