Congratulations to Mike Lahr, director of Logistics for LKQ Corp., named 2010 Fleet Executive of the Year. The award, sponsored by Fleet Financials magazine and The CEI Group, was presented in a special ceremony at the NAFA Fleet Management Association (NAFA) Institute & Expo April 25.
Lahr directs a 2,900-unit fleet at LKQ, a national provider of aftermarket collision replacement, recycled OEM parts, and refurbished OEM collision replacement products. A 32-year fleet industry veteran, Lahr also heads corporate logistics purchasing programs and is responsible for negotiations with LKQ product delivery vendors.
"I have to thank the LKQ Corp. employees who embraced all the changes we have made in making our Logistics Network world class," Lahr said in accepting the award. "I also have to recognize LKQ president and CEO Joseph Holsten for providing us with great leadership and the tools to be as effective as possible in our efforts. I must also mention my wife, Beth, for allowing me to spend countless days on the road to continue my passion of my work and dedication to LKQ."
Lahr dedicated the honor to his son, Nathan, currently on a second U.S. military tour of duty in Afghanistan with the 82nd Airborne Army. The proud father had a simple message for Nathan: "Come home safe and soon, son."
Lowering Costs as Company Grows
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.
Currently serving a significant majority of the top 75 U.S. automobile markets, 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 they work and live.
With more than 10,500 employees, the $2 billion-plus company operates a fleet that includes trucks, tractors, and trailers from Isuzu, Freightliner, International, Kenworth, Volvo, Great Dane, Wabash, Strick, and Fruehauf.
Under Lahr's direction in 2009, LKQ distribution costs as a percent of sales were reduced by 0.5 percentage points, while the company grew by 7.3 percent. The company's costs year-to-date are $4 million less than last year, all while the company continues to grow with more locations and increased sales.
Lahr's other accomplishments include creating the company's World Class Logistics Network to boost efficiency, reduce costs, and improve customer service in shuttle network and network delivery. He also developed an overnight services program to customers from 300-plus LKQ facilities.
In addition, in 2009, LKQ increased the number of stops company fleet drivers made per day, dramatically reduced overtime costs, improved driver safety, and reduced fuel costs by keeping operations lean and implementing telematics.
A Fleet Executive Shares His Secrets to Success
When asked how he succeeds in his role, Lahr cited working with "great" upper management who allow him to think outside the box and utilize his 32 years of experience, knowledge, and team to help accomplish goals and get the job done.
"Sometimes we have to get the customer taken care of rather quickly, and service comes before costs," he said. "Then, after it calms down, we look at costs and efficiencies. I think management recognizes this passion and 'get-it-done' attitude and appreciates it."
One of LKQ's mottos is, "What are we waiting for?" And in only 12 years since the company's inception, it has accomplished a great deal. Lahr works quickly and proactively to ensure a steady course.
"I have surrounded myself with some great people who have the same passion I do, and we do not like 'No' for an answer or, 'It cannot be done!' " he stated. "Another item that has helped is that I have been with LKQ for 10.5 years of the 11.5 years the company has been in business. It helped coming in rather early and growing with the company and learning its culture from the very beginning."
Lahr also added that because LKQ is a sales-driven company, teamwork is not restricted to within specific departments. When Lahr's team members find the opportunity to help sales in the form of logistics work, they do not hesitate to assist with deliveries, service, shuttle work, and controlling costs.
Another secret to Lahr's success: embracing change, technology, and vendor expertise.
"We have our suppliers/vendors tour our facilities quite often and help with fulfilling our needs in their area of expertise," he pointed out. "If they do not know what we are doing and what our goals are, how can they help us? We challenge them to help reduce costs by being creative, not necessarily cutting their rates."
As Lahr pointed out, any company can cut a rate, but can they help reduce costs associated with those rates?
For example, for the company's power liftgates, they reached out to a vendor, showed them how LKQ uses their liftgates, and then asked the vendor to help identify the correct liftgate for the job.
"We asked them to come up with a solution that was not necessarily the cheapest, but could help by being quicker, improving productivity, and being safer," Lahr said. "They know their liftgates better than us!"
Lahr also reaches out to employees for cost-cutting ideas. He advises others in his position to ride with a driver and ask what he or she would change on the truck to make it more productive, more efficient, or safer.
"Our truck designs, especially delivery vehicles, are primarily designed with ideas from our drivers," he said.
The LKQ Logistics team also turns to outsourcing when some of their tasks don't fall within the team's core competencies. Lahr pointed out that outsourcing such things as fuel tax reporting and IRP plates required for interstate travel allows the team to eliminate tedious and time-consuming jobs at a low cost.
With 300 plants in numerous states and thousands of carriers, LKQ contracts with a third-party company to manage less-than-truckload carrier negotiations and claims. Using its expertise and connections, the vendor gets LKQ the best carriers for the best price.
"They use their bargaining power as they have other business from other companies they can leverage with for rates," Lahr added.
Best Practices within an Award-Winning Fleet
When asked to cite the Logistics team's top best practices, Lahr pointed out that continually comparing LKQ facilities, in relation to distribution costs as a percentage of sales, is vital.
"This allows us to find out who is doing poorly and why, and at the same time find out who is doing well and what they are doing differently," he said.
Choosing preferred vendors and suppliers, putting a limit on the number used, and becoming loyal to those vendors and suppliers is another best practice. "If you are loyal to your vendors, they will become loyal to you," Lahr stated.
He also stressed the need for constant auditing of small parcel freight and fuel invoices within LKQ.
"Not all of our employees understand company goals and policies. You would be surprised of the choices some of our people make and their reasoning behind it," he said. "We are very careful of the law of averages. We measures items at ranges rather than averages, as averages can present false information."
Another best practice for the LKQ Logistics team focuses on delivery and shuttle equipment. The group is constantly examining methods to improve efficient delivery of its parts products.
"We might develop a process and think it is a good way, but will still continue to look at it and try to improve," Lahr stated.
The same goes for the company's shuttle equipment and containerization. Some regions are constantly experimenting with containers for LKQ's parts shuttle equipment to lessen labor costs, improve productivity, and enhance safety.
Lahr added that each company or operation LKQ acquires usually performs some functions differently.
"We take advantage of some of their best practices and implement them into our own company," he said. "We never stop looking for ways to do something, better, safer, or more productively."
Telematics Creates Savings & Efficiencies
One of LKQ's most dynamic recent fleet initiatives is its telematics solution. The program, while still being rolled out, immediately led to routing efficiencies, reduced idling and speeding, lower out-of-route miles, and an elimination of after-hours use.
In fact, in 2009, LKQ won the PHH Arval "Best Practices and Productivity Award" for utilizing telematics in its fleet. 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 program," Lahr said.
To assess the system's effectiveness, Lahr compiled data at two locations and conducted a four-month test. He compared the new data to pre-test information. According to Lahr, the results were staggering and caught the fleet team somewhat off guard surrounding several issues, including:
- Speed control of drivers greatly improved.
- Idling was out of control.
- Productivity was vastly improved by quicker start times and more deliveries. Also, drivers returned more quickly because they were being monitored.
As a result of the telematics test, idling declined by 35 percent, speeding reduced by 81 percent, mileage declined by 12 percent, and after-hours driving decreased by 48 percent.
Network & Purchasing Program Optimized
During the early days at LKQ, the company could only grow by "seeing and selling" each plant's inventory and having the ability to deliver it. As the company added locations, computer systems were in place to accommodate this approach. However, the company also needed shuttle operations that ran at night for next-day delivery in a variety of states. The Logistics team established "cross docks" to meet the need.
"We have numerous cross docks across the country using a 'hub and spoke method,' " Lahr said. "Parts are ordered from other facilities within their region and are loaded throughout the day. At night they all go into a predetermined cross dock, exchange parts, and come back to their respective plants. Upon arrival, the night loading crew or early morning personnel check the parts and load them onto delivery trucks for delivery that day."
This method enabled LKQ to gain rapid growth and success; the company now operates 2,600 delivery vehicles and a few hundred shuttle vehicles used at night.
Another key program revamping came in the wake of a lack of centralized purchasing.
"In the very beginning of the company, we really did not have any one person doing centralized purchasing programs," Lahr recalled. "Each department was doing its own to a certain extent."
But as LKQ grew, management required a centralized purchasing program to leverage purchase size and opportunities, not only for the company, but for preferred vendors/suppliers as well.
"I now do a lot of the corporate purchasing programs for the company, not only for the logistics department, but for other departments as well," Lahr said. "Included in these programs are coffee/water, uniforms, and used liquids, such as oil, gasoline, Freon, and a variety of others."
LKQ's Logistics Network and Purchasing Program has allowed the company to expand its reach while reducing costs and increasing efficiencies.
Moving into the future, Lahr sees LKQ's delivery and shuttle fleet constantly growing and changing to adapt to the volume of the company's products being shipped.
"We have these mottos: 'The Future Is Now' and 'No Part Left Behind,' " Lahr said. "This means that our parts, every one of them, will get to our customers when they want them, damagefree, and delivered economically."