e-Transit: Electronic Business Strategies for Public Transportation, Volume 1, Supply Chain: Parts and Inventory Management (2002)

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T R A N S P O R T A T I O N R E S E A R C H B O A R D WASHINGTON, D.C. 2002 www.TRB.org T R A N S I T C O O P E R A T I V E R E S E A R C H P R O G R A M TCRP REPORT 84 Research Sponsored by the Federal Transit Administration in Cooperation with the Transit Development Corporation SUBJECT AREAS Public Transit e-Transit: Electronic Business Strategies for Public Transportation Volume 1 Supply Chain: Parts and Inventory Management MITRETEK SYSTEMS Washington, DC and TRANSTECH MANAGEMENT, INC. Greensboro, NC

TRANSIT COOPERATIVE RESEARCH PROGRAM The nation’s growth and the need to meet mobility, environmental, and energy objectives place demands on public transit systems. Current systems, some of which are old and in need of upgrading, must expand service area, increase service frequency, and improve efficiency to serve these demands. Research is necessary to solve operating problems, to adapt appropriate new technologies from other industries, and to introduce innovations into the transit industry. The Transit Cooperative Research Program (TCRP) serves as one of the principal means by which the transit industry can develop innovative near-term solutions to meet demands placed on it. The need for TCRP was originally identified in TRB Special Report 213—Research for Public Transit: New Directions, published in 1987 and based on a study sponsored by the Urban Mass Transportation Administration—now the Federal Transit Admin- istration (FTA). A report by the American Public Transportation Association (APTA), Transportation 2000, also recognized the need for local, problem-solving research. TCRP, modeled after the longstanding and successful National Cooperative Highway Research Program, undertakes research and other technical activities in response to the needs of transit service providers. The scope of TCRP includes a variety of transit research fields including plan- ning, service configuration, equipment, facilities, operations, human resources, maintenance, policy, and administrative practices. TCRP was established under FTA sponsorship in July 1992. Proposed by the U.S. Department of Transportation, TCRP was authorized as part of the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA). On May 13, 1992, a memorandum agreement outlining TCRP operating procedures was executed by the three cooperating organizations: FTA; the National Academies, acting through the Transportation Research Board (TRB); and the Transit Development Corporation, Inc. (TDC), a nonprofit educational and research organization established by APTA. TDC is responsible for forming the independent governing board, designated as the TCRP Oversight and Project Selection (TOPS) Committee. Research problem statements for TCRP are solicited periodically but may be submitted to TRB by anyone at any time. It is the responsibility of the TOPS Committee to formulate the research program by identifying the highest priority projects. As part of the evaluation, the TOPS Committee defines funding levels and expected products. Once selected, each project is assigned to an expert panel, appointed by the Transportation Research Board. The panels prepare project statements (requests for proposals), select contractors, and provide technical guidance and counsel throughout the life of the project. The process for developing research problem statements and selecting research agencies has been used by TRB in managing cooperative research programs since 1962. As in other TRB activ- ities, TCRP project panels serve voluntarily without compensation. Because research cannot have the desired impact if products fail to reach the intended audience, special emphasis is placed on disseminating TCRP results to the intended end users of the research: transit agencies, service providers, and suppliers. TRB provides a series of research reports, syntheses of transit practice, and other supporting material developed by TCRP research. APTA will arrange for workshops, training aids, field visits, and other activities to ensure that results are implemented by urban and rural transit industry practitioners. The TCRP provides a forum where transit agencies can cooperatively address common operational problems. The TCRP results support and complement other ongoing transit research and training programs. TCRP REPORT 84: VOLUME 1 Project J-09 FY’00 ISSN 1073-4872 ISBN 0-309-06766-9 Library of Congress Control Number 2002112858 © 2002 Transportation Research Board Price $17.00 NOTICE The project that is the subject of this report was a part of the Transit Cooperative Research Program conducted by the Transportation Research Board with the approval of the Governing Board of the National Research Council. Such approval reflects the Governing Board’s judgment that the project concerned is appropriate with respect to both the purposes and resources of the National Research Council. The members of the technical advisory panel selected to monitor this project and to review this report were chosen for recognized scholarly competence and with due consideration for the balance of disciplines appropriate to the project. The opinions and conclusions expressed or implied are those of the research agency that performed the research, and while they have been accepted as appropriate by the technical panel, they are not necessarily those of the Transportation Research Board, the National Research Council, the Transit Development Corporation, or the Federal Transit Administration of the U.S. Department of Transportation. Each report is reviewed and accepted for publication by the technical panel according to procedures established and monitored by the Transportation Research Board Executive Committee and the Governing Board of the National Research Council. Special Notice The Transportation Research Board, the National Research Council, the Transit Development Corporation, and the Federal Transit Administration (sponsor of the Transit Cooperative Research Program) do not endorse products or manufacturers. Trade or manufacturers’ names appear herein solely because they are considered essential to the clarity and completeness of the project reporting. Published reports of the TRANSIT COOPERATIVE RESEARCH PROGRAM are available from: Transportation Research Board Business Office 500 Fifth Street, NW Washington, DC 20001 and can be ordered through the Internet at http://www.national-academies.org/trb/bookstore Printed in the United States of America

The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished schol- ars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. On the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and techni- cal matters. Dr. Bruce M. Alberts is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Acad- emy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achieve- ments of engineers. Dr. William A. Wulf is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, on its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Acad- emy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both the Academies and the Institute of Medicine. Dr. Bruce M. Alberts and Dr. William A. Wulf are chair and vice chair, respectively, of the National Research Council. The Transportation Research Board is a division of the National Research Council, which serves the National Academy of Sciences and the National Academy of Engineering. The Board’s mission is to promote innovation and progress in transportation by stimulating and conducting research, facilitating the dissemination of information, and encouraging the implementation of research results. The Board’s varied activities annually engage more than 4,000 engineers, scientists, and other transportation researchers and practitioners from the public and private sectors and academia, all of whom contribute their expertise in the public interest. The program is supported by state transportation departments, federal agencies including the component administrations of the U.S. Department of Transportation, and other organizations and individuals interested in the development of transportation. www.TRB.org www.national-academies.org

FOREWORD By Gwen Chisholm Staff Officer Transportation Research Board TCRP Report 84: e-Transit: Electronic Business Strategies for Public Transporta- tion documents principles, techniques, and strategies that are used in electronic business strategies for public transportation. TCRP Report 84 will be published as multiple vol- umes; Volume 1: Supply Chain: Parts and Inventory Management examines the supply- chain concept and identifies supply-chain strategies used by non-transit fleets to reduce investments in parts and inventory while increasing fleet availability. This report includes a clarification of supply-chain terms, discussion of the impact of asset- management decisions on parts and inventory management needs, and strategies for streamlining the supply chain. Non-transit fleets with practices identified for emulation include utility fleets, a state DOT fleet, private-sector motor carriers, and the U.S. mili- tary. This report may be used by senior managers, operations managers, materials man- agers, asset managers, inventory professionals, and procurement officers. The Internet and other new information and communication technologies are revo- lutionizing the way services are delivered and organizations are structured. Electronic business processes change the ways organizations operate and conduct business. Oppor- tunities to lower transaction costs and improve efficiency have changed relationships between transit agencies and their suppliers and customers, and electronic business processes are likely to change industry structures in the longer term. Portals for trans- actions in government-to-government and business-to-government marketplaces are offered through diverse organizations. Numerous transit agencies are preparing to offer customized itinerary planning and fare media purchasing over the Internet. The declining costs of communications, data storage, and data retrieval are accelerating the opportunities spawned by the Internet and other information and com- munications technologies. Choosing and sequencing investments in technologies, processes, and people to reduce costs and increase productivity present challenges to the transit manager, who must weigh the costs, benefits, and risks of changing the ways services are delivered. To assist in meeting such challenges, TCRP Project J-09 will produce a multiple-volume series under TCRP Report 84. The research program will identify, develop, and provide flexible, ongoing, quick-response research designed to bring electronic business strategies to public transportation and mobility management. Volume 1: Supply Chain: Parts and Inventory Management is the first volume in the TCRP Report 84 series. Mitretek Systems and TransTech Management, Inc., pre- pared this report. To achieve the task objective of gathering information about how non- transit organizations used information technology to support fleet operations, an Internet- based survey form was used as the focal instrument. Secondary information sources complemented the survey results and provided additional insight into the findings. The findings of the study reveal that non-transit, fleet-focused organizations have achieved a

significant degree of supply-chain integration for parts and materials support with Inter- net parts sourcing at most companies limited to the use of online vendor catalogs. Also, results reveal that most firms recognize the Internet as an integral tool for future parts sourcing. Volumes issued under TCRP Report 84 may be found on the TRB website at nationalacademies.org/trb.

1 SUMMARY 3 CHAPTER 1 Introduction Research Approach, 3 Comments on the Internet Survey Effort, 4 5 CHAPTER 2 Findings Supply Chain—Concept Overview, 5 e-Procurement and Business-to-Business Marketplaces, 6 Buying Process Automation, 6 e-Markets, 7 Buyer Consortia, 7 Industry Portals, 7 Private Trading Exchanges, 8 e-Procurement: Adoption Rates and Application Trends, 8 Supply-Chain Success Stories, 8 Public Sector “Just-in-Time” Materials Ordering, 9 Commercial Carriers’ Supply-Chain Approach, 9 Parts Procurement and Inventory Management—TxDOT and the U.S. Military, 10 Inventory and Parts Management—Utility Fleets, 10 12 CHAPTER 3 Interpretation, Appraisal, and Applications Supply-Chain Management—Application to Transit, 12 Transit e-Procurement, 13 Transit-Focused e-Procurement, 13 Core Competency, 14 Asset Management, 14 15 CHAPTER 4 Conclusions and Suggested Research Conclusions, 15 Suggested Research, 15 17 REFERENCES A-1 APPENDIX A Non-Transit Fleet Supply-Chain Survey B-1 APPENDIX B Non-Transit Fleet Supply-Chain Survey Results C-1 APPENDIX C Bibliography CONTENTS

COOPERATIVE RESEARCH PROGRAMS STAFF FOR TCRP REPORT 84 ROBERT J. REILLY, Director, Cooperative Research Programs CHRISTOPHER W. JENKS, TCRP Manager GWEN CHISHOLM, Senior Program Officer EILEEN P. DELANEY, Managing Editor ANDREA BRIERE, Associate Editor TCRP PROJECT J-09 PANEL Field of Special Projects PAUL A. TOLIVER, King County Metro, WA (Chair) GORDON AOYAGI, Montgomery County Government, MD RONALD L. BARNES, Central Ohio Transit Authority ROBIN CODY, San Francisco Bay Area Rapid Transit RAYMOND H. ELLIS, AECOM Consulting Transportation Group, Inc., Fairfax, VA RICARDO ERNST, Georgetown University LAWRENCE J. HARMAN, Harman Consulting, Boston, MA EVA LERNER-LAM, Palisades Consulting Group, Inc., Tenafly, NJ SHAWN M. MARCELL, Gladwyne, PA PATRICIA S. NETTLESHIP, TNG, Inc., Santa Monica, CA DANIEL ROTH, Freightdesk.com, Bethesda, MD ROBIN STEVENS, New York, NY LINDA S. WATSON, Corpus Christi Regional Transit Authority, TX NIGEL H. M. WILSON, Massachusetts Institute of Technology ANTHONY M. KOUNESKI, APTA Liaison Representative THOMAS PALMERLEE, TRB Liaison Representative AUTHOR ACKNOWLEDGMENTS The research described herein was performed under Transit Cooperative Research Program Project J-09, fiscal year 2000, by the Intelligent Transportation Systems Division, Mitretek Systems. Henry Canipe of TransTech Management, Inc., a subcontractor to Mitretek Systems, was the principal investigator. The work was per- formed under the overall direction of Donald Roberts, Manager, Mitretek Systems.