When Richfield, Minn.-based Best Buy turned its inventory parts management over to a third-party logistics (3PL) provider, that move alone didn't allow the electronics retailer to do away with parts warehouses.

But the 3PL-Wauconda, Ill.-based Fidelitone Logistics—created a subsidiary company specially to manage the Best Buy account, a logical decision given the size of Best Buy's parts distribution network.

"Acquiring the massive number and variety of repair parts required for Best Buy's repairs is a major challenge," says Dave Telschow, director of repair service. "We order all the parts for the computer, home appliance, and home electronics industries, including Geek Squad [Best Buy's computer and electronics installation and service unit]. There are millions of SKUs in those three industries."

Telschow says Best Buy initially decided to outsource parts management to Fidelitone Logistics—and subsequently the subsidiary known as National Parts—simply to take the burden of ordering parts off its employees' shoulders.

"Different suppliers have different processes, which made what should have been a simple task—ordering parts—pretty complicated from an employee perspective," Telschow explains. And because no single supplier could handle all Best Buy's needs, "The only way to go was to put together a standardized process for order tracking and fulfillment," he adds.

National Parts developed just such a process, which allows parts for Best Buy's entire service and repair operation to be ordered from a single location. Vendors also deliver parts directly to the repair center that requests them—most arriving just hours before they are to be used. The entire operation is handled by an order management system that National Parts built to accommodate Best Buy's business rules.

"We put together a relationship with 40 suppliers," says Tom Giovingo, a National Parts executive VP. "We automatically shop the suppliers to identify price and availability and location of the part. Based on matching criteria, we award a purchase order."

Parts are shipped overnight to repair facilities, while National Parts tracks shipping status. That information is automatically fed to Best Buy's accounting system, from which payment is generated. From order to invoice, the entire process can take just minutes.

Telschow says the system yields tremendous savings. "We removed a lot of costly activity out this operation, and improved customer service. It's a great scenario."

This relationship also enables Best Buy to account and receive credit for defective parts, with National Parts serving as the clearinghouse. Best Buy service technicians send defective items to National Parts, which in turn ships them to the appropriate supplier. The supplier then issues a credit to National Parts, which passes it on to Best Buy's accounting system. This centralized process led to a 90-percent match-up rate on return parts, meaning 90 percent of parts are being returned to the correct vendor, and Best Buy is receiving the proper credit.

"A very high match-up rate means we don't have to put horsepower into chasing credit," says Telschow.

It also puts an end to warehousing too many service parts because after all, a fully stocked warehouse no longer signifies a well-run business.