When It Needs Fixing

Third-party parts procurer
brokers Best Buy buys

December, 2006 - Stores Magazine
By: Craig Guillot

Logistics and supply chain management is often one of the most challenging parts of any retail operation. Procuring hundreds or thousands of products from multiple distributors and coordinating delivery and inventory management can be a daunting task, even for multi-national corporations with billions of dollars in resources at their disposal.

Outsourcing segments or even the entire logistics department is becoming more popular with companies of all sizes. Third-party logistics providers (3PLs) offer retailers the opportunity to lessen the complications of inventory procurement and control.

In 2001, Best Buy sought the assistance of National Parts, a subsidiary of inventory management, distribution and logistics company Fidelitone Logistics. Founded in 1929 as a manufacturer of record player needles, Wauconda, Ill.-based Fidelitone Logistics reinvented itself in the 1990s as a 3PL and used its experience to cater to a market in which supply chains increasingly were turning toward technology and away from bricks-and-mortar operations.

Best Buy has more than 3.5 million home entertainment and computer parts product lines that call for more than 500,000 orders every year. National Parts implemented a logistics system for Best Buy's parts and repair department through a creative and collaborative work effort.

"Clients that feel they no longer have the in-house expertise or flexibility to meet their customers' requirements usually turn to a 3PL to capitalize on some of the core competencies that their internal operations don't have," says Fidelitone Logistics executive vice president Tom Giovingo.

Dave Telschow, director of repair services for Best Buy, says there are a lot of logistics involved in the parts-procurement process. In fact, obtaining parts for repair services can be more complicated than procuring product. Whereas retailers and merchandisers can usually estimate needs for products, there is no telling what a service center is going to require. Best Buy's repair arm can call for thousands of unique parts from numerous manufacturers every day.

"It's much more dynamic," Telschow says. "We've got thousands of units coming into our repair centers every day. Based on what's coming in . . . we have to go source those parts immediately."

All from one provider
Best Buy wanted to find a single provider that could procure parts for repairing computers, home electronics and home appliances. The solution called for accessing multiple suppliers and a comprehensive order system whereby parts could be quickly obtained within reasonable geographical reach.

Through National Parts, Best Buy can access an endless inventory of parts from one vendor and location that keeps interaction between all the suppliers uniform.

"The reason the relationship has grown so strong is that they're one of those companies that have really immersed themselves in what we do," Telschow says. "They spent a lot of time learning our business and found some really good solutions."

Best Buy and National Parts work with 34 U.S. parts suppliers, each of which has been integrated into the system and brought up to speed on Best Buy's business practices. Suppliers include equipment manufacturers that provide parts for factory warranty repairs, parts distributors and rebuild of parts. The system works within those networks and developed processes to leverage that network of suppliers.

Keeping to deadlines
Best Buy's order-processing system aggregates all the information and produces numerous data files for National Parts every day. National Parts then sends needs lists to suppliers with cut-off times that dictate when orders need to be filled.

"We put them together as very defined shopping trips hour after hour," Giovingo says. "For suppliers that have the item available that we requested, we look at geography and price. Whoever has it at the best price in the best place gets the order."

Once an order is issued, the supplier is expected to ship the item(s) that same day and invoice National Parts, which in turn compiles the billing, shipping status and tracking information and feeds it back to Best Buy central processing.

Everyone, from the home office to field technicians in their trucks, can access all of the information as it relates to the orders for the day. National Parts also works the system in reverse by coordinating the return of new and defective parts to the manufacturer.