VDOT pilot with NAPA leads to a new contract with Virginia Beach firm

New era in warehousing and delivery services

Photo by Trevor Wrayton
A Virginia-Beach firm, MANCON, was awarded a contract for storing and delivering parts and supplies for all of VDOT. A contract employee moves supplies in the Richmond District warehouse.

VDOT runs on parts and supplies. Getting them more efficiently has been a goal for several years, and it is about to be achieved through a radical change in the department's warehousing and delivery program.

Problem: VDOT over the years has suffered from a lack of expertise in managing inventory, managers say. Keeping supplies or parts from becoming "dead inventory," or items that never move off the shelves, has been a perpetual problem.

Background: VDOT managers and analysts have been assessing the problem since 1995, focusing particularly on delivery of equipment repair parts. Technicians needing them often stopped work to order parts by phone. They also frequently drove to a store to pick them up. This inefficiency resulted in high costs for parts (purchased retail), lost time repairing vehicles in the shop, and slow-downs in getting vehicles back in service.

In October 1995, VDOT signed a contract with NAPA to provide parts and supplies on a pilot basis to the Richmond District, a contract extended in 1998 to Bristol and Fredericksburg districts. NAPA staffed those district warehouses and supplied parts to the three districts on a prompt schedule. However, VDOT persevered in finding a more efficient means of obtaining parts and deliveries during the seven-year NAPA pilot. Managers learned much that prepared them for writing a contract for a new era of warehousing and delivery.

Solution: Toward the end of the NAPA pilot, a new warehouse and delivery program was launched based on best practices derived from the pilot. It was named the Integrated Supply Services Program (ISSP). To support the program, a contract was awarded in October 2002 to Management Consulting Inc., known as MANCON. The firm contracted to operate supply points or warehouses in approximately 78 locations across the state. The contract also stipulated MANCON would:

About MANCON: Management Consultants Inc., which won the bid to service VDOT's Integrated Supply Services Program, is based in Virginia Beach. The non-public, woman-owned company has broad experience managing inventories and projects in local, state, federal and military contracts. Among them are contracts for stripping and refurbishing U.S. Navy ships docked in port after a tour at sea. The company has work sites across the U.S. as well as in Guam, Japan, Italy, Spain and Puerto Rico.

• order direct from the manufacturer, negotiating prices that reflect buying in large quantities for the whole department;
• deliver 90 percent of emergency items, including ones for snow operations, within one hour;
• provide the product to VDOT with no markup from manufacturer's price;
• procure items based on a fully specified "master commodities list" developed by district teams, not only for equipment parts but also for road flares, boots, gloves, goggles and other supplies;
• ensure "obsolescence protection" so that items can be returned for credit, with reasonable notice, if VDOT no longer needs them;
• supply any items not on the master list when needed by VDOT--without markups of prices paid by MANCON.

MANCON will not provide all supplies. Districts will still continue to purchase and inventory grass seed, stone, traffic paint, lumber and other road stock items resulting in the continued use of Capital Asset and Inventory Control Division's Inventory Management System (IMS). VDOT will pay MANCON a contractually agreed upon management fee. The company must manage its operations efficiently to achieve a profit out of that fee.

Schedule: MANCON assumed supply responsibilities for the Bristol, Fredericksburg and Richmond districts in late 2002 and early 2003; Staunton District in June 2004; and Northern Virginia District in October 2004. The firm, which is setting up in Culpeper and Hampton Roads districts now, will begin service for Lynchburg District in May and Salem District in June. ISSP has agreed for MANCON to use spaces formerly devoted to VDOT residency and district shop inventories. Meanwhile, the Central Warehouse in Richmond, which had distributed supplies and parts to all districts for many years, was closed in December.

Outlook: Some of the major benefits of the ISSP and the MANCON contract are:

• an overall reduction in cost of goods will be realized by VDOT;
• department-owned inventories (costing $9-10 million) at the central, district, and residency warehouses will not be needed;
• surplus dispositions of unneeded parts and supplies will be given to MANCON;
• procurement paperwork will be reduced, and repair managers have more time to manage their shops and inspect equipment;
• equipment technicians will stay on the job instead of buying and picking up parts;
• vehicles under repair will be returned to service more quickly for department operations.