CTA SAVES MONEY THROUGH STOCKLESS PURCHASES

February 7, 2000
02/07/00

The Chicago Transit Board , at its monthly meeting, today awarded a contract that will allow the Chicago Transit Authority to continue its cost-savings initiative of reducing its warehouse inventory by moving toward a system of stockless purchases. Through stockless purchases, the CTA saves money by not purchasing large quantities of products and supplies that have a definitive shelf life and which may expire before the agency is able to use up all of its inventory.

The Board awarded a two-year, $650,000 contract for the purchase of various paint products and paint supplies to a group of five vendors. This cost-savings move allows the CTA to purchase items such as paint, brushes, rollers and paint thinner, on an as-needed basis from a list of five vendors who are required to deliver the materials to the CTA in one to seven days.

This contract for need-based delivery of paint products and associated materials will save the CTA $100,000. Besides saving money up front, the CTA also experiences savings down the road. These items do not have to be cataloged and stockpiled in our warehouse thus reducing inventory carrying costs, material handling costs, housing and storage costs.

When certain inventory items, such as paint, expire they are no longer usable, however, they must be disposed of in an environmentally-responsible way. This requires the materials to be picked up, removed and disposed of by a professional hazardous waste hauling company. The costs for this kind of remediation can quickly add up, costing the CTA up to $265.00 to remove one 55-gallon drum of latex paint.

"The CTA Purchasing Department has been working aggressively to reduce our in-house inventory through better inventory purchases and practices," said CTA President Frank Kruesi. "The CTA has reduced its inventory from $93 million in 1997 to $66 million and that will continue to go down as these stockless purchases and need-based delivery practices continue. Through better management and inventory analysis, we have improved our service levels to Bus and Rail operations, which result in better service for our customers."

These same cost-savings strategies have also been applied to the purchase of a number of items that are not critical to rail and bus operations and maintenance, and by focusing on purchasing products that are easily available on the market. By combining purchase contracts for a number of materials, the CTA has benefited from economy of scale on purchases of maintenance cleaning towels, antifreeze, transmission fluids, bus wash soap, various cleaners, conduit, lubricants and oils.

Chicago Transit Board Chairman Valerie B. Jarrett said, " As a public agency with limited resources, we are constantly looking for ways to spend our dollars more efficiently. I applaud the efforts of the CTA staff toward eliminating waste and making this agency run with a more precise business-like efficiency. Through stockless purchase initiatives and inventory reduction practices, we are proving to our customers that we are committed to fiscal responsibility and accountability."

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