Recently, I sent out a three-question survey about logistics and supply chain management to leading associations, manufacturers, program groups, distributors, resellers and repair shops. My intent is to write a comprehensive piece on the subject with representation from the various factions, however, without all of the returns in yet, I want to preempt myself with a blog to get the discussion started. The three respondents to my survey so far are: the Auto Care Association and the Automotive Aftermarket Suppliers Association (AASA) and Johnson Controls Power Solutions (JCPS).
The best place to start this discussion is with an overview trend statement that sums up what the supply chain has to accomplish day-in and day-out in this industry: “The biggest trend –- one that has been the focus of the aftermarket supply chain for some time –- is the delivery of the right part to the right place at the right time, says Bill Long, AASA president and COO. “Key category management and cataloging improvements by suppliers have been major contributors to achieve the goal of right part, right place, right time. Channel partners also are doing a better job of implementing hub and spoke systems within their distribution channels. This area is still ripe for aftermarket industry collaboration as all supply chain partners are focused on reducing time that service professionals have to wait for parts.”
In essence, I think Long is talking about how effective the aftermarket supply chain is but at the same time is calling for more efficiency. Although I know that most aftermarket players are focused on the commercial market these days, I would add do-it-yourselfers to his assessment because they will always be part of the customer mix no matter how sophisticated vehicle technology gets.
So what is the driving force to becoming more efficient? “Accurate and complete data is paramount,” says Larry Northup, Auto Care Association senior director, Member Services and executive director of the Automotive Warehouse Distributors Association. “Everybody is trying to get more efficient. They are wringing out every last half percentage point in their profitability by having the right stuff on the shelf.”
To achieve this efficiency, Taylor Mitchell, Auto Care Association senior director, Technology Standards, says ACES (Aftermarket Catalog Enhanced Standard) and PIES (Product Information Enhanced Standard) have contributed substantially and that these data standards are being adopted more readily as people see the return on investment that can be achieved.
Being ACES and PIES compliant can have an even bigger payoff, according to Mitchell. “You can move into different markets easily when your data is consistent and can effectively communicate that. When you’re trying to transport data to get your parts into other markets, having everyone do things the same way in an ACES or PIES format, it can only make a market grow more quickly.”
Long underscores the point citing some findings from the association’s recently released special report, “Navigating International Logistics for Global Exporting.” Although he says there is a great opportunity for both experienced global companies and new entrants in international trade, he cautions that they must learn to navigate “a maze of global logistics.”
One of the main challenges cited by the survey respondents was different label requirements for different countries, as well as language specific labeling. Long says these two things lead to too many variations of the same part number leading to inventory proliferation.
Whether looking at the domestic market or global markets, e-tailing is the fastest growing trend in the aftermarket, according to Behzad Rasulli, Auto Care Association vice president, Market Intelligence. “The shift of dollars through electronic transactions is a trend that’s going to grow at about 17 percent a year over the next 20 years or so if things stay status quo. Our research shows a $6 billion market in 2014. In five years that will more than double to about $13 billion and will double again to about $24 billion in another five years.” (Note: ACA just released a comprehensive study on e-tailing called “E-tailing in the Automotive Aftermarket”).
“There are players that have come on that didn’t exist 10 years ago,” says Northup. “It seems like almost every day we see a company with an idea in terms of delivering products to end users and they are all eyeballing the massive auto parts market. Even the fancy taxi service, Uber could be a threat, says Northup, because of its massive number of potential delivery vehicles. “Would we be able to maintain the instant delivery edge over competitors like that?” Northup asks.
Although Northup says he has no inside knowledge as to what the programs groups or their distributor members may be strategizing, he thinks it is feasible to think they would consider partnering with an e-tailer. “Why reinvent the wheel?” he asks. “You find a partner who is already in that world who can plug in that component in the supply chain while you can do another.”
In fact, Northup says this kind of partnering is already happening to some extent citing one of the paint companies that uses jobbers as fulfillment houses for direct sales. “They sell direct over the Internet but the delivery role is played by jobbers. On the hard parts side of the business there are some jobbers that serve as fulfillment houses for eBay. No doubt we’ll see more of this.”
E-tailing has the attention of AASA as well. “One of the key areas that the aftermarket industry needs to address is the call on suppliers to handle more small or individual part shipments as a result of growing channel partner online sales,” Long emphasizes. “In most cases, the supplier is not able to charge a handling fee for those orders which affects the bottom line of the supplier. All aftermarket partners need to work together to address this as special order sales assume a larger percentage of aftermarket sales in the future.”
Looking to the future, Rasulli says the industry needs to keep its eyes on 3-D printing. “If the trend is toward accurate and just-in-time ordering, looking for better information and getting the parts as fast as possible, there’s no better way to do that than have the diagram to the parts and the tools to make it in your shop.” We believe it’s only a matter of time before this gets put to use and shops incorporate these parts into vehicles.”
Even with all of the challenges that supply chain management poses. AASA, and AASA member, JCPS, appear to be handling them in stride. Citing a recent AASA survey (“2014 Supplier Benchmarks”), Long reports that its members are doing an “amazing job” dealing with SKU proliferation, freight minimums and shorter turnaround times. “The majority of AASA supplier members participating in the survey reported a fill rate of higher than 94 percent. This demonstrates that suppliers are managing SKU proliferation while meeting the demands for higher fill rates.”
JCPS, which is the world’s largest manufacturer of automotive batteries, is staying on top of supply chain management with an extensive distribution network. “In the U.S., our company has nine battery distribution centers covering the East coast to the West coast. Our shipping footprint enables us to reduce logistics and shipping costs while providing our customers with the freshest possible product,” says Mike Carr, JCPS vice president & general manager, North America, Aftermarket.
The need for collaboration is not lost on Carr. “The group of companies that make up an end-to-end supply chain will need to work in ever more integrated ways. The more everyone communicates, the more efficient and successful we will be as a whole.”
Clearly, manufacturers and distributors need not only to be linked but they need to be synced in planning, forecasting and replenishment processes. This means that the creation and implementation of joint business plans and common sales forecasts, as well as the generation of actual orders to meet customer demand, have to be paramount objectives. Anything less opens the industry to outside competition. But maybe that is unavoidable and a paradigm shift is underfoot. No matter — those who want to be successful in this business will truly embrace complete and transparent collaboration to move parts more quickly, more efficiently and more profitably.
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