As aftermarket companies expand into ecommerce channels, inventory management has become even more critical. Distributors and retailers alike need to know exactly what they have on hand in order to meet demand from multiple channels.
While the retail supply chain at large has tackled many of the challenges of real-time inventory visibility, the aftermarket has some unique obstacles when it comes to optimizing inventory.
One issue is the historical overabundance of SKUs, and that isn’t going to change anytime soon. In fact, it will likely get worse. That said, finding a way to address the large number of long-tail SKUs and the complexity of forecasting inventory is an important part of staying competitive moving forward.
“Keeping up with SKUs puts a real burden on suppliers,” says Roger Moyers, president of Blue Sage Software. “The ability to price things differently for each customer is also another common challenge with aftermarket suppliers.
“How do you manage inventory when it is not at all that consistent?” says Keith Thompson, senior software architect at Epicor Software. “This isn’t just seasonality, but inconsistent sales over long time periods. Not matter what math you use, there is always a potential hole there.”
“Auto parts is a difficult space in a lot of ways, because everything is application-specific,” Thompson adds. “You have to be SKU intensive and cast a wide net. Balancing inventory dollars between width and depth is difficult.”
Ecommerce has exacerbated these issues, because now there are more demand points being served by the same inventory. “It can be difficult to retain the inventory on hand accuracy, because you don’t have any prior sales history to support those inventory decisions,” Thompson says. “It can be difficult to keep up with the pace of sales. If you have to do that manually while business is increasing, that can be a real struggle.”
More companies are applying inventory management software, barcoding, and other technologies to stay on top of these issues.
That is an important trend, given that the aftermarket has been a relatively late-adopter of new technology over the past few decades. “The aftermarket has traditionally lagged behind a bit with technology,” Bunting says. “If you’ve been in this industry for a while, you’ve likely gone through a technology deployment that didn’t’ work out well, so there is some resistance. But for those companies willing to take that step, I think think we’re seeing their profits reflect the benefits.”
Technology allows aftermarket companies to automate purchase orders, forecasting, and other operations. “Previously, they may have been evaluating these demand cycles in Excel or they had to do some manual interpretation,” Bunting says. “They can automate that now, and take in tings like seasonality and sales velocity, and pull that into the calculation. Customers don’t have to use a gut feeling; they can use data and analytics to establish what those trends are.”
That has been helped by new forecasting tools within inventory management systems as well as custom tools developed by buying groups and other stakeholders. There are also solutions that can help determine stocking methodologies that can be varied by line, customer, and location. These solutions can also help better predict return rates and reduce buybacks.
Complete inventory visibility can also help with things like stock transfers, an increasingly important capability now that companies are adding e-commerce channels to their businesses. “If you’re in a store and you don’t have the part, but a sister store does have it, you can transfer that and have it delivered directly to the customer or sent to your store,” Thompson says of Epicor’s Vision solution. “We can move overstock from one location to another. Being able to see other inventory Is extremely helpful.”
Inventory Technology Best Practices
As more companies deploy these systems, some best practices have emerged.
“If you are going to invest in an ERP system to manage your warehouse and inventory, then you need to use it in all of your operations,” Moyers says. “That includes purchasing, receiving, and selling. The software is only as good as the data goes into it. If you skip steps, then it’s very likely your inventory is going to be out of whack.”
In fact, not scanning inventory into the inventory system is a key blindspot that Moyers says he sees when talking to aftermarket companies. “They take things out of inventory and don’t keep the system up to date,” he says. “There’s a lot of opportunity for leakage or employee theft. Guarding against that is a big task for our customers.”
In that regard, barcoding is another key best practice that the vendors interviewed for this story say is increasing in the aftermarket, but not as quickly as it could.
“When you scan everything you receive, the inventory is accurate by part number, and all of the larger distributors have something like that in place,” Thompson says.
Adoption is increasing among smaller and mid-size companies because the cost of the technology has fallen so dramatically. “Before, a scanner for a warehouse was a $1,500 investment,” Moyers says. “Today we can support scanners that are significantly cheaper than those units and our customers can use them without a huge financial outlay.”
“Barcode scanning is far more efficient from a cost perspective now,” Bunting agrees. “You can scan barcodes with our system using scanners that cost just $30 or $40. We’re seeing greater adoption now, because even at the jobber or retail store level those scanners are affordable.”
In customer demos, Bunting even uses a $13 scanner he bought on eBay to show customers how easy it is to adopt scanning. “You can watch a short video and be up and running with our software and barcode scanners in just a few minutes, and start scanning your physical inventory,” Bunting says.
Effectively using these new tools can also give the industry the ability to run a much leaner inventory. “It’s no longer necessary to have things on a month-long order cycle,” he says. “With regional warehouses and Amazon, you can keep a lean inventory. You can streamline inventory levels, but we don’t’ see a lot f companies adapting to that yet. But from a logistics perspective, we do have the ability to streamline what you keep on the shelf and still have satisfied customers.”
There are obstacles to applying technology to these inventory management challenges. Retraining is critical for the success of a deployment, but there is often employee resistance or institutional resistance to change, particularly if the old processes were in place for a long time. But manual processes will be harder and harder to maintain as more companies shift to ecommerce.
The Future of Inventory
The vendors that Aftermarket Business World spoke to for this story indicated there were some additional technologies and features on the way that could benefit the industry. 3D printing, for example, could change the way warehouse carry inventory (since they could create some parts on demand). More companies are also adopting the online storefronts integrated with their ERP and inventory so that they can expand into ecommerce.
Mobile solutions will be more important, particularly as more software moves to the cloud and hardware platforms become more flexible. Mobile devices are also playing a larger role in sales and customer service up and down the supply chain, as companies use tablets and phones to pull up account information and customer data that can be used to help improve inventory management and ordering. “Jobbers like the idea that they can meet with customers, pull up accounts and return rates, and all of that information is right on the tablet,” Bunting says.
And even farther into the future, “smart” auto parts will be able to provide more accurate information about their status. “Think about what Tesla is doing,” Moyers says. “They are embedding integrated circuits in each part, so the part can be smart enough to ask to be replaced, and then check with the inventory control system if it’s in stock or not. That’s an application that’s pretty far out there, but that’s the vision Tesla has. Software systems like ours will have to adapt to that.”
