How many warehouses or distribution centers (DCs) do you need to distribute automotive parts? Well, I won’t keep you in suspense — it’s somewhere between zero and several thousand.
Some of the biggest players do well with what may be considered reasonably small numbers. For instance, NAPA, the perennial leader in wholesale parts, serves all 50 states with 64 DCs, while retail powerhouse AutoZone has eight DCs and a fulfillment center in Memphis. For comparison, Amazon has 69 DCs in North America and Wal-Mart has 129 in the U.S.
The Wal-Mart model
Many companies, including many aftermarket firms, have attempted to emulate Wal-Mart’s highly successful distribution model of automatically replenishing goods in the shortest amount of time possible. That goal certainly speaks to the aftermarket’s need to serve demanding independent repair customers.
But this model is not a one-size-fits-all solution. It requires enormous capital investments to operate a trucking enterprise and/or warehouse/DC. The cost of buying and maintaining a fleet of company trucks, as well as employing and training hard-to-find drivers (who may require union representation) is very challenging. Plus, there’s a pressing need to keep pace with ever-changing infrastructure and software needs, as well as the need to stay current on stringent shipping regulations.
Not surprisingly, aftermarketers who practice inclusive distribution find themselves wondering if they are in the parts business or the shipping business. Their struggle for identity may explain the aftermarket distribution system’s dirty little secret: although it completes most routine vehicle maintenance and repairs in one day or less, the majority of more complicated repairs take two or more days to complete. The main reason for this? Parts needed for repairs are not accessible immediately in spite of the aftermarket’s mantra of “right parts at the right time.” The aftermarket collectively operates hundreds of warehouse/DCs around the country, but under the current system hundreds more may be needed to fill parts accessibility holes.
A supply chain edge
So what can the aftermarket do to fill the parts accessibility holes? Should the program groups get together and build more warehouses/DCs that they can share, as well as share existing facilities? Maybe they could do that with the auto parts retailers, too? It certainly would be more efficient in terms of parts availability and in keeping warehousing costs down for all concerned. Just sharing the costs of operating and maintaining a common truck fleet could reap untold financial benefits.
The problem, of course, is that each one of these entities is looking for a competitive edge and by homogenizing the supply chain, each would have to think about other means to accomplish it. Generally, the quality of parts, the available technical service and other supporting services offered by program groups and automotive parts retailers are very similar. That leaves supply chain management and logistics as the main means of differentiation. Being able to deliver the “right parts at the right time” 100 percent of the time would be welcomed by all repairers.
Consideration for 3PLs
Although supply chain management and logistics are crucial to parts manufacturers and distributors, they need to ask themselves two questions: 1) are we best suited to manage these specialized disciplines and 2) are we handling them at the expense of our core businesses. (When tasked with supply chain management duties, manufacturers’ product innovation and quality may suffer, while distributors may fail to market and merchandise their products vigorously.)
Short of all manufacturers and distributors coming together to operate a closed distribution system, they should explore what third-party logistics providers (3PLs) can offer. Instead of hundreds of warehouses/DCs, 3PLs have thousands. Moreover, they have placed them much more strategically than aftermarket warehouses/DCs because they were conceptualized and built on supply chain management principles. Too many times, aftermarket distributors have made warehouse decisions based solely on the availability of property or its cost rather than the most efficient distribution location possible.
What about post-sales management?
Even in the instances where the current distribution system delivers parts in timely manner, only part of the fulfillment problem is solved. The other part is post-sales management, which unfortunately is usually left to happenstance. Not much, if anything, is in place to make sure customers are satisfied with their purchases because manufacturers and distributors tend to view post-sales support as an annoyance or distraction from their main function of selling parts.
For the most part, this “annoyance” revolves around returns because of the complexity of analyzing all of the variables associated with them. Time and time again, the aftermarket has shown it is either incapable or disinterested in handling returns in a fair and timely manner. All too often, a product is returned to the parts store or warehouse only to be lost, forgotten or left in limbo because the reason for the return is unclear.
Perhaps it is time the aftermarket looked externally for a resolution. Other markets have found external sources such as 3PLs as viable intermediaries to handle returns. If set up as return specialists, they can make the immediate determination if a product needs to be returned to its manufacturer, refurbished, repackaged, disassembled for parts and reused, recycled or discarded. No doubt this would be a more objective process that could replace an inept system that seems to send back every return to manufacturers for any reason.
To solve the aftermarket’s dirty little secret, manufacturers and distributors need to rethink their current approach to parts distribution. In my opinion, they should start with a clean slate focused on their overall efficiency and long-term viability, as well as responsive and comprehensive post-sales management for their customers. Frankly, 3PLs that specialize in supply chain management and logistics should be considered as sources to meet the intense delivery demands and desired support services of independent repairers. Certainly the math is easy to comprehend — warehouses/DCs needed: zero.
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