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Right part, right place, right time at what price?

Wednesday, October 29, 2014 - 07:00
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The automotive aftermarket will never be accused of setting the pace for any technological advancement to help distribute and account for parts. From what I hear, there are grumblings from some manufacturers that you can still find pockets of jobbers and service repair facilities that are working on green screens and hand writing invoices.

That said, there’s another end of the spectrum where some companies — manufacturers and distributors — are not only using best logistics practices but are earnestly, no, make that desperately, trying to pull others along with them into the 21st century. These leaders recognize the industry really has never reached its potential because it has never really controlled the industry’s collective inventory. I think we can safely call this a movement of sorts with the intent to implement the latest techniques to track and account for every part in the system.

So what’s the big deal? Don’t we have parts everywhere we need them when we need them? Don’t most vehicles get repaired in one day or less? Don’t customers demand that parts be available for this quick turnaround time? Yes, yes, yes! However, we are offering this service at the expense of supply chain efficiency and thus, profitability for all channel players. We are drowning in our own inventory in our attempt to have the right part in the right place at the right time. Distributors have some slow moving parts that they’ve had for so long, they have long forgotten why they bought them in the first place. We truly have no idea how much inventory there is in the system and, worse, we don’t know where it all is. Having adequate inventory is one thing but having parts saturation equals unsold inventory. If this is planned obsolescence, I would hate to see it unplanned.

At one end of the distribution chain we have manufacturers with the competitive mindset to fill the shelves even if they are already full. At the other end of the pipeline are some repair shops that make matters worse by placing orders with a number of suppliers, thus pitting them against one another to see who can deliver the parts the fastest. This practice leads to inventory cascading where parts are automatically replenished once they are ordered even though only one order is used. So shops wind up with what they need — speedy delivery from the supplier who can get it to their shops the fastest — but the bloated system loads up with more unnecessary inventory.

A Special Report — “Channel Visibility: Accessing and Utilizing Down-Channel Transactional Data” — issued in 2012 by Epicor and the AASA Technology Council, points out the irony of the competitive rush to fill orders, which happens thousands of times a day across the country. Just like Wal-Mart and Target, the report says, the aftermarket now has the required business intelligence structure — including “aggregated eCatalog lookups, manufacturer shipment documentation, distributor POS transactions and information mined from service estimating solutions — to avoid the over ordering, over-inventory problem. Although the data isn’t universal, it’s pervasive enough to control most of the inefficiencies in the system. But there’s a catch — you actually have to use it! 

Why is this the case? Simply, the manufacturers have yet to overcome their longstanding practice of keeping the pipeline overfilled. To alleviate, or perhaps solve this problem, collaboration, data sharing and transparency are needed throughout the supply chain. Unfortunately, manufacturers have always feared sharing business intelligence. Translation: By collaborating with channel partners and becoming transparent they fear they will lose their competitive edge against other manufacturers who aren’t sharing business intelligence. There is no pill or potion that can make them think otherwise. It seems as though the only way the entire distribution chain will get on board is to watch and learn from the few brave souls who will blaze the trail for them. 

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