Think logically. Think logistics.

Jan. 5, 2015
Rather than closely vetting the emerging markets message and thoroughly analyzing the logistics, many aftermarket companies (like most U.S. companies) took this as the gospel and joined the march to globalization too quickly.  

If there was ever a time where you could use the term “fire and brimstone” in the aftermarket, it was back in the late ’80s and early ’90s when many of the featured speakers at aftermarket conventions and meetings preached the low-cost benefits of doing business with the emerging markets, particularly China. Their preaching was adamant, persuasive and urgent. If the industry’s manufacturers, distributors and even the installers didn’t want to end up in a dark, forlorn place, they needed to become globalized converts.

This was an extremely peculiar, even adversarial strategy, when just 15 years earlier the “America – Love it or Leave It” sentiment was a predominant thought among U.S. citizens. Accepting a new way of thinking was sacrilegious for an industry built on providing quality parts because everyone knew that there would be quality compromises dealing with low-cost countries because the products those countries were exporting to the U.S. were subpar – and I’m being overly kind using that term. Dangerous and junk are better adjectives.

Rather than closely vetting the emerging markets message and thoroughly analyzing the logistics, many aftermarket companies (like most U.S. companies) took this as the gospel and joined the march to globalization too quickly.  Evidence of this fact surfaced early on when repair shops couldn’t get parts to fit or had to replace parts soon after they were installed due to the inferior quality of the parts. In a word, the outcome was hellish. Repair shops got burned as their customers lost faith in them; distributors got burned as the shops stopped buying from them; and manufacturers got burned because they had to eat their mistakes, plus they lost some of their distributor customers.

Moreover, to obtain lower cost parts, the repair shops were asked to give up the added value services from distributors and manufacturers. Training, warranties and ease of returning parts went by the wayside. Many shops were open to losing these services in favor of more favorable margins but losing parts quality is where they had to draw the line. Those that didn’t found themselves in dire straits and some that went too far went the way of the Edsel. The bottom line is that shops may experiment with what they buy and where they buy it, but the smart ones (and most of them are) will not only insist on quality parts, but also the unadulterated backing from its distribution and manufacturer partners because the shops’ customers expect shops to stand behind the parts they install. Parts can be replaced, but loyalty is irreplaceable.

In retrospect, an industry that was struggling with the implementation of bar codes, a bloated inventory, a runaway return process and a lack of channel transparency, should have postponed its global initiatives until its members did copious homework. Unfortunately, the industry’s surging hormones to obtain greater margins with the manufacture of cheaper parts was too attractive to ignore. I know the independent distributors thought they had to respond to the savage cost cutting from the feisty and upstart parts retailers, but the independents’ response to the perceived threat was an overreaction. In their haste to match the retailers pricing, they crippled their own service model. Although the retailers were successful skimming off the top of the independents’ commercial business, the independents were never in any real jeopardy of losing a grip on it as long as they held steadfast with their value added services. Unfortunately, it took the independents years to realize they were the ones in the driver’s seat.

And how’s this for irony? Many of the same industry stalwarts who said manufacturers and distributors couldn’t survive without dealing in offshore and outsourced parts have done a 180. Today, these flip-floppers are aggressively warning of the dangers of outsourcing and recommend USA-made parts or, if parts are outsourced, recommend that the same stringent manufacturing standards are upheld and verified. They also insist that shops not only expect added value services, but demand them. 

Some aftermarket companies wound up going abroad on failed or scrambled logic. Many of those chasing pricing nirvana are returning home as a result of failed logistics. Although the source may seem a bit strange, Chinese philosopher and military general Sun Tzu succinctly sums up its importance: “The line between disorder and order lies in logistics.”

There are varying definitions of logistics. Mine starts with the notion that it is every thought about a part — from its conceptualization to its engineering to its manufacture to its final delivery at a repair shop to its actual installation. Any interruption or miscommunication across the spectrum can cause disorder. Interruptions come in many forms such as unpredictable political events, changing international regulations, volatile oil prices, shipping intrusions and unanticipated wage hikes – to name a few.

The lesson is that there is no avoiding logistics, whether you’re operating domestically or internationally. The automotive aftermarket is increasingly complex and the markets that it serves are fluid. Being able to anticipate and respond quickly to changing market conditions is the price of admission to play the game. Attention to every detail that encompasses the process of creating, selling and delivering – and servicing – a part separates the highly successful from the also-rans. 

In my opinion, manufacturing companies probably should stick to doing what they do best, that is, manufacturing parts. Their time should be spent in perfecting their parts and creating new solutions. Logistics is a specialized discipline best left to third-party experts. If logistics is integrated throughout the entire distribution channel, it will not only complement the manufacturing and distribution processes, but also will manage them and ensure the delivery of the right part at the right time to the end users of the products, whether they are repair shops or do-it-yourselfers. To that I say, “Hallelujah.”

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