Inventory and demand forecasting remain critical challenges in the automotive aftermarket, but technology is advancing that can help suppliers and distributors make better decisions about the placement of inventory – right down to the zip code – that can increase turns, reduce obsolescence and save costs.
Timken is one of several aftermarket companies that is leveraging sales history, registration data, and other information, along with complex analytics, to improve sales and reduce costs. The company uses an internally developed solution called Demand Insight to help distributors optimize their inventory.
Timken's catalog team matches parts and vehicles, and combines that information with vehicle registration and replacement/failure rates, along with internal sales data. Crunching that data using proprietary algorithms helps them predict how many parts will be needed in a given geography, and how those parts sales will fall within the premium aftermarket, economy aftermarket and OEMs.
More than 300 distributors and Timken sales representatives now use the online system, and it includes more than 4,000 parts with vehicle applications. Customers can access detailed analysis and charts showing demand for specific parts based on location. They can also view the most popular parts in order of demand, along with peak demand based on part lifecycles.
"We've been able to take VIO and cataloging data, and add a third element in the replacement rates," says Barry Harris, global manager of automotive aftermarket at Timken. "We're an OE manufacturer, and we know the replacement timing of our parts. Using that information and some sophisticated logic we developed, we can say in general when you can expect demand for those replacement parts to begin. The question then is, how do you make that forecast better? That started us down the path of using geographic information, and now we're even adding information on weather patterns and local road conditions."
Timken launched Demand Insight in 2010 and the Canadian market went online in 2012. There have been other tweaks over time, including the addition of a data source that helps predict new vehicle registrations for up to two years into the future; flags that indicate part applicability for agricultural or heavy-duty vehicles; and the ability to do multiple searches in multiple tabs. In 2014, the company added medium-duty vehicle aftermarket demand.
This type of data-driven, intelligent forecasting is expanding in the aftermarket. Delphi, for example, has an Intelligent SKU Management solution that uses proprietary research, market trends and customer provided information to help optimize inventory for local markets. Goodyear Engineered Products has the DataDrive Market Intelligence System, which uses Veyance Technology's algorithms to evaluate stocking levels by region, county and metro area for warehouse distributors. TRW Aftermarket uses a big data solution from PROS Holdings to make tailored offerings and improve pricing strategies based on inventory data.
Large distributor groups also have developed their own inventory management tools for forecasting.