In with three-step

Jan. 1, 2020
When I interviewed for my first job in this business in 1979, my soon-to-be boss said, “It’s a simple business based on a simple three-step distribution model. It’s a tried-and-true model that is at the heart of this industry’

When I interviewed for my first job in this business in 1979, my soon-to-be boss said, “It’s a simple business based on a simple three-step distribution model. It’s a tried-and-true model that is at the heart of this industry’s ability to fix cars quickly.” Anyway, I started the job and had hardly found the bathroom when my boss turned over a call from a jobber who was complaining about her warehouse “selling around her.” Huh? What kind of crazy anomaly was this? Didn’t this WD know his role as the second link in the distribution chain, that is, to mark up the parts to sell to the jobber, the third link in the chain who will mark the parts again to sell to shops?

To make a long story short, I tried to meet with this WD, who just said “no comment” and that was that. What I did learn was the jobber was relying on the accepted three-step model to do the work for her. In effect, she was trying to run a 1950s business in the late 1970s. Her business was so dark, dingy and dirty and so poorly run that even her shop accounts were turned off. They would rather deal directly with her WD. Call it a local market correcting itself.

My next most memorable “unfair competition” story came in the early- to mid-1990s. Many of you will remember when APS Inc. and ReddiBrake Supply Corporation led the “two-step revolution” that threatened the very being of three-step distribution. APS was opening about five new Installer Service Warehouses each month that foolishly competed with its own Big A jobber stores, while ReddiBrake was building a national network of specialty warehouses at a rate of three outlets each week. Over just a couple years, it became apparent that they could serve a purpose if properly run, but they imploded.

Enough of the history lesson. You can pick the era and come up with businesses up and down the chain trying to exploit a weakness or void in the three-step model. Today, just about every imaginable way to sell parts from various levels and various players of distribution is being tested, while the program groups and major auto parts retailers continue to build their empires. As predicted, the retailers continue to move towards jobber business practices by investing in their commercial offerings. The program groups continue to grow through the means of three-step distribution, and I would argue, the retailers have emulated the three-step method through their proprietary operations that revolve around distribution centers.

Over the last several years, there has been much talk about a new business paradigm in the aftermarket. Evidence offered to support this thinking ranges from the rush of American parts manufacturers to make their parts in low-cost countries to Wal-Mart expanding their auto service to Amazon.com taking over the world, including auto parts sales. All of these things and everything in between have altered the aftermarket to some degree but none of them have truly shaken the three-step model, let alone usurped it.

The three-step model was built on having the parts available when they are needed. Some have argued that this has led to an over-inventoried system, but in reality, it is getting the job done. This doesn’t mean that the system couldn’t stand some serious purging but much of that has been done with the incorporation of manufacturer/distributor partnerships, as well as more sophisticated inventory systems centered on regional demographic data.

As long as motorists rely on their vehicles to get where they need or want to go, parts availability will be the name of the game. About the only thing that can disrupt the three-step model that keeps needed inventory in the queue would be for manufacturers to build their own distribution centers or if everybody becomes a DIYer and orders parts off the Internet. I’m all for innovation but there’s no good reason to complicate what is otherwise a simple, effective process.

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