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2009 Program Distribution Report

Program group members reassess spending, inventory and customer bases to get ahead
Thursday, April 16, 2009 - 00:00
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Offering advantages in disguise, the recession is weeding out weaker aftermarket competitors, spurring innovations in cost management and opening the door for stable resellers and WDs to pursue new customer bases while expanding existing market share.

And the program groups are working to implement training and education to ensure their members remain stabile and profitable.
“There are opportunities, but they may be unconventional. Change is happening, change will happen. There are businesses that are growing and finding new opportunities and those that address it will be stronger for it,” says Tim Odom, AAM president.

A steady focus on the opportunities available to boost sales and success should be nothing new to those in the aftermarket, says Richard Morgan, president and CEO of the Aftermarket Automotive Parts Alliance. “That’s our job every day. Members are all out there working hard daily just keeping their businesses going. It hasn’t been easy for 15-20 years. It has been a long time since people just raked in the cash,” he says.

Program groups are keeping their memberships stable and growing in a time of stagnant spending and delayed repair by identifying new market segments, streamlining expenses and adjusting inventory to address parts proliferation and customer demands.

Expanding the customer base
Program groups are also re-evaluating the market and their customer demographics to find new sales opportunities.

In 2008, AAM launched Aftermarket Gateway, an order-entry Web portal that accesses warehouse inventory across the country.

“This simplifies sourcing across our national and international channel and members have national access to our products,” Odom says. It has also helped members approach national and non-conventional accounts they would have normally not pursued he says.

Some of his members have now established business relationships with people in the RV, outdoorsman, farm and home supply markets, among others.

“Because we have this network, we can offer a diversity of product and diversity of locations from which we can ship. We are able to cut transit time and cut costs in delivery,” Odom says. “In addition to giving an opportunity to address existing business, we are also trying to expand our distribution footprint.”

If nothing else, the recession is teaching program group members and independents to simply re-evaluate their business practices, Odom says. “It is causing everyone to stop and look at their businesses, look at it and create a strategy. You must assess your business: Who am I? What services are essential? Who are my customers? What do I need to do to retain my customers? Those things are painful, but needed to grow a business,” he says.

Cutting costs
From staffing to inventory and delivery, spending cuts are being felt across the board throughout the aftermarket. But making smart decisions and removing frivolous expenses are vital to remaining financially healthy.

Since the recession, there has been a renewed focus on identifying areas to save money while not scrimping on business.
“We have a committee that concentrates on discovering systems to do more with less through electronics,” says Dan Freeman, president and CEO of Automotive Parts Associates, Inc. “An example would be GPS delivery tracking systems’ real-time knowledge of where the installers’ parts are in the system. The installer can go online and identify that the part has been pulled, is on the truck and is three miles from the customer’s door.”

But simply making the delivery process more efficient is also a target, says Bill Maggs, president of the National Pronto Association.

“Fuel costs are down, but they will certainly go up. We encourage our members to make one delivery instead of two or three for the same merchandise,” he says. The group has also moved to electronic invoicing and account reporting, which improves efficiency and speed while cutting costs in the long run.

Federated Auto Parts Distributors CEO Rusty Bishop says the key in cutting costs is to do so without sacrificing value. “Anyone can make cuts, but often this can impact competitiveness and reduce overall value. Federated members are using creative approaches in better use of bar coding for managing inventory, increased use of electronic ordering and data management, better management of delivery service, increased use of the Internet and many other areas where cost can be reduced while improving the overall business process,” he says. “The goal is to improve service to the customer while reducing costs.”
Streamlining the shelves
Despite members watching expenses more than ever, “everyone still recognizes that we are a service industry and the biggest part of that service is having the part,” says Jim Donohue, sales manager at Auto Pride.

To appease member requests, Auto Pride has been offering business training for about four years now that helps members learn how “to get rid of dead inventory,” Donohue says. But with parts proliferation and members all looking to better control expenses, “it is a very difficult tightrope to walk,” he says.
In the future, “the biggest event will be the pent-up demand to repair all the used vehicles in the market place,” Freeman says. “Once the public feels confident about their jobs and the stability in the financial institutions and home value, the auto repair and maintenance business should be powerfully strong for a prolonged period of time.”

So being ready to meet the demands of your customers will be vital to staying ahead of competitors in the future,
“We are advising our members to add inventory and add new product categories. When the increase in business comes, and it will come, the demand will be great, and ramp-up in demand will take months to satisfy,” Freeman says. “The distributors with product on the shelf will get the sales, retain their current customers and garner new business.”

The Aftermarket Auto Parts Alliance has also introduced a data warehouse program to its members to help them order and maintain the most profitable and successful inventory.

The program enables Alliance members to “have the right parts on the shelves,” says John Washbish, Alliance executive vice president. “There is an increased usage by members and participating suppliers in reporting what is being sold and what is not. This is why our members are so appealing to independent technicians — we have the right parts.”

Overall, the recession should be used as a motivator to re-evaluate and for some, revamp, business practices, Odom says. “It is causing everyone to stop and look at their businesses and create a strategy. Day-to-day business can be filled with answering phones, helping customers. But you must assess your long-term business: Who am I? What services are essential? Who are my customers? What do I need to do to retain my customers? These things can be painful, but are needed to grow.”

In the end, a positive attitude can make all the difference in business success or failure, Maggs says. “Focus on the good things. Because when the market pops, people don’t want to deal with businesses that have been crying,” he says. “They want to do business with people who have planned ahead and are ready to deliver quality service and parts that are competitive in the marketplace. You have to work for it.” 

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