Anything that can go wrong will go wrong, as the saying goes. And, boy, did that ever happen for automotive aftermarket suppliers during the height of the COVID-19 pandemic.
Pre-pandemic, things were going great — the supply chain was strong, containers were inexpensive and readily available, as were trucker drivers, there were no issues with raw materials and fill rates were almost 100 per cent.
Then the pandemic hit. “From shutdowns, overseas, obviously, shutdowns here, labour shortages and everything else, we just could not get product for one reason or another to our customers,” observed John Carney, vice president of sales and operations at FDP Virginia, a brake manufacturer.
They tried many different solutions, like overweighting containers and shipping to different ports.
It opened their eyes to one big realization: “Obviously, we were ill-equipped to handle supply chain disruptions,” he said.
Heightened consumer demand wreaked havoc on the strained supply chain. “Sales not only rebounded — they exploded,” Carney said during the Automotive Aftermarket Suppliers Association’s recent Technology Conference. “And it really was just gasoline on a fire.”
He had a term for this: Unforecasted sales. The winners during the pandemic were those that had inventory and were able to support unforecasted sales.
An obvious solution to unforecasted sales is to carry more inventory so you’re prepared for such events. But FDP found that backfired as inflation and interest rates went up. “So the issue with carrying more inventory is that inventories get more expensive to carry, and could continue to get significantly more expensive to carry,” Carney explained during the conference that was forced to be a virtual event after Hurricane Ian struck Florida.
Another issue? Brand loyalty goes out the window when the customer — be it a shop or a DIYer — is in need of a product. If their usual brand isn’t available, they’ll go with another or private label to get the job done.
“And what you realize in a no-inventory, low inventory environment, brand loyalty and preference evaporates,” Carney said. “That I think is an opportunity for a lot of people and certainly a headwind for others.”