Getting Into the Loop

The automotive aftermarket distribution chain that we often refer to is really nothing of the sort. It’s not a chain at all. Rather, it is a disparate, loose association of businesses that are frequently at odds with each other.

To a point, this is the way it should be. From your perspective, it’s not really expected that anyone should hold your interests closer to heart than you. Having said that, there is a critical need in the aftermarket for some real supply chain management.

I was speaking about this idea with Jerry Loney, whose words on Gross Margin Return On Inventory graced the pages of Jobber News Magazine several years ago and who, I am pleased to report, is rejoining our group of Class A contributors in 2003. The man who virtually wrote the book on automated inventory management maintains that supply chain management will determine the success or failure of the players in the aftermarket, and its impact will be felt sooner rather than later. The difficulty is that it is not even understood by most players in the aftermarket.

I agree. Step one is to understand what supply chain management is, and to do this it is probably easier to define what it is not. It is not inventory management. It is not an Internet connection to your WD. It is not a hookup to your best customers. It is not even electronic data interchange between warehouse distributors and their suppliers. It is not captive distribution. And it’s not just-in-time delivery.

Supply chain management is all of these things and more. Put simply, it is an open exchange of information that allows everybody up and down the line to plan and execute with a minimum of wasted resources.

Try to think of the supply chain not as a chain, but as a loop that starts with the service provider and ends with the service provider. The beauty of this model is that it gives primacy to no one. Currently, everybody at every level views one player or another as the most important, when the reality is that the whole thing falls apart if any one part does.

This is where we’re at now. The chain too often operates as a set of links pushed together but not connected. They work together when it works, then operate independently when commonality gets hard to find. When the latter is more common than the former, you get a supply chain that operates pretty much the way the aftermarket does. Forecasts are best guesses, day-to-day sales are a mystery to those who make the products, service providers buy in haphazard ways, warehouses are filled with huge inventories that are older than the stuff in my garage, and jobbers can only guess at how well, or how poorly, they are doing.

If demand was flat, products unchanging, and competition constant, this would be okay. Instead, demand is changing dramatically; parts required to repair cars change all the time. Competition from car dealers is increasing and they are gaining ground.

The big issue is that the aftermarket needs to exchange information better and more comprehensively. Proprietary barriers need to come down. Turf wars over information need to dissolve. Inventories need to be rationalized.

There are billions of dollars of duplicate inventories and products in transit that drain resources and cost everyone in the aftermarket profits and market share. It is important that we all recognize that it doesn’t need to be this way.

The jobber is critical to the success of the transformation, as is every player, but the role of the jobber is unique. He has unparalleled contact with the service provider, where information about sales patterns, customer profiles and opportunities lies.

Everyone in the aftermarket needs this information to move to genuine supply chain management. It’s time we stopped daydreaming about it and started treating it with a sense of urgency. It will come; this is a sure thing. Whether it includes you is not. — Andrew Ross, Editor

NEXT MONTH

The November issue will focus on Oil and Lubricants Marketing, some Undercar Opportunities, and more.