The aftermarket’s new inventory concerns

For a while, inventory issues meant jobbers couldn’t get enough products to satisfy customer demand. Now, it’s been flipped where some in the aftermarket have too much product on their hands.

The aftermarket has seen growth after the initial hit of the pandemic. DesRosiers reported a 10.5 per cent jump in 2022 compared to the year before for automotive parts, accessories and tire stores.

The industry saw “much bigger numbers, I’d say, than then we often expect in our nice steady, slow-growth aftermarket,” observed Paul McCarthy, president and chief executive officer of MEMA Aftermarket Suppliers during a quarterly call with the media.

That said, “there have been some concerns about where we stand with inventory and maybe returns as we face what is still a very positive, but maybe a more normal market,” he added.

A key question among suppliers: Is inventory in the right places?

A common issue was orders of 100 units of a product in hopes that 20 would arrive. McCarthy called this “noise in the system.” Orders were coming in because the industry was looking to get their hands on whatever they could get as availability was a real concern. Furthermore, the perception, and often reality, was that anything they had on their shelves could be easily sold.

“So there’s this theory that maybe some areas have too much, maybe some areas have not enough as the market continues to evolve on us,” McCarthy said.

This put a strain on relationships throughout the supply chain. Shops needed parts to meet customer demands. Distributors were leaning on suppliers to get them needed product. Suppliers were handcuffed due to logistics issues. Those relationships have “significantly” improved, from MEMA’s perspective.

“We’re hearing that from customers and hearing it from suppliers, versus where we were at the depths of the crisis,” McCarthy reported. “And I think our big message is we need to keep that up.”

Specifically, each side needs to keep things practical. Rather than placing a huge order in order to raise the likelihood of getting a portion of it, being realistic is key.

“We need to work together. We need to have real transparency on what are the real orders, the real needs, the real expectations for this year — just real joint business planning for growth,” McCarthy advised. “If we didn’t know before that our very complex supply chain couldn’t shift on a dime, well, we certainly know it now. And we need to work together on that assumption.

“And we think one of the biggest challenges and maybe opportunities for the aftermarket over the next half-decade may be improving our forecasting together. There’s a lot of money that we could all save.”