Inventory Optimisation for Automotive Aftermarket
Driving the Automotive Aftermarket
People are so reliant on their cars these days that even one day
without it can cause personal logistical nightmares. If their car
cannot be fixed same day or next day, this will inevitably see
customers switching dealers, garages and ultimately makes. This
level of customer control means that the automotive aftermarket
industry demands high service levels and product availability; and
the inability to meet customer requirements will undoubtedly result
in a vehicle standing still with no work taking place.
Barloworld Supply Chain Software understands that the customer
in today's automotive market is much more educated than previously
and that the total cost of ownership is a major consideration when
buying a new vehicle. We are therefore at the cutting edge of
industry knowledge regarding the necessity of available inventory
at dealer level from Parts Distribution Centres (PDC), in what is a
very competitive and complex market, with tight margins.
Gearing up for a Challenge in Inventory Optimisation
In Europe, a huge challenge for both manufacturers and dealers
alike has been the introduction of the block exemption regulation
(BER), which controls the sale and servicing of cars. The
regulation is intended to "put consumers in the driving seat" - by
giving dealers greater independence from carmakers, promoting
inter-brand competition, and introducing competition to the
aftermarket. If a customer needs their car servicing the next day
and the dealer cannot meet that deadline due to a delay in a part,
then they will simply go elsewhere. The dealer similarly can
approach any manufacturer they like who will be able to deliver the
part when they need it, putting pressure on manufacturers to have
the correct parts at the correct place within the correct
Inventory Management with a Complex Product Range
Another factor that makes the automotive aftermarket sector very
complex is the vast ranges of parts required to be stocked in order
to service the cars within the required time frames. PDCs and their
dealer networks have to stock hundreds of thousands of parts in
multiple locations in order to achieve the required service levels.
This problem is then compounded by the fact that many parts fall
into the category of slow moving on the one end, which can be from
older car models, to new product introduction at the other end of
the scale - with many variations in the middle.
And when it comes to replenishing this immense product range,
parts managers at the PDCs have to deal with long lead times from
manufactures, large minimum order quantities and frequently make
'last time buy' decisions. However, on the dealer network side
order lead times normally range from 1 to 3 days and storage
capacity constrains mean that the parts need to be replenished very
frequency, sometimes up to 2 times a day. This has lead to the
creation of geographical positioned super dealers that act as
stocking hubs for the smaller dealers which again adds a lot of
complexity to the supply chain.
Optimiza Inventory Planning Software: The Right Tool for the
To make such a complex supply chain work it is imperative that
the right tools be deployed at a central location where the correct
skills and decision makers are available.
The Optimiza software, from Barloworld Supply Chain Software has
been introduced to many Automotive Aftermarket companies because it
allows such visibility for their purchasing and logistics
departments. All ordering, deployment of product to PDCs and then
from PDCs to dealers is done from this central location with
inventory managers managing the process and taking responsibility
for the decisions.
This ensures that the right stock is being ordered in the right
quantity and there is no stock sat on shelves gathering dust.
In addition to this, the growth experienced in recent years has
meant that backward looking, simple forecasting algorithms have not
kept pace with the actual growing demand. Barloworld Supply Chain
Software's Demand Planning module and integrated advanced
forecasting engine uses a mixture of algorithms to identify the
best fit algorithm on which to base future projections.
The inventory profile rules for different segments of the data
- The large number of Stock Keeping Units are categorised
- Safety stocks are set uniquely for different target service
levels and risk profiles
- Visibility of the overall supply chain is heightened
The Business Intelligence layer categorises items on a daily
basis into various hotspot areas, clearly illustrating to the
Planner what action is required. It alerts the user to:
- Stockout and potential stockout
- Surplus and expedite orders
In addition, the inventory planning methodology introduces a
formal process to the planning team with clear roles and
responsibilities and Key Performance Indicators to ensure the right
and constant focus.
Optimiza has given us the increased visibility and ability to
manage the inventory that we needed in order to control our
inventory in line with the requirements of the business and its
sales drives. We can forecast and order very accurately from a
centralized location, hence reducing inventory investment and
stockouts, whilst increasing service levels.
Carl Croot, Automotive Materials Manager, DHL Exel Supply
Optimiza has given us the increased visibility we needed to
order and control our inventory in line with the company KPI's and
budgets. We can forecast and order from one system.
Optimiza has already changed our thought processes and brought
us confidence in our future planning. We look forward to the
benefits that we are sure Optimiza will bring us through reduced
inventory, whilst increasing our availability
Tracey Leggett, Supply Chain Supervisor Automotive
A long and healthy partnership has seen inventories reduce by
26% while at the same time increasing availability.
In the spirit of continuous improvement the latest initiative
has rolled out a Centre of Excellence operation to the Dealers to
increase visibility throughout the supply chain.
General Motors (SA)
A rewarding partnership has meant that the latest initiative was
to roll out the functionality to the East African operation. The
results achieved have been a 14% inventory reduction with an 18%
reduction of excess inventory and much improved fill rates.