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What Mid-sized Automotive Aftermarket Distributors Need To Get Ahead

Integrated supply chain management drives better profit margins, increased visibility and control of operations — from supplier to end-user.

Polk, a leading global automotive market intelligence firm, expects new vehicle registrations to reach almost 16-million by the end of this year. As the automotive industry continues to recover, its supply chain processes need to adapt, too.

Integrated supply chain management drives better profit margins, increased visibility and control of operations  from supplier to end-user.

Global 500 companies already know these facts. After all, they have the planning, optimization and forecasting tools to see the big picture and influence decision-making. They have big IT departments and lots of tech support, too.

But what about mid-sized distributors? How can they compete effectively?

Professionals in these organizations wear a multitude of hats. They have lots of SKUs to track. They use Excel spreadsheets. In many cases, the accumulated knowledge of business resides not in a database, but in a specific person’s head.  

And if even mid-sized distributors have ERP systems, those systems have likely been cobbled together over the last 10 to 15 years.

What they need are fully integrated systems where everything is tied together. Such systems can manage the huge SKU lists, the low-volume products, the multiple suppliers and multi-step distribution models with which automotive aftermarket distributors are all too familiar.

Take, for example, 20,000 SKUs distributed over five warehouse locations. The replenishment of demand for just one SKU over all of those venues means 60,000 items need to be reviewed. Without the proper tools, officials review each SKU and determine — based on instinct and experience — where the greatest demand will be. Add the complexity of multiple vendors, and the math gets quite complex.

A fully integrated system with dynamic planning tools takes planning through market conditions and not solely on products. Doing so allows buyers to set business rules, freeing them up for more strategic endeavors. Such tools mitigate the need for a paper-pick system and eliminate inefficiencies in the warehouse, too.

To wit: They enforce the best practice of picking to a zone to fulfill three or four orders concurrently in lieu of picking to a single order – the latter, which is untenable in today’s omni-channel, customer-driven marketplace. They also automate sales orders so that tougher orders don’t end up at the bottom of the order fulfillment basket, often the case with manual picking. Put-away also can be done with some precision. Instead of waiting for all the items of a single SKU to be unloaded before put-away, the product in question can be returned to its rightful place dynamically.

Another key area planning tools address are warranties. Distributors need to be able to quickly identify what products need replacement, where they are to be shipped, and the status of their warranties. Such tools also serve as a customer service management platform, enabling workflows for better worker performance. They help distributors understand the complexities of their supply chains, their competitors, and partners. The ability to assess the supply chain is paramount.

Moreover, such tools give distributors the ability to properly address replenishment, but also look for opportunistic purchases. If they can buy products cheaply at the right price and quantity, such speculative purchases can shape demand, simulating what total increased revenue and optimized profit margins might look like.

Finally, managing recalls and fluctuations in catalog pricing also are supported by planning tools.

Much like the food and beverage, and pharmaceutical industries, auto aftermarket distributors require the ability to track and trace the spare parts in their inventories. Who is the manufacturer? Where did the product originate? It’s important to be proactive in this day and age, and not reactive. It’s imperative to have a plan in place for recalls. Mid-market distributors have more at risk.

Meanwhile, properly tracking catalog pricing starts with inventory visibility. And visibility starts with dynamic inventory control.  Parts pricing in catalogs is continually updated. It’s imperative that distributors know what products are in transit, the positions they hold in product stock, and what truckloads are coming and going.

In the end, business is all about customer service. More modestly sized distributors can achieve the benefits once reserved for larger competitors by employing the right tools to help them get the job done.

Joe Swaim is Director of Pre-Sales Consulting at IBS, a world leader in distribution resource management software, providing ERP and WMS business applications for the wholesale, distribution and manufacturer/distributor markets.

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