Advances in digital technology offer original equipment manufacturers (OEMs) in the automotive sector new ways to counter the threats to their highly profitable aftermarket.
OEMs are not the only source for parts. Given the profit margins, large wholesalers, retail chains, and thousands of mom-and-pop stores are also attractive parts sources to auto dealerships. Recognizing this competition, OEMs have attempted several measures to bolster service parts sales. One of the initiatives involves incentivizing dealers to increase the companys service parts inventory. But here too OEMs face competition from dealers and other service providers that offer their own incentive pricing and customized delivery programs and services. OEMs face major obstacles to unlocking the financial opportunities that exist within the automotive aftermarket.
Technology holds the key.
While many software capabilities are available in the market, the real question to automotive manufacturers is often; where do I start?
Recent advances in digital technologies help automakers align their supply chains to actual market demand. Many are seeing dramatic improvements to supply chain efficiency and responsiveness as they increase sales of spare parts and simultaneously reduce inventory levels and costs against the high uncertainty of demand.
Four game changers have emerged.
Big Data:With Big Data collection and analytics capabilities, OEMs can obtain real-time understanding of actual demand. By capturing connected car data, dealer point of sales information and transactional data from distribution centers – such as shipments, inventory, and replenishment rules on a daily basis they acquire timely data to better sense, shape, and respond more rapidly to demand.
Integrated Business Planning :OEMs and dealers can develop a collaborative forecast system. This can incorporate sales, marketing, and finance functions alongside supply chain and demand chain participants from vehicles, distribution centers and dealerships.
Participants can provide inputs according to their role, laying a strong foundation for ‘bottom up’ forecasting accuracy. They are able to use inventory optimization applications to place stock across various distribution centers and dealerships to maximize service levels and minimize on-hand inventory levels and last mile transportation costs.
With planning information thats easily accessible within a cloud-based, collaborative management review process, OEMs can make better decisions that take into account operational and financial constraints such as enterprise capacity and budgets. They gain the ability to optimize purchasing, production, and deployment plans.
Optimized Order Management:Digital capabilities can be used to create a distributed order orchestration hub to seamlessly integrate disparate demand channels such as dealer management systems and e-commerce sites. This hub can also include data from central and regional distribution centers and partners and even vehicles to more effectively align the supply chain to actual demand.
Agile Fulfillment and Logistics:The fourth piece of the puzzle involves creating an agile fulfillment and logistics network that is responsive to market demand. The use of GPS and mobile data opens up dynamic routing options and visibility to coordinate orders, stocking locations, vehicles, and loads. By matching incoming order fulfillment data to actual truck locations, dispatch becomes faster than ever before. Reduced delivery times and increased frequencies mean dealers can lower inventory levels, thereby bringing down carrying costs and obsolescence risks.
For OEMs, the increased availability of genuine automotive parts will reduce loss of sales to competitors. With better responsiveness without additional costs, OEMs can competitively increase their market share and profit opportunity.
Find out how OEMs can grow service parts sales as a means to improve their overall financial performance in a white paper that Michael Ger from Oracle Automotive Industry Solutions and I teamed up to develop.
TCS is a Platinum Sponsor of the Executive Summit at Oracle Modern Supply Chain Experience 2017. While companies understand the value of digital technologies, they struggle to develop strategies and a roadmap to leverage digital capabilities to transform their business models. Do join us for an insightful sessionwhichwill focus on attendees strategies and their perception of the challenges, opportunities, and impact digital technologies are and will have on their operations. Click here for more details.