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]]>As and internationally active brand LEXOT stays always close to wholesales and workshops throughout Europe, Turkey and Middle East. Discover the fairs and trade shows where you can experience LEXOT live on site.
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]]>The post Aftermarket Auto Parts Supply Chain: No Time To Spare appeared first on Lexot.
]]>To compete in this fast-shifting sector, aftermarket auto parts companies have to speed into e-commerce and get their supply chains in high gear.
Americans’ cars are going gray right alongside their drivers. Along with an aging population, the average age of the cars on the road in the United States has inched up to 11.8 years. Moreover, the number of vehicles between six and 11 years old will jump 27% between 2018 and 2023, according to IHS Markit.
This is good news for the aftermarket auto parts sector. Vehicles between roughly five and eight years old are in the repair “sweet spot,” says John Giangrande, director of sales with Fortna, a consulting firm focused on distribution operations. Most of these cars are out of warranty, so their owners are less likely to head to dealers for repair. Yet many are still in decent shape and worth an investment in parts and repairs.
At the same time, aftermarket auto parts businesses are facing significant challenges and changes. E-commerce is upending sales and delivery channels, while other advances in technology are changing the makeup of vehicles themselves. The businesses that succeed will learn how to leverage these changes to both retain and capture market share and reduce costs.
DIFFERENT LANES
The aftermarket auto parts supply chain can be broken roughly into two channels, says Chris Gardner, senior vice president with the Automotive Aftermarket Suppliers Association (AASA). One encompasses independent repair shops and service chains, such as Firestone and Jiffy Lube, as well as retailers like AutoZone and O’Reilly Automotive. These companies typically buy aftermarket parts from a range of third-party suppliers.
The other channel consists of the original equipment supplier companies (OES). These are the companies that made the original factory parts for a vehicle.
To be sure, some overlap between the channels occurs. For instance, ACDelco is a General Motors brand. It’s also “the brand we go to market with, with independent retailers,” says Vince Faletti, general director, global customer care and aftersales, supply chain and logistics with General Motors. Many aftermarket retailers, as well as online marketplaces, stock ACDelco products.
E-COMMERCE OVERDRIVE
As in many other sectors, e-commerce is putting significant pressure on the distribution practices of aftermarket players. E-commerce, and especially Amazon, has been a “game changer” in the aftermarket, says Dennis Hamann, director, logistics, North and South America, with HELLA GmbH & Co. KGaA, a developer and manufacturer of lighting technology and electronic products for the automotive industry.
The reason? It combines requirements traditionally associated with original equipment customers, such as on-time delivery performance, with those typical of retailers, such as a large variety of products. Add fluctuating demand, and these shifts are “increasing the importance of proper demand planning and inventory forecasting,” Hamann says.
Changing cu
stomer expectations for convenience, speed, selection, and value should prompt players in the aftermarket supply chain to develop their O2O, or online to offline capabilities. That’s according to a recent report, “Digital Transformation: The ‘New Retail’ Future of the Aftermarket (and How to Win),” by AASA and strategy consulting firm Roland Berger. “A new retail aftermarket is emerging, characterized by a strong integration between the online and the offline worlds, differentiated customer experience, and lower cost-to-serve and working capital requirements,” states the report.
NAVIGATING INTERSECTIONS
This shift will create both winners and losers in the supply chain. The companies that develop a strong omnichannel strategy and capabilities will be best positioned for success, with a flexible supply chain that aligns with evolving consumer expectations, targeted marketing, and consistent pricing across channels.
Another key criterion is cost-effective management of the last mile, the movement of parts from distribution hubs to consumers—a widespread industry challenge. “Whoever can get to market first with the quickest way to handle the last mile will benefit,” says Karl Borgman, principal with Tompkins International, a supply chain consulting firm.
To compete, manufacturers need to apply the “Amazon model of logistics,” says Gigi Ho, data co-op director of operations with the Specialty Equipment Market Association (SEMA). That is, they may need to stock parts across multiple locations so they can quickly fill orders.
Partnerships also can be a way to move toward an omnichannel world. In late 2018, Advance Auto Parts and Walmart announced plans for an automotive specialty store on walmart.com. “At Advance, we are absolutely committed to building a best-in-class omnichannel experience,” Tom Greco, president and chief executive officer with Advance Auto Parts, said in an official statement.
The two companies are also partnering on fulfillment options, including home delivery and parts installation.
ONSITE ASSISTANCE
Brick-and-mortar service providers will still have a role to play, especially for more complicated services. “This isn’t like buying shoes or clothes,” Giangrande notes. When it comes to some services, such as installing new parts, only a small segment of consumers can reasonably do it themselves.
To address the many consumers that need assistance, some online marketplaces, including Amazon, allow customers to select a service option when purchasing some car parts. Their purchases are delivered to service providers near them, who then handle installation. “It’s a major business model change,” with small garages now getting referrals from major internet providers, says Mike Rayne, managing director in the corporate finance segment with business advisory firm FTI Consulting.
Along with changing sales channels, technology is altering cars themselves. “Today, you open the hood, and you have to work for NASA in order to do something,” Giangrande notes.
That’s impacting supply chains by driving growth in the “do-it-for-me,” or DIFM, market. In turn, that’s prompting some retailers to carry more parts geared to this market.
AUTOMOTIVE UPGRADE
Repair shops also need to boost their tooling and employee training so they can effectively work on increasingly technical cars. And that costs money.
To meet this challenge, many independent garages in Europe have joined together to share parts distribution, training, marketing, and other services. GROUPAUTO International, a spare parts distribution and services network for passenger cars and commercial vehicles, spans 60 countries, encompasses more than 1,300 distributors, and provides a cost-effective alternative to vehicle manufacturers, according to its website.
Advancing technology is just one driver behind parts proliferation, along with the ever-increasing number of brands and models. Faletti’s division at GM works with nearly 500,000 parts. “It adds complexity,” he says.
The sheer volume of aftermarket parts can complicate inventory planning and management. Not only does it create more products to track, but some of the parts also lack decent historical information that could be used to estimate future sales.
While the difference between high- and low-tech products has always existed, it has become more pronounced as cars get more computerized. “Before, anyone could change a shock absorber,” Rayne says. That’s less true today.
Both the low- and high-tech sub-sectors face challenges. Lower-tech, commodity parts are vulnerable to pricing pressure, especially now that consumers can check prices with the click of a mouse.
This pressure is especially challenging for some historical players with established large infrastructures, like lengthy distribution networks. “It makes it difficult to reduce prices,” Rayne says.
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]]>Electric vehicles (EVs) are taking over the roads, with major automakers under pressure to develop full EVs. Volvo will even be electrifying its entire fleet.
Electric vehicles (EVs) are taking over the roads, with major automakers under pressure to develop full EVs. Volvo will even be electrifying its entire fleet.
Industry experts aren’t sure when EVs will become the standard. However, it’s safe to say once the mid-2020s roll around, EVs will be comparable to, or cheaper to buy and operate than, internal combustion vehicles. Once that point is reached, it’s likely EVs will be on the fast track to market domination.
Much like the auto industry, the aftermarket parts industry will look quite different when EVs take over the market. To stay relevant, aftermarket manufacturers must have a plan for the changes. Which parts will stay, and which parts will be phased out? What new parts will be needed? Here’s a quick look:
Parts That Will Stay
EVs and gas-powered vehicles drastically differ in some ways, but there are parts they have in common, such as:
- Brakes
- Batteries
- Suspension components (shocks, struts, etc.)
- Body parts
Parts That Will be Phased Out
EV motors have about 20 moving parts, a big decrease from the 2,000 moving parts in internal combustion engines. That means a lot of parts will be phased out, including:
- Fuel system parts (fuel tanks, pumps, filters, etc.)
- Engine parts (oil and air filters, spark plugs, starters, etc.)
- Exhaust system parts (mufflers, oxygen sensors, catalytic converters, etc.)
- Multi-gear transmissions
- Clutches
What Will be New?
The rise of EVs also will bring entirely new parts to the table, including:
- Single-speed gear boxes
- Motor controllers
- Electric motors
- Regenerative braking systems
- Electrically driven water pumps, steering pumps, air conditioners, etc.
How Aftermarket Manufacturers Can Adapt
If an aftermarket auto parts manufacturer wants to stay relevant, they’ll focus on the parts that will stick around and those that will come into the picture as EVs rise in popularity. Also, as internal combustion engine part sales drop, manufacturers of those parts will start looking for other parts to make. This will shake things up in the industry.
The parts that are only relevant to internal combustion engines will still be produced by some niche aftermarket parts manufacturers, as it will take a decade or two for demand for these parts to drop. However, these companies will have to figure out how to stay relevant in an EV-dominated market. The bottom line: expect to see a large shift in focus to EV aftermarket parts as EVs become more popular. Also, expect to see a lot of aftermarket companies phase out their internal combustion engine parts to make room for EV parts.
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]]>This is a paragraph. It should not have any alignment of any kind. It should just flow like you would normally expect. Nothing fancy. Just straight up text, free flowing, with love. Completely neutral and not picking a side or sitting on the fence. It just is. It just freaking is. It likes where it is. It does not feel compelled to pick a side. Leave him be. It will just be better that way. Trust me.
Left Align
This is a paragraph. It is left aligned. Because of this, it is a bit more liberal in it’s views. It’s favorite color is green. Left align tends to be more eco-friendly, but it provides no concrete evidence that it really is. Even though it likes share the wealth evenly, it leaves the equal distribution up to justified alignment.
Center Align
This is a paragraph. It is center aligned. Center is, but nature, a fence sitter. A flip flopper. It has a difficult time making up its mind. It wants to pick a side. Really, it does. It has the best intentions, but it tends to complicate matters more than help. The best you can do is try to win it over and hope for the best. I hear center align does take bribes.
Right Align
This is a paragraph. It is right aligned. It is a bit more conservative in it’s views. It’s prefers to not be told what to do or how to do it. Right align totally owns a slew of guns and loves to head to the range for some practice. Which is cool and all. I mean, it’s a pretty good shot from at least four or five football fields away. Dead on. So boss.
Justify Align
This is a paragraph. It is justify aligned. It gets really mad when people associate it with Justin Timberlake. Typically, justified is pretty straight laced. It likes everything to be in it’s place and not all cattywampus like the rest of the aligns. I am not saying that makes it better than the rest of the aligns, but it does tend to put off more of an elitist attitude.
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