CHICAGO — Entries for the first-ever R. L. Polk Inventory Efficiency Award are proof that some companies are indeed advancing the industry.
New, obsolete and dying items, lost sales data, replenishment processes and lean manufacturing are pervasive industry problems, with technology and collaboration at the core of the solution.
Through a steering committee, R. L. Polk determined that aftermarket companies vying for the award needed to exude innovation in inventory efficiency.
Nine companies, including retailers, manufacturers and distributors, submitted entries for improvements, including handling out of stocks and turns; cleaning up production processes with technology like RFID or bar coding; and generating replenishment systems. All entries articulated a measurable business impact.
“The whole essence of the award is to recognize companies in the industry that are doing something to impact one of the industry’s largest problems and let them talk about their activities so that others get encouraged to do the same,” said Polk North American Aftermarket Vice President Mike Gingell.
A separate panel comprising key industry executives, not associated with any of the applicants, judged the entries, “with two emerging as the clear leaders,” said Joe Adrid, director of sales for Polk’s North American Aftermarket division, who added that all submissions were judged anonymously to ensure objectivity.
Presented at the Global Automotive Aftermarket Symposium in May, the first award was given to O’Reilly Auto Parts in the retailer category.
O’Reilly developed an inventory management solution that enhanced their ability to forecast and replenish inventory in all their stores and distribution centers. To improve the productivity of buyers and merchandisers, they enhanced their inventory system to use exception-based reporting. They created a hub/spoke network to service other centers so that slow moving, non-job critical SKUs resided in only three regional distribution centers.
Polk said that O’Reilly showcased leadership with regards to synchronization and adherence to the Product Information Exchange Standard (PIES).
“Standards allow industry participants to talk to each other in the form of technology… it helps the whole industry,” said Gingell.
Michael Swearingen, senior vice president of merchandising at O’Reilly, said, “We have multiple DCs with several thousand SKUs at each so we had a lot of prep work to do.” Since no data company had a program that would fit their needs, O’Reilly designed their own software, enabling them to better forecast future demand using factors such as vehicle population data.
Federal-Mogul, the winner in the manufacturer category, developed a local inventory management system for use by their sales force. The parts supplier worked out a collaborative effort with their customers to create a better inventory mix and initial demand for new items.
Adrid said, “Some of the entries that were really good, clearly asked, ‘What is it that our trading partner or customer needs?’” which is critical in creating efficiencies.
Federal-Mogul’s system provided their national sales force with the ability to create on-demand customized inventory movement reports for customers.
Jay Burkhart, VP of global marketing for Federal-Mogul, said they were able to use data from local markets in an effort to tie application information to sales history. They developed their own software and delivered it via an IBM platform for the sales staff. “Getting data synchronized was tough but we used AAIA standards and wrote the software around that.” Initially, their inventory management model couldn’t be tailored to local markets.
A hopeful future
Gingell said members of the aftermarket should follow the lead of this year’s winners and take the next step to evaluate and determine how much coverage is really needed across the board to be successful, instead of “trying to be everything to everybody.”
He added that technology, standards and partnerships will continue to be of mounting significance within the industry.
“To me, if you boil the industry down, it’s about economics. Supply plus demand is going to equal efficiency if you get the equation right,” said Gingell. “So depending on what company you are, if you are in distribution or manufacturing, you need to be looking at utilizing technology or information to assist you in figuring out how many parts you need to be producing and where to be putting them in the chain.”
Applications will be available in November for next year’s award. All aftermarket companies are eligible and are encouraged to apply.