Something happened to me the other day that was not only disturbingly disappointing, but managed to boost my blood pressure by about 20 points. And like so many things do, it caused me to stop and consider some of the real problems we face in the automotive aftermarket.
The trigger was nothing more than a stop at my favorite neighborhood auto parts store to pick up an oil filter for my 2004 Mini Cooper. The amiable young man behind the counter clicked through several screens on his computer before he announced, “Sorry sir, can’t help you. We don’t have them.”
“Do you mean you’re out at this time, or you don’t ever carry them?”
“I mean they aren’t even showing up in my catalog,” he replied.
Thinking back to how much of my youth was spent chasing parts for British sports cars, I hoped that my most recent vehicle purchase would not force me to relive those experiences.
I don’t remember exactly how I responded. It was one of those situations where I was thinking about databases, eCat standards, data mapping and generally wondering what conspiracy of circumstances was preventing my counterperson from addressing my need. I probably muttered something befitting my agitated mental state.
It was clear that the man behind the counter sensed my frustration and confusion and wanted to help, so he uttered those dreadful words we aftermarket people hate to hear.
“Well, if I were you, I’d go to the dealer.”
Needless to say, that really got my blood pumping.
Just didn’t compute
Back at my office, I couldn’t let it go. Why wouldn’t my parts store have an oil filter for my car? True, the application is a bit more obscure than your average Toyota or Chevy, but it’s just an oil filter and probably the same one that fits several other cars. That thought led me to a blinding flash of the obvious: What if the right part for my car was on the shelf, but the right data wasn’t in the computer? I decided to take the time to drill down into the problem, hoping to fully understanding it.
My first call was to a friend at a filter manufacturer, the same one that supplies my local store. I asked him if his company covered my application. “Sure we do. The 2004 model takes the same filter as the 2003.”
I guess he could tell by the stunned silence on my end of the phone that I was a little perplexed by his answer.
“Let me guess,” he said. “You went into a store, asked for a filter and they said they didn’t have it. And now you’re thinking that, had you known a 2003 filter would have fit, you would have asked for it.”
He was right, of course, but what I was really concerned about was if they had the 2003 filter in stock, but didn’t have the data to know it fit a 2004 model. I told my filter friend I’d call him back. Then I called my parts store and had my worst fears confirmed. They had the part in stock to fit the 2003, but told me once again that they didn’t offer coverage for the 2004. When I asked if the part for the 2003 would fit the 2004, he said he had no way of knowing, and suggested that I might want to call the dealer.
The score was now OE dealer two, aftermarket zero.
How bad is the problem?
The questions started confronting me. What were the circumstances that prevented my parts store from getting the data they needed to provide me with the part they already had? How pervasive is the problem? What is this costing us in lost sales? Why does the distribution of data take so long? And most importantly, what do we do about it?
I’ve discovered that the pervasiveness of the problem is profound. Most product managers I spoke with indicated that the “carry-overs” of a part number to the next model year is quite common. It routinely occurs more than 50 percent of the time in some categories. This huge volume of carry-over coverage presents equally large problems for people charged with maintaining eCats. One such person I spoke with indicated that, because the incidence of carry-over is so high, there is a temptation to simply go ahead and catalog previous year’s numbers for new applications. However, as he put it, “.500 is a darn good batting average in baseball, but doesn’t cut it in cataloging.”
Each year, about 380 new base vehicles are introduced in North America. The average model has approximately 800 replacement hard parts. That means there are more than 300,000 new data fields that need to be populated and make their way to the parts counters of stores before the first replacement part can be sold for those vehicles. (And that is not even considering that some stores dual and triple line some categories). When you consider this staggering volume of new data and the average time of four to eight months for it to reach the counter, the cost in lost sales must be astounding. I decided I needed to try and “guesstimate” just how much.
I recalled a presentation made by Marlen Silverii from Arvin Meritor at an industry forum last year. To quantify the dollar value of the problem on the strut business, Marlen had done some ballpark calculations. He pegged annual industry-wide lost sales resulting from just a six-month lag in data to be $33 million at retail. Yes, $33 million on just struts. If you assume that struts account for as much a 5 percent of total retail aftermarket sales, you project more than $5 billion in lost sales annually, directly attributable to slow distribution of catalog data. Admittedly a SWAG, but one of staggering proportions; and one I’m willing to toss out for somebody to disprove.
And what is happening to that unfulfilled demand? If my oil filter experience is indicative, the overwhelming majority is headed right to OE dealerships. What bitter irony it is when our own counterpeople are suggesting that their customers take that path. There is another possibility of what happens to some of that uncataloged demand. It is likely some maintenance is simply being deferred because of the apparent unavailability of parts. More bitter irony as we attribute a substantial piece of the $60 billion in unperformed maintenance to bad or tardy data.
Somebody to blame
All of us in the supply chain are to blame for the multi-billion dollar problem. Lost sales resulting from slow distribution of new application data can be laid at the feet of manufacturers, resellers and eCat providers alike. The bad news is, we’re all culpable. The good news is we all can contribute to cleaning up this mess. In a nutshell, manufacturers need to step up and invest in their data and its management; resellers need to invest in systems that can receive the data in a timelier manner; and eCat providers must strip out inefficiencies and reevaluate how they are doing business.
Let’s start with the third party eCat providers because everybody loves to pile all the blame at their feet. While there is plenty of room for them to improve, it’s just too easy and not at all fair to make them out as the bad guys.
Generally speaking, these folks are engaged in a marginally profitable, labor-intensive business. It has become something of a thankless job, in spite of the critical role they play. They have manufacturers supplying data in wildly disparate formats. I spoke to one who indicated that around 30 percent are submitting their data in either paper format or non-standardized electronic files (like Excel spreadsheets). In either case, significant manual manipulation is required. Unfortunately, those who are doing a good job with their data are suffering data distribution delays because of the poor job non-conformers are doing. Manufacturers in general need to do a better job in standardizing and submitting their data to eCats. That being said, the eCats must find a way to reward complying manufacturers with faster tracks to market –– without additional charges. Conversely, non-complying manufactures should expect a combination of charges and slower fulfillment.
Perhaps if more CEOs of aftermarket companies did the same arithmetic that Marlen Silverii did, they would find the resources to invest in the care and feeding of their data. I imagine Marlen had little difficulty in justifying to his boss that the recovery of some small portion of the $33 million of lost annual sales would fund cleaning up and standardizing his data. Likewise, if eCats charged more to the non-complying manufactures, those product and catalog managers might find a more sympathetic ear for data clean-up come budget time.
When examining this issue, one must also consider the reseller’s contribution to the problem. Unfortunately, the attitude of many resellers is that data is somebody else’s responsibility, and they shouldn’t have to be concerned about the problem, or helping to solve it. About a year ago at an industry eBusiness forum, the president of a large program group made a presentation in which he admonished manufacturers for failing to provide timely and accurate data for pricing and cataloging. During the Q&A following his presentation, he was asked how he intended to help with the staggering costs that would be associated with the fix he proposed.
His answer was immediate and blunt. “I can tell you this, we won’t be paying for it.” I remember thinking at the time how wrong he was. Of course his members are paying for it. They’re paying for the gross inefficiencies of their worst, as well as their best, vendors, along with the inefficiencies of their eCat vendors. To say they wouldn’t pay for it is somewhat akin to being elated about the “free” floor mats you got with your new car.
Another big contributor to this “time to market” issue is the large number of resellers whose business systems are not suitably Internet enabled. The only way they can accept catalog updates is via hard media, typically a CD or DVD sent through the mail. Now this was considered a very high-tech solution before Al Gore invented the Internet. Fact is, burning and distributing discs adds an additional 30 days to any data update…best case. Simply put, more resellers must step up and demand systems that will enable them to receive data updates over the Internet. To quote Rob Tyner, it’s time for them to decide if they’re going to be “part of the problem, or part of the solution.”
For their part, eCat companies have business models that reflect the way things were, and not what they are or will be. There’s something wrong with a business model where manufacturers supply data to the eCat companies, who in turn manually enter and recheck, before they redistribute it to resellers by mail. That may have been an appropriate model 15 years ago, but it makes no sense today. With so many of today’s manufacturers developing expertise and capability to manage their data in compliance with industry standards, the model needs to change.
With the breadth of data issues facing the aftermarket, and the acute need for speed, just how realistic and pragmatic is it for eCat providers to continue to function primarily as data brokers between makers of products and resellers? Does it not make more sense for the data to move as products do, directly from the manufacturers to their resellers?
So what do we do about it?
Working our way out of this mess is going to be an effort on everybody’s part, even though the solution is really quite simple. Plainly put, we all have to start caring about data, data management, data standards and the processes we use to maintain and share our data.
It starts with wider adoption of our industry data standards. Unless and until everyone in the aftermarket not only endorses, but actually starts using the new industry Aftermarket Catalog Enhanced Standard (ACES), we will suffer from this problem. While the new standard was officially introduced at the AAPEX show in November 2003, as of this writing in early 2004 only a few manufacturers, resellers or third-party eCat providers have adopted it. In fairness, it should be noted that the new standard is necessarily quite complex and adopting it is no small undertaking.
Even so, every manufacturer with sufficient resources should have a team at work mapping data to the new standard. Those without adequate resources should explore outsourcing options. As somebody said a couple of thousand years ago, you can’t cast stones if you are culpable (or something like that). If your company’s data is not compliant with the ACES standard, you’ll have no right to complain about delays in your data getting to market.
If you are a reseller whose system is unable to take data feeds directly from the Internet, you need to invest in that capability. Until you do, you are adding a minimum of 30 days to the data distribution process.
eCat providers are in the toughest position. They need to consider profound changes in their business models. For example, they need to consider opening up their systems to allow qualified customers to make additions to their catalogs with data received directly from their suppliers.
This column started out as a simple oil change. It has ultimately pointed out the need for a major overhaul. Next month I want to expand on the scope and magnitude of the manifestation of these issues and look at what actions we ought to consider as an industry if we intend to correct these problems.
