When I began my aftermarket career with AC Spark Plug in 1962, the challenge of differentiating your business typically meant developing new and better products and enhancing the power of your brand.
I moved to the distribution side of the industry in 1983 and discovered that while achieving competitive differentiation was equally important for a distributor, it had become far more complicated because of a variety of industry dynamics. It was easy to become overwhelmed by parts proliferation, increased product complexity, the advent of imports and the improved reliability of modern vehicles. The distributors, jobbers and retailers who survived — and who remain strong today — realized competitive advantage comes not simply by offering the best brands or through smart management of physical inventory, but also through the rapid exchange and analysis of information. Data has become our Holy Grail.
Good data accelerates our delivery of value to the end user. From the manufacturer who creates and deploys a service solution for a late-model application to the shop owner who promises to return the customer’s vehicle by 5 p.m., the aftermarket will thrive on its ability to continuously enhance speed to market. If this industry fails to find new, better and faster ways to address market demand, we’ll be handing yet another advantage to the new vehicle dealerships.
It was this realization that led the Alliance to embrace the concept of a data warehouse in 2000. Data warehousing wasn’t new — it had been used with great success by catalog retailers and other distribution-intensive businesses — but the technology hadn’t been utilized on more than a pilot basis within the aftermarket. In fact, it was the All Pro/ Bumper to Bumper organization, in partnership with a leading aftermarket technology provider, that raised the possibility of mining a “warehouse” of data for new insights to market behavior.
The driving force behind our data warehouse was the collective awareness among Alliance shareholders that our competitive velocity depends not only on variables we could identify and manage, but by countless others we hadn’t begun to explore. As Bill Schlatterer, chairman of our IT committee, put it, “We’re smart enough to ask hard questions, but there are always new questions we don’t know to ask.”
We believed a data warehouse would help raise thousands of new questions not only about our own businesses, but also our customers’ businesses. We believed the daily analysis of thousands of parts transactions and inventory records, combined with the sharing of information among strategic partners, could revolutionize the manner in which we pursue long-term growth and profitability. And we were right.
Understanding data warehousing
Perhaps the best way to understand data warehousing is to learn how other businesses use this technology to predict our own buying behavior. For example, if you receive catalogs from clothing, book, jewelry or electronics retailers, chances are your past purchases have triggered those mailings; in fact, the product assortments may have been matched to the tastes demonstrated in your past purchases. Data warehousing enables retailers to track an endless array of variables in order to maximize the chances of a profitable sale.
Having a data warehouse opens up an entirely new field of vision with which to tune your performance as a marketing organization. It means having better information than the competition about the types of products and services being delivered to the vehicle owner. It’s the crucial next step beyond carrying great brands and offering the best programs.
Make no mistake, however, that the application of data warehousing is far more difficult in our business than for a catalog retailer — who conceivably has little or no deployed inventory — or a grocer largely carrying fast-moving products. The challenge for aftermarket businesses is to match new insight to buying and selling patterns with a more rational inventory strategy.
Can information gleaned from service dealer and DIY purchases be used to predict demand for products like ball joints, tie rods, brake calipers or engine bearings? No. But we’ve found that by capturing and mining data we can make significantly better, faster and more profitable stocking decisions. We’ve also leveraged this information to increase sales with existing customers, enhance margin management, optimize our inventories (by analyzing “risers” and “fallers” within each product category) and to ensure first-to-market availability of new service solutions.
Imagine being able to power up your category management activities with significantly more data points. Consider the savings in time, energy and money available through immediate, accurate tracking of warranty returns. Our data warehouse makes each of these benefits possible.
Moreover, data warehousing has helped strengthen our relationship with key suppliers, who derive significant operational benefit from enhanced visibility into our distribution channel. They, too, have a significant stake in tracking risers and fallers, warranty returns and potential overstock issues among our shareholders.
Capturing the benefits
Our success with data warehousing isn’t a result of the size of our business; in many ways our scale and structure — with 56 member owners — made the project more difficult than it would be for a smaller group or individual business. We also faced the unique challenge of prioritizing project queries running through the data warehouse (our technology provider’s system offers both preloaded and a virtually limitless number of customizable reports), caused again by our size and the unique competitive needs of each Alliance member.
And just to keep things interesting, our members use an array of POS and business management solutions; some member systems were easily integrated with our technology partner’s data warehouse technology while other systems proved more problematic. The point is, we worked through these issues — under the careful direction of the Alliance IT committee — because we could see that the benefits would far outweigh the hassles. And, once again, we were right.
Data warehousing makes sense for any distribution business that has the ability to capture POS and inventory data from multiple store locations. It makes sense for smaller distributors who want to complement their “gut feel” for the market with hard data gleaned from like-size businesses. The keys to success include finding a technology partner with a proven data warehousing solution designed for the aftermarket, and following a carefully planned implementation strategy.
Here are some additional considerations:
Make a commitment to success. A data warehousing project will require the allocation of staff and financial resources. Make this project a central part of ongoing business management and IT activities; develop a project timeline and demand results from your team. This approach will help maintain momentum as you manage nagging issues such as systems integration.
Define rights to proprietary information. It’s important to protect the proprietary nature of your strategic partners’ information. If you are part of a program group, expect your headquarters to define the types of inventory, marketing and POS information that is to be shared with other group members.
Involve your key suppliers. We established a manufacturer’s steering committee to ensure our data warehouse delivers ample value to our suppliers’ businesses. Think of it in these terms: By optimizing your business model, you are enhancing your value in the eyes of your key suppliers.
Manage complexity by committee. This might seem counterintuitive, but we used a committee structure to help minimize nonvalue-added planning and implementation activities. Once our headquarter’s leadership signaled its commitment, the project was managed by an IT committee made up of shareholder representatives who understood the objectives. We also utilized a manufacturer steering committee to ensure participation by our key suppliers.
Target “first downs.” Once your data warehouse is in place, it’s important to focus on targeting tangible bottom-line results. In football terms, this means pursuing a “ball control” strategy through which you make steady progress in uncovering new insights to customer and market behavior.
Integrate with industry best practices. An effective data warehouse is best used to complement other business processes, such as category management and inventory efficiency “best practices” set forth by AAIA.
Don’t assume you’re too small. At least one technology provider is now populating a data warehouse using information shared by thousands of independent parts stores tied to a common operating system. You can tap into this data warehousing solution to measure your performance and inventory profile against businesses in noncompeting markets.
Ask for help. There’s no perfect way to manage a data warehouse; share your experiences with peers and ask others for advice in establishing expectations. It is important to rely on the input of an experienced technology partner, one that has brought a project of this type to fruition — both on time and on budget — for other aftermarket organizations.
The Alliance data warehouse has been a tremendously valuable tool, and the benefits seem to multiply on a monthly basis. I liken our current situation to Major League Baseball players who talk about “seeing the ball better” during a hitting streak; we’re using our data warehouse to better see and understand the challenges and opportunities within our markets. Does each swing result in a home run? Certainly not. But the Alliance is continuing to improve its on-base percentage, and in this business that means increased sales and stronger customer relationships.
