Do we have a blurred image of our customers?

Maybe nurturing a 'channel partner' approach can change the way we think.

The Internet has created an interesting phenomenon for me. My columns have a much longer "shelf life" than when they only appeared in print. I regularly get responses to articles that appeared months earlier when someone encounters them online.

Some columns have continued to generate responses fairly consistently. One in particular that I wrote about 18 months ago has drawn rather consistent e-mail responses over that period.

In a column that appeared in April of last year, I suggested that many of the aftermarket's traditional business practices were antiquated and outmoded and in radical need of re-evaluation.

I pointed to manufacturer suggested pricing, reluctance to share business data and our hierarchical distribution structure as examples of inhibitors that were keeping us from adopting more progressive practices. I admonished the aftermarket's approach to pricing or, more specifically, "the deal" — extra discounts, extended terms, deferred payments, consigned stock, pay when sold, factoring or some other financial device that has the effect of lowering price or reducing investment.

This increased focus on "the deal" has resulted only in moving costs around rather than removing them altogether. When costs are moved around in the supply chain from one participant to another, the market doesn't benefit. While one party might have a short-term gain, the cost is still there; somebody else is paying for it. And when someone's cost goes up, it inevitably results in a higher price for all.

But in addition to our conventional practices, I also took issue with how some of our collective behavior propagates our problems. How playing the deal game results in strange rituals where resellers and vendors go into meetings with their roles and their scripts predestined. The reseller, faced with shrinking margins and burgeoning inventory, bangs on the vendor for concessions. The vendor, feeling bullied and bruised, retreats to a position that is less about doing what is right, and more about controlling how much he will "have to give up."

Sharing the blame

Since that column appeared, I have had a couple dozen people react to my comments. As the responses came in, a trend began to emerge: nearly all the responses were about how right I was regarding the "other guys."

A distributor I know that regularly buys distressed inventory and returns it for credit thanked me for pointing out what a bunch of reprobates manufacturers are because he is just sure they are giving his major competitors better terms than he gets. Conversely, a manufacturer that has more "deals" than Carter has little pills congratulated me for pointing out how demanding and greedy resellers are. It seems everyone who read the piece made note of the references to the bad behavior noted on "the other guys'" part and failed to account for their complicity in the situation.

At first I found the whole thing amusing, but the more I thought about it, the more concerned I became. I suppose it is human nature not to see our own flaws. I thought back on my past marriage. I remember being pretty sure most of the problems weren't because of me. It was only after I got some distance from the situation that I was able to reflect more realistically. I remember the mantra the marriage counselor used to chant: "All problems are owned 50/50 by those in the relationship."

At the risk of turning this column into some sort of pop psychology encounter group, the aftermarket could use a healthy dose of that advice. The pettiness that I see displayed in this "blame the other guy for what's wrong with my business" attitude is keeping us from reforming the practices that desperately need reforming.

If more aftermarket trading partners would take the 50/50 approach to resolving supply chain issues, we actually might get somewhere. So let me risk overusing the troubled marriage analogy by saying that in those situations, there are typically others who need to be considered more than the quarreling parties: those who are dependent on them, usually the kids. In contentious trading partnership relationships, it's likewise those who are dependent on the trading partners who get the short end.

So I've decided to go public with a concept that I share with the companies with whom I consult. It is what appears at first to be a small idea. But upon further consideration, it's one that I think has the power to transform how companies think about the supply chain and how they need to work with one another.

It starts with me asking the question, "Who is your customer?" The first answer I get is typically whatever business writes them a check. If I'm speaking to a manufacturer, he says his customers are the distributors, program groups and retailers to whom he sells. If I'm speaking to a distributor or program group, they instinctively say their customers are the jobbers who buy from them.

Some take the question and run with it, saying they have multiple customers, including car owners, store managers, manufacturer reps, DIYers, repair shops; some even talk about "internal customers" within their own companies.

Upon hearing these typical responses, I stress that there is only one true customer: the person who throws away the box.

Think about it. Nothing is truly "sold" in the automotive aftermarket until the part is bolted on the car and the box is thrown away. And for most of us who sell replacement parts, that "customer" is the repair shop. I know that there are a significant number of manufacturers, especially those in the chemical, wax and lubricant business, who sell to DIYers, and there are some resellers who do much of their business with the same public. But for most of us, our customer is the professional technician.

Inevitably I get resistance from someone who wants to argue with me that the businesses between them and the installer are their customers. It usually comes in the form of a comment like, "I can tell you this, I don't cash any checks from Joe's Garage." Or, "I would hate for my jobbers to hear I don't think of them as my customers." At that point, I stress the importance of viewing the aftermarket as a supply chain that has a single common customer and multiple "channel partners" who each provide important value-added services that bring the products the customer requires to him.

Each of those channel partners performs a function that the others (relatively speaking) cannot. Manufacturers make things. Resellers (distributors, jobbers and parts stores) maintain local availability on a broad range of lines, extend credit and offer delivery. Together, this collection of channel partners represents a value for repair shops that is unequalled.

A long view of the supply chain

I stress the importance of taking this "long view" of our supply chain because I believe that when manufacturers and resellers think of one another as channel partners, it has the power to transform their way of viewing things. If everyone in the supply chain views "their customer" as being the repair shop, everyone benefits. It becomes the proverbial "gut check" for making decisions. If we ask ourselves, "Is this good for OUR customer?" more often than not, we will make the right decision.

The best example I can cite to support this observation is parts consolidation. The practice of "consolidation," or designing parts to cover multiple applications, was motivated by the supply chain's desire to reduce inventory and the expense of carrying it at the supplier, warehouse and store level. Relatively speaking, that is a good thing. Manufacturers, faced with ever-growing parts proliferation, worked creatively to combine applications and reduce the amount of inventory required to cover the parc.

Resellers accepted and encouraged the practice by rewarding those suppliers who had the most consolidated lines with more business. That's OK, too. The problem arises when consolidation becomes universalization, when the needs of the channel partners are put ahead of the needs of the customer. When universalization results in sloppy fits, cables that are too long, boxes full of adapters and instruction sheets explaining how to modify parts to make them work, then we have lost sight of the needs of the technician: our common customer. In essence, we have made a self-serving decision.

Had we ever bothered to consult with "our common customers" about what they thought of the practice, or even stopped to consider what they might think, we may well have chosen to do things differently. Instead, we created a scenario where parts with proper "form, fit and function" that came from the new car dealership were suddenly a better option than the "near fit" stuff we were selling.

If both suppliers and resellers view each other as integral steps in a supply chain that is both effective and efficient at providing the one true customer with what he or she needs, everyone is better served. This is a challenge of significant proportions because, as an industry, we have not historically displayed the skills required to truly adopt a collaborative approach to problem solving. One might argue that we are "collaboratively challenged."

If you think I'm overstating the situation and our market doesn't need to re-evaluate how it conducts business, here are a few points to ponder: Are we swimming in profits? Are we flush with efficiencies? Are we on top of new parts introductions? Are we ready for real-time price adjustments? Is our inventory in perfect harmony with our sales? Are we adopting the technology breakthroughs that can improve our processes and lower our costs? Do we have returns under control? Are we helping our common customers get the data they need to fix the cars?

We've reached a point in our super-mature industry where our collective problems can't be solved by simply focusing on our own needs; channel partners need each other to serve the needs of the people who throw away the boxes. It is not until we are willing to get past the bias of yesterday, and realistically address our mutual condition, that we can begin to bring greater profitability and real fun back to this business.

Never in the history of the aftermarket has a collaborative approach to business relationships been more important than today and tomorrow. And never has it made more sense to step away from outdated mind-sets and paradigms and nurture a "channel partner" approach to solving our problems and serving our common customer.

The simple truth is, each channel partner is performing critical, value-added functions, and none of us can survive without the other. From that perspective, why would we feel the need to "gig the other guy" when he is so critical to our collective success? It makes no sense.

Maybe it's just semantics, but try thinking about "the other guy" as your channel partner. His success is your success. Just as you need to be profitable, he needs to be profitable. Your success is not dependent on squeezing him for a few more shekels; it's dependent on working together to make sure your common customers are getting what they need.

Bob Moore is president of Bob Moore & Partners, a consulting firm that specializes in the automotive aftermarket. Moore can be reached at [email protected].