Europe's path to data standards parallels ours

They say travel broadens one's perspective, and a recent trip to Las Vegas broadened mine significantly. No, not that way...it was through a glimpse of how a European organization is prosecuting the implementation of data standards and supply chain technology.

Said glimpse came at the recent Automotive Aftermarket Industry Association (AAIA) Standards & Solutions Committee meeting. A group from TecDoc, roughly the European equivalent of the AAIA Standards & Solutions Committee, made a presentation about their organization and how it has evolved.

The presentation was anchored by TecDoc's managing director, Ulrich (Uli) Zehnpfenning, and included a presentation from its technical director, Andreas Assman. I say that TecDoc is roughly the equivalent of the AAIA Standards & Solutions Committee because the structure and philosophy of the two organizations have distinct differences.

The European model is more vertical and more "socialistic" in nature than our trade association here. Owned by the trading partners it serves, TecDoc is a nonprofit corporation. Its purpose, assigned by the large suppliers and resellers who "own" it, is to create technology standards and solutions required for disparate aftermarket companies to do business electronically. By virtue of this vertical approach, it not only creates the standards for the electronic catalog, it also builds the solutions.

But differences aside, the presentation was eye-opening. As Scott Luckett, AAIA's VP of Standards and Solutions, put it, "It's eerie to sit and listen to a story so similar to our own." How right he is. The TecDoc folks related their sojourn through the creation of industry standards, navigating the minefield of industry consensus on definitions, descriptions and field content, and applying it practically.

My glimpse of Uli and Andreas' story pushed three issues into the front of my mind regarding our own efforts: as an industry here in North America, we are doing the right things; as intriguing as the European vertical model is, it is not one that will work here; and there is much we can learn from them.

Collaboration's also the key in Europe

TecDoc has essentially been attacking the same problems that we have: trying to collaborate to create technological efficiencies across disparate businesses and systems. Seeing that it has independently resolved many of the same problems with solutions quite similar to our own validates that we are doing the right things.

The standards we are creating for cataloging, imaging, product attributes, communications, etc., are spot on and are what the marketplace requires. Discovering that should be heartening to the volunteers who worked so hard to create the standards and hopefully will motivate more non-adopters to get on board.

Their trading community has broadly embraced their efforts at standardization and the impact they have had is quite astounding. Uli remarked that at one time, new part returns for a typical European distributor were an alarming 20 percent or more. With the timely and accurate delivery of product catalog data, however, that rate has been reduced by 50 percent.

Uli went on to say that in reducing returns and increasing profitable sales, the aftermarket share of Europe's parts and service business grew over the last 10 years by 5 percent.

But I must confess that while I admire and respect their successes greatly, at the same time I find them disheartening. I say that not because I want our European brothers to fail, but because I am frustrated by our own inability to achieve similar results through our nearly identical efforts. Which leads to my second point.

More monolithic OEMs

There were many folks from North America in attendance at the TecDoc presentation who were all abuzz with the notion that, "We need to do it exactly the way they have." I admit that the temptation is quite strong, but I also recognize that their model is not likely to work here.

One of the most significant reasons is the market situation in the European aftermarket. The market for replacement parts (or "spare parts" as they call them) is dominated by the OEMs. The market is the converse of our own, with the OEMs controlling about 70 percent of the replacement parts business; the threat of the OEM is vastly more monolithic in Europe.

When the TecDoc folks started a dozen or so years ago, the European aftermarket was reeling from market share erosion caused by its own inability to match the OEM with systems for lookup and ordering. Staring back at a market share loss of 5 percent that could be directly attributed to the lack of technical solutions, everyone realized something had to be done.

The TecDoc people went to work on a data format and standards that would enable the aftermarket to fight back. Once those had been created, it was logical that TecDoc should be the one to create the electronic catalog itself. Its success was predicated on two factors: clearly recognizing the OEM threat and taking quick action, and the fact that there was a far less significant existing infrastructure of commercial aftermarket companies providing technology services to both suppliers and resellers.

It is the combination of those two factors that created the opportunity for TecDoc to succeed. Likewise, it is the absence of those two factors that would prevent a TecDoc model from succeeding in North America.

You see, while we pay lip service to the idea that the OEMs are an emerging threat to the replacement parts business, I'm not convinced that most of us really believe it. Ironically, the independent aftermarket seems to be displaying the same cavalier complacency that was apparent at General Motors over the years as more than half of its market share slipped away.

At its high point in 1963, GM had a 52 percent market share. From there, it declined at a fairly steady rate every year right up to this year when it dropped to just below 25 percent. One can only look at this steadily declining chart and wonder what those in charge could have been thinking, or more appropriately doing, that never once resulted in so much as a temporary flattening or (God forbid) a slight uptick.

I worry that the same thing is happening to the independent aftermarket. We have a 70 percent share of the replacement parts market. We talk theoretically about the OEM threat, but maybe we are a little too much like those GM execs who thought, "So we lost a couple of share points the last few years. It's to be expected when you dominate the way we do."

The OEMs have vast distribution networks that are much more vertically controlled than ours. They have access to all the parts and data. Their parts define "OEM form, fit and function." They have the ultimate brands: the same as on the cars.

Car owners almost never specify an aftermarket brand, but, according to techs, frequently ask for OEM parts. Even with the deck so heavily stacked in their favor, we underestimate the OEM threat.

Then there is the issue of our existing infrastructure.

When TecDoc came into existence, there were few existing commercial aftermarket companies providing data or eCat services to either suppliers or resellers. Here, we have myriad service providers who offer services like researching new OEM applications, aggregation and distribution of data, building and maintaining eCats and providing communications and Electronic Data Interchange (EDI) links between trading partners.

TecDoc: A socialistic model

I referred to the TecDoc model as being somewhat socialistic. That wasn't being mean spirited; rather, I think it describes it. A socialistic model has been demonstrated to be very effective for ramping up where little or no infrastructure exists.

TecDoc has done an enviable and remarkable job of making the European aftermarket an effective competitor in a very short period of time. But that model won't fly here. It would be unethical and downright un-American to have a trade association step up and start competing with private technology businesses.

The only way for us to be successful is to collaborate with existing providers in our market though universal acceptance of, and compliance with, our technology standards. I wish there were another way, but I don't see it.

The third thing I took away from the TecDoc presentation was that there are several things we can learn from the Europeans' experiences. The first is to treat the OEM threat differently than how GM treated threats from its competitors.

The European aftermarket reacted to losing business to the OEM with the power of collaboration. Certainly losing five share points is a lot more noticeable when you only have a 25 percent share of the market than when you have 70 percent, but they recognized it and reacted.

Perhaps the most profound lesson we need to learn is to listen to and heed what some of our own people are telling us about our industry. That is what the people from TecDoc did, and now they must wonder why we haven't done the same.

I'm referring to a story Uli told in the question and answer period following their presentation. Uli attended the 2002 eForum, where he heard Jerry McCabe's groundbreaking presentation, "It's All About the Data," in which McCabe attempted to warn us all that unless we took the time and trouble to get our data and data management processes right, we would pay for it down the road in the form of operating inefficiencies and loss of business. Erroneous and incomplete data would make both our products and services undependable and less attractive, driving our end users to alternative sources, most likely the OEM channel.

Uli heard McCabe's message loud and clear. During the Q&A, he spoke with passion about how McCabe's words had resonated with him and how he went home and made an impassioned pitch to his constituents about getting their data and data management processes right, or be doomed to continue to lose business.

Listening to Uli, you had to wonder, how is it that McCabe's message resonated distinctly with him, but did not make the same impression with our people?

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