Data standards gamble worth it for risk-takers

A recent issue of Aftermarket Business focused on the specialty parts market, so my editor asked if I would take a look at that market segment from a data and technology standpoint.

He was curious if product attribute and cataloging data problems are as prevalent (or perhaps even more prevalent) in this niche as they are in the traditional aftermarket. He wondered if, as typically smaller businesses, specialty manufacturers and distributors were struggling more so with technology issues than their replacement counterparts. It struck me as a worthy investigation, and what I learned impressed me.

It seems that our Specialty Equipment Market Association (SEMA) brethren are taking the subject of data standards and supply chain technology pretty seriously. In fact, the SEMA Business Technology Committee (BTC) is instituting a data pilot program among SEMA trading partners. It's designed to jump start the data sharing process by assisting manufacturers with gathering data and making standards compliant, then validating and synchronizing the data files used by both manufacturer and distributor.

The SEMA BTC has recruited about a half-dozen data service providers and paired each with a specialty manufacturer. They will help populate a Microsoft Excel spreadsheet containing 19 mandatory product attribute fields and 28 optional fields for each SKU.

The 19 mandatory fields are the common stuff trading partners need to do business: part numbers, prices, dimensions, order quantities, etc. Once the data is populated in the spreadsheet, the form's content will be validated by an independent audit.

Agreeing with themselves

A unique and very progressive step the SEMA BTC is taking is requiring synchronization of the manufacturer's product attribute data files with its own application data files. While a supplier synchronizing its data with itself might seem odd, it turns out this critical "in-house" step eliminates the source of a profound number of data errors.

Most manufacturers have discrepancies in their internal systems between their product data files and their application or catalog files. This is typically because product managers keep the product attributes and a catalog manager or outside service keeps the electronic catalog files. While there are very few pieces of data duplicated between product attribute files and e-cat files, when they are not in agreement at the source, the problems that ensue are significant and typically unseen by top management. This is a lesson that would be well learned by the replacement parts sellers.

Once the manufacturer's data is certified, all of the distributors who carry the manufacturer's line will submit a spreadsheet containing the 19 mandatory fields plus any of the optional fields they keep in their system. Again, an independent audit will identify any differences between the two data sets and the trading partners. This results in the data that resides on the buyers' and sellers' systems being in perfect synchronization.

So what do they intend to get out of all of this, I asked Jon Wyly, chairman of the SEMA BTC, executive vice president of Arrow Speed Warehouse, one of the biggest distributors in the specialty market and an Aftermarket Business Editorial Advisory Board member.

"Two things: We want to confirm that greater sales can and will result for both manufacturers and distributors when the data both use is in industry standard format. We just know in our bones that if more SEMA members have their data in standard formats, it will create more opportunities for us to sell our products to and through more outlets," says Wyly. "Secondly, I see tremendous operational efficiencies that can result inside our business having accurate, standardized data in both supplier and distributor systems."

I asked Wyly if they had trouble getting volunteers to participate in the test. He said they had, but not for the reason one might think. "I had manufacturers lined up to have their data normalized, and before we could get them paired up with a data provider, several decided we weren't moving fast enough and they proceeded on their own. It was a classic good news/bad news scenario. The bad news was we lost a pilot participant; the good news was we had another manufacturer join the data-ready ranks."

Wyly points out such behavior is typical of the specialty parts community. "The great thing about SEMA members is what practical people they are," he says. "If the association presents them with a strong case for why something is important, they just do it. It also helps that the association has a solid track record at making such recommendations."

A niche of risk-takers

One of my original questions had to do with the appropriateness of the existing industry standards, ACES and PIES, and how good a fit they are with the specialty market. Bob Castle, VP of IT for Global Accessories, a company that sells almost equally to the replacement and specialty markets, says the short answer is "yes." "There are some limitations, especially in the ACES catalog standards," he continues. "But working with the ACES and PIES of (the Automotive Aftermarket Industry Association (AAIA)), we have been able to make slight modifications to the standards to accommodate the data needs of the SEMA marketplace."

So now for the big money question: How is the SEMA BTC initiative progressing? Wyly reports that within about 60 days of kicking it off, they had a couple of manufacturers who had submitted data for audit.

All of this is very impressive, considering it is being accomplished by relatively smaller businesses than the larger and supposedly more technologically savvy businesses on the replacement parts side.

That got me to thinking, what is operating in the specialty parts market that would result in such an aggressive and progressive undertaking?

Several theories emerged

I asked Scott O'Toole with Motor State Distributing, a pilot program participant who says, "Maybe we're too naive to think we can't do it." Naiveté can be a positive thing. One is certainly not burdened by past failures, overly ambitious undertakings or the "we tried that and it didn't work" mentality — attitudes I often see on the replacement side.

Another theory is SEMA folks are inherently greater risk-takers because of their businesses' nature. I often hear those in the specialty segment describe themselves as being "in the fashion business."

It's an apt analogy in that some products certainly get "hot" in popularity, which forces manufacturers and distributors to invest in anticipation of their demand. Such entrepreneurial traits might explain this market's willingness to gamble on technology. If one sees an opportunity to sell more thorough Internet Parts Ordering, visibility of their catalog on more resellers' systems or other technology-enabled methods, they might bet on the outcome.

I suspect timing is an issue as well. What was a daunting task when replacement parts people undertook standards and supply chain technology some three to five years ago is much more doable today. But somewhere along the line, the replacement parts folks just lost their zest for accomplishing the task.

AAIA has formed a strategy planning team that is attempting to evaluate what the impediments are and what needs to be done to encourage broader adoption of the standards and technology solutions. One recommendation is to create educational programs to "enlighten top management of aftermarket companies of the opportunities that exist to improve processes and rates of return."

I've got a suggestion: shame. It's mind-boggling to me that $2 million companies can see the benefit in standards and technology and take action to implement both and $2 billion companies can't. If I was the CEO of one of these replacement parts companies that was not engaged with the standards, I'd be ashamed. I think I also would have to question my own business acumen and skills. It is so very clear that technology drives every aspect of business, how would it be possible for me not to see the importance of managing something that literally impacts everything I do?

I came across an anonymous quote on the Internet, "Technology is dominated by two types of people: those who understand what they do not manage, and those who manage what they do not understand." There are countless people in the replacement market who are managing product attribute databases, who are cataloging parts to applications and who understand the potential of technology and standards.

But there are other people who control budgets and resources who don't understand what the technology is or does. They are people who say things like, "The aftermarket just isn't ready for all this high-tech stuff," or, "I've never been on a sales call where someone asked me about our data," or, "All right, pick, do you want to run advertising next year or populate PIES?"

They can be found with manufacturers and at resellers. They are the ones holding back their businesses and this market.

Whether they are aware of it, their inaction is creating opportunities for the few competitors that understand and manage this technology. That includes a handful of resellers and manufacturers, but more poignantly the OEMs who are out to recapture the replacement parts business.

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