There's more to inventory management than data

Jan. 1, 2020
Chicago — Although Parts Depot was a 2006 winner of the esteemed Polk Inventory Efficiency Award, President and CEO Willi Alexander has a confession: "I know our inventory is terribly inefficient."

Aftermarket eForum presenters share the nuances to a successful supply chain.

CHICAGO — Although Parts Depot was a 2006 winner of the esteemed Polk Inventory Efficiency Award, President and CEO Willi Alexander has a confession: "I know our inventory is terribly inefficient."

Winning the R. L. Polk & Co. award, he adds, is not by any means a determination that the company has its inventory completely figured out, but it has helped Parts Depot learn things it did not know before.

At this year's Aftermarket eForum, which took place in July, last year's Inventory Efficiency Award winners shared some of the secrets of their success.

For Parts Depot, it's the OSR (one simple rule) system, which is a rules-based process that makes reactive recommendations based on sales history, lost sales and buyouts, as well as proactive recommendations as to what parts will be needed in the future.

Inventory data is updated weekly and sales data is updated once per month, says Alexander. Store management reviews stock change recommendations, and OSR compiles the approved stock nightly.

"Our merchandising group sits around a table and determines what parts need to be stocked in our stores based upon a series of data requirements," says Alexander. "These rules are always running, (we're) always making recommendations. We've grown a lot as a company, and if we didn't have this application I don't know how we would get the physical work done."

As with all previous eForum presentations, the use of data standards (like PIES, a product standard, and the ACES cataloging standard) is stressed as the backbone to inventory success.

"If we didn't have ACES and PIES, it would take several hours to do what these applications do in minutes," continues Alexander.

Smaller companies frequently don't use data standards, says Anne Coffin, VP of IT & marketing and CIO of Beck/Arnley, and another eForum speaker. Sometimes the industry overestimates the difficulty of using established standards. "We think it's going to be a lot more difficult than it really is," she says.

The key to inventory efficiency lies not only in following data standards, but in applying rules to the inventory.

Regarding Parts Depot's rules-based software, "whatever (rules) we thought were right have turned out to be wrong," says Alexander, who adds these "rules" have changed significantly over the years.

Other eForum speakers agree that the idea of following industry standards to improve a company's operation seems like a simple process, but there is more to cleansing data to share with channel partners than meets the eye.

The solution to inventory efficiency, when looked at from far above, seems like a pretty unremarkable solution, but the results are remarkable, says Jerry McCabe, vice president of business architecture for Affinia Group, Inc., another 2006 Polk Inventory Efficiency Award winner.

Affinia's average fill rate improved by more than four full points, 24-hour turnaround times increased by a full point and order accuracy stayed exactly the same.

But, "by mid-year, we had reduced our inventory by 27 percent. That is a significant number and that got everyone's attention at our place."

Providers are abundant

Now, more than any time in history, a wealth of products and systems are available when it comes to implementing data standards to help better manage a company's inventory, says Ed Heon, CEO of DATAgility, who spoke to attendees at a first day session.

"If we ever had a time to be optimistic about widespread use of industry standards, that time is now," Heon says.

One hurdle to overcome, however, is getting companies' legacy software systems to unify data and programs, as the first order of business is internal, before moving to external success with trading partners.

"Legacy systems carry product data in myriad and sundry formats; the data needs to be complete," says Heon.

McCabe notes this fact when describing the process of turning Affinia's inventory system around.

"We had to create a new data stream that tied in information from all over the business," he notes. "If we'd been fortunate enough to be running our whole business on a single ERP (enterprise resource planning) system, this would have been easy. With the collection of legacy systems our folks had to work with, it was a little more difficult."

He stresses collaboration, as following standards and controlling inventory is "everyone's job."

McCabe adds: "We're blessed to be in an industry that has standards. This is just the beginning. It's not an end-all."

Reinforcing this point, Heon says it takes approximately nine months to get data out into the aftermarket, as opposed to overnight, which is how it should be.

"We ought to be able to get product data disseminated at least within a week," he adds.

Every company also should have a chief data officer, says Heon, and if the company is large enough, this should be a full-time position.

Europe's quest for data compliance

The data situation in Europe initially was a mess, as there was a dearth of efficient data suppliers, too much cost in distributing the data and every supplier had its own definitions, says Ulrich Zehnpfenning, CEO of TecDoc and the eForum's keynote speaker.

"It was a bit like if the Penske racing team and Ferrari and BMW racing teams were on different racetracks and different lengths of racetrack," he says.

TecDoc has since set up a successful standards program and become a leading supplier of electronic parts information based on the PIES and ACES systems in the United States. The organization now is expanding its reach globally to areas like Israel, Turkey, Serbia, Russia and Latvia.

TecDoc has about 150,000 customers and comprises 31 shareholders, including Bosch, Contitech, Federal-Mogul, MAHLE, Hella, Honeywell, Valeo, Tenneco and Siemens VDO.

"The community's growing," says Zehnpfenning, who adds the community has increased from 21 data suppliers in 1994 (mainly from Germany) to 280 suppliers, which include Italian and French data suppliers, among others.

Additionally, TecDoc will launch its first Chinese catalog in the Chinese market this October.