Aftermarket ethics

The New Year is a time for reflecting on "where we've been" to improve on "where we're going." I think that makes this a good time to start a dialogue about how globalization and technology affect our business behavior. I've even decided that, like Siskel & Ebert, I must vote either thumbs up or thumbs down and find a behavior either ethical or unethical.

Established manufacturers have complained about offshore suppliers entering the North American aftermarket and borrowing their parts numbering systems. They maintain that it is a theft of intellectual property and spares offshore suppliers the expense of application engineering and cataloging.

The other side argues that this practice is not new and points out that some competitive manufacturers already use the same part numbers, making them the property of the industry. They also point out that there has been a long-standing practice of using the part numbers of the dominant North American supplier for private label lines, establishing a precedent for "universal use" of part numbers.

I don't know the legal ramifications of using someone else's part numbers, but I recognize its practical implications. When a competitor "borrows" another's part numbering system, it eliminates the need for them to invest in the product and cataloging research it takes to support the sale of a line.

I recently joined a senior sales executive of a leading traditional aftermarket company on a panel discussion addressing offshore competitors. He calculated the average cost of wraparound services offered by established suppliers, including warranty, returns, sales force, cataloging and data services, technical support, training, etc. He concluded that such services add as much as 35 percent to the cost. In other words, if a supplier didn't have to provide those services, he could sell 35 percent less and still make the same return.

Not the least of the wraparound expenses are associated with electronic catalogs (eCats). Manufacturers pay fees to third-party eCat providers, who sell that information to distributors, jobbers and technicians. Additionally, manufacturers are required to continue the expense of creating paper catalogs.

And that is what suppliers who "borrow" established part numbers are doing. They tell their channel partners to order by the full line supplier's numbers and then ship the appropriate parts. Channel partners then distribute the full line supplier's paper catalogs and sell to technicians with it. And eCats are even easier. Short line suppliers can pirate a copy of the data file and load it into any commercially available eCat.

The argument that this practice is nothing new doesn't stand up to scrutiny. If it were restricted to the use of a part number, it would be acceptable. But it often includes the use of images, technical data and catalogs (electronic and/or paper). By not having to do the OEM research, application engineering, data development and cataloging that a "borrowed" part number represents, the practice becomes theft and is unethical. Hence, I vote thumbs down.

I recognize that this will not be a popular position. But it is one thing for a private label line that is bought from the full line supplier to use its part numbers. Or, for a private label to ask for permission to use an established set of part numbers. But it's another thing for a business to use intellectual property that was created by another.

I am not so arrogant or naïve as to imagine that my opinion will have some profound effect on this unethical behavior. However, bringing this problem into a public forum is the right thing to do. I know there are dozens of similar ethical issues percolating in the marketplace. In the course of the coming months, I would like to use this column as a forum to analyze and debate them. I invite readers to e-mail me with their observations on issues that need public debate and scrutiny.

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