Cut collective inventory

Jan. 1, 2020
Over the past months, I have been examining the aftermarket's collective inventory.
Over the past months, I have been examining the aftermarket's "collective inventory" — the complete channel inventory held in manufacturing plants, distribution centers, retail and wholesale warehouses, jobber and retail stores and service bays. It isn't known how excessive that inventory is, but it's a significant multiple of what is needed.

Excessive inventory drew comments from this publication's readership, and the typical response was, "I'd rather have it than not have it," underscoring that availability continues to be a differentiator between aftermarket suppliers. Many of you say you never want to tell customers, "I don't have that." But using inventory to maintain high service levels and 20-minute part availability is a dangerous game we can no longer play.

Often viewed as a single issue, parts proliferation is a dual-headed monster: new inventory from expanding vehicle makes and models and new stock to support continuous advancements in vehicle technology and systems. Both impact what we stock. In the next couple of years, we'll see new nameplates from India and China. Add to that past advances in systems like ABS and fuel injection and coming technology like brake-by-wire and telematics. This, along with the increasing fleet age, will have parts staying in demand longer and new parts coming at an unprecedented pace. But there are other less obvious, but still powerful, causes contributing to the parts proliferation phenomenon.

Category management — manufacturers offering several grades of products within a category — is increasing. At a recent category management meeting, resellers explained that we needed to have as many as six grades of products in each category: opening price point, good, better, best, heavy duty and ultra premium.

Social proliferation, another contributor, includes the desire for increased fuel economy, "green initiatives" including the impact of hybrids, biofuels and other eco-friendly alternatives and, most significantly, the customer's expectation that his or her vehicle will be repaired in one business day.

If we continue our current practices of forward deployment, our working capital, individually and as an industry, will continue to grow, increasing the pressure to have the "right" inventory.

Manufacturers, distributors and stores have one critical business process in common: managing inventory. The method of choice for many is to try to "push" their problems to someone else, either through returns or financial concessions, only serving to move the problems, not remove them.

We need to focus on ways to remove costs without pushing them off on someone else. More than category management, more than inventory management, more than product management, we need channel management. How we start finding ways to address the aftermarket's surplus "collective inventory" is something we can focus on next month.

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