Aust & NZ
2nd Jun 2016

Original Equipment Manufacturer Sponsored Centralised Parts Inventory Replenishment Systems

A key element for a parts department’s Dealer Management System is its inventory management solution. It is an expectation of these solutions that a parts manager be able to effectively manage the important and often substantial balance sheet item which is the parts inventory. The parts manager needs to delicately balance the requirements to maintain ‘adequate’ stock to fulfil the needs of both internal and external customers, whilst minimising the risk of obsolescence, all within the constraints of both the physical storage (warehouse) and the dealership cash flow. In an era where cars run very complex and often expensive componentry, this is a tricky task to say the least.

Over the years, many Original Equipment Manufacturers have come to recognise that the supply rate performance of their parts departments in their dealer networks can have a massive impact on customer satisfaction indexing for vehicle owners, as well as minimising the need for trade customers to shop elsewhere if parts demand cannot be met. When a car is in for repair, it needs parts quickly. Whether that be across the road in the dealership service department, or a suburb away at an independent repairer. The problem for the Original Equipment Manufacturer has been about how they can provide more certainty about their parts supply rates around the dealer network. Their own supply and logistics of course gets scrutinised and modernised and tweaked where required, but what do they do for the dealers?

An Original Equipment Manufacturer trying to improve and measure dealer parts supply rates is a great challenge. They need to deal with parts managers of vastly different backgrounds and skill sets, many of which are not formally educated in inventory management or logistics. On top of that, they will be dealing with quite a number of Dealer Management Systems, which each have their own unique way of being setup, configured, and tuned to generate forecasted suggested stock orders, which largely may not be well understood by those driving them. Again, a real problem for the Original Equipment Manufacturer.

The Solution

We are seeing an increasing trend by Original Equipment Manufacturers to attack this problem head on by introducing a centralised replenishment system. Rather than dealers generating suggested orders in their Dealer Management Systems, the dealers each submit commonly formatted data files containing the details of each product for its stock on hand and sales history. This is then used by the centralised system to generate the stock order for the dealer. The system will have been geared to the requirements of both the Original Equipment Manufacturer and each specific dealer’s requirements and limitations. This provides the Original Equipment Manufacturer with the comfort level that they no longer need to be concerned about a dealer’s inventory management ability, and can be satisfied that with the greater control they are providing, they can vastly limit and reduce their large annual cost of obsolescence buy-back schemes.

It really is a win-win solution. The Original Equipment Manufacturer is able to actively manage the breadth and depth of stock located in their dealer network, and the dealer network have their parts managers focused on selling and running the business. All this with the protection of what is typically a generous return program for the dealer for any products that they have been caught with as a consequence of the central re ordering program.

What’s not to like about all that!