The aftermarket is no more just an afterthought. Today, leading OEMs have started identifying the opportunities and the effect of parts sales on their overall financial health. These sales are less cyclical and often generate more revenue and profit as compared to original equipment sales. However, trickier part is to devise and adopt a spare parts sales plan to make sure that the dealers and customers purchase OEM parts to make the most out of it.
A well-managed and optimized spare parts strategy with effective spares management will help boost revenue, brand image and profitability as well. Spares management includes managing spares purchase, inventory and sales as well as keeping track of spares needed for the sales and service counter. Spare purchase management includes management of shortage and damaged parts whereas spares sales include tracking both counter and bulk sales including return management.
Strategic Importance of spare parts
In today’s customer-driven world, spare parts and service business is gaining prominence as a key focus area with rising total revenue share for the OEMs. The increasing strategic importance of spare part business and the inherent complexity of managing this business make it essential for OEMs to look forward to the complex challenges as opportunities.
Let’s go through some of the ways that will help put such a plan in place:
Forecasting and planning strategies:
Providing cost effective and excellent service and spare parts availability experience to their end-customers is one of the challenging areas on which many OEMs need to focus. The challenge of inherent complications in offering desired service levels in a cost sustainable manner needs to be addressed effectively. Spare parts operations need to be optimized to control the warranty costs and manage overall profit margins.
Some of the major barriers include:
• Lack of supply chain visibility across multiple levels
• Unpredictable parts supply of spares for old models
• Complicated EOL (End of Life) scenarios with multi-faceted supersession and replacement regulations,
• Complexity in assessing optimal inventory levels with available inventory planning capability
• Trading partner collaboration challenges
• Operational planning and execution-oriented information systems with primary forecasting and inventory planning competence
Auto OEMs need to step up with the service revolution. Accurate demand sensing/modeling capability is necessary to find an effective solution to spare parts planning complications. This will precisely estimate the intermittent demand at a granular level with multi-level inventory optimization ability. Automated demand modeling can be the key to achieve this. OEMs should plan for tactical and operational strategies along with operational execution. Managing inventory is expensive and time-consuming. OEMs need to have advanced software for inventory level analysis and demand sensing to get the optimal balance of service level, cost and profit. Today’s state-of-the-art tools have seamless inventory management algorithms such as ABC analysis, FMS analysis and so on. The built-in features of such software enable the business to figure out items representing the vast majority of inventory value and thus, focus its inventory control efforts on those specific items.
Integrating the spare parts business with the overall strategic plan will facilitate end-to-end supply chain visibility. Furthermore, it arms businesses to leverage this visibility into demand and inventory levels to optimize business performance.
Incorporating post-manufacturing-specific tools like Excellon Assist into your aftermarket plan will help empower dealers and customers to make real-time decisions based on precise information and order the spare parts they need in a fast, convenient and electronic way. Excellon Assist with its manifold features including effective spares management helps to deliver unparalleled value to customers, which will in turn boost sales while increasing customer retention.