This guest blog was written by Ted Fellowes, President of Fellowes Research.
The COVID-19 Pandemic is a black swan that is taking a toll on society. While our first concern is for the health of family, friends, colleagues, neighbors, and everyone everywhere – ‘sheltering in place’ is providing many of us with the spare time to consider this crisis from the perspective of own industries and professions. I have been asked a few times in recent days for my thoughts on the impact of COVID-19 on Service Parts Management (SPM) is and how improvements to and investments in SPM solutions may improve our current situation and prepare us for the next disruption.
COVID-19 is clearly impacting SPM: according to news reports, service parts shortages are growing – creating delays in vehicle and equipment repairs, And eCommerce is soaring – displacing face-to-face and even ordering by phone. Below I address how OEMs and their networks of dealerships and distributors can leverage SPM solutions to (partially) mitigate adverse impacts and adjust to the changing landscape.
OEM Parts Availability. Service parts are critical to the maintenance and repair of all durable goods – particularly vehicles and equipment. Over the last several decades, the slack in our supply chains has systematically excised with a just-in-time perspective on parts availability. The more supply chains are optimized, the more sensitive they become to disruptions.
OEMs’ service parts inventories – and those of their suppliers – have become very lean. But in many industries, dealerships and distributors have boosted the breadth of their service parts inventories to have off-the-shelf parts availability for a broader range of service operations. As a consequence, the combined service parts inventories in an OEM’s dealer network are considered part of a virtual parts warehouse. To leverage this virtual OEM parts depot, The first step in leverage these virtual part depots is to implement a parts locator to facilitate dealer-to-dealer (d2d) parts trade. Adding OEMs’ parts distribution centers (PDCs) to the network enable dealers to immediately know to source a part from another dealer if the part is not readily available from their OEM. Next, ‘vintage’ parts inventories (older parts that OEMs choose to no longer carry in their warehouses which are not scrapped, but are available in large, centralized warehouses shared across OEMs) can be added to the locator. With an OEM service parts locator, dealers can find parts that are temporarily not available from OEMs.
Mize designed their SPM platform so that even service parts kept in vehicles driven by service technicians, and specialists can be tracked and included in parts locator search results.
OEM can mitigate service parts supply disruptions with d2d parts locator and related SPM solutions.
OEM Parts eCommerce. Walk-in parts buying now comes with risks and challenges – and perhaps liabilities as ‘social distancing’ becomes our watchword. Even ordering by phone could be degraded or unavailable if Parts Department staff cannot work remotely or become ill. With eCommerce, parts buyers are able to serve themselves – identifying the parts they need and submitting orders – with the option of attaching messages and questions to tentative orders. Dealership Parts Department staff can respond, providing a high level of customer support to ensure that every order is accurate and complete.
COVID 19 is motivating buyers to switch to eCommerce across industries – for service parts sellers, eCommerce is morphing from an option to a necessary sales channel. For many OEM parts buyers, eCommerce will now be more familiar – and their expectations. For OEMs and their dealer network, parts eCommerce is one way to mitigate some of the risks of parts ordering during the current crisis – and for future disruptions.
Referral. Combining service parts availability and eCommerce solutions results in service parts ‘Order Referral’ solutions – which also aid in mitigating COVID-19 disruptions in parts and services. Several use cases (or scenarios) are covered below.
For our first scenario, consider what happens when vehicles in a dealer’s service bay are diagnosed and determined cannot be safe to drive. If the dealer does not have the needed parts on their shelves, they must place an order with the OEM for parts. If the OEM does not have the part in its stock of service parts – the dealer’s order becomes an ‘emergency backorder.’ Augmenting a d2d parts locator with an automated eCommerce mechanism enables the creation and transmission of parts buy-back offers sent to participants with needed parts on their shelves). In practice, the vast majority of service parts that are on emergency backorder status are in-stock at multiple dealerships. Many – if not most – times, a dealer will accept an OEM’s electronic buy-back offer and ship the part where directed – for a moderate handling and processing fee. While backorder referral automation solutions will not eliminate parts shortages, it can reduce the severity by half. Several OEMs have implemented automated “Service Parts Emergency Backorder Referral” solutions successfully and have used them to flatten the curve of unfilled parts backorders.
The next order referral scenario occurs when an OEM receives a stock order from a dealer in a remote location. Fulfillment of the stock order from the OEM’s nearest parts depot may be expensive or slow. However, nearby dealers can fill regular parts on backorder quickly if the SPM systems and policies permit this. The OEM can also provide incentives for nearby dealers to serve as a just-in-case virtual parts depot for other dealers in that location.
A third use case for parts order referrals occurs when end-users order parts from a dealer that is out of stock for one or more parts in that order. A few well-designed OEM parts eCommerce solutions have an option for that parts order to be referred for fulfillment by the OEM or by another dealership.
Delivery Options. We are also seeing local delivery options expand as an extension to SPM solutions – as fewer customers in this time of social distancing are willing to pick up items at dealer parts departments. The same firms that deliver food and people (Postmates, Lyft, others) will provide OEM service parts via an automated tasking and scheduling mechanism.
Recommendations. COVID-19 creates new challenges in terms of OEM service parts performance. OEMs can respond to this disruption and prepare for future interruptions by investing in SPM platforms designed to (1) mitigate the increasingly brittle nature of OEM service parts supply chains, (2) to open online sales channels and (3) reduce stock-out impacts with order-referral. And best of all, these three solution sets – parts locators, parts eCommerce, and parts referral solutions – are valuable aids to business in good times too. A key takeaway is that the need for new functionality can occur with little notice. That is why it is important to select a technology partner with a quality, broad platform encompassing a wide range of SPM solutions (as opposed to an OEM building their stand-alone SPM capabilities).
Mize Service Parts Management solution, powered by Connected Customer Experience Platform and Smart Blox, streamlines all Service Parts processes, including Parts eCommerce, Ordering, Fulfillment, Returns, Support, and Logistics. Please Contact Us if you have any further questions or want to discuss how you can enable your team and all stakeholders to optimize service parts management and mitigate supply chain disruptions.