Partnering on Service Parts Management for Auto Industry

Reynolds and Reynolds to offer Servigistics solution to help auto manufacturers, retailers automate service parts operations


Reynolds and Reynolds to offer Servigistics solution to help auto manufacturers, retailers automate service parts operations

Dayton, OH November 21, 2003 Auto industry solutions provider Reynolds and Reynolds is partnering with service parts management software provider Servigistics to offer a solution designed to help automotive original equipment manufacturers (OEMs) and retailers better collaborate and automate service parts operations.

Reynolds offers a variety of solutions targeted at automotive OEMs and retailers, including retail and enterprise management systems, Web and customer relationship management solutions, data management and integration services. The company's 20,000-plus customers comprise nearly 90 percent of the automotive retailers and virtually all OEMs doing business in North America.

Under the agreement, Reynolds will "private label" Servigistics' Service Parts Management Platform, offering the solution to its own customers as a way of reducing inventory cost, increasing service revenue and improving customer service levels by streamlining the complex service parts network in automotive and adjacent markets. The offering will be branded the Reynolds and Reynolds Service Parts Networking system, "powered by Servigistics."

In an interview, Mike Kapolka, director of OEM solutions for Reynolds, said that his company has been actively working with Servigistics to develop customers for the solution. Reynolds will market the solution not only to automobile manufacturers but to OEMs in the power sports, marine, recreational vehicle and commercial vehicle industries, Kapolka added.

The Service Parts Challenge...

In the automotive space, service parts management can be critical to the bottom line at both OEMs and dealers. Industry data show that service parts can drive up to 10 percent of OEM revenues and 30 percent of profits, while at the average dealership, parts and service accounts for 12 percent of the revenue and 48 percent of profits.

Those figures are not surprising considering that of the 220 million vehicles on the road on the United States, 167 million are out of warranty, and the average vehicle age is eight-and-a-half years. Those figures add up to a lot of repair visits every year.

And yet technology consultancy Aberdeen Group's Service Parts Management Benchmark Study found that, on average, service parts operations suffer an on-time delivery performance of just 89 percent and first-time fill rates of 82 percent.

"This finding means that nearly one in 10 parts delivery is late, and nearly two in every 10 are not fulfilled correctly the first time," according to Tim Minahan, vice president for supply chain research at Aberdeen. "The typical automotive company reported 216 stockouts per year. Such underperformance can negatively impact customer satisfaction and overall profitability."

...and Risk...

Alan Chakra, vice president of OEM solutions at Reynolds, agreed that every automotive service visit represents an opportunity for the OEM and retailer to demonstrate the high service levels and parts availability that consumers want, but also a risk if the retailer fails to have the right part needed to service a consumer's car. "In this case, the consumer typically takes the car elsewhere for the repair, thus causing the retailer to lose service revenue and an opportunity to enhance customer loyalty," Chakra said.

That risk extends to the OEM, too, as evidenced in industry research showing that 68 percent of consumers that switched brand of automobile did so because of poor service.

Part of the reason that many companies in the automate space continue to suffer this risk is that they frequently do not have adequate processes and systems in place for managing their service parts, according to Kapolka. "There are a number of people using spreadsheets or just guestimation approaches," he said.

...and Opportunity

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