According to Wall Street Journal article, Americans are keeping their cars longer. In fact, the total number of vehicles in operation has risen about 10% since 2013.
The impact of longer product life cycles in tandem with a growing product population naturally extends to a discussion centered on increased maintenance servicing and replacement parts demand. A portion of the conversation should be centered on how today’s technological capabilities can improve the evolving business model.
Extending the useful life of a vehicle can provide the opportunity for a greater financial return to the owner. However, in this case, the search for financial reward isn’t the entire story.
Americans are not forgoing new vehicle purchases. Instead, they are adding to their number of household vehicles with a continued reliance on ole faithful.
This shift in consumerism presents increasing demand for service centers to sell more parts for vehicle maintenance and repairs.
Everyday replacement parts get manufacturer’s attention
It’s no secret that vehicle maintenance or replacement parts are a necessary and profitable part of doing business for both automotive manufacturers and suppliers. With a growing portion of a month’s production designated specifically for replacement parts, and demand increasing with time, automotive OEMs and suppliers need to increase efficiency in the management of service parts.
Effective service part operations are directly linked to profitability and customer loyalty for automotive manufacturers. It begins with visibility of replacement part quantities and locations as they move throughout the distribution supply chain.
For example, when a vehicle owner requires maintenance or repair, they have two choices -- buy the certified-original equipment (OE) part or select an after-market part. Although the OE part is often the most popular choice, some consumers may choose an after-market product, marking a missed opportunity for automotive OEMs and their designated suppliers.
The selection of an aftermarket part enters the opportunity of risk that touches everyone. Counterfeit or grey market parts are an extended concern for both the manufacturer, service provider, insurance industry, and the consumer. Uncertified parts can lead to safety anxieties because these parts cannot always ensure stability and operability for the consumer.
Preventing the purchase or potential failure of these counterfeit parts is about a lot more than sales numbers for the OEMs and suppliers, it’s about the health and safety of their loyal customers.
Some repair facilities unknowingly end up with counterfeit parts when ordering what they think are OE parts. As repair jobs steadily increase, sourcing certified parts to meet timely and industry repair standards, while meeting the affordability needs for insurance carriers, is becoming increasingly difficult for collision centers. According to the Anti-Counterfeiting Council, it is difficult to trace what parts are counterfeit. These counterfeit parts performance or characteristics misrepresent the supplier and add unnecessary risk to operating the vehicle.
Service centers that provide replacement parts present a huge opportunity for customer retention, too. If manufacturers can’t supply enough service parts to the dealership in a timely fashion, vehicle owners get flustered and may take it one step further than buying off brand; they vow to never buy another car from that manufacturer again. Poor inventory management can result in the direct loss of a customer.
Although vehicle manufacturers are overall optimistic about the increased number of household vehicles, there is an accompanying concern -- if requirements to build more cars goes up, it’s going to be hard to keep up with service part production. Labor, space, manpower, material and time are not in surplus, which will make it difficult to keep up with the increasing demand for both mass production and replacement parts.
The nightmare that is recalls presents another problem when automotive companies have lack of visibility. The ability to quickly identify a part after it is out in the market helps to mitigate the effect of recalls. A recall instantly triggers investigative questions to help find the recalled parts that have gone off the production line, when were the cars in production? What lot were they in? How long was the faulty material being used? These questions can all be answered today, but the manual process is logistical chaos.
Digitalizing the life of a replacement part
Although replacement and recalled parts present a variety of scenarios for the automotive industry, Internet of Things (IoT) and RFID technology digitalize and streamline visibility for replacement parts helping to maximize opportunities and minimize challenges.
With an increasing need for control of replacement parts, automotive suppliers and OEMs can focus on achieving cost savings, efficiency, and end to end supply chain management through digitalization.
Data collected through IoT collects critical information about demand, supply and logistics and is integrated into intuitive, cloud-based supply chain software, which has helped automotive manufactures take their replacement part supply chain management to the next level. The role of data in today’s supply chain supports improvement of a part’s complete lifecycle.
It all starts with inventory, racks or parts inside the facility. Software accompanied by IoT technology can track inventory by buckets (mass production versus replacement parts). This level of visibility ensures inventory is available at the time of need, streamlining replacement part management.
It then moves to visibility as packaging and parts move from facility to facility. Containers or racks with replacement parts that are shipped to and from plants need to be fully visible with highly accurate data. This ensures they are returned to their sender and don’t get lost. Having the right type and quantity of containers improves overall quality and efficiency.
It ends with complete traceability of the part from the production line to the dealership. Reliable data helps answer need-to-know questions, such as “when was this part built?” These traceability capabilities mitigate the problems of counterfeit parts as well since the source of the part can be followed throughout its life cycle. RFID tags and part serial numbers are associated to one another, making it easy to follow the parts throughout the automotive supply chain.
There’s no doubt the replacement part cycle is complex from production to consumption. Data and visibility have become crucial for managing the replacement part supply chain. IoT and RFID are the most reliable technology tools for end-to-end supply chain visibility in the automotive industry.
Digitalizing automotive supply chains reduces wasted time and improves cost efficiency. It empowers each user to schedule, aid and plan – increasing customer satisfaction and turning visibility and efficiency into future sales.
Digitalization of the parts supply chain increases reliability of part genealogy, part availability when needed, and of course, the safety of families on the road.
The transition to technologies for visibility, location and Blockchain as electronic validation needs to be deployed as quickly as possible. Profit along the supply chain, customer loyalty and the lives of drivers who trust their vehicle and its parts all depend on it.