The processing of auto parts is at a critical level, says Paul Gurizzian, CEO of data and aftermarket strategy company Carlisle & Co. The volume and duration of out-of-stock parts is increasing, he says, and this causes a number of problems. Customers of the dealership service are unhappy with the inconvenience caused. After-sales services lose revenue from repair orders while waiting for the necessary parts to arrive. And automakers, unable to supply parts to customers, could lose markets to aftermarket suppliers. Gurizzian, 59, discussed the parts supply issue and its impact on the service road with publisher Dan Shine. Here are edited excerpts.
Question: These supply chain issues have been going on for some time. Is there a light at the end of the tunnel?
A: We’ll be fine, but the exact duration is unknown. There is no single root cause, so there is no quick fix to solving the challenge. But at Carlisle, we have short, medium and long term recommendations for the industry.
Let’s start with the short-term recommendations.
The cost of wasted filling is significant. Some of these are measurable, but others are not, as the tarnishing of its brand occurs slowly and the impact on the loss of market share and pricing power is subtle. The point is that investing in solving this problem is well deserved, just as you would invest in improving quality or increasing production capacity. Purchasing departments must understand that their suppliers and carriers compete for labor, and the prices you pay them must be high enough that they can hire labor and qualified drivers on the market. Now is not the time to try to save 2% off the price of a part or [less than load] rates. Be careful, but pay at market price or above to secure capacity against your competition.
What are Carlisle’s mid-term recommendations?
Think carefully about suppliers and supply chains for critical parts that enable customer uptime. Redundancy must be increased and supply risks reduced. This means several things:
- Relocate production rather than relocate it to the Far East. Reducing procurement distances and delivery times simplifies your supply chain and reduces the risk of bottlenecks.
- Spend money on a second set of tools so that there are two vendors for key components rather than just one. For today’s production parts, your manufacturing colleagues need to take the lead. For older model parts, aftermarket supply managers should take the lead. Focus on the more limited parts or suppliers that support uptime, like the powertrain.
- Rethink what can be remanufactured and reconditioned to free up capacity, especially in electronics.
- Ask yourself where you are on the additive manufacturing journey. More and more materials can be 3D printed. It is another source of surge capacity.
Finally, what are the long-term actions?
I will recommend bold, strategic and controversial actions. They require investment.
As the aftermarket industry, we’ve measured what we can measure, not how customers feel. OEMs typically measure order fulfillment rates from their warehouses to their resellers because this can be easily measured. Yet end customers don’t care about dealership fill rates – they care if the dealership has the right parts to repair their vehicle when the car is in the repair garage. This is measured through the dealer ‘plug and play’ fill and the ‘repair order’ fill.
The end customer, when buying parts or getting a repair, experiences an off-the-shelf filling and repair order.