Availability: The Key Driver for Growth

COPYRIGHT © SYNCRON

Availability : The KEY Driver for Growth

23rd October 2014

Tony Abouzolof – Syncron co-founder

COPYRIGHT © SYNCRON INTERNATIONAL AB 2014

Aftermarket inventory managers face a number of challenges

Many hurdles including: multiple systems, poor data quality, ownership of inventory, inventory management skills …

Expectation from the end customers for high levels of parts availability

Increasingly competitive aftermarket world

Aggressive targets for increases in parts sales and market share


The goal is to control and improve the experience of the end customer, which is impacted by multiple factors

PERFORMANCE OF CAPITAL EQUIPMENT

PRICING

SERVICE CONCEPTS

AVAILABILITY

DELIVERYTIMES AND PRECISION

TECHNICAL SUPPORT

End Customer Experience


Survey of 66 aftermarket professionals revealed greatest opportunity for improvement

Greatest opportunity for improvement through better spare parts management

were:

1. Increased availability/service levels

2. Improved inventory balance across my network

3. Integrated planning and management of consumable and repairable spares

Other areas of concern:

• Implementing common supply chain KPIs

• Improved order process and fulfillment

• Consistency in policy and procedures

• Lower operating costs from integrating and automating

• Planning the dealer, subsidiary or customers inventories

• Inventory Reduction


In a fragmented supply chain, target service level degraded because planning doesn’t account for the extended supply chain

Stocking Policy & Target Service Level

EN

D C

US

TO

MER

S



Central Warehouse 1

Central Warehouse 2

Regional Warehouse 2


Regional Warehouse 1Dealers

Dealers

Dealers


Coordinated supply chain, improves target service level because planning is improved across the extended supply chain


EN

D C

US

TO

MER

S



Central Warehouse 1

Central Warehouse 2



Regional Warehouse 1Dealers

Dealers

Dealers


The Availability Challenge

Central Warehouse250,000 part numbers

98% Availability

Regional Warehouse30,000 to 100,000

part numbers95% Availability

Local Service Location3,000 to 5,000 part

numbers55% Availability

60%+ Rush orders

“customers are up to 50% less likely to consider the manufacturer in a future purchase if they have a poor repair

experience”


OEM Research – Key Findings Dealer/Local Subsidiaries

Off the Shelf Availability

Stock Turns Stock Obsolescence

Stock / Emergency Order Ratio

Worst Depots 40% < 1 40–50% 10/90

Smaller Dealers 50–60% 1–2 30-40% 30/70

Best Dealers/Subsidiaries

85% 2–6 25% 70/30


Typical Dealer Analysis Report


1. OEM has a lot of vital information directly relevant to Inventory Management close to the Customer

2. Dealer/Distributor has a lot of vital information directly relevant to Inventory Management at DC/RDC level


System support is often lacking at the dealer/subsidiary level

Inventory Management skills are negatively correlated with distance from OEM/DC and the number of tiers away in the Supply Chain


OEM has a lot of vital information directly relevant to Inventory Management close to the Customer:

• Recommended stock lists

• Critical stock lists

• Supersession information

• Experience from other markets

• Stock and excess stock visibility etc..


OEMSubsidiary

Dealer

There is often no or a very fragmented approach to ensuring that these dimensions are considered in the inventory management process close to the end customer


Dealer/Distributor has a lot of vital information directly relevant to Inventory Management at DC/RDC level:

• Visibility of true customer demand.

• Local sales and marketing campaigns.

• Visibility of local stocks.

• Local competitive landscape.


OEMSubsidiary

Dealer

Often such intelligence is not used in the inventory management processes at the DC/RDS’s with disastrous results.


The solution to better planning closer to end-customer

The solution is dependent on the business model. As well as, on how your company approaches the end-customer.

Optimal inventory availability from an end-customer perspective can only be achieved by a joint effort

OEMSubsidiary Dealer


Dealers/Subsidiaries Research – Key Findings

The opportunity

Release cash by reduced stock levels.

Based on our analysis, Dealers/Subsidiaries can provide similar or better levels of off-the-shelf availability with large reductions in stock.

This will vary by Dealers/Subsidiaries, but reductions of at least 25% can be achieved.



The opportunity

Increase sales through better availability.

Industry analysis suggests that a 2% increase in off the shelf availability can lead to a 1% growth in sales, as customers become confident of the Dealers/Subsidiaries availability to provide what is needed.



The opportunity

Improve profits by reducing freight costs.

Landed cost factors for airfreight can be up to 40%, while sea freight can be as low as 10-15%. This can allow the Dealers/Subsidiaries to increase their competitiveness or to increase margins.


Dealer/Sunsidaries Research – Key Findings

The opportunity

Reduce losses from dead stock write-off.

OEM will take back all parts ordered by the Dealers/Subsidiaries if not used within a 12 month period.

These parts will be taken back with no penalty / handling charge to the Dealers/Subsidiaries , and credited at current replacement cost.

The parameters for stock replenishment will be agreed between the Dealers/Subsidiaries and OEM inventory specialists.


Case Study Automotive Company

PoC Results : Profile Stock

£-

£10,000

£20,000

£30,000

£40,000

£50,000

£60,000

£70,000

£80,000

£90,000

£100,000

Wk 4

8

Wk 1

2

Wk 1

5

Wk 1

8

Wk 2

1

Wk 2

4

Wk 2

7

Wk 3

0

Wk 3

3

Wk 3

6

Wk 3

9

Wk 4

2

Wk 4

5

Wk 4

8

Profile Healthy Profile Excess Profile Obsolete

PoC Logistics Efficiency: Order line Reduction

0%

20%

40%

60%

80%

100%

120%

83ki National All Parts 83ki APR Dlr All Parts 83ki APR Profile Parts

82ki Order line Level

+ 13%

- 17%

- 50%

PoC : Profile Parts Availability

40

50

60

70

80

90

100

Wk

48

Wk Wk Wk

17

Wk

21

Wk

25

Wk

29

Wk

33

Wk

37

Wk

41

Wk

45

Syncron Forecasted Availability Customer Actual Availability Check Target

Availability increased from 59% to +98% in 14 weeks

TOTAL - Parts Sales : APR vs National Trend

0

5,000

10,000

15,000

20,000

25,000

30,000

Profile Parts Competitive Parts

No

. of

pie

ces

Last Year This Year

Actual + 14%(National Trend + 7%)

Actual + 13%(National Trend + 8%)

139

+15% reduction in average inventory

50% reduction in logistics cost for profile parts

Pre APR: 59% availability


Dealers running Syncron RIM September 2014

Central WarehouseDealership location

Volvo CE has systematically

implemented a RIM process and solution across the globe with

more than 90% of business volume

connected


RIM Project Challenges

• Ownership of stocks

• Initial stock cleansing

• Project funding

• Integration to DMS systems

and data accuracy

• Scalability

• Selecting the right pilot

dealers

• Dealer incentive schemes

• Stock buy-back process


Syncron has a strong value proposition

With Syncron, customers can orchestrate and streamline their end-to-end demand and supply processes using their existing IT investment thereby enhancing the performance of their global supply chains

This will typically yield performance improvements of 20-30% within a 6-12 month period in three major areas: customer service levels; supply chain process efficiencies; and stock level reductions


Hosting at Syncron Data Center

Syncron Data Center

SaaS Applications

SaaS Platform

User verification, access management, fail-over application servers, clustrered database Redundant

firewalls

Global Inventory Management

Global Order Management

Global Price Management

MDM

Redundant Internet

connections

Internet

Web

Legacy

Connected Warehouses

Customer A

Customer A

Inventory Planners / Purchasers

http, https

FTP,sFTPMQ….

http://www.lawson.com/wcw.nsf/pub/GlobalStartPage


How many of you could claim to have full visibility of inventories and availability across the extended

supply chain?

Availability: The Key Driver for Growth

Software

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