Data errors continue to be $1.7 billion annual problem for aftermarket
LAS VEGAS — The problems associated with unsynchronized product data, like nearly half of product returns, are a fact of life for many aftermarket companies.
“Many small and medium businesses are not using technology because of expense and lack of standardized solutions,” said Scott Luckett, vice president, technology standards and solutions, for the Automotive Aftermarket Industry Association (AAIA) and moderator of a recent panel at the Automotive Aftermarket Products Expo.
The panel featured two sets of trading partners who shared their real-life experiences with data: Affinia and O’Reilly Auto Parts, and Cardone Industries and Advance Auto Parts.
“Those who are doing e-business find that proprietary formats, incomplete data and a lack of synchronization are contributing to rising expenses,” added Luckett. “And the time required to get our product and catalog information to market is costing us sales and impacting our ability to sell new items.
“While the aftermarket suffers under excess inventory, offshore competition, eroding margins and rising expenses, the OE competition is increasing their market share and focusing more resources on their parts and service business. They have OE form, fit and function and almost real-time data capability.”
Luckett stated that the rate of new part returns is 25 to 30 percent. “By some estimates, half of that can be attributed to failure of product data.” According to a data synchronization study conducted by AAIA, data errors add $1.7 billion in transaction costs per year.
An assortment of standards
Panelists Greg Beck, vice president, purchasing, O’Reilly Auto Parts; Michael Cardone III, manager, marketing development, Cardone Industries; Mark Hickman, vice president, POS processes, Advance Auto Parts; and Jerry McCabe, senior VP, marketing, Affinia Group, discussed everything from the importance of ACES and PIES standards to Internet Parts Ordering (IPO) and the PARTnerShip Network during the technology seminar.
PIES is an open industry standard for product attributes, and ACES is a cataloging standard to allow for a single electronic format.
Beck shared the value that PIES compliancy has had at O’Reilly Auto.
“It’s definitely been a very positive move for us in the data synchronization process,” he said. “Before we started synchronizing with Affinia, when we would add a new part, it would take days to weeks before that part could get into the system so we could replenish that part into our distribution centers and to our stores.
“Being able to sync up our data when there are changes or new numbers, we’ve cut that down to days as opposed to weeks. The other area we’ve seen a huge improvement on is manufacturing order quantity. We saw a number of instances where we were buying in different increments than what we should’ve been buying from Affinia.”
Beck explained the company was buying certain product in increments of 10 when it should have been buying in increments of one.
“Where that really becomes a problem is in the slow-moving items that seem to clog up the entire system in distribution centers and stores,” he continued. “That could be several years’ worth of product we are going to have to sit on. If it’s a dead item, then that’s stuff that eventually will have to be returned to the vendor if they’re willing to accept it.”
Advance Auto expects to be accepting ACES data for the company’s electronic catalog system by 2006, said Hickman.
“I think we all know that if the application part is not in the electronic catalog system, it’s probably not going to get sold. The fact of the matter is the counterpeople of today don’t have 10, 15, 20 years of experience,” he stated. “For kids coming out of high school, if you put them in front of a paper catalog rack, they look like a deer in headlights because they’re not properly trained. We find at our stores that if it’s not in the electronic catalog, a lot of times the inexperienced counter guy will tell the customer we don’t have it, and it’s literally sitting on the shelf.”
The next big push
Another undertaking for many distributors next year will be getting their vendors up on the PARTnerShip Network, a peer-to-peer software solution that allows electronic exchange of product information.
“We have 33 vendors active today,” said Hickman of Advance. “Cardone was first. That saves our company $3,000 a month just on that one vendor. The savings in a year’s time is well into the six digits for our company.”
Luckett agreed that a low-cost method of connecting partners is crucial. “Until you start communicating with someone, you just have a big pile of data in front of you,” he said.
Beck also said the PARTnerShip Network is definitely the big push for O’Reilly in the coming year.
“We have about 40 vendors currently on PARTnerShip Network. Realistically, to realize the ROI that we’re talking about with the data synchronization...you have to have the PARTnerShip Network out there so you can share all this information,” Beck said.
“That’s why we’re making such a big push on it. We need to do everything we can to drive out any nonproductive costs in the supply chain and this is a big part of it.”
He explained it costs O’Reilly $30 to $35 for each purchase order they are not able to process electronically.
“There’s the cost of actually processing the information manually, whether it’s faxing the (purchase order), and then on the invoicing side as well, we have to manually process and match up the pricing information by hand as opposed to doing it electronically, which saves us a significant amount of money,” he continued.
Panelists even suggested that the determining factor for who distributors conduct business with might come down to which supplier is e-enabled.
“That is critical to getting all businesses of all sizes connected on the same grid,” Luckett stated. “Get everyone connected to everyone else so we can all participate in the data aftermarket.”
Cardone Industries is active in IPO as well as the PARTnerShip Network.
“IPO gave us direct connection all the way down through the channel, so we’re seeing some great results in that area as well,” including a reduction in calls to their call center, said Cardone.
Picture perfect
In October, AAIA published Automotive Aftermarket: Imaging Best Practices, a guide for the production, management and distribution of product images in the supply chain.
The adoption of these imaging guidelines is the next step in helping our industry get the right part to the right place at the right time.
“We recognize the growing demand of visual aspects at the point of sale or throughout the distribution channel,” said Luckett. “In the absence of a standard, the major resellers were going to suppliers with different requirements for the digital images of the product. Providers had to take multiple photos of products in order to comply.”
Beck at O’Reilly noted that standardized images are the next step in making sure they receive the part they ordered.
“We don’t want to special order a part, bring it in the next day or two, only to find out it wasn’t the right part and we have to return it and order another part. The customer satisfaction level drops dramatically,” he explained.
Manufacturers were taking photos of products numerous times in order to comply with individual requests.
“It was a huge undertaking; we took photographs at least four or five different times,” said McCabe of Affinia. “If you haven’t done this yet, make sure you’re clear what the standards are, make sure (the photographer) is crystal clear on what the assignment is and how the pictures are to be tagged. That’s one of the places we got into trouble: We sent customers images that weren’t properly identified.
“It’s involved, but it’s critical. You go to any OE dealer and they can usually pull up a picture of a part. We’ve got to have all those same advantages so we really have to get to work and get this done.”
Advance Auto Parts is in 100 percent agreement with the imaging best practices guidelines, Hickman said during the panel.
“I think at point-of-sale everybody knows — especially when you have to special order an item — that if you can actually bring a product up on the screen and validate that it’s what the customer needs before you order it, you’re going to save yourself a return.”
Even though data standardization and catalog management are still works in progress, many in the industry are hoping more aftermarket companies will adopt the standards.
“We’ve got savings right here in front of us in an industry that’s starving for margins,” McCabe declared. “It just amazes me that America, as in love with automobiles as they are, seems to frown on the people who supply the parts. We don’t seem to be as popular as the people who make the cars.
“We could change that if we have enough people adopt the standards,” he continued. “Quit rolling logs in front of the standards, telling us why they won’t work. Instead, get on board and tell us how to make them work. If we all do this together we can make this work. And that’s what we need because the savings won’t really be there for any of us until it’s there for most of us.” A policy of change leads to improved standards
The Automotive Aftermarket Industry Association’s (AAIA) Catalog Enhanced Standards (ACES) are an industry standard format for vehicle-specific catalog applications. In 2005, AAIA adopted a policy of annual change management, which allows them to decide what changes in the standards are going to be published the following year. According to Scott Luckett, VP of technology standards and solutions, “a standard that does not change to keep up with the industry soon is obsolete.”
Here are some ACES enhancements to expect in 2006:
1. New tags for valves per engine and transmission control type.
2. International extensions — ACES will support multiple units of measure and language management.
3. Coded Qualifier database (Qdb) — refers to all the footnotes and comments that a company makes.
4. Full validation of all vehicle attributes (1985 and later) — passenger cars and light trucks. Those using ACES will find it impossible to configure a vehicle that did not exist in those years, ensuring a high level of quality.
