Automotive Aftermarket – Disruption and Opportunity – Part Three
Automotive Aftermarket – Disruption and Opportunity – Part Three
In this Three-Part series we discuss the Automotive Aftermarket:
- The Industry – Part One
- The Challenges and Strategies – Part Two
- The Opportunities – Part Three
As you remember from reading “The Industry – Part One” (Link), we discussed the three overarching industry trends:
- Changes in customer empowerment and expectations
- Next-generation vehicles
- Shifts in competitive power
In “The Challenges and Strategies – Part Two” (Link), we discussed:
- Value Chains Are Increasingly Complex
- Common Pain Points
- Increased Investment in Information Technology — Source of Competitive Advantage
- Increased Competition from Dynamic Channels
- Automotive Aftermarket Service and Parts Issues and Strategies Vary by Vantage Point
Now, we investigate “The Opportunities – Part Three”; what you need to do to prepare for the changes brought on by the trends, and overcome the challenges and implement strategies to differentiate oneself in the market.
Part Three – The Opportunities
To succeed in today’s marketplace, leading companies recognize that aftermarket service can help differentiate them from competitors while providing highly profitable revenue. Recent surveys have demonstrated that approximately 50% of the profits made in the auto industry come from service and parts. Although the focus of the past was the way cars are marketed and sold, now we must place a greater emphasis on the aftersales elements of service and parts. These elements can have a disproportionately large impact on the overall customer experience and the profitability of an organization.
Driving Desired Results
To address these opportunities, SGC assists automotive aftermarket organizations in transforming their operations. Our solutions encompass a comprehensive transformation strategy built upon improvement initiatives, prioritized to reduce costs, and achieve maximum strategic gain. This transformation includes changes to organization, processes, enabling technology, and the metrics used to measure success.
In SGC’s point of view, the potential benefits far outweigh the challenges:
- Inventory reductions of 30 – 50%
- Fill-rate lifts from the low 90s to the high 90s
- Revenue increases of 5 – 10%
- Warehouse productivity gains between 20 – 30%
- Transportation cost reductions of 8 – 15%
- Increased profit of 2-8%
- Additional benefits are reaching 5 – 10 times the up-front investment
These benefits translate into revenue growth, reduced need for working capital, improved operating margins, and increased shareholder value.
SGC’s experienced automotive Service and Parts practitioners are focused on assisting your company in developing a tailored service parts transformation strategy that delivers both immediate and long-term recurring benefits. Our approach may be self-funding, with the savings generated by short-term tactical initiatives supporting longer-term strategic projects.
The SGC Approach
Analyzing and improving your service parts operations requires a holistic, strategy-led approach to change. Strategic investments in the right organization, process, and technology solutions will enable automotive aftermarket companies to increase their competitive position in the marketplace.
The best way to start is through the development of a Strategic Roadmap. SGC’s Strategic Roadmap provides the analysis and design methodology to help your company move from confusion to alignment to action. In creating a Strategic Roadmap, SGC performs a rapid analysis of your company’s organization, processes, technology, and metrics. During this phase, we work with you to evaluate and prioritize a portfolio of initiatives to build the Roadmap, including a high-level implementation plan and a quantifiable business case that will guide your company through the transformation process.
Our joint recommendations are grounded in your company’s greatest improvement needs and potential market opportunities. The solution results in a portfolio of initiatives for suggested strategic and tactical improvements, quantifiable value propositions supporting the business case, and an integrated, high-level implementation road map encompassing both process and technology improvement initiatives. The Strategic Roadmap includes initiative dependencies, time phasing, implementation, risk mitigation, and change management plans.
