In today’s competitive environment, everyone needs to be on top of their game in order to prosper. If dealers can’t offer the parts customers’ need, when they need them, vital equipment will be left idle. With that in mind, here are three reasons why OEMs need to have a heavy hand in planning inventory for dealers.
Reason #1: Best-in-class planning doesn’t evolve in a vacuum.
Successful OEMs have strong, healthy dealers who communicate effectively. Dealers are able to provide an overabundance of information relevant to inventory management at the distribution center and regional distribution center levels. They have a deep understanding of inventory demand. And, it is at the dealer where it new item adoption increases and, conversely, where demand declines for parts. OEMs are able to incorporate customer information collected from the global market to identify trends and provide guidance about which parts are most critical to have on hand; items that are often ordered in excess; the goods most commonly used in each geography; what stock will be needed as new equipment is brought to market; and lessons learned in individual territories that can be helpful to other dealers around the world Software to facilitate this dialogue is key.
OEMs can provide dealers access to inventory management systems that will not only aid inventory planning, but will also automatically analyze historical inventory data. OEMs can then add a level of insight that considers the effects of new product development on demand. By working together, the OEM and dealer can drive best-in-class planning so optimal inventory levels can be reached.
Reason #2: Increased efficiency reduces costs and lifts profits.
Inventory management can be incredibly overwhelming. OEMs and dealers alike can get bogged down in managing day-to-day administrative details rather than focusing on activities that lead to more business. Therefore, an end-to-end approach to inventory management that helps manage those details will increase efficiency and improve the bottom line for everyone.
Dealers who do not have the luxury of working with their OEM to plan inventory often experience some very common problems:
- They may not have the parts they need when they need them.
- They struggle with service levels for newly introduced products
- They often end up with too much excess stock that will never be sold
When dealers are reactionary, they place emergency orders that cost precious time and money to fulfill. When they have too much inventory in stock, revenue-generating programs and improvements may not be implemented for lack of capital. In both instances, every level of the supply chain is effected as accurate forecasting cannot be achieved, service decreases, and profits slip. If the OEM controls inventory planning, they can use a global approach to prompt more predictable dealer behavior and:
- Improve availability of all parts by understanding what and where items need to be stocked
- Identify and actively reduce excess stock
- Forecast for all demand patterns, including slow, lumpy and erratic demand
- Eliminate manual processes and multiple reviews
- Boost the bottom line
Reason #3: Better service helps build a meaningful brand.
A meaningful brand is not simply a name, a fancy logo or a catchy jingle. It is an all-encompassing expectation that customers associate with a company and its products at every single point of contact. It is the way the receptionist answers the phone; how staff members present themselves; the cleanliness of the restrooms; the level of service customers receive; and so much more.
Some may consider it only a minor inconvenience when a dealer does not have parts readily available when customers need them. But, this minor inconvenience can have a deep impact. Perhaps a customer is losing money every hour his equipment is down, or another can’t get to work to earn a paycheck until her car is fixed. Customers have choices and they want to do business with companies that can solve their problems quickly. Dealers who can deliver parts immediately with friendly service and helpful advice will earn trust, which leads to repeat business, referrals, and a stronger brand.
Powerful OEMs understand that inventory management is a vital part of a customer’s brand experience. They can provide the guidance dealers need to meet higher customer expectations (regarding availability of parts), maintain customer loyalty, and elevate the overall integrity of the brand.