Tuesday, October 13, 2009

Six Big Issues For 2010

We see six big issues that will shape 2010 and beyond for the industry:
  1. Big supply chain improvements by seven companies across all sectors.
  2. Huge improvements in e-marketing and the fundamentals of service retention.
  3. Dealer count and densities changed markedly for some OEMs.
  4. We are on the cusp of major legal and regulatory changes that will impact fuel economy, drivetrains, and mix.
  5. Many have been successful in erasing the borders for dealer stock order deliveries.
  6. Organizations are much leaner now and have different expertise mixes.
We will be focusing a lot of attention in these areas from now through the April 2010 NASPC in Indy. All these areas impact costs and the capability to change.
  1. When you drill down into the numbers, you will find that several companies made significant improvements to key 2009 supply chain metrics. The 2010 NASPC metrics will be processed by March, 2010, and we expect to see additional movements. What’s happening? Many OEMs have been cleansing their inventories, with a special focus on the slowest moving and obsolete. Others have outsourced their parts operations. Still others have shrugged off years of complacency and made unexpectedly rapid improvements. The big questions have to do with the processes behind the metric improvements, and the adaptability of these changes to other enterprises. Supply chain improvements go right to the bottom line, fairly quickly in most cases. We need to know more.
  2. The most rapid changes we’ve seen in this industry are in e-marketing. We focused a few blogs on this and saw incredible improvements. I heard back from other OEMs (non-auto) telling me that more improvements were well on the way. The thrusts of these improvements are in (a) consumer education, (b) customer information integration, (c) closer linkage of e-need (e.g., I type “Ford service” into the search engine) with dealer fulfillment, and (d) seamless e-merchandising of related customer needs (e.g., extended warranties and service contracts, pre-paid maintenance, accessories, DIY parts ordering, dealer service scheduling, etc.). These are all fairly visible e-processes, but what about the numbers? What’s happened with sales per 5-year UIO? Service retention? Dealer $/RO? Dealer hours per RO? Service contract penetration rates? For new? For not-so-new? Accessory market shares? What impacts do we see on younger owners? How do all the puzzle pieces fit together – Twitter, cell phones, cell-phone navigation, Facebook, Telematics? The change has been monumental, but we need to know more.
  3. The past year has seen huge reductions to dealer counts across most sectors – Motown bankruptcies and CE recessionary sales meltdowns. In most cases the defunct dealers were small volume stores, where whole goods and parts sales reductions were small compared to dealer count reductions. It is easy to construct a story that assures us that this was not all that significant. I wonder. What about parts returns from these defunct dealers? What about D2D wholesale sales? Who is servicing stranded customers? What did the OEMs do to tighten up their supply chains in response to less dense dealer networks? Did we lose meaningful market share? Were there any meaningful transfers of the defunct dealers’ parts business to other dealers or the IAM? This was a monumental experiment for dozens of “theories” about our businesses. What results do we write in our lab book? We need to know more.
  4. The market is ripe for regulation. Even in a rebounding economy and with relatively low fuel prices, folks are not driving large or far. SUV and pick-up sales are still strangled, and there’s even talk of moving heavy trucks to natural gas or propane. Electric car companies are being launched and supported by the Obama administration. Saturday Night Live did a great job of making fun of the Obama theme of “Change”, intimating that there ain’t been much. But, that wasn’t quite true. He’s made change in areas where he had to (turning the knobs to fight the recession, engineering streamlined bankruptcies for Chrysler and GM, firing CEOs, cash for clunkers). The Administration has also followed up on some campaign themes (and taken advantage of weakened opponents) by setting a course for CAFE and introducing cap and trade legislation. How will these regulations, and the new drivetrain technologies they encourage, change our lives? What happens with maintenance contracts and service behaviors of hybrid and electric vehicle owners? Are they really serious about natural gas for heavy trucks? How would that impact our businesses? We need to know more.
  5. Some OEMs now ship dealer stock orders from US warehouses to Canadian dealers. In the old days it was common knowledge that this was not a big bell ringer in supply chain savings. Further nailing down the lid of the coffin was the expectation of significant border delays. For those who did it, was it worth it? How did they get around all the obstacles? What were dealer reactions? Fill rates? End customer impacts? We need to know more.
  6. The recession took a huge bite out of service-parts headcounts. How did it impact the mix of staff? What was the role of outsourcing? What about bundled service providers? Supervisor ratios? What happened to enterprise efficiency? We need to know more.
Bottom line: we have seen a huge amount of change lately; we simply need to understand what it was, how we dealt with it, what worked, and what did not. We don’t need to waste our time with revisionist history. We need the truth.

See you in Indy.

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