It’s not the same with motor vehicle companies. Car owners tend not to junk their cars. As such, slow moving genuine parts have a distinct market, largely because of the complexity, increasing quality, longevity of the product, the cost of the whole goods, the nature of the competition, and the temperament of the customer demographics. Unlike with dishwashers, the motor vehicle customer expects you to have the part to fix their vehicle, regardless of the age of the vehicle.
What does this all mean? It means that we in the motor vehicle industry must excel at managing slow moving inventory. It’s a requirement that sets this industry apart. So let’s take a look at slow moving inventory:
Basically, there are three circumstances that cause slow moving parts:
- Part is slow moving at the beginning of the whole-goods production cycle because of supply-side constraints; most of the volume is going to the assembly line.
- Part is slow-er moving during most of the whole-goods production run because of lengthy mean-time-between-failure characteristics.
- Part is slow moving at end-of-life because whole-goods populations are dwindling and being replaced and/or idled by newer product. Production suppliers are on to other parts and many OEMs decide to live off their last buy.
The supply chain challenges are with Type B&C slow moving parts. When we asked OEMs how they determined “slow-moving” we got back a variety pack of definitions and break-even points. Several OEMs use “pieces” sold to define lower-limit boundaries for slow-moving parts. The cut-off ranges from 1 piece sold per year to 100 pieces sold per year. Both ends of this spectrum were from Heavy Equipment OEMs. High volume auto OEMs were on the low side. Go figure.
Generally, what we found was:
- Limited consistency in defining a slow moving part
- Wide variety of toolsets for forecasting slow moving parts sales – use of re-order points, Croston’s algorithm, less reactive
- Tendency to centralize slow moving stockpiles
- Typically horrific labor, space, and transportation efficiencies
I grew up on a farm. One of the secrets to success in farming is liking what you are doing. For example, if you don’t like cows, you might not be very good at dairy farming. If you hate onions, you’d be a pretty bad muck farmer. There’s a certain consistency to this. Maybe if you don’t like slow moving parts, you aren’t too good at managing a bunch of acres full of them? Maybe there’s a better way?
- Why not collaborate on slow moving parts management?
- Why not jointly manage these with a single brain trust?
- Why not have common slow-moving Ts & Cs?
- Why not have a single organization manage the forecasting, materials management, and maybe even the non-current-model parts supplier purchasing?
- Why not design unique slow-moving parts operations based on best-in-class versus worst-in-house?
- Why not go out and find who is best-in-class in slow-moving and design a collaborative operation based on what you learn?