Thursday, May 6, 2010

RIM’s Coming of Age at the NASPC

Two sessions at this year’s NASPC in Indy had 100% top-box satisfaction scores: E-fulfillment and Retailer Inventory Management (RIM). We talked about E-fulfillment last week. The fact that nine OEMs agreed to sit in a room for five hours talking about RIM is proof enough that this is still a hot topic. They would have gladly soldiered on for another five hours if their schedules permitted (and perhaps if there was not an open bar starting right outside the conference room). Although the discussion was very detail-oriented, some noteworthy trends rose to the surface.

OEMs are increasingly moving towards pull systems. For some, however, the transition is not yet complete. At one of the heavy truck companies, for example, RIM-related incentives have been crafted to reward smart inventory management; but the sales team is still pushing parts. With a commitment to implementing a pull system, another OEM has an eye toward new model parts. They will protect returns on these parts and not dock dealers for compliance if they elect not to order them. Along similar lines, “performance terms” companies will begin offering incentives on sales instead of purchases.

It probably does not come as a surprise that RIM programs, like all other aspects of the aftersales business, have been impacted by economic conditions. As resources have tightened, some OEMs are beginning to reevaluate their approach to supporting dealers. At some, the focus up until now has been on relationship building; every dealer is assigned an analyst to whom they have virtually unlimited access. These analysts not only spend hours on the phone with dealership personnel, but also make regular in-person visits. Time and travel expenses are becoming harder to justify. Pushback from dealers accustomed to personal attention is a fear for some

Beyond the RIM discussion at the NASPC, we saw from the NASPC Recessionary Dealer Survey that RIM was no longer a dealer problem child. It is not perceived as the root of all evil. This is a change from those blistering comments on Dealers Edge. One of the most interesting discoveries among the participating OEMs was that the balance of power has recently shifted away from sales and marketing departments. Several OEMs commented that dealers trust RIM more than they trust sales and marketing. This has had an impact on the sales and marketing departments’ abilities to implement different promotions, as dealers are increasingly reluctant to stock parts if they are not recommended by RIM. While it is tempting to jump to the conclusion that dealers are merely responding to incentives (i.e. protected returns), dealer respect for recommendations generated through RIM systems seems to extend beyond incentives. One of the OEMs in the group does not protect returns or offer any incentives; yet, their sales and marketing people are increasingly asking the RIM group for advice on future promotions. It seems that dealer resistance to RIM is slowly being replaced by an understanding of and respect for its power. Why is that? Because it works.
Time Out: An additional RIM-related fact from the terms & conditions section of the NASPC Data Book is that some HE OEMs (as well as some others) provide 100% return credit for obsolete RIM-ordered parts, whereas they normally charge a restocking fee for non-RIM ordered parts, or have limits to the amount that can be returned. This certainly is a significant benefit to the dealers, as it assures them that they will be able to return these items if (or when) they do not sell. This most likely contributed to the NASPC Recessionary Survey responses which show that RIM does little to contribute to E&O (since they can return it).
Going forward, OEMs are interested in using RIM-based point-of-sale (POS) data to drive the planning process at the wholesale level. In theory, POS data gives us more timely information on what customers are actually buying; every other retailing industry relies on it. One Heavy Equipment OEM recently dipped a toe into the water here, replacing purchase data with retail data in their forecasting tool. (This OEM has an edge here as dealer participation in their RIM program is mandated for all dealers.) Well, this was a bold move … maybe a bit too bold. They recently halted this practice due to concerns from their sales group that retail sales would lag purchases, and screw up supply chain parts flow. At the end of the day the upside is that their planners still have visibility to retail data even if they choose not to use it explicitly in their model. No other OEMs have made the switch to using POS data; the limiting factor for most OEMs is that not all of their dealers are on RIM. In the future, OEMs will be striving to increase RIM enrollment and compliance as a means to reduce variability and improve forecasting.

In addition, RIM is starting to have an impact on labor productivity inside OEM warehouses. Some OEMs automatically generate orders without requiring dealer approvals. This both simplifies the part manager’s life and gives the OEM control over when the order is processed. This has enabled some OEMs to level load their RIM generated stock orders, improving productivity, and enabling later cutoffs on emergency orders.

Overall, the RIM session was a success and participants planned to meet again next year. In the meantime, the industry could benefit by defining some key RIM-related metrics. Currently, OEMs employ a range of metrics, from RIM compliance to analyst performance, but calculation methodologies are not always consistent. If the goal of these RIM sessions is to strive for Best-in-Class status, apples-to-apples benchmarking at regular intervals is a necessity. We will be pursuing this metrics definition requirement during the next few months – Gene Metheny will lead the charge here on our part.

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