Thursday, February 28, 2013

The WorldPac Experience

What do customers want? We’ve spent a lot of time dissecting this subject as it pertains to service customers. We know what these customers value (“MyGuy”) and where dealers fall down.

But what about wholesale customers? You know, those same pesky independent repair facilities (IRFs) that outperform dealers, at least in the minds of many service customers. Through focus groups and surveys, we know what IRFs value in a parts supplier. Hint: it is not dissimilar to what dealers expect from OEMs.

The Top IRF Requirements
  • Parts Quality – Comebacks cost money and drive customer dissatisfaction.
  • Availability – Gotta get parts quickly to turn those bays.
  • Delivery – Ditto.
  • Price – Net price, that is. IRFs rely on parts margins to contribute to their bottom line.
  • Ease of Ordering – The knowledgeable parts counterperson is being replaced by the user-friendly online ordering system.
So, what do you get when you offer high quality parts with same day availability, five daily delivery times, 35%+ margins, and a slick online ordering system? Seriously loyal IRF customers.

We’re talking about WorldPac, the largest distributor of import auto parts in the US (they also sell parts for domestic car lines), formed in 1995 and acquired by General Parts in 2004. When import-oriented IRFs get together for a focus group, they can sound like a paid ad for WorldPac.

WorldPac’s business model is unique. It is primarily e-commerce based, with no jobber storefronts. IRFs order parts online using WorldPac’s user-friendly website or desktop application; the key is easy parts lookup with live availability, pricing, and delivery time selection. With many local delivery facilities and a privately owned delivery fleet, WorldPac provides multiple (read: as many as five) same-day delivery times to IRFs. Parts are presumed to be high quality, as WorldPac offers “OES” (Original Equipment Supplier) parts made by manufacturers such as Bosch and Delphi. Most fundamentally, WorldPac is dedicated to serving IRF customers; they do one thing, and they do it well.

So how do dealers stack up? Well, they’ve got the product quality nailed, but on the other requirements, the consensus among IRFs is that dealers are floundering. It’s often a tough sell to ask dealers to carry the right inventory to service these IRF customers, and to dedicate staff and vehicles to deliver low-ticket mechanical parts multiple times a day. And OEM/dealer pricing doesn’t always accommodate IRF margins in the realm of 35%. Finally, only some OEMs and dealers have online ordering systems that cater to the needs of IRFs.

Bottom Line: If we want dealers to be on IRFs’ speed dial for competitive maintenance and repair parts, it’s going to be an uphill battle. Improvements made in any single area could generate incremental wholesale parts sales, but to really move the needle OEMs and dealers need a compelling “package” that hits all top criteria.

Friday, February 22, 2013

Blog Review: Our Readers’ Favorite Articles from 2012

TV shows and magazines often run stories like “highlights of 2012”. We reminisce about the London Olympics hype from last summer and recall catastrophic moments from super storm Sandy. “Tech-geeks” may ponder Facebook going public or Dell going private. Others still cheer the rover Curiosity’s successful landing on Mars. And of course, there is still plenty of coverage on the great election of 2012.

Well, Carlisle & Company could equally run a piece on its 2012 highlights, and our blog captured most of them. So let’s get the top stories from 2012. Last year we posted 48 blogs, with topics as specific as “diesel particulate filters” or “grey markets and counterfeits”. Some blogs included studies on collaborative opportunities, whereas others were in-depth analyses of warehouse operations or new technologies. Here is the breakdown of the 2012 Spare Thoughts blog posts by topic:

Nearly half of our blog topics related to market research or consumer surveys – and our readers loved them. Here we shared insights from our research or consulting projects. On top of the 2012 North America Parts Benchmark in Chicago being a huge success, a large segment of posts concerned our company’s benchmarking practice. Another large category was blogs with “MyGuy”-related insights. (I highly recommend that you read our latest one, “ Is Coming” from November 29, 2012, or visit the MyGuy website at

The number of visits to our blogs proves that our audience is interested and keeps coming back for more. While we don’t have YouTube’s 26 million daily visits or the viewings of Beyonce’s Superbowl show, our visitors certainly seem to get more useful information. Our subscribers are a surprisingly diverse group, ranging from top OEM managers to parcel company representatives.

So what are the Spare Thoughts blog highlights from 2012? Some may pick “MyGuy”, while benchmark participants support NAPB-based topics. Heavy Equipment subscribers may find information on diesel particulate filters fascinating, and, of course, the automotive group votes for the post on batteries. The point is that each blog contains nuggets of insight on what is happening throughout the industry and to our customers.

So here are the Carlisle Top-10 Spare Thoughts blog posts from 2012, ranked by the average number of daily unique visits within the first week of posting. Whether you are new to the Carlisle blog or a long-time subscriber this is the list of posts to read first.

Rank Date of 2012
Blog Post
Blog Post Title
1 March 21 Can Longer Warranties Sell Parts?
2 June 20 NAPB – Warehouse Technology Panel Wrap-up
3 June 15 Customer Retention Modalities in the Motor Vehicle Industry
4 July 18 Our World Has Changed; People Are Not Illiterate, They Just Process Information Differently. Maybe Better.
5 November 29 Is Coming
6 June 8 What’s the Value of Telematics Today and Tomorrow?
7 September 13 MyGuy Customer Retention Practices – Hey, I Know That Stuff Already And I Am Not The Stereotypical OEM! I Can Prove It
8 January 16 What Good Is the J.D. Power IQS for Picking Out a Good Car?
9 October 18 YourMechanic Wants to Kill Your Service Business (And Other Observations from the 5th Digital Summit)
10 February 9 Something to Think About – Trivia from the 2012 Consumer Sentiment Survey

Thursday, February 14, 2013

Why Would Anyone Put High Volume Parts on Ship-Direct?

Imagine the following. It is Sunday night and your spouse says, “Honey, I forgot to go to the grocery store today. Can you run out and pick up some milk, bread and eggs to get us through tomorrow?” Being a good person, you of course say, “Yes.” However, when you get to your local store, you find that the dairy section has no milk or eggs, and the baked goods aisle has no bread. You track down the store manager and ask, “What’s the problem?” He quickly apologizes, and explains that his store recently introduced a new ship-direct supply chain to save you, the customer, some money on your most frequent purchases. As a consequence, they are out of stock on items like milk, bread and eggs “just every once in a while”!

Does this ever happen to you with grocery staples? No, of course not, because if it did, you and everyone else would quickly shop at the store down the road that always (well, nearly always) has milk in stock. Who cares if you can save five cents on a hypothetical gallon of milk if the milk isn’t there?

Hmm… what does this have to do with motor vehicle service parts? Everything! Based on our North America Parts Benchmark (NAPB) research, and looking at over 20 motor vehicle OEMs, nearly 15% of net sales, on average, is delivered to dealers via ship-direct. For some individual construction, agricultural, truck and auto OEMs the volume is nearly 30%. In many cases, some of the fastest moving parts, such as filters, are delivered ship-direct. By the way, we think of ship-direct as a distribution flow that physically bypasses most or all of an OEM’s distribution network (i.e., ship-direct parts are most often shipped directly from the supplier to the dealer). Sometimes ship-direct parts go to a consolidation center or a cross-dock facility to minimize transportation costs or reduce the number of deliveries a dealer receives.

Okay, some facts to frame this issue.

Fact #1, What OEMs Think - OEMs love ship-direct because it saves money – both supply chain costs and inventory holding costs – but, certainly not because it improves service. Our research with OEMs shows this loud and clear.

Fact #2, What Dealers Think – On the other hand, dealers dislike ship-direct. As shown below, our research from 11,000 dealer parts managers tells us that they would much rather get their parts from their facing parts distribution center. Why? Availability is higher, order response time is shorter, visibility is clearer, and so forth. In fact, here is a quote from a dealer parts manager that neatly summarizes what many think, “I perceive the drop ship [ship-direct] program as your ‘red headed step-child’. It allows you to stock less at your depots, spend less on warehousing, facilities, delivery expense and personnel. It is a win-win for you. No so for the dealers. It is high maintenance for the dealers. Invoicing is inconsistent at best. We have to be in constant interaction with the vendors to check on orders, delivery times and reconciling orders / invoicing, etc. For all the time and money you save by shifting the responsibility of these items to the drop ship program, the support just isn't up to par. I would prefer all the drop ship billing be seamless with the genuine parts billing…”

So, what does this mean? Is the answer to never use ship-direct? Of course not. Ship-direct is a sensible distribution strategy for hazardous parts, such as batteries, that we do not want in our distribution centers, or for slow-moving, end-of-life parts that are prone to high levels of obsolescence and scrap. For hard-to-handle parts, such as tires, there are specialists who have perfected a niche in which we will always struggle to keep up.

Conversely, ship-direct is absolutely the wrong strategy for the fastest moving maintenance and repair parts (think milk, bread, and eggs!). Your customers need these parts off the dealer’s shelf or available on the same day. As the OEM, you need to support your dealers and provide the highest level of fill, as well as the shortest order response time. That means the parts come from your local PDC within a couple hundred miles, not from a supplier three time zones away. Further, keep in mind that your dealers have choices for obtaining those fast moving parts. You’ve got competition; if you cannot deliver these parts quickly and consistently, NAPA can. They are probably within 10 to 15 miles of most of your dealers and will deliver several times a day, within an hour’s notice.

Systemically, to convert these ideas to sustained action, Carlisle & Company uses a ship-direct part selection model that considers the customer’s need, the supplier, and the costs.

The bottom line is that ship-direct is the right distribution strategy for some parts, such as less competitive slow-mover parts. And is not the right distribution strategy for other parts, particularly high volume competitive parts that are essential for customer uptime. I could write a lot more about selecting the right parts for ship-direct, but my wife is calling. She still needs me to go pick up some milk, bread, and eggs at the grocery store...

Thursday, February 7, 2013

The North America Parts Manager Survey Is Complete: Availability Is Still The Biggest Driver of Parts Manager Satisfaction; Pricing, Not So Much

How well is the automotive industry doing in terms of satisfying its parts managers? What is most important to these parts managers? Carlisle’s most recent North America Automotive Parts Manager Satisfaction Survey (PMSS) was conducted in September 2012 and the results help shed some light on this.
On a comprehensive basis, U.S. parts managers expressed the highest Overall Satisfaction (54% “Very Satisfied”, otherwise known as “Top Box”) with their OEMs, followed by Canadian (42%) and then Mexican parts managers (31%). From a brand perspective, Asian car companies dominated Overall Satisfaction among U.S. parts managers, while European brands took the lead in both Canada and Mexico.

Looking at changes in scores between the last two surveys, twice as many OEMs experienced increases as those with decreases in Overall Satisfaction. Also, note that the gap between Asian OEMs and non-Asian OEMs is shrinking – most of the gainers are non-Asians, while most of the decliners are Asians.
One of the most impressive improvements was a Detroit-based OEM that, in 2012, enjoyed a 9.5 point gain in Overall Satisfaction, on top of an industry-leading 15 point gain in 2011. That’s a 25 point gain in just two years – a huge improvement from the dark days of 2009!

The chart below shows Overall Satisfaction across the individual categories, looking at industry high, low, and average. The average satisfaction for the highest categories (Parts Reps and Order Processing Systems) is twice as high as that for the lowest categories (Accessory Support and Pricing).
Further, every category, other than Retail Inventory Management (RIM), shows at least a 40 point gap between the industry high and industry low. These gaps highlight the fact that there is a tremendous opportunity for improvement by benchmarking and sharing best practices across the industry.
Non-U.S. entities made great strides in satisfaction over the past year. Canadian or Mexican brands represented the biggest year-over-year improvement in 15 out of 18 categories. Granted, the U.S. brands started at a higher satisfaction level. However, roll-out of new programs, processes, and systems is reflected in the large performance improvements at Canadian and Mexican OEMs.

We spoke with representatives from all of the OEMs that “moved the needle” in the most recent survey. While we can’t share the details in this public version of the report (participating OEMs received details with attribution), some of the key initiatives included:
  • Modifying call center schedule (hours/days open, staggered staffing during breaks, etc.)
  • Enhancing order systems to allow dealers to self-service their non-critical needs
  • Replacing poor performing “assets” (field representatives, transportation providers, etc.)
  • Extending order cut-off times (without impacting operations) by staggering order printing/releasing throughout the day rather than at beginning of the shift
  • Implementing new wholesale programs with dedicated staff to support dealers
  • Holding vendor ship-direct suppliers to strict delivery/ back order ETA requirements
Finally, every year we examine topics which are most important to our dealers. For the most recent survey, Availability and Phone Support were the top statistical drivers of satisfaction across the industry – a pattern we have seen for the past few years.

Availability is the most universal of these issues. At least one OEM from each group (Domestic, European, Asian, Canadian, and Mexican) had Availability as the top driver of Overall Satisfaction among surveyed parts managers. Conversely, phone support (both Order Processing and Technical Support) seemed relatively more geographically focused. Out of the nine OEMs where one of the phone categories emerged as a top driver of satisfaction, six are Canadian. It is also interesting to note the relatively low importance of Pricing. While it is often the number-one topic discussed at dealer meetings, statistically, it does not even crack the top five in terms of impacting Overall Satisfaction.

* * * * *
The PMSS is a comprehensive, online survey that covers all phases of OEM support to their parts managers. It addresses 18 topics, including parts availability, delivery, technical support, training, field support, catalogs, and parts marketing. The surveys contains over 100 questions focused primarily on satisfaction, but it also covers key areas such as dealer fill rates and priorities for improvement. Along with the quantitative feedback, the 11,000+ respondents provided almost 65,000 verbatim responses with specific, actionable feedback for their sponsoring OEMs. 2012 was our 11th year conducting this survey on behalf of the auto industry. This year’s participation was our largest ever, with respect to both respondents and participating OEMs. We received responses from over 11,000 parts managers, representing 17 U.S., 12 Canadian, and eight Mexican automotive OEMs. If you have any questions on this or any other Carlisle syndicated survey, please contact Harry Hollenberg at 978-318-0500 x-106 or