Friday, September 5, 2014

New Vehicles Need Parts Too, Sometimes
by Eliza Johnson

We want customers to find buying a new car an exciting experience. We want them to love their new cars—shiny and sleek, with cutting edge technology. The tradeoff is asking them to fork over what is for most people a big chunk of change. So, imagine the customer’s frustration when two weeks after buying a carefully selected new car, the air conditioning quits in mid-July, or the navigation system starts having glitches. What is wrong with this thing? I spent $25k and it’s already breaking? Imagine the deeper frustration when that annoying issue takes two weeks to fix because the dealer had to place a special order to get the parts. What is wrong with this dealer? Not coming back. And did I make the wrong decision with this car…?


Aside from all of the design and engineering that goes into new model vehicles, the planning necessary to stock and manage service-parts inventory for these cars is a major component of a successful launch. This is pretty critical to the new vehicle customer experience. And if we want them to buy another new car down the road, we have to get this right. Think about the situation described earlier: this customer may turn to an independent service provider and be lost to the dealer from the get-go. Plus, we know that such a poor initial experience will likely push the customer to another brand entirely the next time they go car shopping.


New model parts are important for dealers and OEMs who want to keep their customers, but planning for them creates new and different challenges for OEMs. How can you forecast demand? How can you define critical vs. non-critical parts? How do you balance the needs of service and production?


We recently conducted a benchmark study with a group of automotive and heavy equipment subject matter experts to investigate how new model parts are managed and stocked, and the impact or performance of those strategies on fill rates. “New model part” typically means any new part on a new or redesigned vehicle (a few heavy equipment OEMs also include carryover parts on new vehicles in this bucket).


While there was little consensus on how to best manage new model parts and how to accurately forecast these parts, a few potential best practices emerged.


  • Some OEMs stock just a couple of months of supply for all new parts, while others stock up to 12 months of supply on a fairly limited selection of parts. In general, the standard is to keep months of supply low. Defining critical parts within new model is key so that stocking breadth can be more targeted.
  • New model part fill rates and targets vary fairly widely, both in measure and in practice. Some OEMs measure fill rates at the time of vehicle sales, others one month out, and others up to six months out. Measuring new model fill at the time of vehicle sales will better measure and mirror the actual customer experience.


  • Very few OEMs, if any, are currently tracking or tying customer satisfaction to new model part fill rates and strategies, despite the risk that problems with a new part could ruin a customer’s experience with a vehicle. Happiness with that new car will help drive your customer back to the dealer for service and to the OEM when it’s time to buy another car.
Bottom Line: A new model release requires attention to more than vehicle design and rollout. The service-parts stocking strategies are key to a customer’s satisfaction; they are worth greater thought and focus than they’ve been getting. New model parts management presents a unique, important challenge that can set the tone for a new owner’s experience. At worst, it’s damage control; at best, it can cement a lifelong customer relationship.

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