From the Inside: What Service Parts Sellers See

From the Inside: What Service Parts Sellers See

Vehicle service and repair is a huge part of the revenue and profit equation for independent retail tire dealers. But how much do dealers really know about those companies and groups that provide the parts and information that help them succeed in delivering outstanding auto service?

Recently, Mark Phillips, editor of Counterman, a sister publication of Tire Review, interviewed some of the top auto parts corporate and association executives.

Participating in these interviews were:

  • John Washbish, ‎Executive Vice President of Aftermarket Auto Parts Alliance
  • Mike Lambert, President of the Automotive Distribution Network (Parts Plus)
  • Gary Martin, President and CEO of Automotive Parts Associates
  • Roy Kent, Chief Strategy Officer and President of New Business Development for Federated Auto Parts
  • Bill Maggs, President of National Pronto Association
From left to right: Bill Maggs, Gary Martin, Mike Lambert, Roy Kent and John Washbish
From left to right: Bill Maggs, Gary Martin, Mike Lambert, Roy Kent and John Washbish

Q: The Automotive Aftermarket Industry Association recently rebranded itself the Auto Care Association, favoring the phrase “auto care” over “aftermarket.” Will you and your group adopt this new language? What are your thoughts on moving away from the term “aftermarket?”

Washbish: “The Alliance fully supports the move by our trade association to better and more clearly communicate with those who may be confused by or hold conflicting views of what the term ‘aftermarket’ means. This change is most critical in the association’s efforts to communicate with lawmakers on Capitol Hill. Our legislators in their verve to serve often craft legislation that contains unintended consequences for small business. If our association representatives can get to those critical issues rather than waste even a minute of the time, they have with lawmakers explaining what the aftermarket is, the change is clearly the right thing to do. Certainly, when it comes to consumers, bringing our association name in sync with our vehicle owner outreach Be Car Care Aware creates useful synergies in our communications.

“That said, the term aftermarket as ‘trade jargon’ is firmly rooted in our collective business culture. It is the business we are in and have so called it for more than a century. As an industry we must be careful not to become ensnared in the all too common practice of the day, politically correct speech. ‘Auto care’ is an important and apt description for what we do. However, it is not a synonym for ‘aftermarket.’ We have many shareholders who are engaged in businesses that are not car care-related, such as performance parts and accessories, heavy-duty, stationary engines, pumps and generators and many more activities that are clearly aftermarket businesses and not car care businesses. In those specific trade instances, the aftermarket name will remain relevant and in place.

“It is very similar to the way we refer to ‘jobbers’ when talking among those in the trade, yet refer to the same entities as ‘parts stores’ when talking to those outside our industry. We need to use a similar filter as we transition and introduce the term ‘car care’ into our vocabulary describing our industry. Apply it where it makes sense and not try to force it where it does not.

“The Alliance will support and practice the use of the jargon ‘car care industry’ where it makes strategic sense and fits. If, over time, it becomes the prevailing way people choose to describe the industry in the way that ‘remanufactured’ came to replace ‘rebuilt’ years ago, so be it. In the meantime, we will remain the Aftermarket Auto Parts Alliance.”

Lambert: “I believe the term ‘auto care’ is a better description of our industry for the outside world. The term ‘aftermarket,’ to non-automotive people, creates more questions than it answers. We will certainly use it when discussing and describing our industry to others. For all of us who have grown up in the ‘aftermarket,’ it is a single word that simply describes our segment of the industry. I am sure we will continue to use it internally.”

Martin: “The actual answer remains to be seen, and that’s primarily because of how the our marketplace reacts to changes more than anything else. While I understand the reasoning and thought process behind the change, our industry is slow to adopt changes of this kind.

“The effort and process of rebranding will take time. It will be easier to effect this change in the halls of Congress, because they do not have the institutional memory around the term ‘aftermarket.’ So it comes down to managing the concept of internal and external marketing of this rebranding within our own industry walls. I do not see a ground swell of activity going on inside the aftermarket to abandon the historic terminology, but Automotive Parts Associates will support the initiative as we see the need and momentum growing.”

Kent: “We have always felt that the term ‘aftermarket’ is an industry term that is not well understood by consumers. We use terms such as ‘Car Care Centers’ for our shop partners and always try to communicate in a manner that will maximize understanding and effectiveness. We fully support the new association name and feel that it will definitely add to the understanding of what our industry is all about. Promoting “auto care” is a natural for our members and we will work to support not only the new name but also the concept of taking care of vehicles. There is no doubt that this is a solid upgrade and one the entire industry should be excited about supporting.”

Maggs: “We will adopt and support the rebranding effort. This is a long-term process and the sooner we start incorporating ‘auto care’ as our industry and consumer focus we will be able to spend more time talking about the business and issues … versus what is the ‘aftermarket’ in many conversations. Will the word “aftermarket” be removed from the industry forever? Time will tell. The other great aspect of the rebranding is that it not only helps explain what our industry is about, but removes a negative connotation of what the word ‘aftermarket’ may mean to people outside of our business.”

Q: The aftermarket truly has become a global industry. How much a part of your group will be represented by stores or warehouses outside the U.S.?

Washbish: “The Alliance itself has long been a multi-national group. Today, 33% of our 52 North American shareholders are in Mexico (11) and Canada (six). What has made us a truly global group and is now facilitating global expansion is our joint membership venture with Temot International in Europe. Together, we are the most globally connected and focused program group in the international marketplace today.

“With 44 members in 40 countries, AAPA and Temot will sell nearly $8 billion worth of parts in 2014. We have hundreds of distribution centers selling over $8 billion annually to servicing hundreds of thousands of technicians on four continents. This powerful base fosters global group growth in two ways: First, it is a strong attraction for new members in new countries; second, it provides resources for start-ups if and where that’s the right approach. We currently are in discussions with potential shareholder members in both Central and South America.

“The North American aftermarket is mature and nearly flat. The real growth opportunities for us are in foreign markets and you will see our global presence expanding in the years ahead.”

Lambert: “We have just signed up our first 12 Parts Plus stores in Puerto Rico. We also have added three new members in Mexico and we have members in Canada. This at least makes us a northern hemisphere company and not just a continental U.S.-based firm. Some of our members also sell into Central and South America so we have expanded our reach. The global aspect of our company deals more with the suppliers we use from around the world.”

Martin: “Approximately 10% of APA’s business is represented by interests outside of the U.S.”

Kent: “While we do have members outside the U.S. and serve some global markets, it has not been a priority focus. Federated exists for the benefit of our membership and while we continue to look at global markets, we have not found sufficient advantages for our current members to pursue this in a major fashion. If our members or supplier partners see a benefit in increasing the focus outside North America, we will respond to their direction and increase the effort on their behalf.”

Maggs: “We currently have eight members in Mexico, three members in Canada and one in Puerto Rico. We continue to look for distributors in these countries that fit our membership profile where we can add value to their companies as well as our vendor partners. It’s hard to give a specific percentage goal – we believe our growth in all of North America will continue.”

Q: How can e-commerce be used as a strategic benefit to program groups?

Washbish: “Any business that is today not making robust use of technology as a point of competitive advantage is simply pretending to be a player. As with our global presence, the Alliance is leading the way in e-commerce enablement in the aftermarket.

“The centerpiece of our e-commerce initiative is MyPlaceForParts, a wholly owned customer lookup and order entry technology that enables the user to lookup any part (application, supplies, accessories, tools, universal, etc), any place, 24/7 on any device. MyPlace Mobile continues to lead with functionality such as the fastest, most user-friendly VIN scan app for Android and Apple smartphone and tablet devices.”

Lambert: “Providing e-commerce sites to members is a great opportunity to add value to our member distributors. There are many costs that can be shared making things possible that individual companies could never do on their own, such as our recently released license plate lookup feature on WebShop, and the mobile site with VIN Scan technology. This is why our group has embraced e-commerce, providing a central service to our members for a decade now.”

Martin: “E-commerce is a clear strategic advantage to those groups and entities that make it part of their business environment. It is no secret that e-commerce transactions are here to stay and are growing by leaps and bounds. The barriers to entry for e-commerce trade are miniscule, thus making this method of transacting business relatively easy regardless of entity size.

“There are multiple benefits for users on both sides of the spectrum in the e-commerce transaction when considering the customer and the merchant. Business transactions are no longer bound by the traditional geographic constraints we have been used to dealing with. It is much simpler to broaden the scope of goods and services offered by this medium than the traditional method. Transaction costs go down when a well-constructed site and business plan are engaged in because of the automation of the process from beginning to end.”

Kent: “E-commerce provides our members with many benefits such as an efficient means of communicating with customers, suppliers and each other. It provides information that streamlines customer relationships in a variety of areas. It allows our customers to improve vehicle maintenance and repair procedures and helps simplify the communication of information, such as catalog data, interchanges and specifications. Also, e-commerce provides data to enhance inventory planning, analyze sales trends and identify additional sales and direct marketing opportunities to move excess inventory. In short, e-commerce allows groups like Federated to support all constituents, efficiently and effectively communicating and transacting business through collaboration.”

Maggs: “We use e-commerce in many ways and its development will continue to grow. From cataloging, ordering, invoicing, advance ship notices, statements and payments. Our industry is utilizing technology faster today than ever before and Pronto members are embracing these advantages.”

Q: How does your group get the right mix of parts on the shelf?

Washbish: “For the distributors of auto parts, there is no greater challenge than keeping up with parts proliferation. As OE makes, models, platforms and engines expand and grow, the SKUs to repair them grow, inventory expands and turns decrease. It can sap the very health of the business in reduced efficiency and profitability and increased working capital.

“The only effective method of dealing with today’s proliferation is the deployment of progressive technology to predict how to have the right parts when and where the customer needs them.

“The Alliance has established an industry-leading track record in this area as evidenced by the group and its members winning the coveted Polk Inventory Efficiency Award five of the nine times it has been given and for the past four consecutive years.

“We provide our members with the most comprehensive technology tools available in the automotive aftermarket for inventory and supply chain management. That’s why Alliance members have made monumental strides in improving fill rates and inventory turns all while lowering capital requirements.”

Lambert: “We provide our members with the most robust demand forecasting tool in the industry. Network Intelligence leverages historical failure rates by part type, vehicles in operation at the zip code level updated quarterly, and local sales information. Product managers who know their customers and the local market remain essential and give our members an advantage over the chain stores. Network Intelligence provides these product managers the information and tools they need to succeed at what they do.”

Martin: “APA has one of the best, if not the best, business intelligence systems in the market today. Our membership is increasingly taking advantage of the tools we have made available to the membership through this system to understand what parts are being sold out the door and hung on the car in real time. This information, which is just a portion of what’s available to members, provides the tools to make clear decisions about what to stock across all product lines. At the end of the day, we all must know what to put on the shelves and when to do that. Data Solutions is our business intelligence tool and it simply works for our membership by providing a clear advantage over competition.”

Kent: “We believe that inventory management is a combination of focus and execution. Members need as much information as possible on vehicle population, replacement rates, proper pricing, brands, quality levels, national and regional sales and a host of other input. This information is then applied to local markets where individual expertise on area demand and customer needs are added together with supplier input and other distilled data sets so that inventory can be tailored for each market. It is definitely not an exact science, but there is more information available today than ever before, providing insight and support for managing hundreds of thousands of items on a daily basis.”

Maggs: “Pronto members use many technologies to manage their inventory mix. From our data warehouse information, vendor inventory programs and by utilizing the Epicor Vista program. All of these are available through Pronto.”

Q: What particular attributes about your group give you a leg up over the competition?

Washbish: “The three areas we just discussed effectively sum up the substantive advantages that the Alliance enjoys over other program groups; 1) our global affiliations, 2) our e-commerce enablement and 3) our inventory and supply chain technology superiority.

“This ‘trifecta’ is something no other group can boast. No other group can talk about membership affiliations in 43 countries around the globe. All but a few can say they have their own e-commerce solution that is integrated with the major shop management systems. And in the area of inventory and supply chain management, no one can say that they have won the Polk Inventory Efficiency Award for four consecutive years running.

“I think it is worth noting our procurement and brand development/management expertise. Having come from the supplier side, I have observed that most groups approach product procurement as a buying function. That is, the process of line selection is reduced to who can get me the lowest price. While gaining cost efficiencies is important to the Alliance, our product procurement process is far more comprehensive.

“A few years back, we evolved our buying practices to bring more category management and brand management into the process. This has enabled us to better align our customer’s product needs and expectations with our stocking requirements. In some cases, that has resulted in consolidating multiple grades of products with a single supplier. In other cases, we have introduced multiple brands into a single category of products. In still others, we have launched our own exclusive national brand of product. However, in every case, the decisions we made based on what customers want and need, not just on what makes our shareholders the most margin. And in the end, when you keep customers happy, they reward you with their business.

“In addition, the Alliance is a group of kindred independent businesses in both size and focus. Our membership is comprised of the blue chip distributors from around North America. Check any roster showing the top independent distributors and you will see that the Alliance dominates that list. Even our smaller distributors are powerhouses in their individual markets. Other groups seem to grant membership to drive headcount and take any comers or any size or shape. At the Alliance, we believe that membership should be reserved for those businesses with the vision and acumen to dominate in their marketplaces.”

Lambert: “The Automotive Distribution Network recognizes that all auto parts distributors are not the same but most have some very common needs. We have a place for almost any distribution company under our umbrella. We have numerous services that we can cost-effectively provide to all of our members. We provide a pathway to help them grow.”

Martin: “The diversity of business models within APA is a clear differentiator for our group. We have large mega-distributors that participate in the traditional three- and two-step market, and then we have the specialty market players that cater to the surging import specialty parts marketplace. The overall market place continues to constrict at all channels, and being overly invested or involved in one discipline or market strategy puts anyone at a disadvantage today. APA is well-known for its appeal to all markets and business models and we are not fearful of engaging all segments of the market by welcoming those various business models into our fold.”

Kent: “We believe the strength of our group is in the collaborative sharing of ideas, insights and innovations. Federated members are selfless in their approach to helping the sum of the total be as strong as possible. This may be in sharing processes, ideas or experiences in the market. This can be in areas where cost and inventory efficiencies are leveraged. One example is our member-owned co-man warehouse that receives tremendous support from all members and a large number of suppliers. Another is in e-commerce activities, including our in-house electronic catalog and enhanced supply chain program that allow sharing of the highest-quality information. Collaboration also occurs with the Federated Car Care program where members share ideas, approaches and improvement initiatives. Whatever the area, our members are willing to work together for the common good of all. Individual member success is contingent today on group collaboration and our members are dedicated to this process.”

Maggs: “Pronto has a laser-like focus in several areas of the business and operates very efficiently. We don’t try to be everything to everybody. Our main areas of focus are: products, marketing and technology. We develop programs that come from the membership and board of directors. With a focus on listening to what the members want and not telling them what they need, we achieve a lot of support. With 92 members you will not make everyone happy all the time but I will let our record speak for itself.

“I believe one of the areas that gives us an advantage is the way we manage the members’ money. We look for a return-on-investment in all of our programs. We pay members rebates on a weekly basis with accurate reporting. The most important aspect of a group is, in fact, the members themselves. Pronto members are like family – each membership meeting is like a family reunion with members visiting about business issue and problems – and what must be considered for the future success of their companies and the group.”

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