Choose your partners carefully

Parts supply chains have come under some scrutiny after recent events

Published:  26 August, 2014

By Neil Pattemore

Vehicle owners do not normally understand the complex web of interrelated services that forms the UK automotive aftermarket. They see a choice between the vehicle manufacturers' authorised repairers and a multiplicity of choice which is the independent workshop sector.

Often, the vehicle owner views the vehicle manufacturer's dealer as having the skills, equipment and original parts to service and maintain their vehicle but at a price. No one expects the main dealer to be the cheapest.

On the other side, the independent aftermarket is sometimes seen as the 'poor man's choice', where a vehicle can be repaired but with some risks over the ability of the workshop to have the appropriate skills or equipment and perhaps offering lower quality parts. To some customers, this is an appealing offer but to many customers they may be surprised at the truth.

The aftermarket is a closely linked circle of businesses, none of whom can operate effectively without the others but who together provide a fantastic value chain that provides compelling customer service and choice.

This circle of interdependent businesses is formed by the repair workshops, technical information providers, technical equipment manufacturers, spare parts manufacturers and spare parts suppliers. Of course there is also a crossover of both independent providers and vehicle manufacturers who buy parts and information from each other, especially when those parts are only available from the vehicle manufacturer. These 'captive' parts are classified as 'original equipment quality', which in many cases is true, as they are the same items as originally supplied to the production line but in other cases they may be of lower quality, even though they are in the vehicle manufacturer's branded boxes.

So if customers want vehicle manufacturers' parts, why don't independent workshops just buy these VM parts and fit them? Of course, the answer is that they are both more expensive for the customer and for the workshop, so margins are lower and the benefit to the customer is also reduced.

Perhaps we need to educate the customer better, so that they can understand the choice available and make their decisions accordingly. Equally, from the workshop side, a more savvy approach to buying parts could also be advantageous.

The competition amongst parts suppliers has always been fierce but, with the recent demise of Unipart Automotive just being the latest in a long line of national parts distributors to 'go under' (think Chloride Gaedor, Affiliated Factors, Lucas Service UK, Globe and Simpson and many others), competition is even hotter. This should act as a timely reminder for you to think about your own parts supplier partnerships.

The three key elements for any buyer are price, quality and availability but added to that you need to consider the level of back up for other key issues like product fitment information, product failure support and product liability should something go seriously wrong. There are also the day to day activities like parts returned for credit, stock cleanse agreements, financial/payment agreements and much more.

So, parts suppliers are probably the closest part of the circle to many workshops and are often able to combine other elements of the circle into their relationship with you - so choose your partners carefully. The future may even be more specialist technically orientated parts suppliers as the increasing level of electronic components impacts but no one supplier can provide everything you need.

The smaller, local suppliers often provide great products and great local service with flexible support, whereas the larger groups have immense buying power, are able to scour the globe to find products but may not offer the same flexibility as the local suppliers.

There are many successful UK oriented buying groups, such as United Aftermarket Network (UAN), UK Parts Alliance (UKPA) and the IFA, plus on-line providers like MPD but there is an almost inexorable rise in the 'super groups', like Group Auto Union, ECP (owned by the American LKQ Corporation who have just acquired 5 Dutch based parts distribution companies) and the rise of new groups like Nexus - all of whom are international operators with global ambitions.

Their development is impressive - Group Auto Union started in 1990 with three founding members in France, Spain and Germany and now covers countries across the globe as diverse as Russia, Panama, Israel and Nicaragua. Meanwhile, ECP is owned by a Fortune 500 specialist parts corporation already operating in Belgium, France and Taiwan, whilst Nexus only started in January 2014 and already includes the UKPA, as well as operating in the Middle East and Africa.

Now you need to be aware of the relationship between your local supplier and the best international organisations and then choose your partners carefully, using the advantages of each to your own advantage, encouraging competition to optimise your supplier agreements but equally, negotiating different supplier agreements to provide volume discounts but not at the expense of putting all your eggs in one basket.

Ultimately, it illustrates that the success of the aftermarket is directly due to the great products and services available that support both what you and your customers require. There has never been a better time to enhance the knowledge of your customers concerning their choice between the aftermarket and main dealers

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