Automotive Aftermarket Challenges
If you’ve worked in the aftermarket long enough, you’ve witnessed the industry shift from selling products to selling services and solutions—and now the new era of selling outcomes. “Always changing” is certainly one way to describe aftermarket sales and its continuing evolution, especially when it comes to price and inventory optimization in the wake of global geopolitical conflicts, labor market challenges, and economic uncertainty.
I’ve spent 17 years in the aftermarket space and I’ve seen a number of different industries go through all sorts of transformations—everything from moving from reactive to proactive to predictive service and moving from a cost center to a profit center. This space is always changing.
But with those challenges comes opportunity. Sambare sat down with Jonathan Taylor of AW Rostamani Group and Marc-Steven Havinga of Motus Aftermarket Parts at Automechanika Dubai to unpack this issue and identify keys to aftermarket pricing success in 2024. In short, organizations that move now to capitalize on these trends and mitigate risk will be better positioned to delight customers and win market share. Here are a few top insights from this conversation:
1. Collaborate with internal and external stakeholders
Internal collaboration is crucial as it ensures alignment and coordination among various departments within a business, leading to more efficient operations, informed decision-making, and a unified approach toward organizational goals. Collaborating with external partners, including suppliers, customers, and technology providers, enhances the ability to respond to market dynamics, share valuable insights, and leverage diverse expertise. This results in fostering innovation, improving supply chain efficiency, and ensuring the overall success and adaptability of the business in a dynamic marketplace.
One of Havinga’s takeaways is that disruption will likely continue and keep getting faster. Taylor adds to this point, sharing the macroeconomic trends affecting his business. The more agile organizations can be with their planning systems and teams, the better. Collaboration is key.
2. Embrace segmentation for strategic fulfillment
“For those working in the supply chain, we have to move away from traditional, one-size-fits-all approaches and embrace segmentation,” said Havinga. “This involves understanding different customer segments and tailoring service delivery based on their specific needs.”
The segmentation approach helps optimize availability, cost-to-serve, and impact fill rates. Taylor mentioned a strategic fulfillment branch mapping initiative, an innovation that involved geocoding all current accounts to visualize sales transactions and optimize where branch locations get established. The result was lower stock redistribution and improved stock profiles, ultimately benefiting both internal and external demand.
3. Transition from a cost-plus pricing model to a value-based pricing
Transitioning from a cost-plus pricing model to a value-based pricing structure is essential because it allows businesses to capture the true value they provide to customers, enabling profitability even when costs fluctuate. This shift enhances financial sustainability and builds customer confidence by emphasizing the perceived value of the products or services, aligning pricing with the actual benefits delivered to the customer.
Both Taylor and Havinga emphasized the role of advanced inventory optimization software, such as Syncron’s, in overcoming challenges related to demand spikes and currency fluctuations. These platforms use AI and ML algorithms to provide accurate forecasts, enabling businesses to make informed decisions and collaborate effectively between teams.
Moreover, integrating solutions for both inventory and price enhances aftermarket strategies by fostering synergies between critical operational elements. This integration enables real-time synchronization of parts pricing and inventory management, allowing automatic adjustments to pricing in response to inventory fluctuations.
“If you have a pricing system that talks directly to your inventory system, this is where you can take action immediately,” said Taylor. ”We’re clearly recognizing where there are opportunities, especially when it comes to seasonalities.”
With complementary parts pricing and inventory management software, businesses can anticipate demand shifts faster, optimize their pricing strategies, and significantly improve inventory management—facilitating the transition from a cost-plus pricing model to a value-based structure.
The Automechanika Academy panel discussion, which took place in October 2023 at Automechanika Dubai, offered valuable insights into unleashing the power of inventory and price optimization in the automotive aftermarket industry. The key takeaways highlighted the significance of collaboration, segmentation, and the adoption of advanced tools for inventory optimization and pricing strategies. As industry professionals gear up for 2024, these insights serve as a guide to navigate challenges and optimize business operations in the ever-evolving aftermarket landscape. Click here to view the full discussion.
Syncron at Automechanika Riyadh
Syncron will be at Automechanika Riyadh from April 30 to May 2, 2024, at the Riyadh International Convention and Exhibition Centre. Register here and save your spot to see Sambare moderate another session with Syncron customers at Automechanika Academy.
