Aftermarket software solutions are key to OEMs providing a cost-effective and quality service throughout their supply chains. Anthony Coia takes a look at the diversity, drivers and development of several such systems.

In the wake of economic troubles that still persist on many levels, the growth of the aftermarket sector has led to greater demand for technology that optimises supply chain efficiency from supplier to dealer. Among the more significant trends is to offer solutions for worldwide supply chain management for both upstream and downstream flows that include high level reporting and management tools with traceability. Greater competition demands increased connectivity and systems integration among parties in the aftermarket supply chain. At the same time, OEMs need to implement IT solutions that not only meet their aftermarket service requirements but also are also cost-sustainable.

One shortcoming in the aftermarket supply chain is inadequate service at the dealer level. Global supply chain management software company Syncron addresses this issue with IT solutions for the automotive and heavy equipment sectors. Syncron’s Retail Inventory Management suite provides forecasting, inventory management and replenishmentplanning technology for dealers and distributors.

it-2Steve Tonks, Syncron’s head of sales for Western Europe, says: “OEMs have invested in improving their inventory management capabilities. Master parts centres and their facing warehouses operate efficiently while achieving high fill rates. However, the picture is very different at the point in the supply chain that matters most–where a dealer interacts with the ultimate customer. It is not unusual for dealers to achieve 60% first-time availability, order 70% of their parts on rush orders, or encounter 30-40% obsolete inventory.”

Tonks notes that these percentages have a significant impact on both dealer profitability and customer satisfaction. He says OEMs are starting to take such statistics more seriously and are improving parts availability levels by actively managing inventory at dealer locations.

Integration challenges

For Syncron, growth in demand for retail inventory management is occurring because dealers have reduced their inventory levels and are relying more on the OEMs’ capability to replenish on short lead-time with emergency orders. This has led to increased costs for OEMs and risks associated with lower customer satisfaction levels. For managing dealer inventory, Tonks says that one of the main barriers to entry for IT solutions has been the challenge of integrating multiple independent business systems operated by the dealer body. “The cost and complexity of achieving this has been a problem for both OEMs and their dealers,” he says.


Syncron’s solution involves minimising the amount of data required from the dealer. Its business process layer also enables data acceptance by dealers in various formats and at different frequencies. In 2011, Syncron added functionality to enable better use of existing inventory within the network. This includes redistribution, inventory balancing, and the use of virtual inventory. The latter applies to situations in which no dealer within a network has anticipated high enough demand to hold a particular part in stock, such as a gearbox or a high-cost electronic component. Thus, they hold it at one dealer location on behalf of others.

Tonks says that one of the main benefits of its changes is improvement in same day availability levels. The other is a reduction in stock levels for OEMs and dealers. “For the OEM, this results from a more stable demand pattern, increased visibility and fewer emergency orders. For the dealer, reduced stock levels typically occur from better inventory management and profiling techniques that reduce the overall stock depth,” he explains.

Other improvements are reduced transport costs, reduced picking costs for the OEM, and less time calculating and processing orders at the dealer.

Nissan and the click system

For its inventory management requirements, Nissan North America uses the Click Ordering System from Servigistics. Tom Shannon, senior manager for factory and export at Nissan, says the carmaker’s objectives are to achieve the best fill rate and lowest inventory per month of supply. The Click Ordering System sets the supply levels and fill rates. This includes the primary initial fill rate, as well as the reduction of back orders and ensures one month of supply on hand, which is part of Nissan’s Global Inventory Reduction (GIR) programme.

“We set the Click System to a particular fill rate and it provides the ability to increase and decrease inventory levels. We also use our warehouse management system (WMS) for physical inventory management, which eventually feeds the Click System that determines when and where to reorder,” explains Shannon.

Among Nissan’s challenges is that Europe, Mexico and Canada are all on different systems than the one in the United States. “We have been discussing how to get on the same system. On October 1st we launched the Click System in Mexico and Canada is next in 2012,” he says.

Among the trends that affect the development of Nissan’s aftermarket IT systems is the growth of its export markets. “Currently, we are exporting to 17 countries. By May 2012 we will have expanded to 120 countries from our Smyrna plant and Mount Juliet distribution centre,” says Shannon.


For Nissan’s export compliance, a subsidiary of DHL called DGF handles export documentation. This interfaces with Nissan’s WMS and will feed demand through the hub system. “We want to expand and grow our market share as quickly as possible. Markets such as Brazil, China, Africa and Australia are all expanding rapidly [for Nissan]. The challenge is the cost and whether we have the money for improving our IT systems,” says Shannon.

Another trend is shared-user technology. Software provider GT Nexus offers a cloud supply chain platform for the automotive aftermarket–a multi-tenant model in which companies meet on one platform. It primarily serves industrial equipment manufacturers such as Caterpillar, as well as tier one suppliers. Andy Stinnes, executive vice president, products and strategy, says that GT Nexus provides supply chain visibility in transport management, which includes decision support for planning, execution, and collaboration with 3PLs and ocean carriers amongst others.

“It determines when to consolidate, which volume, and how to execute it,” says Stinnes. GT Nexus’ supplier management tool assists in ordering from tier one and tier two suppliers, including how to facilitate, process and manage orders.

Stinnes says that GT Nexus’ main challenge involves data quality. A high percentage of the supply chain is outsourced to 3PLs so there are a number of variables involved. Another facet of its service is GT Nexus’ Supply Chain Intelligence (SCI), which has been in operation for about a year. SCI makes data available analytically, such as supplier fill rates and cycle time. It also increases velocity by reducing waiting time.

Reducing diversity at Renault Nissan

A pervading theme is the need to commonise IT systems. At Renault, aftermarket logistics is worldwide, either in sourcing from internal or external suppliers, or in distribution to warehouses in the larger regions. Renault uses more than one aftermarket logistics system–each one supporting the processes of ordering, forecasting, inventory management and control that may be functionally different depending on the concerned warehouse, according to Jean- Charles Grosbois, logistics department manager, parts and accessories.

“A major objective is to reduce the diversity of the IT system as much as possible by using logistics business projects as leverage. This way we are able to make the IT system contribute more to Renault’s global performance. IT is a strategic part of aftermarket logistics, which is integral to our service level and aftersales business.

“The system must be reliable, robust, flexible and communicative to support the development of international activity,” adds Grosbois.

Renault’s IT demands include greater inventory optimisation by having the right part available at the right price anywhere in the world. It also needs a higher forecast quality in upstream and downstream flows, international flow management, and standardised exchanges with partners, suppliers, importers, and dealers. Notes Grosbois: “We also need IT to provide greater control of our relationship with suppliers as well as logistics support for our dealers.”

Among its main challenges are to reduce diversity, provide robust and reliable solutions to the market, and provide management tools with relevant global alerts. Grosbois says that the Renault Nissan Alliance IT system is a good way to reach these targets. If Nissan is already present in a country in which Renault is a new player, Renault will use Nissan’s system and vice-versa. With these synergies, Renault reduces its costs of developing and operating logistics IT systems that support the same processes, controls, forecasting and inventory management.

Last year, Renault deployed JDA supply chain management software. It also implemented a management tool for backorders and poorly performing suppliers through Renault’s supplier portal. The company introduced new mobile technologies such as RFID for picking, packing or voice picking. “Our deployment of supply chain software throughout our European warehouses enabled more reliable order estimates and optimised inventory levels. This reduced costs by several million euros and ensured a high level of availability of parts,” says Grosbois.

Nascent systems for emerging markets

In emerging markets such as India, IT systems reveal the growing sophistication of aftermarket logistics. For Mahindra Logistics, among the main IT objectives are inventory management and control, visibility, traceability and recall capabilities, according to Pirojshaw Sarkari, CEO. Another is predictability, which enables better supply chain planning and optimisation. Also essential is the ability to lower total supply chain costs while maintaining or improving supply chain performance.

Mahindra Logistics manages its inventory through its proprietary WMS, which it uses uniformly across its warehouses, aftermarket and service parts operations. For transport management, Mahindra Logistics can offer its customers one of two technology solutions–depending on the size, scale and complexity of the operation involved. One is a transport management system (TMS) that Mahindra Logistics developed in-house for operations in which a full deployment of Mahindra Integrated Logistics Execution System (MILES) is either not required or cannot be justified by the size and scale of the operation. Its TMS is an integrated solution that spans areas such as vehicle placement, transit time tracking, POD tracking, real-time updates and billing.

Secondly, the more comprehensive MILES involves the Oracle Transport Management System along with technology that automates and systemises all transport management processes. MILES is an end-to-end solution that covers planning, deployment, loading, transit time, tracking, realtime updates, delivery, billing and other processes.

“Oracle Transport Management, along with our Advanced Vehicles Tracking system and location automation via hand held terminals, enables MILES to address complex transport management challenges such as those faced by the aftermarket and spares supply chains,” says Sarkari.

Mahindra Logistics manages its ordering, forecasting and other planning functions through ERP systems such as SAP. It can also integrate its WMS, TMS and MILES solutions with its customers’ ERPs.


Growth challenges

Sarkari says the biggest challenge is to recognise the cost/ quality equation each customer seeks and design and execute solutions for them. “The emerging awareness among OEMs is that a professionally designed and executed 3PL solution, supported by an integrated IT solution, really does make a difference from both a cost and quality perspective. As this industry grows and evolves, we will need integrated solutions that tackle design, technology and closer 3PL partnerships. Therefore, it is about formulating a solution that crosses the boundaries of an ERP, WMS and TMS,” he explains.

In accomplishing such, providing end-to-end visibility across the supply chain from the supplier to the dealer is Mahindra Logistics’ main challenge. “We need to get all of the stakeholders on the same platform in order to provide visibility, which would lead to better optimisation by planning and scheduling the operations better,” says Sarkari. “To this end, we try to interface with various independent systems, where possible, through EDI, and where not possible, we have given role-based access to people to update our system directly.”

Mahindra Logistics has recently deployed standard application protocol interfaces (APIs) to enable interaction with other systems for WMS and TMS, including vehicletracking systems for transport. “As a result, we have reduced order-to-delivery time by about 50% through improved order turnaround time in the warehouse and predictable delivery time in transportation. By deploying WMS and TMS, all stakeholders have complete visibility as to the status of their orders, and we are able to predict the ETA based on order turnaround time and standard transit time,” reveals Sarkari.

Like India, China is both a booming and an immature market for aftermarket logistics technology. Ben Wang, auto industry leader for Greater China at consulting firm Accenture, says that recently the industry has been focusing more attention on the aftermarket and starting to implement IT systems. Its first focus is on forecasting and planning, and then on inventory management. For forecasting and planning, the scope is the dealer stock level. “Some joint venture OEMs were maintaining high inventory, yet providing low service levels. We are helping them to increase their service levels,” says Wang.

For its client, Accenture is implementing SCM software from SAP. The main goal is to build planning capabilities. Inventory planning involves replenishment of an OEM’s parts and its dealers’ parts. The goals are to increase the service level, optimise inventory and provide the dealer with the right part at the right time.

Although the objectives for using IT to improve aftermarket logistics effectiveness vary by market and by customer, the common goal is clearly to improve an important aspect of supply chain efficiency.