July-September 2016

purchasingandsupplychain

EVs are here to stayto stayThe electric vehicle is the perfect platform for the future of autonomous driving says Carlos Ghosn, Chairman and CEO, Renault-Nissan Alliance

Katherine Worthen, Vice President,Purchasing and Supply Chain Europe,General Motors

What’s good for GMis good for suppliers

Jan Bures, Executive Vice President Group After Sales and Services,Volkswagen Group of America

Jan Bures, Executive Vice President Group After Sales and Services,Volkswagen Group of America

Port congestion an issue for VW

Gary Johnson, Vice President, North America Manufacturing, Ford Motor Company

Gary Johnson, Vice President, North America Manufacturing,

Ford’s leading edge lieutenant

Neovia Logistics Services www.neovialogistics.com

Global 3PL. OEM Heritage. 85 years of Operational Experience.

The Neovia Difference.

DISCOVER THE DIFFERENCE

OF WORKING WITH A 3PL CREATED

BY AN OEM.

The automotive aftermarket industry

relies on a complex supply chain that,

if organised correctly, can improve

overall effi ciency for OEMs. It is vital

to be organised in aftermarket trade, as

global customers and dealers demand

inconsistent amounts of product

parts to separate locations which

can confuse and delay component

delivery. In order to achieve this level

of optimisation in the supply chain

for service parts, companies must

understand the demand chain for

each part consumed and learn

how to manage the unpredictable

nature of the sector. These

complications have introduced

a number of global third party

logistics (3PL) providers into the

industry, boasting the expertise

to improve operations within

their customer’s automotive

supply chain. Focusing on

demand is nothing new, but

the ability to measure the demand

at the end customer consumption

level of each individual part is greatly

improving. Working backwards through

the supply chain, using accurate end

consumer demand data, is the key

to effective inventory management.

Collaboration at all points in the chain,

from customers, dealers, distribution

hubs and suppliers is also important as

it allows opportunities for improvement,

driven by the change from a supply to a

demand model.

3PLs who have mastered aftermarket

parts logistics management can help

customers reduce overall costs through

optimising inventory on hand, parts

availability and fi ll rate, which allows

the company to be more competitive

and satisfy customers. 3PLs also offer

technological advantages, which is a key

element in developing and increasing

operational effi ciency in the modern

supply chain, eliminating repetitive time-

Fueling innovative and robust aftermarket

supply chain capabilitiesThe demanding aftermarket supply chain can be overcome through the use of

innovative 3PLs. Alex Kreetzer talks to Neovia Vice President, Business Development, David D’Annunzio, to uncover the challenges faced by suppliers and OEMs.

62

consuming logistics activities through

the use of modernised warehouse

management systems. In addition, 3PLs

can increase their customer’s visibility

through the supply chain by improving

communication, which ultimately

positions aftermarket players to better

manage their warehouse stock and

overcome challenges such as excessive

on hand inventory. These are just a few

examples of how this kind of innovative

technology can benefit those in the

automotive aftermarket supply chain.

Speaking to Neovia Vice President

of Business Development, David

D’Annunzio, I gain a further insight

into the key qualities needed within

3PL services, such as increasing

collaboration, reliability and forecasting,

inventory management and overcoming

the difficulties of slow-moving service

parts for modern, longer-life vehicles.

Neovia prides itself as a leading global

integrated logistics service provider

and D’Annunzio believes his 3PL can

offer unique expertise in inventory

management and parts fulfillment

services for its customers.

Collaboration is keyWithout doubt, collaboration is the

most important factor within any supply

chain. This will continue to be the case

as modern technology has strengthened

relationships within the automotive

industry through stronger supply chains.

However, it is still difficult to achieve

and maintain complete collaboration

from end-to-end, so it is important

that all parties involved must have

well-aligned logistics operations to

extract the most out of the relationship;

this is where 3PLs like Neovia come

in. “Proper collaboration starts with

everyone focused on one goal…

delivering the best customer ownership

experience possible with unmatched

service support throughout the life of

the product,” says D’Annunzio. “This is

a common focus across supply chain

partners on improving the customer

experience. When every partner shares

the same common goal - improving

customer satisfaction - real collaboration

can begin.” Once the combined vision

is identified, these strengthened

collaborations will result in reduced

operational costs and increased

efficiency through better rates and more

reliable coverage.

In order to attract new customers,

aftermarket 3PLs like Neovia constantly

work towards new innovative ways to

strike the right balance of inventory

on-hand and parts availability solutions

through collaboration, maximising

product efficiency and overcoming

customer specific challenges such as

slow-moving parts. The introduction

of RFID chips into end-to-end dealer

networks can be a prime example of

a way to revolutionise efficiency by

allowing companies to identify and

locate their products at any time around

the world. This once again increases

collaboration through every link in the

supply chain, from dealer networks to

suppliers. “Already in the industry, we

are seeing changes - information now

comes directly from a product’s onboard

sensors and is being combined with

dealer service shop demand, which is

then used to ensure the right service

parts are available for vehicle repairs,”

states D’Annunzio.

“Having those parts results in

increased customer satisfaction, so

making this happen as efficiently as

possible will require the integration of

dealers, distributors, carriers and, most

importantly, suppliers. This integration

could consist of sharing inventory data,

forecasting plans, shipment status and

so on.” With this level of integration,

visibility across the aftermarket supply

chain connects the supply source all

the way up to the end customer, further

driving collaboration across supply

chain partners. “As the mutual benefit

of sharing data and information with

the goal of continuously improving

the customer ownership experience

becomes obvious, this will naturally

continue to encourage and improve

collaboration going forward,” D’Annunzio

adds.

Staying aheadA major issue found within

aftermarket logistics is the build-up

of slow- moving parts and increased

stock variation. Thanks to a range of

new vehicles constantly entering the

market which frequently require a

unique set of new parts, OEMs need

to, more than ever, strike the right

balance of inventory in order to satisfy

customer demand without carrying

excess and costly inventory. Thankfully,

this process has been improved with the

introductions of such technologies as

Inventory Management planning tools

and simulation technology. These tools,

when used with the right expertise,

can resolve the challenges of varying

demand of the parts throughout their

life cycle. As components become more

As the mutual benefit of sharing data and information with the goal of continuouslyimproving the customer ownership experience becomes obvious, this will naturally

continue to encourage and improve collaboration going forward.

David D’Annunzio, Vice President, Business Development, Neovia

63

reliable, the ability to accurately forecast

and plan will ensure that the right parts

are in the right place at the right time.

D’Annunzio warns that, with these

vehicles, “it is important to get the

slow-moving parts portion of inventory

forecasting correct because you

only have one shot at doing it right -

otherwise you are left with excess and

obsolete inventory.” He tells me that

most automakers, especially in the US,

are required under law to provide a life

service policy for customers, stocking

parts from models dated back ten years.

With life service policies like this in

place, it is extremely important to know

when it is time to plan a make-to-order

operation, instead of carrying stock for

prolonged periods. Neovia provides the

technology and algorithms to accurately

forecast this changing demand.“The

next step is to review and improve all

end-of-life processes such as all-time

buy, forecasting, minimum buy and

supersessions,” he adds. “Traditionally

these areas are the major contributors

to excess and obsolete inventory, which

is expensive and also contributes to

warehouse inefficiencies. This is why it’s

so important to have robust forecasting

for declining growth.”

So it is evident that managing

slow-moving parts requires advanced

techniques, from how demand is

captured right up to forecasting and

inventory planning. However, the

execution of the technology is vital,

as systems must be able to identify

product shifts and volume increases.

D’Annunzio tells me that Neovia is

able to link the planning system and

execution system via its simulation

technology, which replicates what

inventory and parts availability results

the execution system will use, while

providing the configuration used to

get those exact results. Fundamentally,

this allows customers to plan ahead for

any sudden demand for their products.

“As the life cycle of the part changes,

the inventory planning technology

will adjust the inventory volumes in

line with the part’s current demand

requirements. Effectively managing slow-

moving inventory is key to minimising

your overall inventory investment,

maximising parts availability, and

improving customer satisfaction.”

Neovia’s proprietary inventory simulator

has demonstrated positive results that

have, on average, produced 10% to 40%

reductions in on-hand inventory and up

to 20% gains in fill rate for customers.

Dealing with the dealerships There are challenges with inventory

management at dealerships, usually

due to separate distribution networks

that are managed independently;

consequently, dealer inventory can

sometimes overshadow OEM inventory,

which is not ideal for the supply chain.

By extending the inventory planning

process from OEMs down to the dealer

level, OEMs can reduce their inventory

in the supply chain and improve parts

availability at the dealerships, increasing

overall efficiency throughout their

operations. “Neovia has this ability,

and is able to optimise inventory at the

dealer and distribution network level

based on point of sale demand data

from the dealers’ service centres,” states

D’Annunzio. “This allows for optimised

safety stocks at each node and enables

efficient flow of material through the

network to the dealer repair shop.

But reducing inventory and improving

delivery isn’t the biggest challenge,

rather it’s changing the commercial

64

terms and conditions between the OEM

and their dealers. Dealers still own the

inventory in their stores and therefore

new return policies and agreements

on maximum inventory investment are

required to be successful.“

As dealers place orders for parts

throughout a typical day, they might

require multiple shipments to satisfy

same-day customer demand. OEMs

respond by typically offering multiple

deliveries to satisfy the need given poor

parts planning on the dealer’s end. This

results in increased shipping costs and

more inefficiency. In considering the

customer needs, greater collaboration

between dealers and OEMs will facilitate

the supply chain’s ability to achieve

balance, so that the parts are where they

need to be when they are needed.

“Today’s OEMs use a variety of

methods to make up for the deficiencies

in inventory management and parts

planning at the dealer level,” adds

D’Annunzio. “Dedicated daily delivery

and two to three times per day

delivery schedules, particularly in large

metropolitan areas, are transportation

services designed to help dealers who

carry reduced levels of stock, shifting

and increasing reliance on centralised

stock. While this system works to some

degree, the cost of transportation

could be reduced using a more efficient

alternative by gathering point of sale

inventory data (for forecasting and

execution), so both OEMs and dealers

can have the right inventory in the

right places. This would increase space

utilisation at both dealer and Parts

Distribution Centres and defray excess

transportation costs as well as improve

customer satisfaction as an end result.”

No ‘secret’ algorithmAs mentioned previously, modern

vehicles are better engineered and have

prolonged lives. Complications with

slow-moving parts and service parts

can only be overcome if a formula is

implemented into a company’s supply

chain which integrates a combination

of people, processes and technologies.

Neovia’s system focuses on helping

customers integrate planning and

execution through its simulation

technology and inventory management

which, as D’Annunzio adds, “accurately

simulates the inventory investment

and parts availability that can be

achieved with Service Parts Planning

(SPP), but most importantly, provides

the exact parameter configuration to

enter into SAP to get those results.” By

allowing the customer to quickly set the

optimal configuration, Neovia improves

inventory levels almost immediately,

instead of the usual time-consuming and

repetitive ‘trial and error’ procedures that

come with implementing the technology

without proper expertise and knowledge.

There is no surprise why a number

of major automotive manufacturers

have implemented Neovia’s Inventory

Management solution into their supply

chain.

“Neovia helps our customers by

bringing new ideas and innovations. Our

supply chain professionals have decades

of experience integrating inventory,

transportation, and distribution from

sources of supply to end consumer. We

also help our customers through the

execution of best-in-class processes

that drive operational excellence and

deliver unmatched customer and dealer

satisfaction. As companies place more

emphasis on aftermarket excellence

and driving customer satisfaction,

Neovia is the perfect trusted partner to

enable a client’s strategic initiatives.

The combination of people, processes

and technology along with integration

of design, planning, and execution

is essential and what Neovia feels is

the formula for success,” D’Annunzio

concludes. ■

Our supply chain professionals have decades of experience integratinginventory, transportation, and distribution from sources of supply

to end consumer.David D’Annunzio, Vice President, Business Development, Neovia

65