Last week, the Automotive Aftermarket Industry Association (AAIA) announced the second round of its supply chain benchmarking exercise, in collaboration with the Supply Chain Council. Today, Scott Luckett, MAAP, AAIA’s vice president, technology standards, provides a few more details about the project in the hopes of enticing a few suppliers, retailers and distributors to participate. Read on to find out why getting involved is a great idea for your business and the aftermarket as a whole.
Scott you’ve been a longtime and passionate champion of data standards, inventory efficiency and streamlining business processes in the aftermarket. Now, you are spearheading AAIA’s new Benchmarking Exercise in collaboration with the Supply Chain Council. Tell us what the project will entail.
This initiative was born out of the very simple observation that you cannot manage what you do not measure and there’s nothing more vital to the aftermarket industry than supply chain efficiency.
AAIA teamed up with the Supply Chain Council, the respected global authors of the Supply Chain Operational Reference model (SCOR), to elevate the industry expertise in supply chain management and discover the opportunities to improve financial performance. Over the years, those who study and practice SCOR have added 1 percent to 3 percent to their bottom line. We want aftermarket companies to have the opportunity to enjoy those benefits.
It all begins with benchmarking a company’s current operational and financial metrics against others to discover if their numbers are above or below par relative to the industry as a whole. In order to get statistically meaningful results, we need a sufficient number of suppliers, retailers and wholesalers to gather their supply chain numbers (about 30 metrics altogether) and enter them in a secure and private database. A couple of months are needed for the training and data input. The result will be an aftermarket industry-specific white paper that defines the strengths and weaknesses of our supply chain. Most important of all the study will begin to discover the opportunities for financial and operational improvement.
You’ve said, “You cannot manage what you do not measure” in reference to the critical importance of supply chain management. Where specifically do you feel aftermarket companies are lacking when it comes to measuring and managing supply chain performance?
The SCOR model is a standardized method of measuring and talking about supply chain practices it’s a single language for the conversation. For example, every aftermarket company can tell you what their order fill or service levels are. But do they know the four components of a perfect order? Besides shipping the product, the order must be delivered on time, be free of damage or defects and with the proper documentation. Anything less is not viewed as a perfect order in the eyes of the customer. The most successful businesses are those that have a total command of the second and third level metrics of their performance.
Only by benchmarking their performance against others in the same industry can a company learn how they rank against the leaders and laggards. Measuring your own performance without the benefit of industry benchmarking is an exercise in navel-gazing … interesting for a while, but not very useful.
Is there a specific segment of the aftermarket parts distribution channel that you feel will benefit most from participation in this project, or will there be something for everyone (suppliers, distributors, retailers)?
Distributors, retailers and suppliers all operate their supply chains differently and the relevant measures of success are different for each of them. Everyone will benefit from seeing their performance ranked against others in the same channel suppliers against a pool of other suppliers and so on (all anonymous, of course). The greatest benefit will come in the analysis of the entire ecosystem. Companies that are satisfied with their performance in a particular area may find that they are trailing the industry and seek to understand what they can do to improve performance. The point is, we don’t know what we don’t know. But through measuring performance all of the participants will learn a great deal.
And speaking of measuring results, what results can aftermarket companies expect if they participate in this benchmarking exercise?
After each participant completes their data entry, within days they get back an analysis of their performance against the anonymous aggregate of other companies in their supply chain. Once we have a statistically significant number of companies in each channel, the researchers at APQC a leading think tank of supply chain best practices will analyze the complete data set and author a white paper citing the relative strengths and weaknesses of the aftermarket. Of greatest value will be the discovery of the best practices of those industries and companies that outperform the aftermarket.
How can interested aftermarket companies find out more and get involved? When does the project begin?
We have a short presentation available at www.aftermarket.org/supplychain. It answers the most frequently asked questions about the potential benefits of participating, the level of effort required and the steps to getting started. There’s no cost to participate other than your time and expertise. The kick-off meeting of potential participants is Thursday, Oct. 13 at 11 a.m. EST. Registration is required for this webinar and available at www.supply-chain.org/aaia.
Will the final results be available to the aftermarket as a whole, or only to participants in the project? When is the project expected to be complete?
With the training that will be available from the Supply Chain Council, we expect the data input phase to be completed in December (2011) and the white paper will be authored by March (2012). Each participant gets their individual results analyzed soon after data entry. The complete white paper will be exclusive to the participants in the project who contributed their data. However, we will share the top-line takeaways in an Executive Summary form soon after the white paper is released.