Industry Issues - Inventory
Report Outlines Action Items for Addressing Excess Inventory Dilemma

Corrective actions that can help maximize inventory effectiveness and improve return on investment throughout the aftermarket are addressed in a new report that is the result of an industry-wide study conducted by Northwood University 's Richard DeVos Graduate School of Management. The complete report is now available to AASA members.

The final report is the latest phase of the complete excess inventory study. According to Northwood's Dr. Bill Busby, the lead researcher in the study, the next and final phase is the most crucial - implementation of the study.

"The report provides a roadmap for all those in the supply chain to increase efficiencies and help prevent the ongoing flooding of inventory that exists in the marketplace today," Busby said. "The key to making this report viable is the level of implementation that it receives. The study's participating associations have the opportunity to play a key role in rolling out this study and driving new efficiencies in the industry."

The Motor & Equipment Manufacturers Association (MEMA) facilitated the study with strong support from the Automotive Warehouse Distributors Association (AWDA), the Automotive Aftermarket Industry Association (AAIA) and the Specialty Equipment Market Association (SEMA). The program is complimentary to AAIA's category management and enhanced line review programs, but focuses exclusively on application parts. Nonmembers and others interested in obtaining the Northwood report can do so for $300.

"The report is the culmination of more than a year's worth of research and in-depth interviews of various manufacturers, wholesale distributors, jobbers, retailers and installers," stated Dr. Timothy Nash, Dean, The Richard DeVos Graduate School of Management at Northwood University .

"The report provides guidance on pricing practices, forecasting techniques and strategic differentiation as critical areas of improvement the industry needs to embrace to address its excess inventory issue," Nash added.

Using the gathered knowledge and data, the report provides six primary recommendations. Topics discussed in the recommendations include process improvements, the need to improve data gathering and sharing across the supply chain, improved pricing strategies and the establishment of clear strategic differentiation. The study also suggests that industry trade associations can play a vital role in leading the effort to establish greater collaboration among industry participants in such areas as compiling, distributing and sharing of data.

"The study's goal was to identify and validate root causes of the symptoms frequently recited, such as low inventory turnover, high percentage of returns and margin compression," Busby said. "Ultimately, we expect the recommended action items will help alleviate these issues."

The study also suggested actionable recommendations to help the industry maximize inventory effectiveness. Among the recommendations, the study suggests that industry competitors work to create greater differentiation in their business models. Numerous other recommendations on pricing, forecasting and improving operational effectiveness are also explained.

"While the study's findings document the numerous challenges facing the aftermarket, they also present tremendous opportunities for improved efficiencies," Busby said. "Companies that fail to adapt to the continually changing competitive environment will cease to exist. Success will come to those companies quickest to improve their operational effectiveness and ultimately to those that can achieve strategic differentiation."