Industry Issues - Pay-on-Scan
Aftermarket Challenges: Pay on Scan and Excess Inventory

The pay on scan (POS) issue emerged in the automotive aftermarket during a Jan. 14 meeting of AutoZone and its suppliers. The issue had been mentioned and rumored in the industry as the whole market segment struggles with the ongoing challenge of excess inventory.

In 2002, the Motor & Equipment Manufacturers Association and AASA initiated a comprehensive study of excess inventory with strong support from the Automotive Warehouse Distributors Association (AWDA), the Automotive Aftermarket Industry Association (AAIA) and the Specialty Equipment Market Association (SEMA). Conducted by Northwood University 's Richard DeVos Graduate School of Management, the study was nearing its completion when the POS issue began making industry headlines.

AASA and MFSG, MEMA's wholly owned subsidiary and the recognized credit authority for the automotive products industry, immediately reacted to member concerns about the POS issue. In conjunction with MEMA counsel, Arent Fox, AASA and MFSG identified areas of concerns regarding POS:

• Risk of loss/shrinkage and insurance
• Securities laws
• Audit and review rights
• Taxation
• Accounting issues
• Anti-trust issues (Robinson-Patman Act)
• Technology and security issues
• Title/secured creditor/bankruptcy issues

AASA communicated these concerns to members through MEMA publications such as ToplineNews and MEMA INDUSTRY NEWS. Spokespersons for AASA and MFSG expressed supplier concerns about the issue in industry publications such as Aftermarket Business, aftermarketnews.com, Automotive Week and Counterman magazine. The association also researched the limited use of - and success with - POS in other sectors, such as the grocery, greeting card, pharmacy and publishing industries, and reported the results to members.

Since the POS issue arose, the association's position has always been that excess inventory needs to be addressed by other means. AASA's research, both into the legal ramifications and practical application of POS in other industries, backs up its position. Now the release of the inventory study by Northwood University gives the industry practical, corrective actions that can help maximize inventory effectiveness and improve return on investment throughout the aftermarket.

MEMA/AASA/MFSG Pay On Scan Communications with Members

• Recap of AutoZone teleconference (Jan. 30, 2003)
• Review of POS Issues by Arent-Fox (Feb. 10, 2003)
• Robinson-Patman Act analysis (Feb. 27, 2003)
• Summary of Other Industries' POS Use (April 4, 2003)
• POS Symptomatic of Excess Inventory (April 21, 2003)