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Disruptive trends challenge the old parts paradigms

We have been talking as if aftermarket trends are slated for the future, next generation situations — they are, in fact, all here now,” says Bill Wade

Editor’s note: Bill Wade started Wade&Partners in 2003 as a consultant specializing in worldwide vehicle parts aftermarket and industrial distribution. Previously, he was CEO of Durakon, FAG/INA Bearings, CR Services/SKF. Wade states that he lives in a barn and has taught the finer points of shark fishing (and cooking) to three children and eight grandchildren. He can be reached at bill.wade@wade-partners.com

Bill Wade, of Wade&Partners

Doing research for a client recently, I looked at many issues of popular aftermarket trade publications from the last 10 years. Most featured different flavors of problems and opportunities most of us will be discussing if trade shows ever restart. One huge eye opener… we have been talking as if all these trends are slated for the future … next generation situations.

They are, in fact, all here now:

  • Onslaught of disruptive technology. Established competitors and channels are being commoditized or replaced through digitization, info science advancements, the innovative use of new on-vehicle tech and automation. Examples include developments such as machine learning, the Internet of Things, and robotics.
  • Accelerating democratization of information. The increased volume, transparency and distribution of information requires organizations to rapidly engage in multi-directional communication and complex collaboration with customers, suppliers, fellow group member partners.
  • All-out war for talent. As creative knowledge- and learning-based tasks become more important, organizations need a distinctive value proposition to acquire — and retain — the best talent, which is often way more diverse than found in this industry. These “millennial workers” often have nearly alien thoughts and experience and may have different life-style desires.
  • Quickly evolving environment. All stakeholders’ demand patterns are evolving rapidly: customers, supplier partners and regulators have pressing needs. Private equity investors are demanding growth, which inevitably results in acquisitions and restructuring; and competitors and collaborators demand action to accommodate fast-changing customer priorities.

Defense is not usually positive … how to go on offense

So, what are supplier attributes which business customers will value most? Dr. Bill McCleave, a super industry researcher and consultant, who specializes in supply chain evolution, simplified the question:

“While it’s true that smaller firms can survive selling traditional products and providing traditional services, the secret to longevity may lie in cost reduction, efficiency, speed and product application skills. Many smaller firms gain a competitive advantage because of their customer knowledge, proximity, flexibility and ability to take on a variety of customer problems and provide inventive solutions.”

In addition to simple value-added services, jobbers may decide to offer further services that differentiate them from the competition. “A supplier attribute is a quality or characteristic that is used by customers to measure and value suppliers. Ask any customer to list important attributes and most will answer ‘service’ first.” The other attributes on the list will vary but likely will include some of the following:

  • Troubleshooting and installation of new products
  • Field service and maintenance
  • Fabrication of component assemblies
  • Fleet management with predictive maintenance
  • Kitting of common parts for common jobs

Those services can provide excellent opportunities for growth, enhanced customer intimacy and higher technology profile, but there are some challenges. These include added costs, risks and scope creep.

Standard offerings vs. Extra value premium

Value-added offerings must be carefully orchestrated to match effort with solution results and customer-perceived value.

Unfortunately, many distributors and retailers have failed to manage the value they provide and fall into traps where services for sale get blurred with standard offerings and the customer tries to get more for less.

Before adding value-added services as differentiators, consider these points and actions:

  1. Make sure customer requirements are well understood.
  2. Establish a clear distinction between product-attached and optional services, and make sure both types are priced correctly.
  3. Develop and use a menu (or family) of service offerings.
  4. See that additional organizational burdens are considered (and defined processes are in place) to manage new service offerings and opportunities. These could include labor and asset utilization, equipment and technology, billing and receivables, inventory, and distraction / risk factors.
  5. Have confidence that your organization can sell new services and negotiate any new relationships those services may entail.
  6. Ensure that the service team puts processes in place to assure ongoing service improvement through standardization and the application of automation, tracking, and analytic technologies.
  7. Remember that not all “value-added” opportunities are worth pursuing, and assure that those pursued are.

To be effective, value-add services must be supported by sufficient processes and technologies. Now, with accelerating Omnichannel Cloud Commerce targeting B2B and B2C channels … and the business mysteries of the post-COVID aftermarket … what will be your management planning and budget priorities?   

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