CED

March 2014

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Make Parts Buying Easier for the Customer – Think Amazon Differentiate yourself, not based on availability – which everyone can do – but on serviceability and convenience. For as long as I can remember, the No. 1 requirement for customers from an equipment dealership's parts department is parts availability. The recent Product Support Opportunities Handbook (PSOH) – now for sale as a PDF at aednet.org/products – confirms it again. I want to review what we do in parts inventory management, expe- diting and delivery systems to live up to this availability challenge. Inventory Control Systems and Processes. The business system suppliers (DMS) and vendors have not been sitting still. The use of statistical probabilities and the demand pattern matching with various statistics models has helped dramatically. The statis- tical approaches vary by vendor; MMI from Volvo, Poisson from Caterpillar, John Deere with their Critical Codes, and Komatsu's shared approach with their dealers. Yet they all are aiming at the same target: higher availability for customers via the supply chain. The main software providers have been making adjustments as well. From lead times by part numbers to abnormal demand recognition and much stronger interfaces between vendors and distrib- utors and worldwide search patterns on shortages, systems are much more respon- sive to the needs of customers and dealers. Replenishment Cycles. Over my career, the replenishment cycles (lead times) have been reduced dramatically. It starts with the order frequency being increased. Most of the major vendors today offer daily stock orders. From a biweekly or weekly stock order to daily is a very significant improvement. With the increased order frequency the order size is reduced, allowing the vendors to turn around stock orders much more quickly. Transportation logistics have also improved. Today "best prac- tice" vendors have replenishment cycles consistently approaching two to three days. That consistency leads to differing inventory levels and much better serviceability. That is truly something to brag about in the marketplace. Delivery Systems. From customers walking into dealer/distributor stores to using the telephone, to the Internet and parts kiosks, delivery systems have become much more user friendly. Electronic catalogs allow customers and technicians to determine their own parts requirements, and use of the "shopping cart" online order style for customer convenience and responsive- ness has become much more common. Operating Standards. The goals are more evident, clear and visible. Put away every stock order the same day it is received. Find every part that the dealer is short the day of the order, and communicate with the customer as to where the part is available before the end of the day. Ship every order the same day it is ordered. Simple goals that make a difference to the customers. Isn't that what we are here to do? So with all of these improvements, why shift the emphasis? I am not sure we can do much better in the support systems, but I want to move the solu- tion closer to the customers. In the words of Jack Welsh, "When the world around you is changing at a faster pace than you are, the end is near." Let's look at the world around us. Amazon offers a "club" for frequent buyers called Prime. This comes with perks for the customers – access to a lending library, access to streaming videos, elimination of freight charges, to name a few. American Express has their "member rewards" and catalog and Internet retail sales, plus entertain- ment venues for select card members. Visa and Master Card offer their programs, too. Everyone is trying hard to differentiate themselves in the retail world from their competitors. I believe that the differentiation that used to exist with parts availability has been eliminated. Almost every major vendor in the capital goods industries provides similar levels of availability. The large differences have completely disappeared. Availability is good from everyone. So, we need to find enhanced serviceability standards and methods. Perhaps convenience will become more of an issue. We could have supply items "stores" more conveniently located to the customer jobsites. We could bring our parts to jobsites with vans and "Sprinter" type vehicles, rather than waiting for our customers to order from us. We should help customers with their purchasing. We could deliver parts to the customer – what a concept. With the Opportunity Model in the PSOH, we should know what the customer will need, discuss this with the customer, and make buying easier for them – not just easier for those of us in the distribution channel. The time is now. RON SLEE (ron@rjslee.com) is the founder of R.J. Slee & Associates, Rancho Mirage, Calif., celebrating more than 30 years in business in the United States, a consulting firm that specializes in dealership operations. Ron also operates Quest Learning Centers, a company that provides training services specializing in product support, and Insight (M&R) Institute, a company that operates and facilitates "Dealer Twenty" Groups. Fol- low Ron on Twitter: @RonSlee; and read his blog at learningwithoutscars.com. BY RON SLEE Aftermarket March 2014 | Construction Equipment Distribution | www.cedmag.com | 51

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