As we recently commented, the inventory is for a distributor the biggest asset on the books. Keep adding stock-keep-units (SKU) in all different product lines or add a new product line in our warehouse has an enormous cost.
The objective of any distributor should be to ensure that the right product is in the right place at the right time but at the same time trying to maximize the return on inventory investment.
But, when is the right time to add a new product in our warehouse? Is the age of the vehicle where the part is mounted a determining factor in making this decision?
First we are going to analyze the aftermarket demand volume in Europe by vehicle age where the part is mounted, based on 1000 electrical rotating units with light vehicle applications:
If we analyze these data, we identify 5 different vehicle stages:
As expected, we confirm the relationship between the volume of market demand and the age of the vehicle.
Now, we are going to analyze the percentage of these parts that have high demand, low demand or no demand, based on age of the vehicle where the part is mounted:
If we analyze these data, taking into account the 5 vehicle age stages that we have identified, we can draw the following conclusions:
As we can see, in all the different stages of the vehicle, there are high percentages of parts that have low demand and no demand. This causes at all times great uncertainty in the correct selection of the products that we must add in our warehouse.
Now, as an example, we are going to analyze the demand trend of two products:
1) TG series VALEO alternator with SEAT 2004 application.
Between 5 and 9 years: demand activation.
Between 10 and 15 years: optimal and stable demand.
2) Start/stop VALEO alternator with PSA 2008 application.
Between 3 and 4 years: demand activation
Between 5 and 9 years: optimal and growing demand.
As we can see, the years required for the activation of demand (10 or 4 years respectively) and the demand trend (stable or growing respectively) are totally different for the two products.
Demand trend for each product is totally different.
The age of the vehicle where the part is mounted, does not determine with precision neither the volume not the trend of the future demand.
For rotating electrical units with light vehicle applications, 33% of parts for vehicles between 3 and 4 years old, 12% for vehicles between 5 and 9 years old and 4% for vehicles between 10 and 15 years old, have no demand.
Systematic analysis of demand data, cleverly grouped, provides a crucial valuable source of information that represents an opportunity for an improvement of efficiency and competitiveness for the parts distributor, specially for the management of the slow demand products.
Market Expert: information and decision support system for automotive aftermarket parts distributors.