This week, I read an article on the sector saying that a manufacturer had added around 100 new references of alternators and starter motors.
They were saying that now, the company’s 1200+ reference numbers cover more than 80% of the vehicle population.
At first it sounds like all good news for their customers, but has anyone stopped to wonder…
1) Are these new reference numbers duplicates of the products they already had, and therefore contribute no added value to the market, or are they interesting new products with a high level of demand?
2) What vehicle population are they referring to when they talk about coverage of over 80%? Light vehicles, trucks, agricultural, industrial, marine, etc.
All in all, what we want to ask ourselves is: Is the commercial information our suppliers provide us really useful for making the best decisions?
What good is it to add new reference numbers if we don’t know the demand levels and maybe we won’t sell them or very few will be sold?
What good is it to raise the vehicle population coverage % (whatever population it may be) if we don’t know the demand % to which it corresponds?
To take an extreme example, we could easily design a stock that covered 90% of the variety of the vehicle population, of any application segment we wanted, that covered less than 10% of the demand. In other words, we would be investing a lot of money to sell practically nothing! It works like this because product demand distribution is like a big pyramid.
So, why does our sector keep talking about inconsequential indicators like the number of reference numbers or vehicle population coverage %?
When what’s really important is: the DEMAND LEVEL that each product has and, above all, % OF COVERAGE a product selection offers with respect to market demand.
As for the new reference numbers that this manufacturer has added, what can we say about them in terms of market demand?
1) All new reference numbers, as a whole, cover 4.40% of overall demand in Europe, 4.80% of overall demand in Spain and 4.00% of overall demand in Italy.
2) Although the large majority of the references added have high market demand, we also find some reference numbers which are currently in very low demand. For example, the product associated to RENAULT “045903023H” is listed 5000th in the demand ranking in Europe, meaning it would be of very little interest to add it.
Clearly, using Big Data to analyse information and demand allows companies to make the best decisions and improve the profitability of their businesses in a constant way.