Did you know that in auto parts distributors, 50% of the products their customers ask for represent less than 5% of total demand?
The fact about the great concentration of demand in a few products is not new, but we must reflect on the great impact it has from the point of view of the variety of product range that they would need if they wanted to offer perfect customer service.
Actually, in practice, it is impossible to have all these products that are requested, on the one hand because it does not make any sense to incorporate this large volume of products with such low turnover on the shelves, and on the other hand, because the investment required is not much less profitable.
So, what should they do with these products that have such little demand? Basically there are 3 options:
Always have them in stock, which we have seen does not make sense.
Never have them in stock, which would produce a significant decrease in the level of customer service.
Analyze them one by one and decide whether or not they should be in stock.
Of course, option 3 is the best, which requires analyzing thousands of products individually and periodically (in order to review the decisions made over time).
This individual analysis of each product should include some, if not all, of the following parameters:
Level of demand in the market, current and historical for at least 3 years.
Demand trend in the market: ascending, descending, flat.
Identify if it is a product with recent demand and therefore with growth potential or if, on the contrary, it is a product with already consolidated demand.
Assess how many brands sell it on the market, to see if it is popular or not.
Based on all these parameters, it will be possible to decide each month, with very good judgment, which products should be incorporated and which should be eliminated.
At Factory Data we have a unique system in the market for the analysis of the demand for automotive parts that allows us to complement and improve the stock management modules, combining in decision making: the sales history and the real market demand.