Manufacturers and OEMs often rely on global dealer networks to sell and service their equipment. Maintaining a dealer network, especially for automotive, high tech, and heavy industry sectors, allows manufacturers and OEMs to give end-users a local touchpoint.
Of course, with a network of dealers come the challenges of meeting the needs of hundreds or thousands of individual locations, each with their own customer demands and parts requirements. Legacy management software, in-house solutions, and other remote inventory management systems often lack the capabilities needed to calculate location-specific spare parts demand while ensuring the integrity of OEM service strategies. These and similar issues prompt some manufacturers to use dealer inventory management (DIM) software.
In Part One of this two-part series, we'll discuss the advantages DIM systems can bring to both OEMs and their dealers.
When OEMs want to incentivize their dealer networks to maintain particular stocking levels or stock up on parts, they often offer discounts on volume. However, one of the challenges is that dealers will buy or overbuy on certain parts in order to hit the discount target.
A robust dealer inventory management software can help dealers purchase parts strategically, and allot their dollars in a way that makes sense for each dealer. This means that OEMs are able to incentivize part sales, and dealers are confident that they’ll be able to sell or turn those parts on their end.
From an organizational planning perspective, OEMs benefit from managing their dealer networks on a global scale. In order to set good company strategy, an OEM needs visibility into overall supply and demand in order to set prices, forecast manufacturing, and more. At the same time, dealers want independence, and may not want to be “managed via software.”
OEMs can incentivize dealers by essentially sharing the burden. If a DIM system recommends a dealer should buy certain parts that eventually go unused, the OEM can offer a refund in exchange for those parts. OEMs benefit by having an advanced forecasting system make decisions, dealers have the added security that if the system was incorrect, they’re not liable for those costs.
For manufacturers and OEMs alike, it’s important to have reliable part availability both on a market level and dealership level. A comprehensive dealer management software can help keep in line different parts of the organization, forecasting on a market level, and at each individual location.
The benefit of market-level forecasts and visibility is the ability to catch trends before they occur, and reconcile forecasts at various levels. Beyond this multi-echelon capability, a DIM system should also be able to understand clusters of dealers (such as franchises) and split the stock of parts among those teams. Here, the OEM can plan on an organization-wide strategy and also meet the unique needs of every dealer or group of dealers.
There is a tendency to overbuy when planning for aftermarket parts because dealers want maximum availability for their customers. At the same time, excess inventory can bring on other costs, from the cost of warehousing parts to writing off parts that become obsolete. By being able to set constraints for buying at a dollar level and at a warehouse space level, dealers and OEMs are assured that dollars spent provide maximum value.
Whether your organization is looking to improve availability at a dealer or market level, gain more visibility and control over parts volumes, or increase customer service levels at your dealers, a dealer inventory management software that is built for today’s business and service realities is a must.
In Part II, we'll discuss how OEMs can utilize DIM technology's predictive capabilities in their operations.