This week at the Automotive Aftermarket Supplier Association (AASA) Tech Conference in Clearwater (FL), SAP announced its joint findings with the venerable industry group with the release of its 2015-16 survey and white paper “Business Capabilities in an Evolving Industry.” My colleague Brian Diehl joined me with Chief Strategy Officer Jay Burkhart from AASA in the release and discussion that kicked off the B2B Marketing tech track of the conference.
From our side some of the findings and trends involving the growing awareness and adoption of digital capabilities in this segment of automotive were not particularly earth shattering. Spare parts makers – some of the same suppliers that build to OEM models new off the line – have been a key area proponents in manufacturing digitalization for some time. However, with the admission (that according to Forrester) Manufacturing companies as a whole represent the 46% of the laggard companies when it comes to digitizing their processes, and aftermarket as a segment to automotive are further behind that curve, the industry is evolving less due to want and more due to customer demand and need. In short, the industry is at a crossroads and the aftermarket segment is in the crosshairs.
As part of our findings, we learned that the aftermarket segment does indeed have aspirations to move to digital – particularly in the on-line self-service consumption of product information that is so key to engaging Millennial buyers. However the gap between “where we want to go” and “where we are today” across the industry is pretty stark (3+ points on the 20 point capability scale that SAP uses to rank its best practices index). When buyers can go to Amazon.com and engage in a fully preferences-driven experience – even touchless routing to recommended parts and equipment – it puts most conventional parts suppliers to shame. This high bar is reality today, and the “Big 4” aftermarket direct to consumer distributors (Amazon, Ebay, Autozone and Napa) are capturing the lion’s share of Omni-channel (web, phone, app, etc.) sales in the segment. While organizations like Federal Mogul Motor Parts and Grainger offer a very “consumer-ized” buying experience, our study shows that – as an aggregate – this capability gap is not likely to reach a tipping point for at least 3-5 years.
Another key finding that while the move to front office digitalization for aftermarket part sales is front and center, there is a lot of catch-up work and modernization when it comes to the back office operations. Inventory management, visibility to supply chain planning, and configure, pricing and quoting (CPQ) models are front and center of where the need for digital is strong. And while that may suggest a tighter link from front office sales to back office production, it creates a greater need to connect these often “siloed” functions of the parts maker business. Only taking an enterprise-wide approach can create not only self-service but also “concierge” or “guided buying” experiences where sales has access to pre-approved configurations – enabled for manufacture – and supported with the right material inventory and supply to actually deliver, especially on focused small lot sizes or even a “lot size of one.”
Aftermarket has come a long way over the last decade, representing a key margin segment opportunity for parts makers. Where we go and how we realize our aspirations in an evolving industry remain to be seen.
Download a copy of the white paper “Business Capabilities in an Evolving Industry” from AASA here. Join SAP and SAP hybris October 17-19 in Detroit for a further discussion on automotive aftermarket and other key automotive topics at our Best Practices for Automotive Conference (#BP4Auto). This article originally appeared on LinkedIn Pulse.