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Driving distribution excellence with an efficient and flexible supply chain that supports your business objectives is challenging. Minimizing inventory and lead times while maximizing the top line with quick-to-market new products is crucial to staying ahead of the competition. The Specialty Automotive Equipment (SAE) industry is growing rapidly and gaining momentum. SAE manufacturers and distributors must focus on several key initiatives in order to maximize their business performance and position themselves for long-term success. Retail sales exceeded $31 billion in 2005, up 86 percent from 1995 sales according to the Specialty Equipment Market Association (SEMA). The industry has been growing about 9 percent annually over the past decade, outpacing Gross Domestic Product (GDP) growth by almost 6 percentage points.
Automotive parts manufacturers increasingly have to extend their geographic reach beyond local regions or the U.S. — i.e., source their products globally in order to be cost and price competitive in the market. This is especially true for labor-intensive products where labor rate differences are substantially lower outside of the U.S. Overhead operating expenses are significantly lower as well resulting in a much lower overall cost structure. The shipping complexity of sourcing products from overseas has created new challenges for companies who have traditionally only used domestic suppliers. Highly complex products are generally still sourced in the U.S. market due to concerns over quality and maintaining confidentiality of designs and technology.
Shipping costs can increase substantially as a result of global vendors, manufacturing sites and customers. High-value, low-weight and sensitive products generally are shipped by air, while heavier, lower-valued products are shipped via ocean. Automotive distributors and manufacturers must evaluate the added inventory-carrying cost and transit time when evaluating transportation options from international locations.
Increased Importance of Packaging
Because more parts are sourced internationally, the importance of proper packaging has increased. In several parts of the globe, the packaging used is usually recycled. While this is environmentally friendly, the paper fibers do not hold their strength and can result in packaging that will not properly protect the automotive parts. Distributors and manufacturers must work with their international suppliers to ensure that proper packaging is being used and that these costs are included in the total product cost.
Selling Globally
The demand for high performance parts and personalization parts and accessories are growing globally and increasingly automotive parts manufacturers and distributors are finding a way to grow profitably is by selling internationally. Because of the rapid growth of the Internet, new fads and information about ingenuous new products spread rapidly, and automotive parts manufacturers and distributors need to be able to sell to these customers immediately and integrate these products into their supply chain.
Reducing Costs to Increase Gross Margin
Automotive parts manufacturers and distributors continue to look for ways to further streamline operations and eliminate waste and cost. Many companies are pursuing reduced operating costs and increased flexibility in manufacturing by building on previously implemented continuous improvement initiatives such as lean manufacturing and Six Sigma. These operational methods are aimed at eliminating unnecessary processes in not only the manufacturing processes, but all supporting processes as well. This results in less costly daily operations and builds in capabilities to quickly and easily change tooling and molds to build product based on customer demand. This has a significant impact on finished goods inventory since significantly less product will be stored at distribution centers (DC) as companies can quickly make many models of product.
These processes result in smaller quantities of each SKU being shipped to the DC, but much more frequent shipments from the factory to the DCs. Transit time between the manufacturing locations and the DC must be minimal in order to keep adequate stock levels at the DC ultimately to meet customer demand.
Immediate Availability of Product
To compete effectively, distributors are selling their products via multiple sales channels: using a sales force, a Web site, catalog, trade shows, etc. This can cause an increase in complexity in the distribution channel and sales processing; however, it is necessary to continue to increase revenues and profits. Customers also demand and expect their products to be shipped immediately upon request. Distributors must be extremely responsive to these needs as well as last-minute changes. Flexibility in all these processes provides the ability to change as needed by the marketplace.
In addition, quick response to replacement product is expected by the customer. Customers are either relying on their vehicle for transportation to work or necessary daily duties or their vehicle is their passion. Either way, customers demand that their product and distributors must be able to supply the specific product at a moment's notice
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Industry Programs & Events
FedEx is an active supporter and participant in the automotive distribution industry. We frequently provide educational programs and participate in a variety of industry events. Look for upcoming activities in your area.
Industry Associations
American International Automobile Dealers Association (AIADA)
Automotive Aftermarket Industry Association (AAIA)
National Truck Equipment Association (NTEA)
Performance Warehouse Association (PWA)
Specialty Equipment Market Association (SEMA)
Automotive Recyclers Association
Automotive Parts Rebuilders Association (APRA)
Auto Engine Rebuilders Association (AERA)
Motorcycle Industry Council (MIC)
National Automobile Dealers Association (NADA)
Motor & Equipment Manufacturers Association (MEMA)
Original Equipment Suppliers Association (OESA)
Automotive Aftermarket Suppliers Association (AASA)