Automotive Aftermarket Illustrates Growing Business Capabilities In An Evolving Industry

William Newman

At October’s Automotive Aftermarket Supplier Association (AASA) Technology Conference in Clearwater, Fla., SAP and AASA released their joint 2015-16 survey and white paper “Business Capabilities in an Evolving Industry.” My SAP colleague Brian Diehl and AASA chief strategy officer Jay Burkhart joined me for the survey’s release and discussion, which kicked off the Marketing/B2B track of the conference.

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 for OEM models new off the line – have been proponents of manufacturing digitalization for some time. However, with Forrester’s report that manufacturing as a whole represents 46% of the laggard companies when it comes to digitizing their processes, and the automotive aftermarket segment is even further behind the 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.

In our survey, we learned that the aftermarket segment does indeed have aspirations to move to digital – particularly in the online, self-service consumption of product information that is 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 omnichannel (Web, phone, app, etc.) sales in the segment. While organizations like Federal-Mogul Motor Parts and Grainger offer a very “consumerized” buying experience, our study shows that – as an aggregate – this capability gap is not likely to reach a tipping point for at least three to five years.

Another key finding was 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 needed when it comes to back-office operations. Inventory management, visibility to supply chain planning, and configure, price, and quote (CPQ) models are where the need for digital is strongest. 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. 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.

This article originally appeared on LinkedIn Pulse.


William Newman

About William Newman

William Newman is a Strategic Industry Advisor, providing industry perspective, strategic solution advice, and thought leadership to support SAP automotive and discrete industry customers and their co-innovation programs. He helps build and maintain SAP's leadership position in the automotive industry and associated industry segments. He manages SAP’s annual digital aftermarket survey program and serves as the ASUG Point of Contact for the NA Automotive SIG. He is the author of two SAP Press books and a LinkedIn Editor’s Choice contributor.