Preface What is supply chain strategy
First of all, what is a strategy?
The word “strategy strategy” was originally derived from military activities. It refers to how the generals on the battlefield used limited resources to obtain victory in the war. The word strategy used to have a lofty aura, such as The 'One Belt and One Road' initiative is China's national-level strategy.
What is a supply chain strategy?
According to the explanation of APICS, an authoritative supply chain management organization in the United States, supply chain strategy refers to a strategy for how the supply chain realizes the business goals and organizational goals in the process of enterprise development.
How to understand this sentence? My personal interpretation is that the strategy of the supply chain must be consistent with the strategy of the company's development and must not run in the opposite direction.
For example, Apple Inc., as the world's most famous electronic product design and manufacturing company, Apple's business strategy is very focused on product innovation, iPhone products will launch a new product every six months, so Apple's supply chain strategy must also It is very agile and the speed of product iterations is fast enough to keep up with the pace of business development.
In the following article, I will use a case study of an auto parts company to see which kind of supply chain strategy should be used in the automotive aftermarket in order to stand out in the brutal Red Sea and gain more customer orders for the company to win. Take more profit.
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I. Analysis of sales channels of auto parts companies
I have served such an auto parts company. This is a wholly foreign-owned company. The main product is a wiper assembly for automobiles, which includes motors and wiper strips. The company’s customers are mainly domestic automakers. Shanghai Volkswagen, General Motors, and Ford, etc. The products supplied to such customers are also referred to as OEM OEM parts, and are parts supplied directly to the vehicle factory production line.
In addition, the company's other business is the automotive aftermarket, which is divided into two modes.
The first is the original after-sales service supporting OES parts, which refers to the products that are sold through the original after-sales service channels. The automaker needs to have a certain amount of spare parts inventory in the 4S shop of its distribution network for vehicles. Repair and maintenance.
The second is the so-called post-market IAM part, which is the part company through a variety of online and offline channels, distributors, chain stores, e-commerce platforms or smaller-scale roadside repair shops. , to sell auto parts mode.
For auto parts companies, through the cooperation with OEMs, it has established an inseparable link between its OEM products and the original factory, providing quality assurance, but it really brings huge profits to the company. It is OES and IAM parts. Therefore, the consensus in the auto parts industry is that the OEM business runs a lot of money. It still depends on OES and IAM parts.
Second, poor aftermarket delivery performance
In my previous company, the ratio of sales channels in the OEM and post-market sales to the company's turnover was approximately 7:3. The former is obviously the company's business focus. OEM customers not only have a high proportion of business volume, but also have quality and delivery. The time limit is even higher.
For quality, any flaws on the surface of the wiper rod after painting will be subject to customer complaints. The timeliness requirements for delivery are another hard indicator. If there is a delay in delivery, the customer requires us to arrange a special car. Or air shipments, especially when asked to ask the company's management to report to the vehicle factory, explain the reasons for the delay in delivery, and even there will be fines.
In this context, the focus of our daily attention is necessarily to OEM customers. Although the order weight of OES and IAM parts cannot be underestimated, due to various reasons, it has never received the attention of the company, resulting in post-market orders. The delivery rate has always been low. I have summarized several major reasons:
1. Post-market order delivery assessment requirements are low.
Different from the stringent requirements of OEM customers, aftermarket parts are relatively slow to deliver. Even if the delivery is late, at most, some customers complain, and there will not be any punitive measures.
As long as you talk to your customers well, it will be fine to pay for the goods later. In this case, the company will naturally focus its efforts on completing the OEM orders, and the priority of the market orders will be In the final.
2. Lack of stable orders and demand forecasts.
The order of the automaker is a kind of 'relevant demand', that is to say, the order quantity of auto parts company is proportional to the amount of vehicle production.
The demand forecast of OEMs is also more reliable. Generally speaking, they can provide more than three months of sales forecasts to component companies.
Then the order quantity of the market is a kind of 'independent demand'. How many orders will be received depends entirely on fragmented, random market demand, not associated with any particular customer. Under the characteristics of post-market orders, the company It is difficult to obtain stable orders, not to mention demand forecasts.
3. Delivery time, order quantity and other factors.
The delivery date of the automaker is fixed, and it is stipulated in the initial part development agreement. The minimum order quantity MOQ is also the whole unit, or even the whole pallet, as the minimum unit. The goods packaging for the entire vehicle customer is also available. Clear packaging specifications, each corresponding SKU has a packaging job instructions and BOM.
Aftermarket is completely another situation. First of all, the delivery period is random, and the post-market customer may have the next big order at any time. The time limit for delivery is very short, which is one of the characteristics of the aftermarket of auto parts.
Secondly, the order MOQ is very small. Sometimes an order line may only have 5 tablets and 10 tablets. It is very irregular. The packaging line workers are mainly OEM parts packaging. They are disgusted with the different post-market parts with different orders. Because the production efficiency of the package after-sales parts is relatively low, it will also affect the income of the workers, so the enthusiasm for completing these fragmented after-sales orders is generally not high.
Under these objective circumstances, the delivery rate of our factory's post-market orders has been in the 50-60% area. Every few days, our after-sales items have accumulated a lot of orders, and customers often complain that the delivery is not timely. , Can not provide their customers with maintenance items, resulting in the loss of business.
Faced with a large number of customer complaints, I can only coordinate with the production department and state the interests (we will not complain to the general manager when we do not deliver the goods). After that, we can concentrate resources on completing batches of after-sales orders. To quell customer complaints.
Unfortunately, it didn’t last long, and soon afterwards everyone put order for after-sales parts aside until the arrival of the next wave of customer complaints. As a result of this repeated cycle, the after-sales goods were owed to orders as if they were leeks, and the slicing soon became longer. Hey, it will never be clean.
Third, the strategy of eating fresh food all over the country is no longer suitable for auto parts companies.
In dealing with OEMs and post-market orders, we have misunderstandings in understanding, which further affects the formulation of our supply chain strategy.
1. Sales volume or profit
Although OEM orders account for a large proportion of sales, the gross margin is not high, and the product quality requirements are also very strict. If quality claims or fines are encountered, it is very likely that they will lose money. This is purely a loss. type.
On the contrary, after-sales orders account for a small proportion of sales, but they have high gross margins, and their quality requirements are slightly lower than those of OEM parts. They help the company make a lot of money in quietly.
We will be so contempt for after-sales orders, in addition to the above-mentioned cognitive errors, the use of the same set of supply chain strategies to deal with after-sales orders to OEMs, is also a cause of delivery problems.
2. Efficiency or efficiency
The supply chain strategy we adopt in the treatment of OEM orders is a strategy that focuses on lean production, continuous improvement, efficiency improvement and cost reduction.
Our customer orders are relatively stable, with at least 3 months of demand forecasting. These conditions allow us to maximize the utilization of equipment resources, minimize inventory costs, and belong to the efficiency of the supply chain.
The strategy for aftermarket parts is completely different. This is a strategy that requires quick response to customer needs, shortens lead times and balances supply chain costs. The strategy to find the best balance between service level and cost is Benefit to the supply chain.
3. Maketoorder or Maketostock
According to different supply chain strategies, the manufacturing production model can be divided into the Maketostock model based on forecast and safety stock, or the Make to order model based on customer orders.
Which model to choose in the end depends on the situation of product sales and fluctuations in demand. After a comprehensive analysis, a corresponding strategy is developed. In auto parts companies, there will be more than one supply chain strategy, which is the Demand characteristics are determined.
IV. Changes in the Crisis, Adjustment of the Supply Chain Strategy in the Aftermarket Red Sea
After considering these constraints, I made corresponding adjustments to the company's supply chain strategy.
1. Organizational structure adjustments.
I adjusted the organizational structure to further adapt to the after-sales supply chain strategy. In the original supply chain department organization, the customer service staff of the after-sales component is in a team with other customer service colleagues. There is no separate The procurement of raw materials and production plans, all pre-delivery work must rely on his independent coordination to complete, within the department to obtain less support, work more difficult to carry out.
After adjusting the organizational structure, we set up the materials manager for the aftermarket market and the following team so that we can target the customers in the aftermarket.
Special materials are also responsible for the special raw materials for the aftermarket parts, especially in terms of packaging materials. It has its own production planning function to ensure that all customer orders are converted into production orders and can track production progress.
In this way, after-sales customer service can focus on the customer, spend more energy on communicating with customers, and better serve customers.
Although some jobs have been created to bring about higher labor costs, in the long run, especially in the era of rapid development of China's auto aftermarket, these human investment will soon be rewarded.
2. Adjustment of production mode.
In addition to changes in the organizational structure, the production methods also need to be improved. Enterprises need to adjust the layout of the production line and equipment according to their own actual conditions, and establish a separate aftermarket market production area.
If necessary, even to invest in a separate production line, specifically responsible for the aftermarket market, there are not only the factors of production capacity, but also the different production plans arranged considerations.
In terms of inventory strategy, the aftermarket market needs to establish a certain amount of finished product safety stock to respond to customer demand fluctuations and quickly fulfill customer order delivery. Of course, the level of safety stock is set according to factors such as the amount of sales of products and volatility. of.
3. Set the ABC-XYZ strategy.
On the basis of the traditional Pareto 20/80 rule, if we consider the factors of product demand fluctuations, we will develop the ABC-XYZ strategy. The auto parts market is more inclined to the retail industry, and most of the demand is Independent requirements are ideal for using this strategy to better meet customer needs and establish safe inventory levels.
In simple terms, the ABC taxonomy is to define the SKU with 80% of the sales amount as Class A, 15% as Class B, and the last 5% as Class C.
XYZ classification is to classify the fluctuation coefficient of product sales. The 80% before the coefficient CV fluctuation is defined as Z, which is the most unstable, followed by 15% less stable Y, and finally 5% of X is the most Stable SKU.
According to the above definition, we can classify products into nine categories: AX, AY, AZ, BX, BY, BZ, CX, CY, and CZ. Due to space, I don't expand every strategy here. one example.
For the after-market products, the BX or BY-type SKU with relatively low amount and stable demand can set a safety stock amount. If the stock is lower than the set amount, it immediately arranges production replenishment. Because this part of the SKU's The amount is not high, so there is no need to worry about the impact of inventory on cash flow. Due to stable demand, there is no need to worry too much about sluggish inventory.
Conclusion
In the increasingly fierce market competition, it is not only products and prices that compete with each other. Competition among supply chains has also become a key factor in determining success or failure.
Managers of enterprises need to formulate appropriate supply chain strategies based on actual market conditions, and the supply chain department will implement the company's business strategy.
In the auto parts industry, the differences between the OEM OEM parts and the aftermarket OES/IAM parts are not significant, but the supply chain strategy varies, which makes us need to adopt appropriate strategies to gain market share. , Increase operating income, invincible in the competition.
