Results from the Automotive Aftermarket Suppliers Association’s (AASA’s) quarterly “Supplier Barometer,” indicate strong concern among suppliers about higher manufacturing and fuel costs. According to Steve Handschuh, president and COO of AASA, “all of our Q2 2011 survey respondents reported they experienced raw material prices increases over the last 12 months,” and while most reported price increases of 5 percent to 29 percent for raw materials, a significant number reported increases of more than 150 percent.
These findings are cause for concern among aftermarket suppliers. News of the cost increases comes on the heels of what has been a very interesting period for the industry. First, the aftermarket was able to withstand the negative fallout of the economic recession – largely due to cost-conscious consumers choosing to maintain their older vehicles. The aftermarket also weathered uncertainty as a result of the earthquake and subsequent tsunami that struck Japan during March. The disruptions to the automotive supply chain had a worldwide ripple effect, but the aftermarket was able to escape largely unscathed.
While the Japanese disasters have not had a major impact on the automotive aftermarket, a significant portion of Barometer respondents have “had to deal with parts shortages and seek alternative suppliers,” explained Paul McCarthy, AASA vice president of industry analysis, planning and member services.
With these issues on the horizon, the one certainty seems to be an interest in cost cutting and internal efficiencies. Manufacturers will naturally be looking to their supply chains for savings. As suppliers do look to streamline logistics costs and improve efficiencies, here are a few things to keep in mind:
Customized Solutions are Key: A good provider will be able to offer a customized logistics solution that addresses a manufacturer’s unique business needs, which generally means that shipments travel more efficiently and seamlessly.
Keep it Local: If you’re sending a shipment of parts to Canada, doesn’t it make sense to use a logistics provider that has experience in the Canadian market – a provider that can ensure that shipments won’t be delayed at the border, and will arrive on-time at their Canadian destination? This sounds obvious, but a surprising number of businesses trust their shipments to carriers with minimal experience, only to pay the price later with inordinate delays and unexpected fees.
Out of the Box Thinking could mean Big Efficiencies: A post-recession supply chain check is a good time to match your current operating procedures against current industry trends to make sure you’re taking advantage of different options.
- Distribution Center Bypass: Logistics providers are increasingly able to skip unneeded distribution center stopovers by taking advantage of increasingly connected distribution networks. Direct-to-store transit also means that suppliers can maintain leaner inventories.
- Inbound Freight Management: Take control of your transportation spend by managing logistics for all incoming shipments. By centralizing logistics planning, a business negotiates service agreements with a logistics provider, and utilizes that provider for all incoming shipments. A business is no longer beholden to the costs and delivery schedule of a transportation provider selected by a supplier.
AASA’s recent Barometer Survey made clear that aftermarket professionals are quite concerned about both short-and-long term economic factors. By taking the time to evaluate its supply chain, a business could easily put in place new logistics practices that could result in measurable efficiencies and savings.
Is your business within the automotive aftermarket? Are you concerned about the future economy. Share your thoughts and opinions here.