| Automotive dealers have a number of objectives to | | | | dealer forecasting system most of the risk of |
| meet with respect to stock levels. These include | | | | maintaining inventory is with the distributor, not the |
| maintaining the right level of stock inventory, | | | | dealer. |
| minimising stock holdings, keeping stock costs to a | | | | The distributor has a broad visibility of stock levels |
| minimum and maximising efficiency in stock use. A | | | | across all dealerships and in certain circumstances it is |
| consistent ordering process reduces business | | | | possible to open up the visibility between all |
| pressure to meet stock levels and allows dealers and | | | | dealerships. A dealer enquiry for a part can reflect |
| distributors to manage the exceptions to stock levels | | | | both the distributor stock and the dealer network |
| as opposed to moving from one crisis to the next. | | | | stock. Generally, a dealer will be able to see only the |
| Without an efficient forecasting process in place a | | | | distributor stock and if that has been exhausted, a |
| dealer will simply aim to minimize stock holdings. | | | | dealer may be allowed to view the rest of the stock. |
| However, if dealers are not forecasting correctly, | | | | Distributors encourage dealers to buy from the |
| stock levels will be incorrect. There are obvious | | | | distributor first, and then buy it within the network. |
| inventory costs in holding too much stock but at the | | | | When buying within the network the supplying dealer |
| same time, too little may require emergency orders. | | | | accepts the order and is credited from the distributor. |
| Dealers who require such emergency orders bear not | | | | The receiving dealer is charged for the stock from |
| only higher costs of stock purchase but also | | | | the distributor. The distributor can then monitor the |
| increased freight costs. In addition, dealers have | | | | demand between the two, and adjust the system |
| traditionally decided not to order extra stock | | | | for that demand later on. The distributor can then |
| because, in the event that the dealer is unable to | | | | analyse whether a dealership is using more of a |
| move that stock within a reasonable time frame, | | | | particular stock than expected, and can adjust the |
| there may be a higher cost of managing and | | | | dealer's forecast accordingly. |
| warehousing inventory. | | | | Contingency for emergency orders |
| An efficient forecasting system assists both the | | | | The primary goal in any stock control process is to |
| distributor and dealer to reduce costs by providing a | | | | reduce emergency order frequency. An efficient |
| consistent, predictable and reliable basis for stock | | | | warehouse process, where dealers place more stock |
| inventory. There will always be unforeseen | | | | orders and less daily or emergency orders reduces |
| circumstances, but these can be managed as | | | | pressure on the entire distribution and dealer |
| exceptions as opposed to normal business processes. | | | | network. The dealer forecasting system, together |
| Distributor versus dealer forecasting | | | | with an optional distributor buy-back strategy, goes a |
| A new system, pioneered and functioning well in | | | | long way to achieving this. |
| Europe, gives distributors, rather than dealers, | | | | Dealers are encouraged to stock a greater range of |
| ultimate responsibility for forecasting stock | | | | parts, based on the analysis gained from a consistent |
| requirements. By analysing trends in stock ordering | | | | forecasting process so that they can fulfil their |
| across all dealerships, the distributor is better able to | | | | customer requirements efficiently and cost |
| forecast, taking a broad view of requirements, | | | | effectively. The distributor gains the benefit of |
| predicting the expected stock requirements of | | | | knowing where parts are located throughout the |
| dealers and advising accordingly. For example, | | | | dealer network and a more efficient warehousing |
| following the release of a new vehicle model, | | | | operation. |
| patterns may emerge in high volume metropolitan | | | | There are some quite significant benefits to both |
| locations. These then provide valid information on | | | | distributors and dealers of a dealer forecasting |
| trends as the volume increases in other locations, | | | | system. Distributors and dealers in Europe that have |
| such as in country areas. The distributor can advise | | | | engaged this model are experiencing significant upside |
| or make certain components compulsory when a | | | | to their business and are now more able to meet |
| new dealer starts up or a new model is introduced | | | | customer requirements as well as having a more |
| into a new area. | | | | consistent and predictable inventory process. |
| Under this new system a dealer is obliged to | | | | The free flow of information between the distributor |
| purchase a certain level of stock because the | | | | and dealer is enhanced with a dealer forecasting |
| distributor wants to ensure that a dealer has a basic | | | | system. Distributors understand the amount and |
| set of components for a particular vehicle model that | | | | frequency of all stock requirements in the system. |
| will cover most situations. Distributors understand, | | | | There is an ability to move stock using both the |
| through trend analysis, the frequency with which | | | | distribution and dealer network. The dealer however |
| components will be used and are in a position to | | | | has reduced risk in stock holdings and so is more |
| advise dealers about the components that are to be | | | | likely to retain a greater variety and number of parts |
| maintained. | | | | to satisfy customer needs. |
| There has been slight, initial resistance from the | | | | Summary |
| dealers in the implementation of this system. The | | | | Consistent and predictable information flow between |
| major issue has been that the distributor is basically | | | | a distributor and a dealer can be achieved through an |
| instructing the dealer as to the stock that has to be | | | | efficient forecasting system. A distributor, having |
| purchased. However, as the distributor now accepts | | | | access to a broad view across all dealers, can |
| a greater risk by allowing the dealers to return | | | | provide in depth analysis of stock usage, inventory |
| unused stock within an agreed period or to increase | | | | and future stock requirements. A distributor is then |
| or in some circumstances reduce quantities, | | | | able to provide accurate advice to dealers on the |
| resistance has been greatly reduced. | | | | type, amount and availability of stock required based |
| The advantage to the dealer in agreeing to those | | | | on factual data. |
| recommendations is that many dealers today would | | | | Cost reductions throughout the supply chain process |
| not stock all the recommended parts due to the cost | | | | are realised for distributors and dealers through a |
| of maintaining inventory and the fact that it could not | | | | more streamlined forecasting system. Facts can |
| be returned to the distributor if it was not used over | | | | dictate how much stock is required across the entire |
| a given time. Essentially, the dealer manages the | | | | dealer network and the expected usage rates by |
| inventory risk and their behaviour reflects that risk. | | | | each individual dealer. Total stock inventory is |
| Free flow of information within the network | | | | reduced, availability immediately known and the ability |
| The key to successful dealer forecasting is the free | | | | for the distributor to deal with emergency orders is |
| flow of information between the dealer and the | | | | greatly enhanced. For both the distributor and dealer, |
| distributor. Dealers provide information about their | | | | inventory and warehousing costs are reduced while a |
| current stock levels and the demand for stock items | | | | reduction in frequency of emergency orders results in |
| and the distributor can understand the stock patterns | | | | less freight and delivery costs. |
| that the dealer experiences. In a well functioning | | | | |