Aasa webinar presentation inmar gates-100914
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Aasa webinar presentation inmar gates-100914
- 1. Maintenance Required Repairing Warranty Management • Name of Presenter Goes Here In Automotive Aftermarket © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION • Presenter Title Goes Here
- 2. © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION 2 Rob Zomok Sr. Director, Supply Chain Performance Analytics Dave Miller Vice President of Marketing, Automotive Aftermarket
- 3. © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION AGENDA 1. Review Impact of Warranty on the Aftermarket 2. Current Industry Initiatives – AASA Warranty Task Force – Channel Partner Collaboration Success 3. A Look into Another Industry 4. Go Forward Strategy 3
- 4. 117.7 million parts returned annually © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION 4 The Impact: 97.5% of warranty returns are NOT QUALITY RELATED Total warranty at wholesale $3.53 billion in 2013 2.5%Percent attributed to actual quality/defect Source: AASA *If the average cost per item is $30 Estimated 2.9 million are more than likely actual quality driven The variance in alleged defect and actual quality returns is near 114.8 million units Source: Industry assumption cost per item for hard part at $3.53 billion Source: 111.7 million parts x 97.5% preventable
- 5. © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION Source: http://www.glumac.com/greenresources/gr_carbon_emissions.html 5 The Impact: Transportation Cost and Sustainability # of Hauls 57,400 Est. Fuel Consumption (MPG) 6 Avg. Miles/Haul 300 Carbon/US Gal of Diesel (KG) 2.77 Miles/MPG x 2.77KG per gallon Industry Carbon Footprint for "Non Quality" Alleged Defect Returns 7,949,900 KG 17,526,529 Lbs 2,000 parts Extra 57,400 hauls transporting product that could be on a retail shelf or newly installed in a vehicle. Equivalent to a 100- passenger commercial flight traveling from earth to nearly 40,000 miles past the moon For 114.8 million parts returned annually… Per truckload Source: Industry standard 2,000 parts per truck against 114.8 million parts
- 6. The Strain of Warranty Returns On Suppliers and Distribution Partners are identical © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION DISTRIBUTOR/RETAILER Source: AASA Special Summit on Warranty Transportation Storage Handling/Quality Review/Labor Sales Time Credit Issued/Warranty Not Paid Customer Service Disputes Training/Marketing Lost Profit Cost of Goods SUPPLIER 6
- 7. Visibility Into Retail Channel Partner’s Warranty Burden *in Thousands Source: AAP, AZO, ORLY, PBY 2012 & 2013 Annual Reports Source: AAP, AZO, ORLY, PBY 2012 & 2013 10-k Reports © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION Over the past two years, for every $1 at the register retailers are missing out on nearly 2/3 of a penny 7 Total Net Sales from 4 of the Big 5 2013 $23,899,278 2012 $22,634,998 To Top Line Revenue 2013 99.373% $23,749,429 2012 99.376% $22,493,832 Warranty Reserves 2013 0.627% $149,849 2012 0.624% $141,166 Warranty Reserves Warehouse Distributors Segment Reserves could total $315,000,000 Source: 2014 AASA Vision Conference
- 8. Visibility Into Retail Channel Partner’s Warranty Burden Assumed Retailer/WD Reverse Logistics Costs for Warranty Hard Parts Returns © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION Source: Inmar independent research 8 * Excluding Costs associated with Destroy-in-Field policies $15MM DC Costs $6.3MM Transportation $3.2MM Other costs Retail/WD Segment $24.5MM RETAIL/WD TOTAL WARRANTY COST $490 Million
- 9. Not My Problem: Why Should You Care? If you’re thinking… You should consider the possibilities… My Warranty rate is low I sell consumer or “Bottled Products” I pay an off-invoice warranty rate My product is inexpensive with little or no “Labor Claims” © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION • Reducing/Understanding HIDDEN/Admin Costs • Finding Asset Recovery Potential • Analyzing product condition and root cause of returns to intelligently support your allowance rates. You may actually be over paying!! • Improving Supply Chain handling practices Source: AASA 9
- 10. © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION 10 Preventing Returns Before Initiation AASA has teamed with ASA to collaborate and address shop-based opportunities. Warranty Prevention Training and Education Programs Financial Impact of Preventable Warranty Problematic Product Categories AASA Know Your Parts® Build Confidence in Premium Brands Develop Tools (a mobile device application and poster) ASA and AASA resources Assign Metrics
- 11. Data RTV-MFR © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION 11 What Does Collaboration Look Like? SCAN Recall Return Return to Stock Dispose/Scrap Return To Vendor (RTV) - Remanufacture RTV-Validate and Scrap Supply Chain Performance Analytics Auto Parts Retailer Corporate Auto Parts Manufacturer Corporate Inspection and Disposition Data Auto Parts Retailers Auto Parts DC Retailer or 3rd Party Reverse Supply Chain
- 12. Collaboration Elevates Financial Performance For The Entire Industry Collaborative Processing Advantage Overall cost reduction to process More transparent reporting Expedited cycle time with active Distributors © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION period processing Data driven improvements • Increased Category Margins • Improved Trading Terms Suppliers • Increased Category Margins • Confidence and Peace of Mind • Better Business Decisions 12 Customer satisfaction
- 13. Prior to Collaborative Processing… © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION 13 • Gates returns were scrapped through the retailer’s reclamation process • Gates credited channel partner based on agreed terms and policies After Six Months of Collaborative Processing… Gates has realized opportunities to recover 4% of returns as eligible for return to stock • For every $1 Gates invested into the current Collaborative Processing model they have generated $1.20 in return… in 6 months! • Gates has used data analytics to implement process improvement changes to product manufacturing and packaging • Gates’ refined understanding of their warranty returns has impressed their collaborative trading partner and the two channel partners continue to adjust their partnership policies for everyone’s best interest.
- 14. © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION 14 Top Offenders: What Parts are Driving Your Return Rates Gates now has this level of visibility into activity with specific parts and categories Source: Gates Corporation
- 15. Condition Analysis Insights = Opportunity 98% 3% 1% 100% 50% 100% 80% 60% 40% 20% 0% Contaminated OEM Gasket Missing 99% 4% 0.2% 100% 50% 0% Contaminated OEM Gasket Missing © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION Gates used Inmar’s Analytics to help quantify Warranty abuse and provide insights to show that original assumptions were not correct 15 Parts missing SOURCE: Inmar Analytics 97% 21% 0% Film Broken Parts Missing Tensioners Water Pumps Timing Kits
- 16. OE/Competitive Brand Water Pumps and Tensioners Contribute 3% of YTD Warranty Spend $0 $5,000 $10,000 $15,000 $20,000 $25,000 Water Pump Tensioner © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION 16 3%of YTD Warranty Spend Other product makers experience as high as 22% - 30% $ Spent on other makers’ parts returned to Gates
- 17. 96% 4% Destroy Return to Client © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION % of Total Part Type Volume—Return to Client 17 Asset Recovery Distribution Dispositions—% of Total Volume YTD trends indicate that 4% of returns are recovered as eligible for return to stock Tensioner 1% Timing Kit 9% Water Pump 2% Tensioner Timing Kit Water Pump 10% 8% 6% 4% 2% 0% Timing Kits seem to be 6x more likely to be returned in New/Uninstalled condition than Tensioners and Water Pumps Source: Inmar/Gates six month business review
- 18. Let’s Explore What’s Missing We are not alone… other industries face these challenges © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION You are here 18 What they do: • Metrics in place to quantify results/losses • Industry benchmarks for competitive comparison • Agreement on policy related to costs of returns for both sides • Collaboration between channel partners Source: AASA
- 19. Learning from another industry Manufacturers have been © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION 19 Consumer Product Goods manufacturers have had great success utilizing supply chain performance analytics to develop returns policy: successful in reducing their overall industry unsaleables rate by nearly half over the past 10 years by negotiating policy terms Source: Inmar Supply Chain Performance Analytics studies
- 20. © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION 20 The key to success is that both trading partners understand that there is shared responsibility when it comes to warranty
- 21. © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION retail distribution center studies 21 consumer units included in benchmark application consumer units reviewed retail store studies unit loads analyzed Data Drives Successful Benchmarking 550000,,000000,,000000++ 10,000,000+ 7700,,000000++ 2,000+ 45,,000,,000+ 10,000+ 775500,,000000++ shipping containers assessed Source: Inmar Supply Chain Performance Analytics studies
- 22. What a Benchmark Initiative Should Include Access to data from thousands of audits Information on unit load conditions, shipper conditions and consumer unit damaged and expired Aggregated Industry Data for direct comparison benchmarking Drill-down data analysis Year-over-year trending Exportable, high-impact graphics Nested data analysis to tie together data points Geographic specificity of issues Visibility to industry adjustable rates Historical performance of package type by channel or season Theoretical rates are available for setting adjustable rates © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION 22
- 23. What a Rigorous Benchmark Initiative Gets You: Access to timely data Convenient snapshots of important data Insights to improve forecasting and budgeting Directional data © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION 23
- 24. 2 1.5 1 0.5 nearly50% Source: Inmar Supply Chain Data 2008--2013 24 © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION 0 2008 2009 2010 2011 2012 2013 CPG Unsaleables: Client Retail Shelf Trends have decreased The Automotive Aftermarket can begin to evaluate policy strategies that derive from insights into characteristics of warranty product returned. Can all drive improved allowance/credit rates for suppliers and will challenge retailers and WDs to work to improve their handling performance. For example, more insight into: % OE product % Non-Brand product % New, not-mounted parts Source: Inmar Supply Chain Performance Analytics studies
- 25. On product inspectio n alone: 117.7 m million parts returned each year 4% * volume return to stock *Many manufacturers have much higher unrealized RTS rates © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION $141 m gain to the industry 25 What’s Possible for Your Industry 4.7 m eligible for RTS ($30 per part average) If Current Warranty Spend Is: $ 5 Million $10 Million $20 Mill Industry ($3.53B) Return to Stock (4%) $200,000 $400,000 $800,000 $141 Million “Not My Part” (15%) $750,000 $1,500,000 $3,000,000 $530 Million Warranty Reduction (17.5%) $875,000 $1,750,000 $3,500,000 $617 Million Supply Chain Improvements (17.5%) $875,000 $1,750,000 $3,500,000 $617 Million Potential Future Picture $2,300,000 $4,600,000 $9,200,000 $1.624 Billion
- 26. Adapt process flows: NAPA process flow as a benchmark © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION 26 The Key: Collaboration with Trading Partners for a Win-Win Bring industry partners together Data visibility initiatives Develop best practices Warranty reduction initiatives Returned product handling
- 27. © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION 27 What to Talk About and How to Talk About It Use an understanding of retailers’ pains as a way to show the benefit of collaborating with you for improvement: Reduce Possible solutions: • Gain Share Initiatives: Incentives to meet returns goals • Reduced credit % and apply pricing concessions Transportation costs for retailers % of transportation cost with product inspection/verification on return Estimated volume equated to truckloads and units touched by labor force
- 28. © 2014 Inmar, Inc. CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION 28 To Talk in More Detail About Your Specific Goals and Objectives: Set a meeting with us at Automotive Aftermarket Industry Week Jeff Z. Johnson Supply Chain Performance Analytics Consultant – Automotive Aftermarket JeffZ.Johnson@inmar.com 336.770.3505 Contact Info:
Notes de l'éditeur
- Jeff Intro… **summary of webinar** No-Questions-Asked Returns: Helping Manufacturers and Retailers Find the Balance Automotive aftermarket parts manufacturers face significant challenges with managing returns in an environment of increasingly more liberal retail returns policies. While retailers are seeking customer-service differentiation to attract and retain customers, suppliers are hard-pressed to meet the cost demands of no-questions-asked retail policies. In this webinar, we will discuss possibilities for helping makers and retailers collaborate to find balance that serves efficiency, discipline and cost management in the reverse supply chain. [NAME] from the Gates Corporation will join in to discuss metrics, value points and learnings toward short-term handling cost reduction and substantial long-term savings. The discussion will explore development of best practices for returns management that may be benchmarked from industries facing similar challenges. And we’ll identify some next steps toward more proactive returns management that promotes better collaboration across the industry.
- What the math tells us:
- If a TL can hold an average of 2,000 parts, this means there are an extra 57,400 hauls transporting product that should be on a retail shelf or newly installed in a vehicle.
- INTRO: Warranty Claims continue to be a pressing issue, as both retailers and supply-chain partners bear significant costs related to “no-questions-asked” returns policies. As noted in the AASA Special Summit presentation, The next few slides review the current Industry state as was shared by the AASA…
- So what? While some suppliers may feel less-impacted or somewhat “immune” to these issues, there are hidden costs, not often tracked, that mount-up throughout the entire supply chain. The Truth is… We ALL pay for warranty-directly and indirectly Time spent on warranty could be time spent selling your product Labor rates, production rates are all increased to compensate for warranty Distributor head count included in your cost
- AASA has teamed with ASA to collaborate and address shop-based opportunities. Their joint recommendations: Concentrate on warranty prevention, not warranty process (labor claims, return process, etc.) Improve technicians and shops participation in training and education programs provided by suppliers. Improve cataloging and an industry campaign to heighten the awareness of manufacturers’ training programs. Highlight the financial impact of preventable warranty to the shop. Concentrate on problematic product categories that are prone to preventable warranty. These products should be incorporated into the AASA Know Your Parts® campaign to further educate shops and technicians on common installation or diagnostic errors that lead to preventable warranty. Build confidence in premium brands. Suppliers should communicate that they manufacture globally but, regardless of where the part is made or purchased, their brands meet their specific quality guidelines. Develop tools (a mobile device application and poster) that give shops quick, one-stop access to all manufactures’ tech lines and training – another natural fit for the proposed Know Your Parts application. Use both ASA (Automotive Service Association) and AASA resources to be a medium of the respective campaigns. Assign metrics to the various campaigns and initiatives in order to have a benchmark for future success.
- Inmar handles more than $6.3MM auto parts annually on behalf of manufacturers and retailers Collaborative Processing and Shared Facility approach reduces overhead for all trading partners While this is an overall process Inmar recommends to retailers, the circled part is where the rubber meets the road. When suppliers and retailers share data, see each other’s burdens and see each other’s costs, collaboration reveals a common need and better results are possible. The opportunity from participation becomes more evident when the data is more visible on both sides.
- DISTRIBUTORS Increased Category Margins Reduced cycle time Less Accounting Reconciliation/Error Faster Store/Trading Partner Crediting Shared savings when collaborative solution removes cost from supply chain Improved Trading Terms Providing value-added solution to suppliers -- collaboration: “Help me to help you.” Complete data transparency – visibility into more areas where improvement can be found. Opportunity for future efficiency discovery. SUPPLIERS Increased Category Margins Mitigating costs for policy management Eliminate back billing Confidence and Peace of Mind Insights based on unique manufacturer needs. Improved accuracy through system-driven inspection Transparency through photo validation and more complete data capture Root cause analysis on returned goods Better Business Decisions Real-time data to identify risks and solve issues before they multiply Ultimately drive down warranty costs
- Prior to Collaborative Processing… Gates returns were scrapped through the retailer’s reclamation process Gates credited channel partner based on agreed upon terms and policies After 6 months of Collaborative Processing… “Gates has quantified warranty, giving us a better understanding of problems and potential solutions. We have clearly quantified mis-installation issues, quality concerns and outright abuse. This has allowed Gates to quickly address issues with change and education, improving customer satisfaction and the bottom line of everyone in the channel.” Gates has realized opportunities to recover 4% of returns as eligible for return to stock (product that was previously scrapped through the Retailer’s process) For every $1 Gates invested into the current Collaborative Processing model they have generated $1.20 in return… in 6 months! Gates has used data analytics to implement process improvement changes to product manufacturing and packaging Gates’s refined understanding of their warranty returns has impressed their collaborative trading partner and the two channel partners continue to adjust their partnership policies for everybody’s best interest.
- Explanation: 1% of Tensioners are recovered and 2% of Water Pumps are recovered, while 9% of Timing Kits are recovered. Timing Kits are recovered 9x more frequently than Tensioners and 4.5x more frequently than Water Pumps. Averaging out the 9x and 4.5x we come up with 6x… Leveraging Actionable Analytics: Gates Learnings Now easily and clearly able to quantify returns Identified opportunity for improved product I.D. and instruction Made numerous changes to help eliminate installation errors Quantified and worked to reduce warranty policy abuse
- OPPORTUNITIES: Discuss current programs like: Open the box” policy being socialized by AASA Gain share initiative? Discuss Offer 50% instead of 100% credit? Charge a restocking fee? Look at other parallel industries dealing with warranty returns issues
- Consumer Product Goods manufacturers have had great success utilizing supply chain performance analytics: Leveraging Damage and Expiry rates to determine retail trading partner policy rates for returns. Aftermarket Automotive could utilize findings from returns inspections to develop policy rates for their channel partners. In the Consumer Product Goods industries, manufacturers have been successful in reducing their overall industry unsaleables rate by nearly half over the past 10 years by negotiating policy terms with their trading partners that are directly influenced by supply chain handling practices, which drive expired rates and damaged goods.
- Consumer Product Goods manufacturers have had great success utilizing supply chain performance analytics: Leveraging Damage and Expiry rates to determine retail trading partner policy rates for returns. Aftermarket Automotive could utilize findings from returns inspections to develop policy rates for their channel partners. In the Consumer Product Goods industries, manufacturers have been successful in reducing their overall industry unsaleables rate by nearly half over the past 10 years by negotiating policy terms with their trading partners that are directly influenced by supply chain handling practices, which drive expired rates and damaged goods.
- FEATURES Access to data from thousands of audits at both distribution centers and retail outlets Information on unit load conditions, shipper conditions and consumer unit damaged and expired Aggregated data from Inmar services clients for the past three years Drill-down data analysis at the channel, category and sub-category levels Year-over-year trending Exportable, high-impact graphics Nested data analysis to tie together data points and draw a more complete picture of what is happening—relative to both time and touch points Geographic specificity of issues Visibility to industry adjustable rates Historical performance of package type by channel or season Theoretical rates are available for setting adjustable rates
- Benefits Access to timely data from across industries, company size and product type Convenient snapshots of important data to identify and resolve issues Insights to improve forecasting and budgeting Directional data to enable continuous improvement
- Need to adjust 2013 expired to .9
- The End Game: What’s possible Negotiate better warranty policies Right-size warranty spend Reduced unnecessary costs Keep good product out of reverse supply chain Instantly recover stockable material Use data to reduce warranty returns overall Use data to improve packaging and supply chain performance
- Summarize the Industry Need, What we see are the Opportunities, and how Inmar and our Trading Partners can play a role in reducing costs, improving trading partner relations and more with regard to Warranty Claims Issue… Bring industry partners together AASA warranty initiatives Pool resources: Cooperative efforts among manufacturers for stronger negotiating power Data visibility initiatives Get the information Collaborate and share data Develop best practices - Warranty policies and execution Warranty reduction initiatives Set benchmarks, with 1/3/5-year reduction goals at specified reduction percentages Offer incentives to retailers/WDs for complying with warranty initiatives; can be done within scope of current contracted agreements Returned product handling “Not-my-product” initiatives promote better product inspection at retail Establish goals with incentives; penalties for infractions Adapt new process flows: NAPA process flow as a benchmark Benefits Reduction & Elimination of hidden/soft costs Next Steps to finding common ground and success
- We will be at APEX in November if you want to continue the conversation…