The demanding aftermarket supply chain can be overcome through the use of innovative 3PLs. Alex Kreetzer talks to Neovia Vice President, Business Development, David D’Annunzio, to uncover the challenges faced by suppliers and OEMs.

1. July-September2016
purchasingandsupplychain
EVs are here
to stayto stay
The electric vehicle is the perfect platform
for the future of autonomous driving says
Carlos Ghosn, Chairman and CEO,
Renault-Nissan Alliance
Katherine Worthen, Vice President,
Purchasing and Supply Chain Europe,
General Motors
What’s good for GM
is good for suppliers
Jan Bures, Executive Vice President
Group After Sales and Services,
Volkswagen Group of America
Jan Bures, Executive Vice President
Group After Sales and Services,
Volkswagen Group of America
Port congestion an
issue for VW
Gary Johnson, Vice President,
North America Manufacturing,
Ford Motor Company
Gary Johnson, Vice President,
North America Manufacturing,
Ford’s leading edge
lieutenant

2. Neovia Logistics Services
www.neovialogistics.com
Global 3PL. OEM Heritage.
85 years of Operational Experience.
The Neovia Difference.
DISCOVER THE DIFFERENCE
OF WORKING WITH A 3PL CREATED
BY AN OEM.

3. T
he automotive aftermarket industry
relies on a complex supply chain that,
if organised correctly, can improve
overall efficiency for OEMs. It is vital
to be organised in aftermarket trade, as
global customers and dealers demand
inconsistent amounts of product
parts to separate locations which
can confuse and delay component
delivery. In order to achieve this level
of optimisation in the supply chain
for service parts, companies must
understand the demand chain for
each part consumed and learn
how to manage the unpredictable
nature of the sector. These
complications have introduced
a number of global third party
logistics (3PL) providers into the
industry, boasting the expertise
to improve operations within
their customer’s automotive
supply chain. Focusing on
demand is nothing new, but
the ability to measure the demand
at the end customer consumption
level of each individual part is greatly
improving. Working backwards through
the supply chain, using accurate end
consumer demand data, is the key
to effective inventory management.
Collaboration at all points in the chain,
from customers, dealers, distribution
hubs and suppliers is also important as
it allows opportunities for improvement,
driven by the change from a supply to a
demand model.
3PLs who have mastered aftermarket
parts logistics management can help
customers reduce overall costs through
optimising inventory on hand, parts
availability and fill rate, which allows
the company to be more competitive
and satisfy customers. 3PLs also offer
technological advantages, which is a key
element in developing and increasing
operational efficiency in the modern
supply chain, eliminating repetitive time-
Fuelinginnovativeand
robustaftermarket
supplychaincapabilities
Thedemandingaftermarketsupplychaincanbeovercomethroughthe use of
innovative3PLs.AlexKreetzertalkstoNeoviaVicePresident,BusinessDevelopment,
DavidD’Annunzio,touncoverthechallengesfacedbysuppliersand OEMs.
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4. consuming logistics activities through
the use of modernised warehouse
management systems. In addition, 3PLs
can increase their customer’s visibility
through the supply chain by improving
communication, which ultimately
positions aftermarket players to better
manage their warehouse stock and
overcome challenges such as excessive
on hand inventory. These are just a few
examples of how this kind of innovative
technology can benefit those in the
automotive aftermarket supply chain.
Speaking to Neovia Vice President
of Business Development, David
D’Annunzio, I gain a further insight
into the key qualities needed within
3PL services, such as increasing
collaboration, reliability and forecasting,
inventory management and overcoming
the difficulties of slow-moving service
parts for modern, longer-life vehicles.
Neovia prides itself as a leading global
integrated logistics service provider
and D’Annunzio believes his 3PL can
offer unique expertise in inventory
management and parts fulfillment
services for its customers.
Collaboration is key
Without doubt, collaboration is the
most important factor within any supply
chain. This will continue to be the case
as modern technology has strengthened
relationships within the automotive
industry through stronger supply chains.
However, it is still difficult to achieve
and maintain complete collaboration
from end-to-end, so it is important
that all parties involved must have
well-aligned logistics operations to
extract the most out of the relationship;
this is where 3PLs like Neovia come
in. “Proper collaboration starts with
everyone focused on one goal…
delivering the best customer ownership
experience possible with unmatched
service support throughout the life of
the product,” says D’Annunzio. “This is
a common focus across supply chain
partners on improving the customer
experience. When every partner shares
the same common goal - improving
customer satisfaction - real collaboration
can begin.” Once the combined vision
is identified, these strengthened
collaborations will result in reduced
operational costs and increased
efficiency through better rates and more
reliable coverage.
In order to attract new customers,
aftermarket 3PLs like Neovia constantly
work towards new innovative ways to
strike the right balance of inventory
on-hand and parts availability solutions
through collaboration, maximising
product efficiency and overcoming
customer specific challenges such as
slow-moving parts. The introduction
of RFID chips into end-to-end dealer
networks can be a prime example of
a way to revolutionise efficiency by
allowing companies to identify and
locate their products at any time around
the world. This once again increases
collaboration through every link in the
supply chain, from dealer networks to
suppliers. “Already in the industry, we
are seeing changes - information now
comes directly from a product’s onboard
sensors and is being combined with
dealer service shop demand, which is
then used to ensure the right service
parts are available for vehicle repairs,”
states D’Annunzio.
“Having those parts results in
increased customer satisfaction, so
making this happen as efficiently as
possible will require the integration of
dealers, distributors, carriers and, most
importantly, suppliers. This integration
could consist of sharing inventory data,
forecasting plans, shipment status and
so on.” With this level of integration,
visibility across the aftermarket supply
chain connects the supply source all
the way up to the end customer, further
driving collaboration across supply
chain partners. “As the mutual benefit
of sharing data and information with
the goal of continuously improving
the customer ownership experience
becomes obvious, this will naturally
continue to encourage and improve
collaboration going forward,” D’Annunzio
adds.
Staying ahead
A major issue found within
aftermarket logistics is the build-up
of slow- moving parts and increased
stock variation. Thanks to a range of
new vehicles constantly entering the
market which frequently require a
unique set of new parts, OEMs need
to, more than ever, strike the right
balance of inventory in order to satisfy
customer demand without carrying
excess and costly inventory. Thankfully,
this process has been improved with the
introductions of such technologies as
Inventory Management planning tools
and simulation technology. These tools,
when used with the right expertise,
can resolve the challenges of varying
demand of the parts throughout their
life cycle. As components become more
 Asthemutualbenefitofsharingdataandinformationwiththegoalofcontinuously
improvingthecustomerownershipexperiencebecomesobvious,thiswillnaturally
continuetoencourageandimprovecollaborationgoingforward.
David D’Annunzio, Vice President, Business Development, Neovia

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5. reliable, the ability to accurately forecast
and plan will ensure that the right parts
are in the right place at the right time.
D’Annunzio warns that, with these
vehicles, “it is important to get the
slow-moving parts portion of inventory
forecasting correct because you
only have one shot at doing it right -
otherwise you are left with excess and
obsolete inventory.” He tells me that
most automakers, especially in the US,
are required under law to provide a life
service policy for customers, stocking
parts from models dated back ten years.
With life service policies like this in
place, it is extremely important to know
when it is time to plan a make-to-order
operation, instead of carrying stock for
prolonged periods. Neovia provides the
technology and algorithms to accurately
forecast this changing demand.“The
next step is to review and improve all
end-of-life processes such as all-time
buy, forecasting, minimum buy and
supersessions,” he adds. “Traditionally
these areas are the major contributors
to excess and obsolete inventory, which
is expensive and also contributes to
warehouse inefficiencies. This is why it’s
so important to have robust forecasting
for declining growth.”
So it is evident that managing
slow-moving parts requires advanced
techniques, from how demand is
captured right up to forecasting and
inventory planning. However, the
execution of the technology is vital,
as systems must be able to identify
product shifts and volume increases.
D’Annunzio tells me that Neovia is
able to link the planning system and
execution system via its simulation
technology, which replicates what
inventory and parts availability results
the execution system will use, while
providing the configuration used to
get those exact results. Fundamentally,
this allows customers to plan ahead for
any sudden demand for their products.
“As the life cycle of the part changes,
the inventory planning technology
will adjust the inventory volumes in
line with the part’s current demand
requirements. Effectively managing slow-
moving inventory is key to minimising
your overall inventory investment,
maximising parts availability, and
improving customer satisfaction.”
Neovia’s proprietary inventory simulator
has demonstrated positive results that
have, on average, produced 10% to 40%
reductions in on-hand inventory and up
to 20% gains in fill rate for customers.
Dealing with the dealerships
There are challenges with inventory
management at dealerships, usually
due to separate distribution networks
that are managed independently;
consequently, dealer inventory can
sometimes overshadow OEM inventory,
which is not ideal for the supply chain.
By extending the inventory planning
process from OEMs down to the dealer
level, OEMs can reduce their inventory
in the supply chain and improve parts
availability at the dealerships, increasing
overall efficiency throughout their
operations. “Neovia has this ability,
and is able to optimise inventory at the
dealer and distribution network level
based on point of sale demand data
from the dealers’ service centres,” states
D’Annunzio. “This allows for optimised
safety stocks at each node and enables
efficient flow of material through the
network to the dealer repair shop.
But reducing inventory and improving
delivery isn’t the biggest challenge,
rather it’s changing the commercial
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6. terms and conditions between the OEM
and their dealers. Dealers still own the
inventory in their stores and therefore
new return policies and agreements
on maximum inventory investment are
required to be successful.“
As dealers place orders for parts
throughout a typical day, they might
require multiple shipments to satisfy
same-day customer demand. OEMs
respond by typically offering multiple
deliveries to satisfy the need given poor
parts planning on the dealer’s end. This
results in increased shipping costs and
more inefficiency. In considering the
customer needs, greater collaboration
between dealers and OEMs will facilitate
the supply chain’s ability to achieve
balance, so that the parts are where they
need to be when they are needed.
“Today’s OEMs use a variety of
methods to make up for the deficiencies
in inventory management and parts
planning at the dealer level,” adds
D’Annunzio. “Dedicated daily delivery
and two to three times per day
delivery schedules, particularly in large
metropolitan areas, are transportation
services designed to help dealers who
carry reduced levels of stock, shifting
and increasing reliance on centralised
stock. While this system works to some
degree, the cost of transportation
could be reduced using a more efficient
alternative by gathering point of sale
inventory data (for forecasting and
execution), so both OEMs and dealers
can have the right inventory in the
right places. This would increase space
utilisation at both dealer and Parts
Distribution Centres and defray excess
transportation costs as well as improve
customer satisfaction as an end result.”
No ‘secret’ algorithm
As mentioned previously, modern
vehicles are better engineered and have
prolonged lives. Complications with
slow-moving parts and service parts
can only be overcome if a formula is
implemented into a company’s supply
chain which integrates a combination
of people, processes and technologies.
Neovia’s system focuses on helping
customers integrate planning and
execution through its simulation
technology and inventory management
which, as D’Annunzio adds, “accurately
simulates the inventory investment
and parts availability that can be
achieved with Service Parts Planning
(SPP), but most importantly, provides
the exact parameter configuration to
enter into SAP to get those results.” By
allowing the customer to quickly set the
optimal configuration, Neovia improves
inventory levels almost immediately,
instead of the usual time-consuming and
repetitive ‘trial and error’ procedures that
come with implementing the technology
without proper expertise and knowledge.
There is no surprise why a number
of major automotive manufacturers
have implemented Neovia’s Inventory
Management solution into their supply
chain.
“Neovia helps our customers by
bringing new ideas and innovations. Our
supply chain professionals have decades
of experience integrating inventory,
transportation, and distribution from
sources of supply to end consumer. We
also help our customers through the
execution of best-in-class processes
that drive operational excellence and
deliver unmatched customer and dealer
satisfaction. As companies place more
emphasis on aftermarket excellence
and driving customer satisfaction,
Neovia is the perfect trusted partner to
enable a client’s strategic initiatives.
The combination of people, processes
and technology along with integration
of design, planning, and execution
is essential and what Neovia feels is
the formula for success,” D’Annunzio
concludes. ■
 Oursupplychainprofessionalshavedecadesofexperienceintegrating
inventory,transportation,anddistributionfromsourcesofsupply
toendconsumer.
David D’Annunzio, Vice President, Business Development, Neovia

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