22 Jun 2024
The voice of the independent garage sector

Digital supply chain

Supply chains across the globe have been plagued by disruptions over the last several years. A global pandemic, political and economic instability, and parts shortages have run rife, grinding supply networks to a halt. Few industries have been hit harder than the automotive sector.

Retailers and distributors in the automotive aftermarket must be agile and adapt to the ever-changing conditions or risk losing business. Those who digitised and automated their supply chain operations were the most successful dealing with disruptions and maintaining smooth day-to-day operations. While recent supply chain pressures have eased, an adaptable supply chain is more critical than ever. Here are five areas where digital information can transform day-to-day operations for automotive distributors and suppliers.

Set up new items faster  
Automotive distributors need accurate and complete item data from suppliers to add new products to their assortment. With continuous new car model introductions, responding quickly is essential to fulfilling customer demand. This is where item data management solutions can help. These solutions provide distributors with the most up-to-date product data from suppliers, including information on new products, product updates, discontinued items and pricing.
    
Other distributors will use electronic data interchange (EDI) to exchange this item information. The most popular documents used for this are EDI 846 Inventory Inquiry or the EDI 832 Sales Catalog. Both allow for an easier exchange of item data between distributors and their supplier partners. Having the right item data helps distributors place accurate orders, pay invoices precisely, comply with industry regulations, and deliver current information to both their own teams and customers. In addition, item data such as digital assets, product videos and images ensure consumers can access the product information they expect.

Improve order management  
A recent study found that 43% of businesses either track orders and inventory manually or not at all. Because the automotive aftermarket industry almost relies entirely on the rapid replenishment of parts and products, this number is alarming. Manual tracking is not only time-consuming and inaccurate but costly, too.
    
Without timely order status information from suppliers, distributors can’t tell if there is a problem with an order until it is too late. As a result, they often hold more inventory than they need to prevent running out of stock. Digital supply chain management systems help automotive distributors gain confidence in what inventory is coming and when. An automated system can help distributors prioritize orders that need attention or updates and adapt for partial or late orders.
    
For example, a large auto parts retailer notices an uptick in parts requests. An automated system could source them from the closest suppliers, plan the most direct route and manage costs in the blink of an eye – far quicker than any human could.

Enhance receiving efficiency  
Receiving goods efficiently is impossible with partial or missing data. Distributors often lack a clear understanding of what goods will arrive from suppliers or when. In addition to not knowing what a shipment will include, they also don’t know when an item will not be shipped on time or back-ordered.
    
Inconsistencies in suppliers’ use of EDI transactions, such as advance ship notices (ASNs), can cause receiving bottlenecks and slow inventory turnover. In addition, without critical data, distributors must hire additional staff to open boxes, count items, and redistribute products manually. A digital supply chain communication system provides distributors with the necessary data from suppliers to track and organise shipments before they arrive. This enables distributors to schedule the right amount of labour needed to receive goods and move them to the right location at the right time.

Automate invoice reconciliation  
Invoice reconciliation is a matching process between goods ordered, goods received and invoices. Simply put, it ensures you pay only for goods received and avoid paying for inaccurate, mis-keyed or even fraudulent invoices. Because the automotive aftermarket industry heavily relies on the shipping of parts, there is obviously a substantial number of transactions involved – meaning a greater chance for mistakes in the process. Despite its importance, 86% of small to medium-sized businesses manually reconcile invoices, leading to costly and time-consuming errors.
    
Automotive distributors carry tens of thousands of SKUs to meet customer needs. Because of the number of unique line items on an invoice, poor invoice processing means more errors, increased costs in addressing those errors, and lost or missing invoices hampering productivity and causing further delays. Often, documents get lost in the shuffle, which can result in paying for the wrong quantity, price or shipping costs. If reconciliation and the subsequent payment don’t happen quickly enough, the retailer can miss out on promotions and discounts for timely payments.
    
Automated invoice reconciliation reduces or eliminates the bulk of these issues. By exchanging critical data with suppliers electronically, automotive distributors can let an automated system do the heavy lifting and manage invoice reconciliation by exception.

Drive higher supplier performance  
Despite advances in supply chain management over the past several decades, many distributors still rely on gut feel to evaluate their suppliers’ performance. They often can’t track supplier performance relative to their expectations in areas like fill-rate and on-time shipments.
    
The lack of consistent measurement leads to a vicious cycle of missed expectations and friction in supplier relationships. Distributors perpetually order more inventory than they need, and suppliers continuously ship less than what was ordered.
    
If distributors aren’t measuring vendor performance and suppliers don’t understand how they’re being measured, supply chain performance will suffer. Empty shelves and missed delivery dates are nearly inevitable. Using supplier scorecards, distributors can use data rather than instinct to manage supplier performance. With this data in hand, they can understand which suppliers they should be doing more or less business with. A scorecarding effort with insightful supplier metrics can help distributors and suppliers make positive changes in their supply chain performance.
    
In the end, when distributors and their supplier partners exchange digital transactions and item data their total supply chain costs go down while inventory performance and sales go up.