In my last column we wrestled with the question of why technology is essential to the future of the aftermarket. In that installment I presented the case that the aftermarket is a mature market and that the winning strategy in such conditions should be savagely efficient. I further reasoned that if we accept that notion then we must accept the implementation of supply chain technology as absolutely essential.
“The full implementation of that technology can help to get our mutual inventories under control and to achieve a reasonable level of profitability. But none of that can happen without trusting collaboration. Next time, we’ll examine what it takes and if we are ready.”
So now comes the messy business of trust and collaboration –– two commodities as rare as double-digit profits in the aftermarket. We have reached a point in our industry where suppliers and customers no longer can work independently and expect to effectively address the complex problems that are facing both.
This is a challenge of significant proportions since, as an industry, we are not versed in the skills required to truly adopt a collaborative approach to problem solving. One might argue that we are “Collaboratively Challenged.” We engage in strange co-dependent rituals where resellers and vendors go into their meetings with their roles and their scripts predestined. The reseller faced with shrinking margins and burgeoning inventory bangs on the vendor for concessions. The vendor feeling bullied and bruised retreats to a position that is less about doing what is right, and more about controlling how much he will “have to give up.”
As strange as it sounds, this scenario reminds me of an old Irish folk tale I used to read to my son. It was called “Stone Soup,” and like many children’s tales, its wisdom is simple but undeniable.
The story is set during the Irish Potato Famine of 1849. It’s a hard time. Families are starving. People are very untrusting of others, taking care of their own first (already sounds a bit like our business these days).
Then, a stranger comes to town. He announces he can make delicious soup with only water and his magic stone. Nobody really believes him, but some figure, what the heck, a little free soup would be good. He launches into an eloquent pitch about how good the soup will be with his magic stone. As an increasingly convinced crowd gathers to watch, he skillfully adds that if he just had an old bone or a piece of fat, how much better the soup would be. Someone produces a bone. He continues until he gets a bit of an onion, a carrot, and a couple of potatoes; and so on until everyone sits down to eat the wonderful soup. And, in the end, they all agree that the stone is truly magic.
Clearly, the point of the story is that, by working together and collaborating for the collective good, we can overcome our fears and the obstacles facing us. Never has an example been more appropriate for the aftermarket. Because, like the villagers in the story, if trading partners in this marketplace cannot learn to trust one another, we are in for some very dark times, perhaps a famine.
The only way that we in the automotive aftermarket can work our way out of our current dilemma is to find or rekindle a modicum of trust. The time has come for us to rise above this and embrace a new model of collective problem solving. The fact is, too many in our ranks seem to have become convinced that their vendors are out to get them, their customers have no loyalty, and that everyone around them is out to take what is theirs. Just like the villagers in the story. What the aftermarket needs is a magic stone and maybe, just maybe, technology is it.
Two types of trust
Thinking about the trust issue, it occurs to me that there are two trust hurdles that need to be overcome; one relatively small, the other quite large.
The lesser of the two, but still formidable is the obstacle imposed by distrust of technology. It is both astounding and perplexing to me the number of aftermarket business people who, on one hand, quite literally trust their lives to technology and on the other hand, shun it to help run their business. I often encounter aftermarket companies who are resolute in their resistance to try some new technology because of their fear that it may somehow damage their business. Yet those same people will fly on commercial airlines that depend on complex technology to avert disaster. While some honest skepticism about technology is healthy, to avoid technology that has demonstrable abilities to reduce cost and improve efficiency is borderline paranoid. One must ask the question, is this just an excuse to not implement the technology?
The other and far more serious trust issue is the trust of one another.
For too long, resellers have not trusted their manufacturer suppliers when it came to sharing information about their business, an issue that is revisited when considering supply chain technology. The distrust seems to be rooted in the notion that, “if manufacturers know too much about my business, they will take action that will hurt me.” The problem with this seems obvious. What can a manufacturer possibly gain by hurting its customers?
The prospect becomes even more absurd when one considers what sort of information needs to be shared to implement the new technology. Most trading partnerships are built around sharing data like 1) current inventory on hand, 2) daily sales and returns by SKU and 3) sales history. Rarely, or more closely said, never is this information provided by account. As such, vendors can’t exactly construct an “insiders profile” of how and with whom their customers sell. It’s not like providing an outsider with unbridled access to all aspects of their data. Yet, that is the sort of reaction most resellers have at the suggestion of data sharing.
As was the case with the skepticism about the technology, is this just another excuse to not implement?
The point is I believe the basis for the trust barrier between suppliers and resellers is more imagined than real. Like any imagined barrier between peoples, it can be dispelled with logic and reason. We need to enter a new era of trust that can lead to better collaboration between us, and there is absolutely no logical reason for it not to exist.
Beyond trust to collaboration
Webster’s defines collaboration as “to work together as associates for mutual gain.” As such, it is essential that collaboration leads to mutual gains. When technology initiatives are too onerous or one-sided, it feeds our skepticism and our intrinsic suspicion. The recently released Automotive Aftermarket Industry Association report on Pay-On-Scan (POS) initiatives makes the critical and profound observation that the aftermarket model for POS (and by extension, any collaborative technology) must be a win-win proposition. All parties must reap the benefits of the effort, which include increased sales, higher margins, better service levels, lower inventories, payables and receivables. One party grabbing for all of the benefit destroys the environment of collaboration that makes the use of the technology possible.
Most of us in the aftermarket are like nervous bachelors; we still fear commitment. But the fact of the matter is, solutions to our problems will increasingly be found in formalizing strategic business relationships. The survivors will all begin to take advantage of the fruits of collaboration; i.e., things like computer linkage with their suppliers and customers, formal contractual supply agreements and open exchange of market knowledge and intelligence. We are seeing the emergence of a new business model in which there will be special considerations and concessions between trading partners that make formal commitments to one another.
And no single link in the chain can optimize these solutions without looking north and south to its trading partners. Most of the basis for major improvements lies in linkage across enterprises, not within enterprises.
In a climate of trusting collaboration, these technologies will facilitate an aftermarket renaissance for all trading partners, not just those with the biggest sticks. In fact, the move to trust and technology-based services will have the biggest impact on our business since the advent of programmed distribution. And the positive impact will affect manufacturers, resellers and technicians alike if it is implemented properly.
We’ve reached a point in our super-mature industry where staying within our own boundaries can’t solve our collective problems. Face it, manufacturers need resellers, resellers need manufacturers, and, of course, everybody needs the guys who throw away the boxes. It is not until we are willing to get past the bias of yesterday, and realistically address our mutual condition, that we can begin to bring greater profitability and real fun back to this business.
Never in the history of the aftermarket has a collaborative approach to business relationships been more important than today. And never has it made more sense to step away from outdated mindsets and paradigms and nurture a free flowing exchange of data up and down the supply chain. The simple truth is, each link is performing critical, value-added functions, and none of us can survive without the others. From that perspective why would we withhold information or suppress the implementation of technology that can foster our collective success?