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Managing Technology Through Parts Store Management Systems


7/1/2004
By Brian Cruickshank

Connectivity has always been important in distribution, but the Internet has changed how essential connectivity really is.
 

Genoa Auto Parts in Houston, TX, doesn't have a computer - never has. That's just the way store owner George Humphrey has always done things, and he really doesn't see any reason to change now.

For Humphrey, it's not a matter of technology or financial intimidation. It's just that to him, there's been no real need to make the investment.

"I'm used to looking up everything in the books. I've talked to so many of the warehouses that keep telling me 'well, our computer is slow today,' or 'our computer is down right now.' My books don't go down," he said.

He's right on that point, but of course, the use of computers in aftermarket distribution goes well beyond cataloging. Sound store management is an important part of running a successful business, no matter if that management is computerized - or in Humphrey's case, the paper-and-pencil sort.

But when it comes to store management, Humphrey's store is a step back in time: hand-written invoices and lost-sales reports, coupled with store inventories monitored with order sheets and brain power rather than silicon and micro chips are the order of business.

"I've been in this business so long, I know my own inventory," he said firmly.

Humphrey's business is an anachronism, a truly independent store in an electronic and connected aftermarket parts distribution world. Of course, not having a computer does have its drawbacks, as Humphrey concedes, and he bemoans the unsympathetic ear manufacturers and warehouses lend in regards to stores that lack computing power.

"If I can get in touch with manufacturers through their (toll-free) number, they'll send me catalogs, but no price sheets," he said. "Some of them aren't even printing price sheets anymore; it's all on computer." Humphrey believes that area warehouses increasingly ignore small parts stores such as Genoa Auto Parts.

Really, it's no surprise that warehouses are choosing to pass on stores like Humphrey's. Electronic connectivity is an increasingly essential link between WD and jobber, and between jobber and repair shop customer. Rather than ignoring his business, the local warehouses more likely prefer to do business with customers who are connected electronically anyway.

CONNECTIVITY

For the past decade or so, connectivity has been a buzzword in distribution. These days, it's becoming an important part of doing business. While the basics of store management systems have not changed all that much - lost sales reports are still just lost sales reports - the real change has happened in the area of connectivity through the Internet.

"Connectivity is critically important," said John Hamminga of JH & Associates, an aftermarket consulting firm that represents technology and systems provider DST. Hamminga said the integration of the Internet into store management systems has fundamentally changed the way counter professionals and their customers search for information and order parts. It allows businesses at every level of the supply chain to interact and share data, from service facility customers and parts stores to their supplying WDs and ultimately up to the manufacturer.

"It's a big change for the industry," said Scott Roush, vice president of Strategic Programs for Activant (formerly known as CCITriad). "Even five or 10 years ago, connectivity was happening, but it was the dial-up sort. There were, at the service dealer level, a variety of mechanisms where they could dial into a jobber and look up a part, get an acquisition cost and maybe some other information. The problem was that these connections were cumbersome. It was a one-to-one connection."

That's all changed. Today, new management systems with integrated Internet connections allow service dealers to look at multiple part sources, right through the desktop. The same part searches are possible at the store level as well. Previously information exchange was point-to-point and had to be formatted in the exact same way. The Internet's open architecture allows for seamless exchange of information among all levels of the supply chain.

"The counterman just presses a function key or a part inquiry key and now he's talking to another jobber's or WD's own management system where he can look up parts and get pricing instantaneously," said Roush.

VIRTUAL INVENTORIES

As one example, Hamminga describes 'virtual inventories' in which customers can see not just what's on the shelf, but what's in the entire system, from all possible sources.

"The old clich about not being able to sell from an empty shelf is no longer true," explained Hamminga. "Parts retailers and WDs can be connected electronically to many suppliers that have the needed part. The customer - and counterman - need only to make one inquiry, rather than making multiple calls to find a customer's part. This is one way to improve things like efficiencies, productivity and profitability, but it also goes a long way toward improving customer loyalty."

Through these 'virtual inventories,' counter pros don't need to spend extra time searching multiple locations for parts. They can see where parts are right on their screen, eliminating the need to "chase down" parts that aren't on the shelf.

"When you network out to a variety of sources like this, of course you're going to go first to your primary warehouse because you know you're going to secure the most margin there," said Roush. However, most part stores go to secondary or tertiary locations for parts. Normally, these parts searches are done over the telephone. Internet connectivity through a store management system integrates these searches into a seamless and quick search.

"Parts houses call up their suppliers - the WD or the manufacturer - many, many times every day," said Autologue President Jim Franco. "So if you're online, it's just a click and you've got instant response to multiple suppliers in real time. Instantly, you can tell your customer what you have, what's available and how quickly you can get it to him."

Franco, who has worked at various levels of the auto parts business for the last four decades, believes that Internet access for parts ordering is the biggest advancement in technology for the auto parts business in the last 10 years.

"It empowers the customers you already have," he said. "In an auto parts store, you might have several hundred customers in the system. You may only see them twice a year. But now you can send out a letter or flyer telling customers that they can order from you at their convenience, day or night."

Just as important is the connection between the repair shop to the parts store. With Internet connections, parts queries can be made by the shop's service writer without tying up the telephone. But asking repair shops to look up their own parts might generate some resistance. Franco says that from the savings a store will gain from Internet parts ordering, they can offer incentives to their customers to use the system.

"It's been proven that 10 percent of gross profit goes toward the cost of a counter professional. Because the parts house knows it's a greater savings to just have the pick ticket automatically printed out (through Internet parts ordering), he can offer an incentive program to other customers to order off the Internet."

Interestingly, trading partners don't necessarily need to be using the same software for this connectivity to work. "Now there are Activant platforms talking to other company's platforms - even Mitchell systems. It has evolved to the point at which everyone can talk with just about everyone," said Roush.

BEYOND PARTS

Everyone knows that the Internet is a way to access information. But the integration of that information into store management software becomes a powerful tool for everyone in the supply channel.

"At its essence, the Internet is all about decentralized access to centralized information," said icarz President and founder Jesse Hermann. In other words, the Internet gives users the ability to access information where it is best stored, whether at the repair shop, store, WD or manufacturer level. That includes information like pricing, availability, shipping and any information a customer or supplier chooses to share.

"When I worked for a manufacturer, I always knew that if I put a product manager in a store, we'd sell more product and get fewer returns," said Hermann. "But of course, no one can afford to put a product manager in every store - but each store can have access to all the part information that a product manger has access to, and that makes a big difference."

"Think about all of the information that people need today - catalogs, pricing, part information, etc.," continued Hermann. This information is available right through these 'next generation' business management systems, through a Windows-type environment. It's an integrated, connected and seamless solution to the age-old problem of information accessibility.

"Being able to spread across the entire marketplace, from the installer all the way to the warehouse and even up to the manufacturer, to access information has absolutely exploded. It really empowers the jobber at his level, along with his customers, knowing where parts are and what the acquisition cost will be," said Roush.

"Because of the existence of the Internet and the technology that can leverage its use, it provides a means for any business to be available 24 hours a day, seven days a week without lunch breaks or vacations or sick days," said Hamminga. He said that the integration of the Internet into store business management systems expands the product marketing 'bandwidth' by making both suppliers and their customers aware of what products are carried. It decreases returns dramatically because order accuracy is improved.

"DST has had many system users report that once a new system is up and running, managers realize that running a business changes," said Hamminga. "In the past, even though a store was always busy, they were busy with nonproductive work that resulted from correcting errors and addressing complaints. Accuracy, provided by technology, provides stores with the ability to manage their businesses and spend their time in face-to-face conversations with customers and potential customers where they can deal with business deals rather than mistakes."

INTERNET ACCESS ISSUES

Access to the Internet has come a long way since the Internet boom of the early 2000s. According to Babcox Research, today 82 percent of all aftermarket business owners, (repair shops, collision repairers, parts stores and WDs) have Internet access, up from 78 percent in 2001, 73 percent in 2000 and 63 percent in 1999. Specifically, among repair shops, 80 percent have Internet access, and parts stores report 85 percent as having access.

However, Internet usage is often only as good as the connection. Among repair shops, 58 percent still have dial-up connections, as do 56 percent of parts stores. Dial up connections are not ideal for seeing things like real-time inventories. Considering this, stores that want to use the Internet for business purposes - to see real-time inventories for example - will need to upgrade their Internet connections eventually.

"It really depends on what you're doing," said Roush. "If you're primarily doing part inquiries, the performance of a 56k modem is reasonable. It's not necessarily the best, but it's workable. Not everyone needs a DSL line. But, if want to hook up five or 10 installers to your business and move more traffic via the Internet, then you'd want to look at a broadband connection."

WHY CHANGE?

For the many stores that have computerized store management systems, the argument is the same: Why change the way I'm already doing things? This is certainly no new sentiment in distribution; store owners - and their technician customers - are notoriously fickle about embracing new technology, especially when it means getting out the checkbook.

So why change? That's a good question. After all, the computer system you have is already good enough, right? Well, that depends on your store, its growth plans and current situation. More inventory, more employees, more sources, more customers and perhaps even more locations all require systems that can handle the extra workload - workloads that so-called legacy systems sometimes cannot handle.

"Most of the older computer systems were designed and built 20 years ago," said Hermann. "That hardware from 20 years ago is very different than it is today. That's why you have these legacy products that have file-size limitations. Twenty years ago there were fewer parts, and parts proliferation really wasn't anywhere near the problem it is today. So there are some systems out there - most in fact - that have limits on the number of parts you can put in the system. Typically, these numbers may run to, say, 65,000 parts. The typical jobber today stocks 20,000 parts. If they're stocking 20,000 parts, then he's actively selling a couple hundred thousand parts."

Stores may not even realize the limitations of their systems, but Hermann says that when stores realize these limitations, they can start to justify embracing new technology.

"Change is inevitable," concluded Hamminga, "and nowhere is it more inevitable than in the automotive aftermarket. Any other industry you point to operates differently now from a supply chain standpoint than it did just five years ago. And to think that change is not inevitable in our industry is shortsighted."

As the industry marches forward, new tools will become available in the market that tout increased profitability, efficiency and customer loyalty. These tools by themselves aren't necessarily the entire answer to improving these issues. However, the intelligent application of these tools in the right environment will make business better for you and your customers.















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