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Maintenance 
Required 
Repairing 
Warranty 
Management 
• Name of Presenter Goes Here 
In Automotive 
Aftermarket 
© 2014 ...
© 2014 Inmar, Inc. 
CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION 
2 
Rob Zomok 
Sr. Dire...
© 2014 Inmar, Inc. 
CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION 
AGENDA 
1. Review Impa...
117.7 million 
parts returned 
annually 
© 2014 Inmar, Inc. 
CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR W...
© 2014 Inmar, Inc. 
CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION 
Source: http://www.glu...
The Strain of Warranty Returns 
On Suppliers and Distribution Partners are identical 
© 2014 Inmar, Inc. 
CONFIDENTIAL – D...
Visibility Into Retail Channel Partner’s Warranty Burden 
*in Thousands 
Source: AAP, AZO, ORLY, PBY 2012 & 2013 Annual Re...
Visibility Into Retail Channel Partner’s Warranty Burden 
Assumed Retailer/WD Reverse Logistics Costs for Warranty Hard Pa...
Not My Problem: Why Should You Care? 
If you’re thinking… You should consider the possibilities… 
My Warranty rate is low ...
© 2014 Inmar, Inc. 
CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION 
10 
Preventing Returns...
Data RTV-MFR 
© 2014 Inmar, Inc. 
CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION 
11 
What...
Collaboration Elevates Financial Performance 
For The Entire Industry 
Collaborative Processing Advantage 
Overall cost re...
Prior to Collaborative 
Processing… 
© 2014 Inmar, Inc. 
CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITT...
© 2014 Inmar, Inc. 
CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION 
14 
Top Offenders: 
Wh...
Condition Analysis Insights = Opportunity 
98% 
3% 1% 
100% 
50% 
100% 
80% 
60% 
40% 
20% 
0% 
Contaminated OEM Gasket Mi...
OE/Competitive Brand Water Pumps and Tensioners 
Contribute 3% of YTD Warranty Spend 
$0 $5,000 $10,000 $15,000 $20,000 $2...
96% 
4% 
Destroy 
Return to 
Client 
© 2014 Inmar, Inc. 
CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITT...
Let’s Explore What’s Missing 
We are not alone… 
other industries face these challenges 
© 2014 Inmar, Inc. 
CONFIDENTIAL ...
Learning from 
another industry Manufacturers have been 
© 2014 Inmar, Inc. 
CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE...
© 2014 Inmar, Inc. 
CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION 
20 
The key to success...
© 2014 Inmar, Inc. 
CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION 
retail 
distribution 
...
What a Benchmark Initiative Should Include 
Access to data from thousands of audits 
Information on unit load conditions, ...
What a Rigorous Benchmark Initiative Gets You: 
Access to timely data 
Convenient snapshots of important data 
Insights to...
2 
1.5 
1 
0.5 
nearly50% 
Source: Inmar Supply Chain Data 2008--2013 24 
© 2014 Inmar, Inc. 
CONFIDENTIAL – DO NOT COPY, ...
On 
product 
inspectio 
n alone: 
117.7 m 
million parts 
returned each year 
4% * 
volume return 
to stock 
*Many manufac...
Adapt process 
flows: 
NAPA process 
flow as 
a benchmark 
© 2014 Inmar, Inc. 
CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR U...
© 2014 Inmar, Inc. 
CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION 
27 
What to Talk About...
© 2014 Inmar, Inc. 
CONFIDENTIAL – DO NOT COPY, DISTRIBUTE OR USE WITHOUT INMAR WRITTEN PERMISSION 
28 
To Talk in More De...
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Aasa webinar presentation inmar gates-100914

  1. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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:

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