New parts planning system unlocks powerful aftermarket growth with 1500% ROI
Parts availability increases from 87% to 96%+ whilst simultaneously reducing inventory by £3 million
A Management Buy In (MBI) team had recently acquired the aftermarket parts business of an automotive Original Equipment Manufacturer (OEM) from receivership. The business stocked a range of 160,000 different commercial vehicle part numbers in its £22 million inventory and ran a 24×7 operation supplying a network of 400 UK dealers plus many export customers worldwide.
Keen to transform the business into a modern aftermarket service provider and start winning more clients, senior management faced a huge obstacle in the form of an unsupported mainframe computer system running obsolete software and at full capacity. Replacing it was expected to take 3 years and £6 million of investment.
Specialist expertise essential to deliver targets
The company initially decided to replace the parts planning system in the hope of releasing inventory savings to fund later stages of the core ERP system replacement programme. Unfortunately, the required parts planning system expertise and experience were not available in the company and yet the project needed completing quickly to allow time for the inventory to reduce and release cash.
Service part planning system experience makes the difference
Our lead consultant was contracted to undertake the project and initially defined the business requirements for the new parts planning system, selecting a modern software package. Implementation proved more problematic however due to the part demand profile and misshapen inventory. As is common in manufacturing systems, the mainframe system planned safety stocks based on weeks of supply. This caused too much inventory to be held of the faster moving parts and too little of the slower movers.
Stock re-balancing therefore needed to be undertaken gradually to avoid problems with supplier scheduling and cash flow. This required specialist service part segmentation methods and inventory calculations.
System and business configuration is crucial to unlock benefits
The new parts planning system provided new analysis tools to control inventory much more tightly dependent on different part characteristics. Configuration of system parameters was crucial in getting the best out of the system, which also required significant business process redesign. Demand and inventory planning also became a specialist role distinct from that of material scheduling and expediting.
Dramatic improvements release much-needed funds
Improved forecast accuracy and tighter inventory control enabled the dramatic improvements below.
Parts Availability Increase
Inventory Reduction in 18 months
Contribution to ERP System Costs
Project Return On Investment (ROI)
Aftermarket growth is unlocked
In the next 8 years, the company went on to win more clients and grow its part range to 350,000 part numbers.