Automotive Supply Chain Management & Best Practices

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automotive supply chain best practicesOver the past few years, the automotive industry has undergone significant changes in the wake of globalization and modernization. Consumer expectations are at an all-time-high, competitive and manufacturing power is shifting radically, and the way we think about cars, technology, and OEMs has completely transformed the way we understand parts, inventory, and supply-side manufacturing.

Automobile density is set to increase in almost every mature market, yet OEM growth is expected to slow to 3% over the next decade. Part of this is due to the durability of modern vehicles — which are now heavily reviewed and forged by market expectations — but there are also looming supply chain frictions causing widespread disruption. 

Between socioeconomic policies, trade disagreements, tariffs, and black swan events, navigating the already-dense automotive supply chain is tedious. To make things worse, managing existing inventory on the demand-side can be nightmare fuel.

For years, many of these demand-side frictions are circumvented with incentives strategies — which eat around 20 percent of the total automotive maker’s revenue. In fact, McKinsey suggests that automotive incentives have helped drive down the average product lifecycle by a massive 39 months. 

Unfortunately, many manufacturers have paused these incentive programs due to blowback from COVID-19, and OEM and aftermarket providers — which include tire manufacturers and carriers — aren’t able to take full advantage of the massive incentive structures that completed vehicles have to work with.

So, how do automotive part companies, automotive makers, and tire suppliers deal with stock shortages, overstock, and chaotic inventory lifecycles during this friction period. Better yet, how do we move away from the costly incentive structure to make meaningful changes that keep demand-side needs met without the need for complex programs and headache-inducing spreadsheets?

Here’s how aftermarket, OEM, and automakers are leveraging predictive forecasting, data integration, and S&OP to deliver value without deteriorating their value to customers.

Aftermarket Parts: The Inventory-Suppressed Value-Driver of the Automotive Industry

The vehicle aftermarket industry (i.e., parts and services) makes up  20% of total automotive revenues and provides the highest ROI of the entire industry architecture. Yet, growth in this market has slowed by one point over the past few years, while inventory needs spiral out-of-control. We’ve identified the three biggest modern threats/opportunities to the automotive demand-side supply chain:


Customers crave more inventory and purchasing diversity. Not only are customers increasingly expecting a seamless experience that gives them the exact inventory they need at the exact time and place they need it, but online channels are increasing in popularity — with McKinsey estimating that a mind-boggling 30% of aftermarket sales taking place online by 2035.

Aggressive Expansion: 

Aftermarket services are incredibly ROI-dense. As automakers continue to look for areas of opportunity in the hyper-competitive landscape, many are trying to reel in their vehicle aftermarket ecosystem for themselves.

This is an immediate threat to third-party aftermarket providers, who now need to carefully maximize the value of their existing inventory while vying for a position against these larger, more controlling competitors.


A significant chunk of the aftermarket parts market will shift to online over the coming decades. However, complex and hard-to-ship parts (e.g., tires, airbags, etc.) will likely remain on traditional channels. This will require aftermarket providers to leverage both channels effectively, which can be a logistical nightmare without the right inventory control systems.

There’s a convergence of factors at play in the aftermarket space, and most of them lie comfortably outside of the ever-so-complicated supply-side landscape. That’s not to say that supply-side challenges (e.g., supply-side contagion, tariffs, political instability, globalization, etc.) aren’t at play; they’re very real threats. 

But, demand-side factors is where the bulk of competitive agility lies for the aftermarket industry — especially since supply-side challenges are often out-of-reach and R&D-intensive to navigate.

How Supply Chain Innovations Can Increase Competitive Agility & Position Aftermarket Suppliers as Industry Differentiators

By applying the right technology and strategies to the supply chain, aftermarket providers can position themselves against upcoming shocks, black swan events, and (more importantly) the natural evolution of the market. In total, we’ve identified 4 core changes that aftermarket companies can make today to differentiate their company.

Risk Modeling: 

The aftermarket supply chain is constantly at risk. From acute climate events to traffic, new government incentive structures, and sociopolitical turmoil, navigating the supply chain isn’t easy. Risk modeling helps you understand where your risks lie and how to approach them in a controlled, strategic manner. To be clear, risks aren’t caused by massive-scale events like COVID-19. Climate events alone caused $350 billion in losses in 2017. 

McKinsey estimates that risk modeling can reduce high-risk spending by 40%, but those are firing benefits. The core value driver of risk modeling is positioning. You want to understand the resiliency and self-reliance of your supply chain, and how you can shift resources and labor to effectively offset any risks when they occur.


Without diving too deep into S&OP (it can be an organization-wide change), the simple collation of data sources can massively improve your supply chain readiness. McKinsey suggests that S&OP alone reduces inventory value by over 50% and reduces backorder volume by 60%. 

Of course, the value of pouring sales and marketing data into your supply chain management solution goes well beyond inventory risks; it helps you understand the full scope of your supply chain needs.

Data Integration: 

Merging all of your data channels into a single supply chain management solution provides untold benefits. From inventory analytics to understanding suppliers and replenishment, data integration is the simplest and most cost-effective way to instantly transform your supply chain readiness.

Demand Forecasting: 

This is the bread-and-butter of supply chain management. Demand forecasting increases sales, reduces waste, eliminates unwanted inventory, and maximizes the flow of goods already in your storage.

How StockIQ Can Help

The aftermarket industry for automobile parts is filled with supply chain and operational challenges. You need a solution that helps you collate data sources, predict and forecast demand, and manage stock across providers, facilities, and manufacturers. We can help. StockIQ is an end-to-end supply chain management solution that can transform your aftermarket capabilities. Are you ready to maximize the value of your supply chain? Contact us to learn more. 

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