A new forecast from Forrester Research credits greater online spending by Canadians, lower shipping costs and more selection for the spending increase.
Ford and Mazda drive the web to smooth out parts shipments.
It seems simple enough: On Monday, a car owner schedules an appointment with her local Ford dealer to replace the side-view mirror that cracked over the weekend when her teenager backed her Crown Victoria out of the garage. The dealer promises to have the part in three days and the owner makes arrangements for Thursday to get the car to the dealer and herself to work through alternate means.
But it may not be so simple for the dealer or for Ford, each of which knows that disappointing a service customer can mean losing her to another dealer or another car brand. With competition squeezing prices and profit margins, it`s more important than ever to keep car customers happy. But with carmakers constantly introducing new models, features and body styles, the cost of maintaining a ready supply of parts continues to rise. And so does the cost of getting parts to the dealership at the right time.
Satisfying two priorities
"Our first priority is delivering on our commitment to customers, but our second is the need to reduce costs," says Bobbie Rooney, manager of national logistics and transportation for Mazda North American Operations. Mazda ships about 750,000 packages of auto parts to its dealers every year, so if even a small percentage is late it can create a lot of disgruntled customers, she adds.
Satisfying those two priorities requires increasing the efficiency and reliability of the way parts are delivered to dealers. For Mazda and other carmakers, the ticket to better parts delivery is through web-based systems that provide logistics managers like Rooney as well as individual dealers visibility into, and more control over, deliveries both into distribution centers and out of distribution centers into dealers` store rooms.
Retailers face many of the same issues, with challenges around moving merchandise into and out of distribution centers and shipping individual orders to customers. In the case of retail, timeliness is of the essence as retailers want to take advantage of short selling windows for hot fashion items or to capitalize on fads.
By providing universal access to the movement of shipments to authorized users at dealers, automakers and carriers, web-based systems make it possible to respond immediately to problems and inform customers when their parts will arrive. "It`s all about customer service," says Vava Dimond, vice president of product management for Schneider Logistics, which uses a web-based logistics system to manage the shipment of parts to thousands of Ford and General Motors dealers.
In effect, the web is helping shippers and their customers overcome what is often a shortcoming in shipping. "It`s the last part of the supply chain that people often don`t think of as much because most focus is on inbound into the distribution center," says Carla Reed, vice president of logistics for ChainLink Research. "But the last mile is really important. To look at service areas and inbound logistics can mean the difference between a good company and a bad company."
The web doesn`t necessarily provide for a perfect situation that keeps all parties happy. Mazda, for example, notes that some of its dealers are disgruntled because the efficiencies supported by its new web-based system have left them without some of the faster, if costlier, services of the past. Indeed, neither Mazda nor Ford would make dealers participating in their web-based shipping systems available for interviews.
Nonetheless, each company insists that web-based shipping is cutting costs, making carriers more accountable and improving overall customer service.
At Mazda, the former shipping system left the automaker with little control over how shipments were handled, sticking it with consistently high costs, Rooney says. When Mazda had critical orders to ship under the old system, it had one option: shipping all orders to dealers through Fedex Corp.
"As a transportation manager, my hands were tied," Rooney says. "If a truck hood was going to a dealer just 50 miles from the depot, we would have had to send it freight for premium dollars. Now, I can choose a less-than-truckload carrier that could be one-third the cost."
Although the old way was more costly than today`s system of using multiple carriers, the Fedex operation had its advantages. A network of Fedex servers connecting 700 Mazda dealers with five distribution facilities provided visibility into order status, and critical orders were routinely delivered on a next-day basis.
But about two years ago, Fedex stopped supporting the ability of dealers to track shipments. Around the same time, Mazda awarded its warehouse management to Caterpillar Logistics, which led to a reduction in the number of distribution facilities to three from five. But Caterpillar didn`t offer systemwide visibility or the kind of transportation management Mazda needed, leaving a void in the automaker`s shipment operation. "Our products had to move even further across the country, so we absolutely needed visibility to maintain control of transportation," Rooney says.
Visibility and control
To gain that visibility and control, Mazda last year deployed a web-based logistics system from Kewill Solutions North America, the shipping management division of Kewill Systems plc, which automatically determines the best shipment options from a number of carriers. Now, when dealers need parts, they place their orders on a Mazda web site, which forwards the orders to Caterpillar, which sends back a message detailing where the requested parts are located among Mazda`s warehouses. Mazda then forwards that information over the web to Kewill, which produces a report for Rooney`s staff showing the carriers with the best routes and rates to meet expected delivery times.
The Kewill system is helping to improve Mazda`s shipments to dealers in several ways in addition to choosing the most cost-effective carriers, Rooney says. For example, the web makes it easier to monitor and enforce compliance with performance standards imposed on carriers. In the past, Mazda`s transportation managers would review reports of carrier delivery times and costs, then award more or less business to carriers based on their performance. But without a centralized, web-based logistics management system, it was difficult to communicate changes in carrier loads to dock workers, many of whom might be temps with little experience.