Achieving High Performance through Aftersales

The prolonged downturn is causing more and more automotive manufacturers to renew their interest in aftersales as a key revenue generator.

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But some will struggle to achieve optimal results to drive greater profitability and high performance.

While the aftersales parts business may account for only 10 percent to 15 percent of sales, it typically averages 25 percent to 50 percent of profits. Moreover, profit margins on service contracts can be around 50 percent and have a strong impact on customer loyalty. To realize the full value that aftersales can provide, automakers will need to adjust their organizations, processes and technology across key areas to address the challenges of this complex market.

These key areas include revenue management, parts logistics, service support and warranty management. They will be crucial in helping companies to overcome such challenges as transforming a global or regional service parts business or enhancing services to increase dealer and customer loyalty—particularly at a time when customer expectations for quality and service are increasing.

In terms of revenue management, the main source of aftersales revenue comes from the parts business. This makes how parts offerings are structured critical. Traditionally, price lists and related discounts distributed to dealers and service points have focused on higher demand parts and segmented parts families. And a standard mark-up strategy on purchasing costs has been applied to numerous parts, especially those that are medium- to slow-moving.

This strategy does not enable automakers to achieve maximum benefits from pricing that takes into account other factors, such as customer perception. Companies will need to leverage benchmarks, marketing and commercial functions and establish standard processes that shape their aftersales products and services to attract customers, retain customer loyalty and maximize revenues.

For years, automakers have focused on continuous improvement in their parts logistics operations to reduce costs, and improve service levels and customer satisfaction. Nevertheless, parts unavailability can still occur that may cause delayed service, customer dissatisfaction or loss of customer loyalty. It will be important for companies to continue implementing new parts-ordering systems that enable better forecasts and timed parts availability, or execute initiatives to review distribution flows, transportation routes or warehouse locations to sustain effective parts logistics.

Availability key

A key element of the service support that automakers provide dealers is enabling parts availability. But more is needed to help them offer an effective service experience—ranging from the new car-buying process to parts sales and repair service—to sustain high customer satisfaction and loyalty. This includes supporting dealer workshops that enable dealers to service increasingly complex vehicles, and creating and distributing repair manuals that help service departments enhance their repair capabilities and meet “fix-it-right-the-first-time” goals.

Automakers seeking high performance need to view warranty management from end-to-end in terms of their value chain to ensure that the business processes involved are in line with aftersales goals. Then too, companies should make use of warranty data as a potential resource that can help them to better understand inherent quality issues in advance and enhance their ability to monitor repair service performance.

Aftersales, more than ever, represents a powerful opportunity for auto manufacturers to generate substantial improvements in profitability, operating costs, parts inventory and service levels. Companies that can recognize and act on the potential aftersales offers as a critical business function will greatly enhance their ability to achieve high performance.

James Robbins, james.a.robbins@accenture.com, is a senior executive for Accenture, a global management consulting, technology services and outsourcing company.

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