Transcript Slide 1
Contents Executive Summary pg. 3 Special Questions Warranty and the Aftermarket pg. 8 Detailed Results Market Conditions Outlook Issues pg. 16 pg. 23 pg. 29 IMR Repair Shop Survey pg. 32 Appendix Respondents’ Product Segments Full Answers to Selected Questions Methodology 2013 Q2 Aftermarket Supplier Barometer 2 pg. 36 pg. 37 pg. 48 Executive Summary Key Findings 2013 Q2 Aftermarket Supplier Barometer 3 Aftermarket outlook continued to improve Respondents indicate increased optimism from the lows seen in 2012 Have our expectations been reduced? 2013 Q2 Aftermarket Supplier Barometer 4 AASA Barometer Dashboard Market Conditions 2013 Q1 2013 Q2 Change* Direction 57% 52% -5% ↓ Independent Aftermarket Average Growth Rate +2.3% +1.5% -0.8% ↓ OE Service (OES) Average Growth Rate +0.5% +0.2% -0.3% ↓ Increased Gross Margin * 29% -------- +11% ↑ Increased Prices * 37% -------- +6% ↑ 2013 Q1 2013 Q2 Optimistic Towards Business Outlook 40% Adding to Inventories Experienced Growth in Sales Outlook Change Direction 50% +10% ↑ 30% 34% +4% ↑ Increase in Production Capacity 37% 39% +2% ↑ Companies who are Hiring 43% 47% +4% ↑ +2.5% +2.8% +0.3% ↑ New Order Volume Average Growth 100% 80% 60% 40% 20% 0% -20% -40% Status Sales Status Up 50% or better +40% to +49% +30% to +39% +10% to +29% Up less than 10% No Change Down less than 10% -10% to -29% -30% to -39% -40% to -49% Down 50% or more 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 0% New order Volume 2013 Q2 2013 Q1 10% 20% *Note: Please note that survey responses regarding price and GM are delayed by one quarter in order to comply with antitrust ‘safe harbor’ guidelines; change and Direction are calculated from 2012 Q4 to 2013 Q1 2013 Q2 Aftermarket Supplier Barometer 5 30% 40% 50% AASA key takeaways: Increased optimism despite slowing sales Optimism continues to improve with half of respondents indicating a more positive outlook in the second quarter; those with a more negative outlook decreased 8 percentage points from the first quarter (pg. 24) However, respondents experiencing sales growth dropped 5 percentage points from Q1 (pg.17); independent aftermarket and OES sales average growth rates slowed to +1.5% and +0.2%, respectively (pg. 19 – 20) Is this renewed optimism in the aftermarket, despite mediocre sales, due to the a brighter future or are many suppliers simply positive as it looks like they can hit their planning targets next quarter? Inventory additions, capacity production, hiring and new orders all increased slightly in Q2 (pg. 25 – 28). 2013 Q2 Aftermarket Supplier Barometer 6 AASA key takeaway: A failing warranty system provides an opportunity for supply chain collaboration Warranty cost reduction is an issue for the aftermarket • 43% of respondents indicated that warranty cost reduction is of high importance to their company (pg. 9) • The concern is greatest with “general service parts”, “cooling/HVAC” and “engine/driveline” product segments (pg.10) Where “blame” is placed, there are clear benefits for the aftermarket from a better warranty system Collaboration among suppliers, retailers, distributors and installers is the only way to improve the warranty system • Many companies lack a standard review process for warranty returns (pg. 11) • Some respondents feel that the cause of unnecessary warranty returns is because seeking a satisfied end consumer at all costs of winning out over a willingness to fix a flawed and costly system (pg. 14) • There are hidden costs to warranty that if reduced could benefit suppliers and the entire supply chain (pg. 12) • Increased training regarding the warranty policies would provide an opportunity for supply chain partnership • Programs for better education to service technicians provide an opportunity for fruitful collaboration with channel partners • Overall, the entire industry needs to accept responsibility for the issue in order to ensure that the amount of abuse in the warranty system is reduced. 2013 Q2 Aftermarket Supplier Barometer 7 Special Questions: Warranty and the Aftermarket 2013 Q2 Aftermarket Supplier Barometer 8 Importance of “reducing warranty costs” averaged 6.3 for respondents However, for 43% of respondents reducing warranty was rated as a very important issue to their company 43% Average: 6.3 Base: n = 79 2013 Q2 Aftermarket Supplier Barometer 9 Importance of warranty cost reduction ranked highest for “General Service Parts”, “Cooling/HVAC” and “Engine/Driveline” product categories Several product categories indicated even more concern with the problem. With these product categories averaging nearly 7 and above for the importance of warranty reduction, there is clearly some segements who feel the negative impact of warranty costs on their business. 2013 Q2 Aftermarket Supplier Barometer 10 Approach to warranty review process is split among respondents Roughly half indicate that their company has implemented an extensive warranty review process while others have limited or no warranty review What type of internal warranty review process do you use, if any? Extensive Warranty Review Process Limited or No Warranty Review Process “100% inspection.” “Limited evaluation process in place, as it was expensive to run and customers demanded credit for parts regardless of data.” “Complete inspection and evaluation – including lab testing as needed.” “Limited; making sure part is ours usually.” “Every part returned as warranty is checked by the quality department for defects.” “None.” “Very detailed analysis of returned parts, customer satisfaction improvement and updating design, and manufacturing to continually improve.” “Samples of warranty products are brought back to our return center and tested.” “We have a minimal evaluation process. We track by customer and then view the customer warranty to give feedback as to findings.” “We have an ‘autopsy’ room where every warranty item is reviewed for a cause. Credit is issued in most cases, unless there is blatant abuse. But we like to know the root cause.” For full results, see Appendix 2013 Q2 Aftermarket Supplier Barometer 11 Average hidden cost of warranty return was 10.1% These additional costs contribute even further to the aftermarket warranty burden; with direct and indirect costs, warranty reduces industry profits by $3.9 billion* Average: 10.1% Base: n = 77 *Source: 2013 AASA Pulse KPI Benchmarks ~= 3.5+ billion value of parts warranty returns and 10.1% of indirect costs 2013 Q2 Aftermarket Supplier Barometer 12 Respondents indicated that “installation errors” and “insufficient training” were the largest contributors to warranty returns *Note: Scale is from 1 to 10 where 1 is “No contribution” and 10 is “Large contribution” 2013 Q2 Aftermarket Supplier Barometer 13 However, “customer satisfaction” and poor incentives at channel partners are also key contributors in the issue of warranty returns What other factors do you think contribute to warranty returns? What are examples of “abuse” of the warranty system that you have seen recently in the aftermarket? “Customer satisfaction” at the expense of the supplier Lack of Motivation and Education at Channel Partners “Customer satisfaction is the driver of our warranty expense. Our customers will do whatever is necessary to make the end consumer happy including giving them a completely new part even when it is not deserved.” “High turnover at retailers and continued lack of education.” “Manufacturers are receiving warranty returns for good product from retailers using customer satisfaction as a reason.” “No questions asked [at] counter return; zero financial impact to retailer on warranty.” “No policing at WD or retail level; all of the overhead is pushed onto the supplier.” “Overall power of distributors/retailers and their lack of motivation at the purchasing level to take action/work with suppliers to ‘fix’ the problem.” “Marketing of ‘lifetime warranties’ contribute to customer confusion on what really is covered; therefore, store personnel “keep customer happy” by giving warranty on a worn or misapplied part.” “No oversight with no closed loop process for feedback to improve.” “Resellers merely take anything back, no questions asked, charge it to the manufacturer.” “Too easy for the retailer to say ‘yes’.” “The use of warranty for customer satisfaction.” For full results, see Appendix 2013 Q2 Aftermarket Supplier Barometer 14 To improve the aftermarket warranty system, most agreed that collaboration across the value chain is crucial Whoever the “blame” falls on in regards to unnecessary warranty costs, increased knowledge, collaboration, and training for the aftermarket are the only way forward to reduce this growing issue among suppliers What can be done to improve the system and prevent unnecessary warranty costs? “Their systems often times do not capture issues or provide option for employees, those that do have sometimes poor compliance. The entire industry needs to own this issue.” “Better education at the installer level to improve problem diagnosis.” “Our customers have to take ownership over their customer’s neglect. Our customers believe that if they tell their customer no they will lose that customer to a competitor. This will not change until the industry changes.” “Clear warranty process for customers to follow and a clear explanation of warranty by product line.” “Training at the installer level and enforcement of policy.” “Better communication at all levels, starting with the point of sale.” “Get the channel partners more involved through training.” “Installation and diagnostic training.” “Eliminate lifetime warranty and broad customer satisfaction policies” For full results, see Appendix 2013 Q2 Aftermarket Supplier Barometer 15 Detailed Results: Market Conditions 2013 Q2 Aftermarket Supplier Barometer 16 Sales performance stayed tepid; declined slightly from Q1 Decline Growth While roughly half (52%) experienced growth, sales performance continued to be weaker than the highs seen in 2010- 2011; 23% of respondents saw sales declines Base: n = 87 Note: “No change” is shown as neutral (as a zero value) on the chart to allow a visual depiction of trends 2013 Q2 Aftermarket Supplier Barometer 17 Majority of respondents (64%) expect growth in sales in the third quarter of 2013 Only 7% expect declines Expect increases: 71% Expect declines: 7% Base: n = 87 2013 Q2 Aftermarket Supplier Barometer 18 Respondents’ independent aftermarket sales grew on average by 1.5% Although majority indicate growth, the low average (+1.5%) indicated that growth has slowed for the aftermarket Average: +1.5% Base: n = 82 2013 Q2 Aftermarket Supplier Barometer 19 Quarter Average Growth 2012 Q4 +1.9% 2013 Q1 +2.3% 2013 Q2 +1.5% OES average growth rate dropped to +0.2% Majority (56%) indicate OES sales down or unchanged, contributing to further weakness in growth Average: +0.2% Base: n=74 2013 Q2 Aftermarket Supplier Barometer 20 Quarter Average Growth 2012 Q4 +1.7% 2013 Q1 +0.5% 2013 Q2 +0.2% Price Cuts Price Increases Q1 pricing environment increased slightly as 37% increased prices and 9% decreased Base: n= 91 Note: “No change” is shown as neutral (as a zero value) on the chart to allow a visual depiction of trends. Price is delayed a quarter due to privacy laws. 2013 Q2 Aftermarket Supplier Barometer 21 Please note that survey responses regarding price and GM are delayed by one quarter in order to comply with antitrust ‘safe harbor’ guidelines Gross margin performance increased slightly in Q1 Decline Increase Those indicating gross margin growth increased from 18% to 29%; while those indicating declines decreased from 29% to 23% Base: n=90 Please note that survey responses regarding price and GM are delayed by one quarter in order to comply with antitrust ‘safe harbor’ guidelines Note: “No change” is shown as neutral (as a zero value) on the chart to allow an effective visual depiction of conditions. Gross Margin was a new question in 2011 Q2, therefore only limited historical data is available 2013 Q2 Aftermarket Supplier Barometer 22 Detailed Results: Outlook 2013 Q2 Aftermarket Supplier Barometer 23 Respondents continue to indicate a more positive outlook Negative Positive Outlook continues to improve from the lows seen in Q3 of 2012 with 50% indicating optimism from Q1 vs. only 16% who become more pessimistic in Q2 Note: “No change” is shown as neutral (as a zero value) on the chart to allow a visual depiction of trends Base: n = 88 2013 Q2 Aftermarket Supplier Barometer 24 Respondents indicated a slight increase in inventory additions in Q2 versus Q1 Cuts Additions 34% added to inventories while 23% cut Note: “No change” is shown as neutral (as a zero value) on the chart to allow a visual depiction of trends Base: n = 85 2013 Q2 Aftermarket Supplier Barometer 25 Capacity trends have remained steady over the past five quarters Cuts Increase More (39%) added to production capacity in Q2 Note: “No change” is shown as neutral (as a zero value) on the chart to allow a visual depiction of trends Base: n = 84 2013 Q2 Aftermarket Supplier Barometer 26 Hiring increased slightly with 47% indicating growth from Q1 Job Cuts Hiring Only 8% of respondents indicated “Job cuts” Base: n=85 2013 Q2 Aftermarket Supplier Barometer 27 New orders average growth decreased year-over-year, dropping from +3.7% in 2012 Q2 to +2.8% in 2013 Q2 Quarter Average Growth Orders Up 2012 Q1 +5.1% 2012 Q2 +3.7% 2012 Q3 +2.5% Orders Down New orders are still relatively low, but improvement continues from the low seen in Q4 2012 Q4 +1.6% 2013 Q1 +2.5% 2013 Q2 +2.8% Note: “No change” is shown as neutral (as a zero value) on the chart to allow a visual depiction of trends Base: n=80 2013 Q2 Aftermarket Supplier Barometer 28 Detailed Results: Issues 2013 Q2 Aftermarket Supplier Barometer 29 “Lack of pricing power” and “Weak sales” moved to top concerns for Q2 “Extended payment” continued to remain as a key issue facing suppliers More Important Less Important Note: Top Issues in 2013 Q1 1. Extended payment / terms of sale 2. Economic conditions 3. Aftermarket demand drivers 2013 Q2 Aftermarket Supplier Barometer 30 Increased competition from low cost suppliers, economic uncertainty and rise in gas/oil prices impacted suppliers business in the past quarter What events or changes have impacted your business in the past three months? (Open-ended) Increased Competition Economic Uncertainty “2nd tier suppliers” “Slow economic recovery.” “New entrants [in] online channels.” “Poor demand.” “Completion from off-shore manufacturers” “Weaker then expected market conditions in the first half of 2013.” “Global unrest, inability of government to deal with offshore threats…” Rise in Gas / Oil Prices “Hyper competitive pricing at the street level.” “Fuel price increases and new car sales increases.” “Low price supplier competition.” “The rapid influx of low cost competitors.” “Gas prices going up is damaging to the whole Aftermarket…” “Higher gas prices, lower consumer confidence.” For full results, see Appendix 2013 Q2 Aftermarket Supplier Barometer 31 IMR Repair Shop Survey 2013 Q2 Aftermarket Supplier Barometer 32 Shop sales increased quarter-over-quarter 2013 Q2 Aftermarket Supplier Barometer 33 Channels purchased from in past 12 months Note: Respondents could pick multiple categories; therefore, total will add up to more than 100% Retail WDs Dealers/OES Note: The information in this section comes from IMR’s monthly Repair Shop survey research. IMR’s data includes significantly more on shop insights, category insights and shop demographics. IMR offers a 10% discount on their services to AASA members. See www.automotiveresearch.com for more information. 2013 Q2 Aftermarket Supplier Barometer 34 Appendix • Respondent’s Product Categories • Full Answers to Selected Questions • Barometer Methodology 2013 Q2 Aftermarket Supplier Barometer 35 Respondents’ product categories Base: n = 74 Note: Respondents could pick multiple categories; therefore, total will add up to more than 100% 2013 Q2 Aftermarket Supplier Barometer 36 What events or changes have most impacted your business or business conditions in the past three months? (1/2) “1) pressure from payment terms on our ability to get price increases. (2) lower retail (DIY) sales than prior year” “2nd tier suppliers” “Aging vehicle population, new entrants, online channels” “Availability & acceptance of off-shore product” “Biggest impact to our business is driving behaviors, economic conditions, and payment terms with retailers.” “Competition from off shore manufacturers” “Competitive price pressures / decreases” “Competitor closed their doors” “Continued aggressive solicitation of consumer repair business from OES segment. Robust new car sales have not changed dealers' focus on repair service growth.” “Currency (Yen and Euro)” “Customers managing their inventories extremely tight” “Extended terms.” “Fuel price increases and new car sales increases.” “Gas prices going up is damaging to the whole Aftermarket...” “General economy” “General improvement of economic environment” “General Motors ‘Service Lane’ program, which is driving the dealers to buy direct from GM CCA and cut out the ACDelco WD's.” “Global unrest, inability of government to deal with offshore threats to US businesses and lack of US job growth” “Going from flat sales to strong orders in a short period of time has hurt order fill.” “Higher gas prices, lower consumer confidence” “Hyper competitive pricing at the street level; too many suppliers selling into a soft market” “Improving economic conditions” “Indecisiveness of suppliers” “Industry consolidation” “Internal ERP issues” “Lack of heat in which to drive sales” “Lack of pricing power” “Lack of pricing power” “Low price supplier competition” “Macro and industry environment improving, consumer confidence up, anticipate higher raw material costs as the worldwide economy gears up” “Many A/M suppliers continue to cave into the unfair or unrealistic demands of retailers and distributors. This gives them more power - plain and simple.” “More interest from the retail channel” “OE product lifecycles” “OE production volume increases - no capacity to run parts from the aftermarket.” 2013 Q2 Aftermarket Supplier Barometer 37 What events or changes have most impacted your business or business conditions in the past three months? (2/2) “OEMs not adding new programs.” “Our largest aftermarket customer has indicated that their own sales have dropped recently; affects us by 10% of sales, some of which have been made up by stronger OE sales.” “Overall economic improvements in the USA” “Poor demand” “Positive attitude of customers = inventory expansion & growth” “Price of oil” “Primarily the weather (mild winter and severe spring) and the economy.” “Reduced OE/OES demand from mining industry channel partners” “Reduction in miles driven” “Roller coaster demand” “Slow aftermarket sales” “Slow economic recovery.” “Slow GDP growth” “Some re-stocking by customers has resulted in modest growth of order intake” “Stabilization of costs” “The lingering winter has impacted our climate control business and we are optimistic sales will pick up” “The rapid influx of low cost competitors along with tough economic conditions and higher gas prices” “Freight and fuel prices” “We were acquired in a sale.” “Weak sales, weather” “Weaker then expected market conditions in the first half of 2013.” 2013 Q2 Aftermarket Supplier Barometer 38 What other factors do you think contribute to warranty returns? What are examples of "abuse" of the warranty system that you have seen recently in the aftermarket? (1/3) “Installer claiming warranty on parts that the car owner never viewed as defective.” “Installers use 2nd line products and send them back in branded boxes when they fail.” “Junk yard units being returned for cash warranty. • Garages use the life time warranty as a way to make money / charge their customers. • Units pass test but customers still want a new unit. • Remove new core units (end of life) and return to a store for warranty.” “Lack of technician capability.” “Largest contributor is installation error.” “Lifetime warranty and broad customer satisfaction policies” “Limited checks & balances at the point of return Customer Satisfaction (Retail)” “Main factor is abuse” “Manufacturers are receiving warranty returns for good product from retailers using customer satisfaction as a reason vs. sending truly defective product back under warranty which is a small percentage of overall returns.” “Marketing of ‘lifetime warranties’ contribute to customer confusion on what really is covered; therefore, store personnel ‘keep customer happy’ by giving warranty on a worn or misapplied part.” “Minimal returns on our line” “Appearance of reman parts contribute to excessive returns” “Basically catalog errors” “Channel partners are not interested in reducing NTF” “Customer satisfaction is the driver of our warranty expense. Our customers will do whatever is necessary to make the end consumer happy including giving them a completely new part even when it is not deserved. In light of the very challenging market conditions for our products, our customer believes this will help them retain market share, when in fact increasing warranty rates are a drag on market share.” “Customers will take one part out of a kit and return the rest. Cut a portion of the product to use and return the rest.” “Damaged package (when damage is due to sellers’ markings or tags)” “Errors in actually diagnosing the vehicle problem correctly.” “High turnover at retailers and continued lack of education. E-cat errors” “Incorrect problem diagnosis” “Inefficient sales forecasting by customers” “Installer abuse” 2013 Q2 Aftermarket Supplier Barometer 39 What other factors do you think contribute to warranty returns? What are examples of "abuse" of the warranty system that you have seen recently in the aftermarket? (2/3) “Misdiagnosis” “Missing components, cutting off a portion they need and returning the rest” “Most listed above...one is product returned in package with someone else's product” “Neglect and abuse over the three year product warranty period” “No policing at WD or retail level. all of the overhead is pushed onto the supplier” “No questions asked counter return, zero financial impact to retailer on warranty” “None” “None - most product returned is ‘no defect’” “Not a problem in our category” “Other system related issues; not a defect of the water pump or fuel pump but bad system issues (poor quality gas, water /coolant contamination, failure of an adjacent part in the system, i.e. thermostat, water pump) Countless other examples.” “Overall power of distributors/retailers and their lack of motivation at the purchasing level to take action/ work with suppliers to ‘fix’ the system. Maybe AASA should address this as a project!” “Parts changers, not technicians diagnosing the ‘root cause’” “Parts used as a test equipment” “Poor installation instruction sheets.” “Poor knowledge, poor training & poor / no oversight with no closed loop process for feedback to improve” “Product that goes beyond shelf life and is not properly monitored by our customer.” “Resellers merely take anything back, no questions asked, charge it to the Manufacturer.” “Returning obsolete as a function of warranty is a blatant abuse.” “Returning special order items as defective” “Sabotage of part...” “Technicians will play the warranty system so as not to have to charge a customer for their (technician) mistake. High tech turnover drives the lack of mechanical skill.” “The biggest abuse is as pointed out above- Obsolescence / Stock Adjustments being called ‘Warranty’” 2013 Q2 Aftermarket Supplier Barometer 40 What other factors do you think contribute to warranty returns? What are examples of "abuse" of the warranty system that you have seen recently in the aftermarket? (3/3) “The use of warranty for customer satisfaction” “Too easy for retailer to say yes” “Using part to "problem solve".” “We do not have a stock adjustment program, so customers tend to return obsolete/slow moving stock through warranty returns.” “We have limited life time warranty which complicates our results.” 2013 Q2 Aftermarket Supplier Barometer 41 What type of internal warranty review process do you use, if any? (1/3) “100% at incoming inspection on returns” “100% inspection” “A failure analysis to determine root cause” “All labor claims are reviewed. Regular defect returns are not reviewed, but that is changing. We are developing a new plan to review all high value parts.” “All parts are examined for defect etc., however this is getting to a big problem” “Checked against our specifications and tested where applicable” “Complete inspection and evaluation - including lab testing as needed.” “Detailed cause and effect including historic tracking, lot control by production date, corrective action, return of product for review, etc.” “Each and every return” “Engineering inspection and testing” “Engineering review” “Every part returned as warranty is checked by the quality department for defects” “Every part within a warranty claim is reviewed by a product engineer for a manufacturer defect.” “Field salesmen review in field.” “Formalized testing procedure” “If customer has life time warranty it is accepted. Product is still evaluated and data is shared with customers to help educate and drive customer awareness. • Customers with labor claim polices – claim is only accepted on product related or manufacturing related failures. Customer abuse is denied.” “Inspect by ISO responsible” “Inspect for material and manufacturing defects” “Inspect warranty bins before credit is issued. Trying to get resellers "skin in the game“” “Inspection and verification of all parts returned.” “Inspection of all returns on credit line and product line audits in quality/engineering labs” “Limited evaluation process in place, as it was expensive to run & customers demanded credit for parts regardless of data.” “Limited; making sure part is ours usually.” “NA” “New policy in development” “No comment.” “None” “None” “Parts are tested on return.” 2013 Q2 Aftermarket Supplier Barometer 42 What type of internal warranty review process do you use, if any? (2/3) “Periodic audits externally.” “QC” “QC/ISO CAR process” “Quality manager utilizes 6 sigma processes” “Review by part number to check for potential issues” “Review of every part number by date code and reason” “RGA must be requested before product returned. RGA not issued until preliminary reason for return is determined. If product is suspected to be defective extensive testing occurs after receipt of return.” “Robust; QC inspects every part returned, fully tests and advises disposition.” “Sales review in the field.” “Sample size product testing” “Samples of warranty products are brought back to our return center and tested.” “Sampling of warranty returns to gauge abuse. Monitor outliers and engage in training (both technical and customer service) to improve results.” “Test each part and track by customer” “Testing and Engineering play a key role” “Testing, and complete tear-down analysis to attempt to determine cause for removal.” “Varies by product line. Customers with high warranty rates get more in-depth review to determine if there is abuse. Customer Service and Sales Force review warranty claims with customers.” “Very deep analysis” “very detailed analysis of returned parts/customer satisfaction improvement and updating design/manufacturing to continually improve.” “Warranty is monitored every day and if warranty increases an 8D is performed to reduce warranty cost and find out the real cause of the warranty increase.” “Warranty sampling review and categorization of warranty returns” “We are in the process of re-evaluating our entire return process and procedures.” “We discuss every month.” “We established a cross functional team to address rising warranty rates & costs. All high warranty items are being reviewed.” “We evaluate every return to ensure that it meets with our warranty policy- Replacement of related components and proper servicing procedures.” “We go through a formal review/inspection after the field person authorizes return.” 2013 Q2 Aftermarket Supplier Barometer 43 What type of internal warranty review process do you use, if any? (3/3) “We have a minimal evaluation process. We track by customer and then view the customer warranty and give feedback as to findings.” “We have an "autopsy" room where every warranty item is reviewed for cause. Credit is issued in most cases, unless there is blatant abuse. But we like to know the root cause.” “We have an analysis performed for only damage to the engine related to our product.” “We have one, but are basically powerless based on size and influence of customer.” “We inspect 100% of warranty returns” 2013 Q2 Aftermarket Supplier Barometer 44 What can be done to improve the system and prevent unnecessary warranty costs? (1/3) “A complete tracking process of issues beginning at the reseller level. Their systems oft times do not capture issues or provide option for employees, those that do have sometime poor compliance. The entire Industry needs to own this issue.” “Adopt the MAC policies regarding warranty.” “Ask retailers to adjust policies to avoid customer abuses” “Better cataloging. Stronger jobber and distributor warranty policies.” “Better communication at all levels, starting with the point of sale.” “Better education at the installer level to improve problem diagnosis.” “Better investment in QC and improve communications on forecasts with customers” “Catch the abusers and correct this problem” “Clear warranty process for customers to follow and a clear explanation of warranty by product line.” “Closer to the end customer evaluation rather then up at manufacturer level. It is only dealt with at manufacturer level.” “Cost share of warranty costs with distribution on nondefect returns” “Counter personnel need to become more involved instead of just taking everything back and returning to vendor.” “Customer satisfaction no longer returned under warranty for known good product and increased parts counter education” “Discount in lieu of warranties” “Eliminate Lifetime warranty and broad customer satisfaction policies” “Eliminate lifetime warranty and lower customer satisfaction abuse” “Form an industry council that includes all stakeholders including OEMs and dealers” “Get buy-in from customers to improve system. Have offered to pay all costs of improvement but there has been little motivation for purchasing departments to support warranty reduction.” “Get the channel partners more involved through training.” “Go to flat allowance as a percent of sales. Ex. 1% of net purchases” “Having a tracking program to measure returns/warranty by type to take corrective action” “I think we have a pretty good system but educating our customers about shelf life and inventory turns may help.” 2013 Q2 Aftermarket Supplier Barometer 45 What can be done to improve the system and prevent unnecessary warranty costs? (2/3) “Improved channel visibility from WD to installer: sales, returns, warranty claims that are measureable.” “Improved product quality. (given but needs stating) ‘In lieu of’ discounts shift warranty management closer to installation point cutting time, processing and handling costs”. “In lieu of warranty allowance offerings” “In most cases, a clear understanding of the installation procedure and a method to communicate where installation documents are not ignored.” “Increased monitoring” “Installation and diagnostic training.” “More inspection and returns to offender.” “Not a big issue” “Not sure.” “Off-invoice warranty! It works because now everyone has skin in the game” “Our customers have to take ownership over their customers’ neglect. Our customers believe that if they tell their customer no they will lose that customer to a competitor. This will not change until the industry changes.” “Reduce over-ordering” “Reduction of warranty periods and holding the customer accountable.” “Resellers need to be held accountable for no apparent defect warranties” “Retailers in the Automotive Aftermarket need to stand firm when product failure was caused by something else. More training for the counter personnel and store management would enable better dialogue with the consumer. Retailers need to not be afraid to say no.” “Review the catalog” “Since most "warranty" claims are related to end-customer accommodations rather than true defective product, offering a discount in lieu of warranty claims would provide a fund to customers who feel the need to accommodate their customers claims. Then the expense would at least be ‘known’ based on a percentage of sales.” “Technical information and training needs to be improved on installer and counter person level” “Technician training and tighter controls on accepting abuse within the channels.” “Training at the installer level” “Training at the installer level and enforcement of policy.” “Training of service providers. Strict adherence to warranty policy” 2013 Q2 Aftermarket Supplier Barometer 46 What can be done to improve the system and prevent unnecessary warranty costs? (3/3) “Training, tougher review process at customer locations” “Training. Call out the abusing shops or dealers” “Work through the supply, delivery up to installation process and make sure that process is working.” 2013 Q2 Aftermarket Supplier Barometer 47 AASA Supplier Barometer methodology notes • The AASA Supplier Barometer survey presents the latest information on aftermarket supplier sentiments and market trends. • Comments are edited only for spelling and diction and may contain grammatical errors due to their verbatim nature. • The purpose of the survey is to provide members with general information on business conditions and market trends and to allow high-level benchmarking of sector performance. The information and opinions contained in this report are for general information purposes only. • Note that responses to questions related to price and gross margin trends are delayed by one quarter to comply with anti-trust safe harbor guidelines. • Responses to this survey are confidential. Therefore, only aggregated results will be reported. Individual responses will not be released and will be destroyed after results are compiled. • Participation is only available to AASA supplier members. There were 88 survey responses in this quarter’s report. 2013 Q2 Aftermarket Supplier Barometer 48 Contact Information Paul McCarthy Vice President Industry Analysis, Planning and Member Services Office: +1 919.406.8812 | Mobile: +1 248.914.2567 Email: [email protected] Bailey L. W. Overman Analyst/Coordinator Industry Analysis and Member Services Office: +1 919.406.8823 Email: [email protected] AASA | Automotive Aftermarket Suppliers Association 10 Laboratory Drive | Research Triangle Park | NC | 27709 | USA www.aftermarketsuppliers.org 2013 Q2 Aftermarket Supplier Barometer 49