Ricardo says adapt to protect aftermarket profits

Ricardo suggests automakers pay more attention to servicing the aftermarket, which generates one-third of revenue and one-half of profits.

Automotive consultants Ricardo plc, ever looking for new business opportunities, has spotted that as the average age of vehicles on the road increases and automotive manufacturers allocate their production capacity to new models and technologies, so their ability to support lifetime service parts requirements is threatened. 

Ricardo determines that the aftermarket supply/demand dynamic has changed from historical norms. Automakers thus find that traditional production-to-aftermarket transition practices may put them in a precarious position to meet aftermarket requirements.

Various factors compel automakers to analyse and predict lifetime requirements for service parts in an increasingly complex and challenging environment. 

Among such factors is greater length of customer ownership and increased average age of cars on the road.

Also, new powertrain technologies essential for tougher emission standards coupled with growing demand for new vehicles are cutting product lifecycles. This intensifies pressure on automakers’ existing manufacturing capacity to accommodate newer models.

Because of product lifetime forecasting errors, automakers have to make expensive re-launch investments to remedy critical part shortages. 

Automakers have to redesign, resource, retool and revalidate components for low-volume service, leaving their profits and consumer satisfaction at risk.

In its report, Ricardo outlines new operational and technical challenges experienced in transition manufacturing for critical aftermarket parts, including: identifying inventory and supply limitations, redesigning components for economical low-volume manufacturing and re-sourcing activities that include identification of new vendors, manufacturing processes and materials.

These operational, engineering and purchasing competencies may be in short supply in an automaker’s organization; often they are focused on new products from a supply chain producing higher volumes than required for aftermarket needs, as well as the usual day-to-day business.

The clever bit is identifying, anticipating and resolving potential inventory problems, thus safeguarding automakers’ profitability and customer loyalty.

This, of course, is where Ricardo believes it can play a part, using its cross-functional teams to reinforce, even supplement, an automaker’s hard-pressed resources.

Ricardo describes how, in one case, a special support team used a combination of skills to successfully introduce best practices for production-to-service transition for transmissions at an automaker to avoid looming aftermarket risks.

Operations experts audit inventory and identify a solution, and work with technical engineering experts to develop components – taking new designs, materials and manufacturing processes into consideration.

Then, low volume purchasing experts source the necessary materials or suppliers, while operations engineers support the launch of the transition to aftermarket production.