The Aftermarket in the Automotive Industry How to Optimize Aftermarket Performance in Established and Emerging Markets
Contents
1 Executive Summary 4
2 The Aftermarket in the Automotive Industry 6
3 Characteristics of the Aftermarket 8
4 Investments Into Key Initiatives in the Aftermarket 13
5 Performance in the Aftermarket 16
6 Management Approach for Winning the Aftermarket 17
7 Conclusions 34
The Aftermarket in the Automotive Industry 3 1 Executive Summary
The automotive industry is analysis. The main aim of this experiencing significant changes in analysis was to develop a frameset global market volumes, with flat sales that allows automotive companies to in Western Europe and increasing best prepare for challenges in the importance of the emerging markets global aftermarket business. The of Eastern Europe, Russia, China and analysis is based on an in-depth India. This growing importance survey in combination with additional includes not only new car sales, but interviews with over 150 aftermarket also the aftermarket. Given the fact managers of the world’s leading that the aftermarket business creates automotive companies. attractive revenues and margins, aftermarket activities are on the Based on the results of this study, the management agenda in both following key conclusions can be established and emerging markets. drawn for the aftermarket: Winning the aftermarket is far from easy, since it entails significant 1. The Western European complexity, a large number of aftermarket is a rather mature maintenance and parts activities, and market with flat aftermarket crucial supply chains. volumes. The competitive intensity remains at a high level and will be To identify key patterns about how to further accelerated by new best operate in the established as well regulations and competitors. as in these fairly new markets, 2. Improvement of marketing and Capgemini Consulting, together with sales activities is the main the University of St. Gallen (ITEM- trigger to remain competitive in HSG), conducted an aftermarket Western Europe. Because of the flat nature of the Western European aftermarket, marketing Exhibit 1: Global Revenues and Headquarters of Participants and sales activities must concentrate on keeping the Global revenue distribution of participating companies Headquarters of participating companies customer loyal to dealers and repair shops across the car 35% Asia Pacific 31% 9% lifecycle. 30% 27% America 3. Emerging markets offer 25% 13% 22% Germany attractive growth rates with 20% 47% relatively moderate competitive intensity in Eastern Europe, 15% 14% Russia and India but with high 10% competitive intensity in China. 6% 5% In the future, the competitive Rest of Europe 31% 0% intensity is expected to increase to <100m 100m- 501m- 1bn-5bn >5bn a similar level as in Western 500m 1bn Europe. To benefit from the attractive growth rates requires immediate managerial action, Capgemini Consulting before the growing competition makes it more difficult to succeed in the aftermarket. Still, low- performing companies in particular need to focus on selected markets that best fit their strategy and their current capabilities.
4 4. Each emerging market (Eastern different phases to optimize the Europe, Russia, China and India) aftermarket performance in Western is specific in terms of the Europe and the emerging markets. competitive environment and This model helps companies to better customer needs. The different position themselves and develop characteristics of the markets strategic options to boost their require a localization of the aftermarket performance in the aftermarket. Companies trying to respective markets to the point where exploit the aftermarket with a they can become a global aftermarket standardized global approach will champion. To accomplish this, the most likely fail. Finding an model uses three different levels: the individual approach becomes exploration, exploitation and finally essential. the aftermarket champion phase I Surprisingly, most companies are leading into the global aftermarket not prepared to exploit the champion phase. potential of the Eastern European aftermarket and no one In each of these levels companies reaches high performance. The have to focus on different majority of companies are improvements in their aftermarket confronted with improvement operations. Most companies have left activities across marketing and the level of exploration in Western sales, sourcing, distribution, Europe, but have re-entered this level planning and reverse-logistics in the emerging markets. Companies processes. should strive to become emerging market champions in their I Russia’s geographic expansion aftermarket activities in the next five requires improvements in the years. Of course, not every company distribution processes. A more can and will succeed, but the pace of dense distribution network would progress towards that objective will enable a stronger penetration of make the distinction between market the Russian aftermarket beyond share losers and gainers, not only for the major cities. aftermarket revenues and profits. I China is the most challenging emerging market. To succeed In the final level companies should here, major improvements are align their strategy and operations necessary in marketing and sales, towards a vision in which global sourcing, distribution and aftermarket champions concentrate planning processes to become and on a control-tower type of supply also to remain competitive. chain operation. In this case, the I In general, India is a rather company takes over full end-to-end neglected market for Western responsibility for the supply chain European car manufacturers and from its suppliers up to its is increasingly being led by top- customers. Global aftermarket performing Asian companies. champions operate optimized multi- Western European companies echelon networks of warehouses and must learn from the successful use worldwide benchmarks to aftermarket practices of their transfer best experiences among Asian competitors. warehouses, dealers and repair The results of the study led to the centers. development of a model designed by Capgemini and the University of St. Gallen that evaluates the overall aftermarket performance (CHAMP – Capgemini’s Health Check for Aftermarket Performance). The model visualizes the current performance and development needs of a company by identifying three
The Aftermarket in the Automotive Industry 5 2 The Aftermarket in the Automotive Industry
This section provides an overview of definition also includes any the automotive industry’s aftermarket additional innovative services that to set the scene for further analysis. help to optimize the use of the Growth rates in the different regions vehicle. are discussed as well as how basic value propositions are set in this Exhibit 2 summarizes the main industry. components of the automotive aftermarket and also gives an outline Aftermarket Volumes of average margin expectations per Aftermarket operations have a very component. In addition, the broad scope and contain all activities illustration shows how the value related to maintaining a car after its chain of an OEM (Original initial sale and until the end of its Equipment Manufacturer) and OES lifecycle. The relevant activities are (Original Equipment Supplier) is also referred to as aftermarket parts structured and where the after sales and services. The aftermarket activities are based in the chain. encompasses all parts and services purchased for light- and heavy-duty Globally, aftermarket volume, vehicles after the original sale, including retail sales, is growing including replacement parts, rapidly and becoming increasingly accessories, lubricants, appearance important to automotive companies products and service repairs. This compared to new car sales due to the
Exhibit 2: Value Chain of OEM/OES and Focus of Study
Upstream Downstream
Product Manu- New Car Financial Used Car Logistics After Sales Recycling Development facturing Sales* Services Sales
Parts Services
Accessories Appearance Lubricants Replacement Service Telematics/ Entertainment Products & Tires Parts Repairs Navigation
OEM/OES Margin OEM/OES Margin
* New car sales is relevant for OEMs only. For OESs the The relevancy of the different elements varies for equivalent is parts/components sales to OEMs OEMs/OESs due to the nature of their meaning
Capgemini Consulting
6 higher margins. As can be seen in Aftermarket Revenue and In 2007, the aftermarket business Figure 3, the Western European Profits accounted for about half of the aftermarket is more or less flat, while Innovative services such as telematics profits of European automotive attractive growth rates exist in and mobility service bundles offer OEMs/OESs, compared to 26% for emerging markets such as Eastern additional opportunities to generate new car sales and 18% for car Europe. The average growth rate per business and revenue improvements manufacturing. In the aftermarket, year is estimated at about 1% in and account for a growing share of the turnover for car and parts Western Europe, whereas in Eastern the aftermarket. These services are manufacturers has increased to about Europe it is about 5.3% per annum increasingly embedded into new 63 billion euros and operating profits over the past seven years. Among technologies. In addition to more grew from 13 billion euros to 16 Western European markets with a complex parts, they can compensate billion euros, compared with the total aftermarket volume of for the declining share of traditional previous year. 3 In 2009/2010 this is approximately 165 billion euros, parts, repair and maintenance expected to level off due to the effects Germany has the highest sales with services during a car’s lifecycle due to of the vehicle scrapping programs, 48 billion euros and thus contributed higher general quality and reliability such as the Abwrackpraemie in about 30% of the overall Western of cars and parts. Considering the Germany, on the service and parts European aftermarket sales in 2008. total revenue stream of a typical 13- business in the major markets in year car lifetime, 1 only 37% of the Western Europe. In addition, the cost total revenue stems from the new car of warranty is expected to increase sale. The aftermarket business over the next three years. accounts for the remaining 63% in Western Europe. 2
Exhibit 3: Automotive Aftermarket Growth in Western and Eastern Europe
Automotive aftermarket retail value in billion EUR Automotive aftermarket retail value in billion EUR in Western Europe a in Eastern Europe b
Increase 5% Increase 27%
180.0 10.0 163.6 165.4 157.9 158.8 158.8 158.7 160.7 160.0 9.0 8.6 8.2 7.8 140.0 8.0 7.4 7.1 62.6 64.0 64.8 62.0 62.3 62.2 62.0 7.0 6.7 3.3 120.0 6.3 3.1 3.0 6.0 2.8 2.7 100.0 2.5 5.0 2.4 80.0 4.0 60.0 100.6 3.0 95.9 96.5 96.6 96.7 98.1 99.6 5.1 5.3 40.0 4.4 4.6 4.8 2.0 3.9 4.2
20.0 1.0
0.0 0.0 2002 2003 2004 2005 2006 2007 2008 2002 2003 2004 2005 2006 2007 2008
Labor Parts Labor Parts
a) Based on data from Germany, UK, France, Italy, Spain, the Netherlands, Belgium, Norway, Portugal, Sweden, Austria/Switzerlan d b) Based on data from Poland, Hungary, Czech Republic
Datamonitor, Capgemini Consulting
1 The automotive passenger car lifecycle model splits the average use of an automotive passenger vehicle over a period of 13 years into three phases. The first phase runs from one to four years of the car’s age, mainly through the warranty period of the car. Phase two describes the years from four to seven. Finally the third phase describes the years from seven to typically 13. This model is relevant for the management of the automotive aftermarket business as it can be used to describe the usage patterns of end customers in their consumption of parts and services over the different phases. Typically, the older the car gets, the more sales of parts at OEM-owned retail and franchised dealerships decrease in favor of independent retailers. OEMs are continually seeking solutions to minimize this situation as the parts business offers attractive margins. 2 Capgemini Consulting, internal research 3 Capgemini Consulting, internal research
The Aftermarket in the Automotive Industry 7 3 Characteristics of the Aftermarket
To establish a management guide, the marketing and sales capabilities to Key Finding characteristics of each aftermarket maintain their market position in Western, Eastern Europe and first have to be defined. This section light of the increased competition. Russia will increasingly be describes the competitive Moreover, the market will likely environment, market growth and witness the emergence of additional treated as “one” common potential as well as the market and changed business models. investment region, whereas specifics. Differences across markets China and India are still focused do not only occur between the On average, OEMs’ parts revenue is on independently. mature Western European expected to decline by up to 5% in aftermarket and the aftermarket in the next three years, indicating that the emerging regions but also among margins could come under increased the different emerging markets pressure. On the demand side of themselves. standard high-volume parts, specialty chains and fast fitters such as Kwik- Market Potential and Growth Fit, PitStop and A.T.U. will benefit The Western European aftermarket and have more power to negotiate is a rather mature market with flat prices. Independent vendors, volumes. However, with 165.4 supplying, for example, Bosch Repair billion euros in 2008 it remains the Centers, may also increasingly biggest of the study’s markets when it replace OEMs in the aftermarket. comes to volume. 4 In the research, These shifts may result in lower 54% of the respondents expect prices for standard and high-volume incremental growth of up to 5% until parts by 10% to 15% in the next five 2013. years. This means that most market players except for copy Competitors that are able to utilize manufacturers and specialty chains the new European Union Block will face a reduction in overall Exemption Regulation in 2010 turnover. Additionally, margins as (BER2010 )5 for their own purpose well as profits will be squeezed Key Finding can expect additional growth rates of throughout the industry. Whereas the Western European 5% to 10%, compared with the market average. BER2010 will not Total aftermarket volume in Eastern aftermarket is in the maturity only help companies to shape their Europe is low compared to Western stage, strong annual growth competitive edge but should also Europe (see Exhibit 3). The region’s rates of 5% to 15% are expected further increase competition in the market volume is estimated at for the emerging Eastern aftermarket. The regulation will most 8.6 billion euros. 6 But with an annual probably attract more suppliers to growth rate of more than 5% European, Russian, Chinese and the aftermarket, since original parts anticipated by the study’s participants Indian markets. can command a premium and in the next few years, the overall insurance companies often require growth is expected to be considerably them for repairs. This means that higher in Eastern than in Western OEMs and OESs will face significant Europe. The aftermarket development price competition from copy in Poland, Hungary and the Czech manufacturers. They need to show Republic is the main growth driver. strong operational excellence and
4 Datamonitor, Germany – Total Aftermarket Value 2008, 2009 5 The Block Exemption Regulation 1400/2002 restructured the automotive sales and after sales market and led to an increase in competition. For the aftermarket this meant several changes such as, for example, more liberal access to relevant service information for independent dealers. This regulation will end May 2010 and be replaced by an automotive aftermarket specific regulation (BER2010). This will continue to further liberalize the automotive aftermarket and increase competition in the parts and service market. Source: Capgemini Consulting, internal research; European Commission, SEC(2009) 1053, 2009 6 Datamonitor, European Aftermarket Houseview 2009, 2009
8 The Russian car market, in general, rates to be higher than 5% and half Competitive Situation in the was expected to surpass the German expect growth rates to climb up to Aftermarket market in 2008. Within the first six 10% to 15% within the next three Similar to market potential and months of that year, about 1.64 years. The total volume of the market growth, the current and million new cars were registered in Chinese aftermarket is about 5.1 future competitive situation in the Russia, resulting in 100,000 billion euros. 8 aftermarket differs depending on the additional cars compared to region. Germany. However, the Russian In general, India is a rather neglected automotive market has been heavily market for Western European car In Western Europe , the competitive hit by the financial crisis, leading to a manufacturers. The country is still intensity is currently at a rather high decline of more than 50% in the last dominated by three car level, according to the respondents. months of 2008. 7 The total after sales manufacturers, namely Maruti They categorized the market as being market volume in 2008 was Suzuki, Tata Motors and Hyundai, one of the two most challenging in estimated at about 8.2 billion euros. which account for 75% of the market terms of competitive activity (the The expected growth rates are on share. Aftermarket volume is about 2 other being China). All participants average similar to Eastern Europe. billion euros, but the aftermarket were almost certain that Western However, in our research share for Western European Europe can be considered a mature respondents were split about equally companies is relatively small. 9 The market, and on average they expect a in expecting that the growth rates growth rate in the Indian aftermarket moderate increase in the competitive would be up to 5%, 5% to 10%, and is lower than in China, but still intensity. between 10% and 15%. This equal exceeds most mature markets. In our split indicates uncertainty about how research 70% of the participants The picture for Eastern Europe is much the Russian aftermarket will expect the aftermarket in India to different. Here, it was noted that on grow. grow between 5% and 10%, and average the current competitive 24% anticipate growth rates between intensity is somewhat moderate but The Chinese aftermarket has already 10% and 15%. Only 6% assume a with future increases anticipated. achieved relatively high volumes and growth rate of less than 5%. This can be seen in Exhibit 4, which this success story is expected to shows the positioning of the markets continue. The vast majority of the in terms of their estimated companies surveyed expect growth competitive intensity.
Exhibit 4: Current Competitive Intensity
Level of current competitive intensity Average Low Medium High Very High (1 = low; 4 = very high)
Western 7% 45% 23% 25% Europe 2.7 0% 100% 0% 100% 0% 100% 0% 100% 1 4
6% 60% 26% 8% Eastern 2.3 Europe 0% 100% 0% 100% 0% 100% 0% 100% 1 4
10% 62% 23% 5% Russia 2.2 0% 100% 0% 100% 0% 100% 0% 100% 1 4
0% 9% 65% 26% China 3.2 0% 100% 0% 100% 0% 100% 0% 100% 1 4
9% 47% 30% 17% India 2.6 0% 100% 0% 100% 0% 100% 0% 100% 1 4
Capgemini Consulting
7 Ibid 8 Datamonitor, 2008 – 2012 Global Aftermarket – Recession and Growth Beyond, 2009 9 Ibid
The Aftermarket in the Automotive Industry 9 very high level. The majority of the Exhibit 5: Market Growth and Competitive Intensity participants considered this market to be even more competitive than (bln EUR) 4.0 Western Europe. In the future,
China competition in China, along with 3.5 5.1 India, is expected to increase further
h India but with less momentum than in t Eastern Europe Russia
w 2.0
o 3.0 8.6 8.2 Russia, according to the respondents. r G
t The main rationale for this e k r 2.5 development stems from two factors. a
M First, there are an increasing number
2.0 of local Chinese car manufacturers 165.4 Western Europe competing successfully with international car manufacturers. 1.5 Constant Increasing Strongly Increasing Examples include Chery, Geely, Future Competitive Intensity SAIC 10 and BYD 11 for cars, and Yutong, Dongfeng and Beiqi Foton Capgemini Consulting for commercial vehicles. Second, a lot of local suppliers still substitute original with imitated parts meaning that traditional OEMs will experience further pressure in their aftermarket activities. Russia will make an important leap Expert’s Quote with regard to competitive intensity. Through the dominating role of the Today, the participants estimated the Christian Hummel, Capgemini big three market players in India – competitive intensity on average as Consulting China: “China’s Maruti Suzuki, Tata Motors and being the most moderate of all Hyundai – the current competitive automotive market generally is markets. This is likely due to the intensity is rather low. However, fairly young and mainly driven by existing weakness of the domestic car because other market players are manufacturers. Russian car first-time buyers. So the motivated to break through the manufacturers such as AvtoVAZ and aftermarket will see high growth domination of the three main GAZ still have strong disadvantages players, the competitive intensity is rates soon. And due to compared to international expected to increase in the future. customers’ high expectations, manufacturers due to their The majority of the participants rated organizational infrastructure. the installation of a dense and India similar to China, meaning that professional service chain the competitive increase through the In the future, the competitive next years will be high, however still becomes a critical intensity will increase dramatically, a bit less than in Russia. differentiation factor according to the participants. The increase in competitive intensity is for market success.” Exhibit 5 summarizes the expected to come from the market characteristics of the different entry of nearly all international car markets by combining the market manufacturers. This includes the growth, market volume and expected strong presence of Chinese, competitive intensity. South Korean and Japanese manufacturers in Eastern Russia, with the Western European manufacturers concentrating not only on major cities such as St. Petersburg and Moscow, but also on the more rural areas in Western Russia.
The competitive intensity in the Chinese aftermarket is already at a
10 SAIC: Shanghai Automotive Industry Corporation 11 BYD: Build Your Dreams, Chinese automotive manufacturer in Shenzen
10 Achieving Competitive of customization, proximity to Advantage customers and offering services for When it comes to the parts business, attractive prices play an important the way to achieve competitive role as well. This is even more advantage is very similar across important during times in which markets, according to the findings. customers are increasingly buying Regarding business opportunities for parts on the Internet or from car manufacturers, parts sales are independent repair centers. tightly linked to their respective car Outstanding service quality, quick sales. Moreover, price is the response and reaction times, and dominant factor especially in highly branding of service can no longer be competitive markets. Both factors can considered as differentiating factors. be seen as hygienic factors though Furthermore, companies unable to the main differentiating factors are live up to these commodity parts availability and originality of requirements will fail. spare parts. When respondents were asked about the service business, it Eastern Europe is similar to India became clear that factors that with regard to branding and differentiate the service offering vary innovative services. These are not significantly for each market. differentiating factors. The same applies for service quality and quick In Western Europe , the main factors response and reaction times. As long for differentiating the service as prices are attractive, customers are offerings are innovative services, the satisfied with relatively low service high emphasis on specific customer levels and more or less standard requirements and customization of services, according to respondents. services. In line with the importance Customization of services is also of
Exhibit 6: Importance of Factors Differentiating the Service Offering
Western Eastern Average Europe Europe Russia China India All Markets 1 Emphasis on service requirements 1 4 1 4 1 4 1 4 1 4 1 4 2 Customization of services 1 4 1 4 1 4 1 4 1 4 1 4 3 Outstanding service quality 1 4 1 4 1 4 1 4 1 4 1 4 4 Quick response and reaction times 1 4 1 4 1 4 1 4 1 4 1 4 5 Branding of the services 1 4 1 4 1 4 1 4 1 4 1 4 6 Originality of spare parts 1 4 1 4 1 4 1 4 1 4 1 4 7 Price of services 1 4 1 4 1 4 1 4 1 4 1 4 8 Proximity to customers 1 4 1 4 1 4 1 4 1 4 1 4 9 Innovative services 1 4 1 4 1 4 1 4 1 4 1 4 10 Parts availability 1 4 1 4 1 4 1 4 1 4 1 4 11 Proximity to dealers 1 4 1 4 1 4 1 4 1 4 1 4 12 Proximity to workshops 1 4 1 4 1 4 1 4 1 4 1 4 Average per market 2.4 1.8 2.1 2.2 1.9 2.1 1 4 1 4 1 4 1 4 1 4 1 4 Note: 1 = low; 4 = very high Capgemini Consulting
The Aftermarket in the Automotive Industry 11 little interest to most customers, not provide sustainable competitive resulting in few differentiation advantage. This means that the opportunities. For market Chinese market is challenging as competitors this leads to a low high price sensitivity together with margin per unit sold, but profit can high requirements for logistics, still be made by either cutting costs marketing and service quality does through limiting the service offering not provide an attractive margin. In and quality of service or by achieving addition, the effort to satisfy economies of scale. customer requirements is higher than Key Finding in other markets. Maximizing market The large Russian territory drives Russia is particularly demanding penetration therefore requires aftermarket champions to adopt when it comes to branding of significant economies of scale. services. 12 Prices are not considered new distribution network to be a differentiator for service As shown in Exhibit 6, India seems strategies. Russian customers offerings as price sensitivity for to be the least ambitious market in also look for high-quality brands services seems to be relatively low. terms of differentiation. Neither and are less price sensitive More important is that reasonable service innovation, service quality, prices are in line with sophisticated branding nor service levels seem to compared to other markets. service quality and close proximity to offer significant differentiation customers. Russian customers do not opportunities. The most important fully value quick response and ways to achieve differentiation are reaction times, as shown in Exhibit service price and availability of parts. 6, limiting this as a differentiating Furthermore, there seem to be factor. The sheer size of Russia specific service requirements that are combined with customers’ service most relevant to Indian consumers. price sensibility is leading Emphasizing these specific aftermarket champions to change requirements is a potential way to their network strategy to set up high- achieve differentiation. In this market quality dealerships in close proximity companies can be profitable by to their target customer groups’ utilizing a strong logistics network accepted locations such as big that helps them maintain a high shopping centers. Thanks to lower service level and by a focus on cost Russian price sensitivity, participants cutting and basic service offerings, expect companies to be able to while keeping an eye on customers’ achieve a reasonable margin if they specific service requirements. provide good marketing and logistics services. Achieving high volume does not seem to be as critical.
In China , the price of services is the most important factor to achieve market differentiation. However, besides attractive prices customers request quick response and reaction times and sufficient service quality. In addition, the service level is relevant for Chinese customers as well as branding of service, although prices have to be quite attractive. The main target groups are less demanding when it comes to innovation and customization of services. Compared to Western Europe these factors do
12 In addition to the results described in this study please also refer to Capgemini Consulting, Cars Online 08/09: Besides a very high Internet affinity for online car and after sales research, both Russian and Indian consumers are rather ambitious in selecting their after sales services.
12 4 Investments Into Key Initiatives in the Aftermarket
To respond to the various to evaluating future business characteristics of the markets, the potential and making strategic study participants developed key investment decisions. Thus, initiatives and implemented them according to their own judgment, differently according to their with the current budget spent, the individual assessments. The participants are hardly prepared for following section outlines the future regional market developments investment behavior into the and risk their future profitability in aftermarket, the different strategic the aftermarket. initiatives as well as companies’ readiness for the aftermarket. Main Strategic Initiatives and Direction of Investments Total Amount of Investments in The participants were also asked to the Aftermarket prioritize strategic initiatives that According to Exhibit 7, the should help them compete in the investments in the aftermarket tend aftermarket. Four initiatives were to be quite low. As a consequence, identified as most important: only a few participants consider their I Improving and extending the actual investment level to be service offering sufficient, and no one stated that the I Adapting service offerings to local investments are fully sufficient. The requirements findings indicate that, at least until now, the aftermarket appears not to I Increasing the local market have received appropriate top penetration management attention when it comes I Optimizing the planning processes
Exhibit 7: Investments in the Aftermarket and Evaluation of the Investments
Estimate of actual amount of investments Investments in the aftermarket compared to required % of companies % of companies 100% 100%
82% 78% 80% 80%
60% 60%
40% 40%
20% 20% 15% 11% 8% 3% 3% 0% 0% High Medium Low Very Low Very Su fficient Su fficient Not Su fficient
Capgemini Consulting
The Aftermarket in the Automotive Industry 13 Exhibit 8: Key Initiatives Assessed as Important
Key initiatives to exploit the potential of the aftermarket Amount of investments in aftermarket initiatives
Improving and extending the service Adapting the service o fferings 33% 3.5 offering 1 to local requirements
Adapting the service o fferings Increasing the market penetration 21% 2 3.4 to local requirements by setting up local organizations
Increasing the market penetration Improving and extending 20% 3 2.7 by setting up local organizations the service o ffering
Optimizing the planning processes Improving the relationship with among central, regional and 20% 1.7 4 dealers and workshops decentralized organizations
Improving the relationship with Improving the relationship 3% 1.6 dealers and workshops with wholesalers
Improving the relationship with Establishing cooperation to 3% 1.4 wholesalers achieve competitive advantages
Establishing cooperation to achieve Optimizing the planning processes 0% 1.4 competitive advantage among central, regional and decentralized organizations 0% 20% 40% 1234 Very Low High
Capgemini Consulting
In the next step, participants had to centralized and decentralized Key Finding detail their investment budgets for organizations. Additionally, industry To really be successful in the these initiatives. Interestingly, both challenges such as increasing aftermarket, companies’ amount and order of investments do competition, price erosion, higher not correspond to the priority of customer requirements and financial investments need to be initiatives, as can be seen in Exhibit 8. uncertainty may have sensitized drastically increased. management to rethink the The direction of investments reflects traditional business. These factors roughly the participants’ assessment may have caused managerial of the overall key initiatives to attention to switch from marketing exploit the aftermarket potential. and customer relationship topics However, improving and extending towards more seriously considering the service offering, which was the exploitation of the aftermarket evaluated as important by many potential. The major focus is on respondents, receives significantly increasing efficiency in global supply lower investments compared to other processes. top-ranked initiatives. Furthermore, optimizing the planning processes Companies’ Readiness for the was among the most important Aftermarket initiatives but receives the lowest The lack of investment corresponds investments. to companies’ insufficient preparation for regional market developments. As a consequence, there is a large gap This is particularly true for Eastern between required and actual Europe, Russia and India. In all these investments. The reasons might be regions only 35% of the participants that the current situation calls for a said that companies are prepared for change of investment direction regional market developments. In towards new strategic initiatives or contrast, more than 50% indicated former initiatives that need revision. that they are at least largely prepared For example, optimizing the for regional market developments in planning processes seems to have China. And more than 80% said they gained in importance because it are largely or fully prepared for represents an essential factor for a regional market developments in global aftermarket business with Western Europe.
14 Exhibit 9: Companies’ Preparedness for Regional Market Developments
“We are fully prepared for regional market developments”
% of companies
100% 10% 9% 20% 16% 8% 26% Does Not Apply 80% Rarely Applies 20% 19% 51% Largely Applies 60% 30% Fully Applies 63%
40% 43% 62% 25% 36% 20% 10% 18% 15% 11% 0% 8% Western Europe Eastern Europe Russia China India
Capgemini Consulting
The lack of preparation in most of customer requests. This poor fit is Key Finding the emerging markets is evident in driven by the companies’ various statements. Because the performance in the main elements of High and low performers need to investments are rather low, a service offering. According to the apply different market strategies companies only act reactively in the analysis of the study results, these due to their specific learning emerging markets. They do not elements are basically the type of approach the aftermarket services offered on site – service curves. Whereas high performers’ systematically and not in strategic quality as well as service innovation. development is evolutionary, response to changing customer low performers need to be needs. As a consequence, new For example, more than half of the revolutionary in order to catch up. competitors seem to increasingly win participants indicated that existing market share. This is in principle service offerings often do not fit to confirmed by more than 60% of the local requirements. The respondents study participants. also do not recognize the importance of pushing new service innovations The next goal was to better to protect their existing market share understand how this investment and/or to regain lost share. Finally, in behavior leads to low market terms of service quality offered, again preparation and finally results in more than half of the participants increasing competition. Here, the indicated that the quality offered is indicated loss of market share and substandard to customer decreasing revenues and margin are requirements. accelerated by a poor fit between existing service offerings and the actual
15 5 Performance in the Aftermarket
in the aftermarket differently in companies show considerable Key Finding Western Europe than in the emerging improvement potential for the Even companies that perform markets. aftermarket. Specifically, the relatively well in Western Europe performance in Eastern Europe is As can be seen in Exhibit 10, the surprising because companies should still do not achieve medium participants stated that high be able to transfer their successful performance in the emerging performance varies considerably: Western European aftermarket markets, indicating strong Whereas in Western Europe 67% of practices to Eastern Europe. The potential for improvement. respondents said they were high results indicate that this transfer is far performing, no one seems to be a from easy and not a straight road to high performer in Eastern Europe. In success. contrast, 17% said they were a high performer in Russia, 4% in China High- and Low-Performance It is fundamental to understand a and 7% in India. This reflects a Peer Groups company’s current market strong focus on excellence in The performance of the participants, performance in relation to its peers. established markets while the newer based on their self-estimation, varies Interestingly, the performance differs markets are currently left for the widely across markets. Nevertheless, widely across markets and across the local or regional competition. as pointed out earlier, the analysis companies represented by the study Established Western OEMs and OESs uncovered a dichotomy between participants. These points are need to react soon if they are high- and low-performing groups. discussed in the following section planning to take a share of this Also, the results of the study show a and lead into clustering high and low business potential. direct relationship between these performers to start examining lessons performance groups and their learned. The right graphic of Exhibit 10 activities in the markets. shows that average performance is Regional Performance not consistent. Companies achieve a The following section examines the Consistent with the different degrees relatively high performance in market behavior of high-performing of preparation for market Western Europe (3.7). Interestingly, companies and identifies what low development, the performance in the even companies with high performers must do to become high aftermarket differs between Western performance in Western Europe do performers. These results are Europe and the emerging markets. not achieve even medium examined by market, as the group of Participants also rate the current performance in the aftermarket in high performers can vary per market, exploitation of the financial potential emerging regions. Across all markets, with a few exceptions.
Exhibit 10: Detail and Average Performance in the Different Markets
Performance in Western Europe and in emerging markets Average performance in Western Europe and in emerging markets % of companies % of companies 100% 2% 6% Western Europe 3.7 30% 80% 31% 52% Eastern Europe 2.1 89% 60% 28% Prone to 69% Issues Russia 2.3
40% Medium 67% 27% 25% China 1.7
20% Good 18% 17% India 2.3 11% 17% 0% 4% 7% High Performance Western Eastern Russia China India Prone Medium Good High Europe Europe to Issues Performance
Capgemini Consulting
16 6 Management Approach for Winning the Aftermarket
The following section presents a Given the link between aftermarket model designed to help companies performance, service management Key Finding manage the challenges in the activities and benchmarks to the True global aftermarket developments in other industries, it aftermarket and provides operations are still in their infant recommendations on how to best is likely that most companies will pursue these markets. decide to professionalize their service state. But the aftermarket offers management operations in the significant potential and emerging markets and to develop promising opportunities. 6.1 Capgemini’s Health from a cost- to a profit-center Check for Aftermarket oriented organization. Together with Performance continual and incremental improvements in Western Europe, Despite their high potential, companies will be able to take aftermarket operations in the optimal advantage of the emerging markets are fairly young. opportunities in the global There are examples of first movers aftermarket. such as Honda, Nissan and Toyota with their initiatives in high-speed To help companies achieve this and off-road test track camps open to objective Capgemini’s Health Check car owners. Other examples include for Aftermarket Performance Daimler’s telematics joint venture (CHAMP) has been developed. This with Deutsche Telekom, General model indicates the level that Motors’ former investments in U.S. companies have reached on their dealers, or Renault’s joint venture individual path to aftermarket with Autobacs Seven to establish an excellence in the different markets automotive accessories retail chain in and serves as a vital guide to further Europe. Examples in the emerging sharpen companies’ competitive markets include Maruti Suzuki’s edge. This model helps companies investments into Maruti Driving understand their current position 13 School s or Mahindra & Mahindra’s and plot the actions required to investments in early aftermarket exploit the opportunities in the 14 customer loyalty programs. aftermarket. Because of the strong differences in the performance Clearly, approaching the emerging between mature and emerging markets is not a short-term markets, the model distinguishes management trend, but a key among the markets. For each distinct element in a manufacturer’s long- market, the data suggest three levels : term strategy. Still, aftermarket explorer, exploiter and aftermarket operations in emerging markets are champions. immature. Only 7% of the I Explorer level means that participants say they have a global companies have created their first approach that is already operational. experiences in the aftermarket and Approximately one-third have an are mainly in the planning phase implementation in progress, and with some early, but limited returns 56% indicate they are at best still in from the aftermarket. the planning phase.
13 Asian joint venture Maruti Suzuki is a main facility for obtaining driving licenses in India (e.g., 500,000 mostly commercial driving licenses are sponsored by Maruti Suzuki). 14 Mahindra & Mahindra’s daughter company First Choice, India’s largest multi-brand used car provider, offers a broad choice of good quality used cars and services such as different warranty packages for engine and transmission (e.g., silver service level: three months and 5,000 km warranty, or gold service level: 12 months – three months for free plus nine months – and 12,000 km warranty).
The Aftermarket in the Automotive Industry 17 Exhibit 11: Model for Approaching the Aftermarket
CHAMP – Capgemini’s Health Check for Aftermarket Performance
Stage 7: Global Stage 3 Aftermarket Champion Aftermarket Stage 6 Champion 6% 67% 0% 17%
4%
Exploiter Stage 2 Stage 5
11% 11% 25% 7% 17%
18% Explorer Stage 1 Stage 4
22% 89% 58% 79% 75%
Western Eastern Russia China India Europe Europe % of participating companies Mature Markets Emerging Markets % assigned to this stage
Capgemini Consulting
I Exploiter level involves leaving the Western European Aftermarket planning stage and trying to Stage 1: Exploring the Western implement a broad scope of European Aftermarket aftermarket activities. In this level , In stage 1, companies have the aftermarket creates higher discovered the strategic opportunities returns than in the explorer level , in the aftermarket. Companies are but there is still strong potential to starting to set up an aftermarket improve the aftermarket activities infrastructure and develop processes. and create additional benefits. According to the aftermarket I At the level of the aftermarket performance, companies achieve champion , companies have small returns on their activities. The successfully implemented efficiency aftermarket approach is still in the improvements and are exploiting planning phase and few activities aftermarket opportunities. have been implemented. Aftermarket champions are conscious of continually improving Stage 2: Exploiting the Western their aftermarket activities. European Aftermarket In stage 2, companies can be As illustrated on the vertical axis in considered as exploiting the strategic Exhibit 11, companies can be still in opportunities in Western Europe. the stages of exploring or exploiting The aftermarket approach has moved the aftermarket potential in an from the planning phase and is now emerging market and already an under implementation. Activities aftermarket champion in Western related to various issues such as Europe . This model in principle is organizational and network design, intended to be a guide to optimize IT support and operational functions the performance in any of the focus are not fully implemented. As a markets regardless of the origin of result, performance is only at a the OEM/OES and does not medium level. Of course, given the recommend a market sequence on maturity of the Western European which to follow up. aftermarket most companies have already left the exploring and exploiting levels .
18 Stage 3: Optimizing the Western of preliminary defined services to Stage 7: Global Aftermarket European Aftermarket (Mature meet local requirements. The Champion Aftermarket Champion) operations are kept under tight As global aftermarket champions, Mature aftermarket champions have control by the central aftermarket companies maintain optimized increased their performance over the unit. aftermarket activities in various last years and are now in the stage of regions/countries and integrate optimizing aftermarket activities. Stage 6: Emerging Market different local approaches into a These companies have strongly Champion greater regional or one global integrated with dependent Besides performing key functions aftermarket approach. They operate dealers/repair centers. They keep such as those already listed, essential optimized multi-echelon networks of consumers loyal for most of the aftermarket operations are also warehouses and use worldwide product lifecycle. If customers installed in emerging markets. These benchmarks to transfer best practices change to independent repair are relatively independent from the among warehouses, dealers and centers, the goal is to sell parts to headquarters to adapt aftermarket repair centers. The central these repair centers. Mature approaches to specific local aftermarket unit employs major aftermarket champions strive to requirements. Emerging market integration of central and control the whole breadth of champions complement central decentralized warehouses, and distribution channels. warehouses with decentralized optimizes planning and purchasing warehouses (local parts distribution processes across the network of local Aftermarket in Emerging Regions centers) for optimizing parts warehouses. At this final level , global The three levels of explorer, exploiter availability and delivery times. In aftermarket champions concentrate and aftermarket champion also occur addition, they strongly penetrate the on a control-tower type of in the emerging markets. emerging markets with dependent aftermarket operation whereby the dealers and repair centers. They look company takes over full end-to-end Stage 4: Exploring the Aftermarket for integration in planning and responsibility for the supply chain in Emerging Regions purchasing processes between from suppliers up to customers. Explorers in the emerging markets developed and emerging markets and perform key functions such as R&D, adapt local service offerings to the As stated before, the performance of sourcing, manufacturing and sales in specific customer requirements. participating companies helped to emerging countries, but the shape a profile of high and low aftermarket presence is still in the As illustrated in Exhibit 11, stages 4 performers. Low performers are early implementation stage. This to 6 are repeated for each emerging associated with the exploring level . includes defining operational market. In more detail, explorers are those activities for marketing and sales, participants rating their performance sourcing, planning, distribution and The percentage of companies as medium or prone to issues. In reverse logistics as well as positioned in each of the stages contrast, exploiters are those considerations for the whole supply indicates that achieving the considered to be strong performers. and distribution chain. “emerging market champion” level in Finally, high performance their aftermarket activities will be the corresponds with the level of Stage 5: Exploiting the Aftermarket primary driver behind many aftermarket champions in Western in Emerging Regions companies’ “global champion” Europe, various emerging markets or Exploiters in the emerging markets initiatives in the next five years. The even on a global scale. Note that have succeeded in their first results indicate that failing to reach companies can be at different stages implementation efforts, but the the local champion position means of performance in different markets. aftermarket presence still can be risking global aftermarket success improved and optimized. and losing traction in the race to Nevertheless, the early implementation become a true global aftermarket effort has proved the aftermarket champion. Of course, not every approach to be successful and has company can and will reach that led to defined operational activities. level and that is where the markets in Cost considerations limit exploiters Eastern Europe, Russia, China and to operate a central warehouse in India will automatically make the each emerging country and a small distinction between market share number of dependent dealers/repair losers and gainers. centers. Compared to the mature markets, these dealers and repair centers offer only a narrow selection
The Aftermarket in the Automotive Industry 19 Exhibit 12: Dimensions in the Aftermarket Model Operational Excellence Lever Strategic and operational excellence in the management of the value chain
Distribution Planning Sourcing Marketing & Sales Reverse Logistics
Organizational Design Lever Network Lever Control levels selected by the company Structure of warehouse, wholesaler and service center locations
Cooperation
Control Autonomy
Supplier/Manufacturer Wholesaler Retailer Repair Shops/Customer
Information Technology Lever IT for coordinating and supporting the processes in the aftermarket
Distribution Planning Sourcing Marketing & Sales Reverse Logistics
Capgemini Consulting
Performance Levers in the characterizes the management increase transparency both in Aftermarket Model within the aftermarket units. This process execution as well as on the As a result of the analysis, this study includes decision-making authority management level. Typical lays out four levers that are essential between central aftermarket decisions include the usage of to all the participants in order to functions and market units. standard or individual software. operate successfully in the 3. Network Excellence: The network aftermarket (see Exhibit 12). They lever represents the inter-firm The four levers in the aftermarket form the basis for CHAMP and serve collaboration with suppliers, model essentially enable performance as a guide to allow positioning of the wholesalers, distributors and management in the aftermarket. companies in the model. dealers/repair shops, and thus Aftermarket champions seem to have 1. Operational Excellence: This covers all partner relationships reached a distinctly different maturity lever represents indicators for both in the supply chain and in level in the operational excellence functional excellence in various distribution chains. performance lever, compared with companies performing at a relatively operational activities. These 4. Information Technology: This low level. Similarly, organizational include sourcing, planning, lever is a key business enabler and design, network and IT also seem to marketing and sales, distribution is essential to run the aftermarket be potential differentiators for and reverse-logistics processes. business. The most common usage explorers and aftermarket 2. Organizational Design: is automation and coordination of champions. In the following sections, Organizational design indicates processes with high opportunity the main levers for both low and how the relationship between cost. That cost occurs in organizing high performers are described. The organizational entities and the process other than with the levers are further detailed according decision-making authority is support of ERP or planning to the strategic initiatives with a structured. Decentralization software. Also, it is used to focus on the most important ones.
20 6.2 Aftermarket Model for Exhibit 13: Comparison of Operational Excellence Levers Between Explorers and Western Europe Aftermarket Champions
Performance Levers High The profile of the operational excellence lever attributed to both groups suggests which processes should be improved and what areas companies should further develop. Priority Both explorers and aftermarket champions share similarities in the potential and priority attributed to the marketing and sales process. Improvements in sourcing, Low distribution, planning and reverse- logistics processes are of low priority, Low Potential High and seem to have low potential for aftermarket champions. Marketing Sourcing Distribution Planning Reverse & Sales Logistics
Group of Explorers Group of Aftermarket Champions In contrast, to change from low to (Low performers/33% of participants) (High performers/67% of participants) high performance, explorers typically put a high priority on reverse- Capgemini Consulting logistics processes, which only entails medium potential for their business success. In addition, changing from low to high performance requires channels. This leads to more cost- Expert’s Quote further reducing the emphasis on effective warehouses, wholesalers and sourcing, distribution and planning service centers. The balance between Frank Tennstedt, Vice President, processes and freeing up resources to costs and customer proximity leads Strategic Service Management, further push marketing and sales to improved performance. According Capgemini Consulting: activities. For explorers, these to the IT lever, aftermarket processes currently are given champions concentrate on a “Decreasing product-oriented medium priority and offer medium combination of standard and profits, the tendency to bulk potential for improvements. individual IT solutions. Explorers commodity, and intense global have invested in individual software competition have compelled Interestingly, aftermarket champions solutions, but the higher costs in the Western European markets do associated with individual software executives to increasingly rely on not run the densest networks. In fact, do not seem to create the post-sales service to stimulate confronted with stagnant Western corresponding higher returns. corporate growth. It is no longer European markets, these companies regarded as an inevitable cost of have already started to restructure That means that changing from low their network and distribution to high performance primarily doing business, but as an active requires a more cost-efficient lever to drive revenue, profit and network, leading potentially to a customer retention. It represents reduction in the density of a fundamental shift in how warehouse locations, wholesalers and service centers. service operations are managed – moving away from a tactical cost-center approach to managing it as a strategic profit center.”
The Aftermarket in the Automotive Industry 21 Exhibit 14: Comparison of Network and IT Levers for Explorers and Aftermarket Champions
Which IT solution(s) do you use for coordinating processes Comparison of network for explorers and aftermarket champions in the aftermarket? (multiple answers permitted)
Target Current Performance 50% 44% 44% Medium Dense Very Dense Warehouse Locations 40%
30% 25% Medium Dense Very Dense 26% Wholesaler Locations 20%
15% 16% 16% 14% Medium Dense Very Dense 10% Service Centers
0% Standard Best of Breed Individual Software Combination Explorers Aftermarket Champions (Low performer) (High performer) Explorers Aftermarket Champions
Capgemini Consulting
To analyze the organizational set-up decisions and to allow local groups Key Finding and control mechanisms of the whole less flexibility in self-management. High performers reduce distribution chain, the study participants were asked when to best The study shows that aftermarket distribution network density and use integrated organizational and IT champions control fewer levels in the optimize cost. They also manage systems. These systems are defined as aftermarket. The local decision- their distribution based on fewer a main lever to increase transparency making authority is stronger in high- organization levels adhering to within the supply chain and to allow performing companies. In contrast, better control and realization of end- explorers restrict local initiatives and the subordination principle. to-end decisions. The main agree to only limited local decision- assumption here is that the more making authority. From this it can be elements of the chain are controlled, concluded that controlling the the higher the trend to centralize distribution chain up to the very end
Exhibit 15: Comparison of Organizational Design Lever for Explorers and Aftermarket Champions
For which levels of the aftermarket do you use integrated systems?
35% 32% 30% 30% Explorers 26% (Low performer) 25% 23% Aftermarket Champions (High performer) 20% 21% 13%
15% 16% 13% 14% 10% 12%
5%
0%
Central and local Central, Central, decentralized/ Central, decentralized/ Central, decentralized/ wholesalers decentralized regional warehouse regional warehouse, regional warehouse, warehouse and and wholesalers wholesalers and wholesalers and wholesalers dealers workshops
Capgemini Consulting
22 is time consuming and difficult to integration to manage relevant data. manage, whereas the potential Contrary to this, “increasing the benefits, which are increased market penetration by setting up local transparency and commonly organizations” can be linked to the implemented decisions, do not seem lever of distribution and supply chain to outweigh the disadvantages. network definition. Therefore, through well-planned change-management activities Aftermarket champions and explorers focused on the organizational design, differ essentially in the strategic explorers should take steps to reduce initiatives. These are listed by their their control and allow more discriminating power and with Key Finding flexibility. 15 This helps enable local decreasing priority: High performers win by regularly adaptation of centrally made 1. Adapting the service offerings to decisions. local requirements innovating new services that can 2. Improving the relationship with be customized to local Strategic Initiatives wholesalers requirements and by running Besides the performance levers, the strategic initiatives introduced in 3. Improving the relationship with intense loyalty programs for both chapter 4 play an important role in dealers and workshops the wholesale and retail levels. managing the aftermarket business of 4. Improving and extending the the study participants. In most cases, service offering the strategic initiatives are contributing to multiple levers at the These strategic initiatives are driven same time – a straight one-to-one by nearly all aftermarket champions, relationship could not be identified. whereas only a few explorers focus For example, “adapting the service on them. Others – such as increasing offering to local requirements” mainly the market penetration by setting up affects the sales and marketing local organizations; optimizing the process, but it might also involve the planning processes among central, repair center infrastructure necessary regional and decentralized to provide local services and the IT organizations; and establishing
Exhibit 16: Strategic Initiatives Implemented by Aftermarket Champions and Explorers
89% Adapting the service o fferings to local requirements 31%
78% Improving the relationship with wholesalers 23%
81% Improving the relationship with dealers and workshops 34%
74% Improving and extending the service o ffering 29%
Increasing the market penetration by setting up 75% local organizations 48%
Optimizing the planning processes among central, 58% regional and decentralized organizations 39%
53% Establishing cooperation to achieve competitive advantages 44%
0% 20% 40% 60% 80% 100%
Aftermarket Champions Explorers
Capgemini Consulting
15 Change-management activities play an important role in transformation projects and should be thoroughly planned. Often those activities are given lower priority than functional-oriented work streams. For further information please also see: Martin Classen/Felicitas von Kyaw, “Warum der Wandel meist misslingt” (“Why change mostly fails”), Harvard Business Manager, December 2009
The Aftermarket in the Automotive Industry 23 cooperation to achieve competitive its lifetime and improving the Expert’s Quote advantages – have less discriminating adaptation of existing service offerings Prof. Dr. Heiko Gebauer, power. The difference in the towards local customer needs. The University of St. Gallen: “In the percentage of companies main objective is to be able to further concentrating on these last three differentiate from competition. This automotive industry high activities is relatively small compared cannot be achieved by improving performers increasingly to the first four initiatives. To move service quality only, since quality as a concentrate on successful global from the levels of exploration and characteristic of either services or aftermarket operations. Winning exploitation to local aftermarket physical goods starts to become a champions, companies need to commodity. Service innovations are in these markets requires balance both prioritization as well as driven by offering customer-specific managing both a creative and investments into key initiatives solutions and professionalizing efficient service innovation according to the level they are product-related services (for process that is one core planning to enter. example, inspection, maintenance, spare parts and insurance). In any component to satisfy the The prioritization was obtained case, customers’ requirements have growing customer subjectively from the participants to be known quite well. requirements.” and does not reflect the effectiveness of each strategic initiative. Whereas, The participants rated down- and for example, increasing the market upsizing service offerings to local penetration by setting up local requirements as the second most organizations and optimizing the important item of this initiative. planning processes create mid-term Quite often, OEMs centrally seem to cost reductions and revenue increase, bundle services into packages that improving the relationship with are not yet ready to be locally wholesalers, dealers and workshops implemented. Therefore, the local most probably creates long-term organization, as mentioned before, benefits. must have deep insights about their customers to optimize the The four main initiatives require localization of these offerings. further analysis, starting with the adaptation of the service offerings In summary, it can be said that the to local requirements. companies will achieve a competitive advantage if they regularly use their As can be seen in exhibit 17, the most service marketing to gain insights important element of this initiative is about customers’ requirements and to focus on innovating new services. their perception about the current Here, major changes can be seen in level of services. Here, aftermarket defining improved options to make champions frequently integrate use of the vehicle more enjoyable over representatives of both the value
Exhibit 17: Required Changes for Adapting the Service Offerings to Local Needs
78% Innovating new services 21%
67% Downsizing the service o ffering to local requirements 43%
61% Upgrading the service o ffering to local requirements 37%
71% Adapting service levels 52%
71% Adapting service quality 52%
0% 20% 40% 60% 80% 100%
Aftermarket Champions Explorers
Capgemini Consulting
24 chain as well as of different phases of the customer lifecycle 16 in the service Exhibit 18: Required Changes for Improving the Relationship with Wholesalers creation process. Furthermore, those companies will be favored that spend 56% Setting up programs to improve wholesaler loyalty effort on matching up these 14% requirements with centrally offered 68% Improving service level to better satisfy wholesalers “prepackaged” service solutions. 28% Also, it is advisable to set up a Setting up programs to support wholesalers in improving 56% standardized innovation process that the service quality and service level 28% systematically develops service 78% innovations in an effort to change Improving the information exchange with wholesalers 56% management’s mindset in favor of services. Finally, companies have to Improving the usage and adaptation of integrated 57% IT systems for wholesaler relations search for new service innovations 46% based on technological developments 0% 20% 40% 60% 80% 100% and new IT opportunities. Aftermarket Champions Explorers
Capgemini Consulting The relationship with wholesalers still offers improvement potential, since it is the second most important initiative. Recommended changes Concluding this line of reasoning, The relationship with dealers and include setting up strategic programs high performers seem to successfully workshops seems to require even to improve wholesalers’ loyalty and invest in business concepts that help more improvement. Here, the trend improving the service level to better to both improve wholesalers’ loyalty to source at least parts from third satisfy their needs. These changes as well as the service level to fulfill parties has an immediate negative seem to increasingly be important to their needs better and faster. Both effect on the OEM’s business. To help successfully market both services as elements have an immediate effect on turn this trend around, loyalty and well as parts due to their relationship the OEM’s business, since on the one service level improvement programs to retail. Therefore, pushing the side the wholesaler feels tied to the are on the aftermarket champions’ wholesalers’ business and increasing OEM and on the other side the OEM agenda already. their loyalty towards the own brand gives the wholesaler more freedom to seems to have an immediate positive do business, from which the OEM Information exchange programs also effect on the OEM’s results. finally participates as well. Explorers support this aim. In contrast to need to improve in this area. programs on the wholesale level, It is also recommended that companies improve the reaction time towards wholesalers’ needs, which Exhibit 19: Required Changes for Improving the Relationship with Dealers and means an immediate benefit since Workshops again own business is positively influenced as well. Fewer changes are Setting up programs to improve dealer 68% and workshop loyalty 18% necessary in setting up service quality and service level programs to Improving service level to better satisfy 73% dealers and workshops 27% support wholesalers in business with retail and for improving the Improving the information exchange with 71% dealers and workshops information exchange with 38% wholesalers. Improving the usage and Setting up programs to support dealers and workshops 67% adaptation of integrated IT systems in improving the service quality and level 46% for wholesaler relations seems to be Improving the usage and adaptation of integrated 53% of low importance. Because IT IT systems for dealer and workshop relations 48% integration with a focus on the 0% 20% 40% 60% 80% 100% supply and distribution chain has Aftermarket Champions Explorers been on companies’ agendas for quite a while, the level of perfection can be Capgemini Consulting considered relatively high.
16 The characteristics of representatives of different stages of the customer lifecycle have been laid out in Capgemini’s Cars Online study and can be used as valuable input for the service innovation process. This should help to develop services suitable to both extend phases of the customer lifecycle as well as to move customers between particular stages of the lifecycle: Capgemini Consulting, Cars Online 08/09
The Aftermarket in the Automotive Industry 25 which are already mature, the retail not a differentiating factor any Key Finding level has been ignored so far, at least longer. Premium services tend to Superior Western OEMs by explorers. Similar to the current turn into commodity services among continually push retail programs development on the wholesale level, providers and do not guarantee changes in the service quality and customer loyalty. Instead, premium to drastically improve service service programs for dealers and services have reached a stage of sales and delivery capabilities on workshops and the usage and maturity. Here, it is important to the retail level. This positively adaptation of integrated IT systems understand that explorers still put a benefits the OEM’s parts and for dealer and workshop relations are higher emphasis on providing these less relevant. Associated costs of services compared to aftermarket service business. Understanding improving the dealer integration into champions. local requirements and IT systems do not seem to pay off implementation time is key here. completely. The expected returns are Summarizing the key implications too low. Other changes offer a more from the management perspective attractive cost/benefit ratio and create leads to the following conclusions: significant returns with relatively low I Overall, improvements in the field investments. of service offerings are the main bundle of strategic initiatives on The last major strategic initiative, which explorers should improving and extending the concentrate. Within this bundle, service offering, is closely related to managers have to emphasize the the first initiative in terms of innovation of new services, instead adapting the service offering to local of simply focusing on the services requirements. Similar to that already offered. initiative, focusing on service I For both wholesalers and dealers, innovation is the most critical topic. IT integration creates relatively little Furthermore, companies have to corresponding return, leading to a support their wholesalers in relatively low importance of IT- improving service quality and level. related initiatives. Loyalty programs Few changes are necessary to qualify and service levels are more their own service personnel and important and create quick wins. concentrating on premium services. Their ratio between investments and return is much better than for The results of the study imply that IT-related initiatives. premium services are basic and are
Exhibit 20: Required Changes for Improving and Extending the Service Offering
83% Innovating new services 18% Supporting wholesalers to improve 82% service quality and level 24% Improving the adaptation of existing service offering 78% towards local customer needs 23% Improving the service quality through offering 75% customer-specific solutions 24% Improving the service quality through professionalizing 73% product-related services (e.g., inspection, maintenance, spare parts) 31% Improving the service quality through offering different service 66% levels (e.g., basic, extended, premium) 38% Improving the service quality through professionalizing customer 52% support services (e.g., consulting, training, financial solutions) 43% Improving the service quality through better qualifying 29% own service personnel 23% Concentrating on premium services 43% 56%
0% 20% 40% 60% 80% 100%
Aftermarket Champions Explorers
Capgemini Consulting
26 Exhibit 21: Profiles of Operational Excellence Levers for the Emerging Markets
Eastern Europe Russia
High High
Priority Priority
Low Low Low High Low High Marketing & Sales Potential Potential
Sourcing China India
Distribution High High
Planning
Reverse Logistics
Priority Priority Group of Aftermarket Champions (High performers)
Group of Exploiters (Low performers) Low Low High High Group of Explorers Low Potential Low Potential (Low performers)
Capgemini Consulting
6.3 Aftermarket Model for shown in exhibit 21. Therefore, in the Emerging Markets the following discussion explorers will be compared to exploiters in this The aftermarket model for the market. Still, exploiters, although emerging markets is similar to being the best performers in this Western Europe. It also covers the market, need to drastically improve main levers that were already to turn into high performers. To described. In addition, the main achieve this, the results indicate the strategic initiatives play an important importance of learning from Western role, similar to Western Europe. 17 European aftermarket champions as this is the market with the closest Performance Levers geographic reach and fewest cultural Operational Excellence Lever differences. Also, in a direct peer-to- Using a similar approach with peer market comparison, the Western aftermarket champions and explorers and Eastern European markets show for the emerging markets also leads the most similar requirements for to specific profiles for each market. customer service offerings. This can The characteristics of the profiles be seen in Exhibit 6. This implies correspond to the market features that the actions taken in Western outlined in the section on Europe require fine adaptation to aftermarket characteristics. Eastern European market requirements. In Eastern Europe , a strong majority of companies are still in the Explorers are concentrating strongly exploration phase and no companies on improving the marketing and have achieved high performance, as sales activities. Less improvement
17 The following initiatives are relevant for Western Europe: Adapting the service offerings to local requirements, improving the relationship with wholesalers, improving the relationship with dealers and workshops, and improving and extending the service offering.
The Aftermarket in the Automotive Industry 27 potential is associated with functional processes. The Expert’s Quote: improving sourcing and distribution improvements are assigned high Nick Gill, Global Leader of processes, but the priority of these priority and potential. Even current Automotive, Capgemini improvements is very high. That high-performing companies have means that explorers are still in the improvements in marketing and Consulting: “Foreign high phase of setting up the basics for sales, sourcing, distribution and performers have an ongoing these processes. Implementing the finally the planning process on their chance to further develop the basics will not directly lead to management agenda. However, Russian automotive aftermarket increased market share, but rather aftermarket champions have already enable them to maintain their implemented elements of necessary due to the weakness of the local existing performance levels. improvement activities to OEMs. One critical component successfully exploit the aftermarket. for these market share gainers is Even for exploiters in Eastern The marginal rate of aftermarket to develop the retail service Europe, improvements in marketing exploitation is decreasing and and sales hold high potential. additional investments in processes capabilities to both service Nevertheless, at the current state, the create only limited increases in the technologically advanced foreign priority assigned to such exploitation of the aftermarket. vehicles and simultaneously to improvement activities is quite low. cover the existing local This indicates that changes in Nevertheless, aftermarket champions marketing and sales are most focus the most on reverse-logistics standards throughout the whole probably long-term initiatives taking processes. This could link back to country while keeping an eye on into account potential synergies with demanding customers who are used the Russian customer service Western Europe. In addition to these, to returning parts at the smallest sign requirements.” planning processes seem to be most of malfunction. In general it also relevant for exploiters, indicating that could be a clear symbol of quality the efficient supply of the market is a issues combined with low cost of key competitive component. repair as well as an effort to generally Explorers should consider this as improve margin wherever possible well when budgeting initiatives that due to the tight market situation. In are planned for implementation. contrast, explorers can still increase their aftermarket success by making In Russia , explorers are on the edge improvements in any kind of of losing the markets. The priorities processes that already show a high of all improvement activities were priority. rated very high. Without a broad scope of improvement activities, Finally in India , there is a general explorers seem to risk losing market balance between priority and share to competitors. Therefore, the potential associated with expansion and focus on the improvement activities. Explorers are distribution process is estimated as confronted with multiple challenges Key Finding having the highest potential. This is in the marketing and sales, in line with the former reasoning that distribution, sourcing and planning The challenge for explorers is to despite quite a few market entries areas. Aftermarket champions seem understand their core already, the competitive intensity is to have already positioned capabilities per market and to expected to increase dramatically in themselves and to have overcome focus on dedicated topics they the next few years. High performers most of the initial challenges such as have achieved considerable successes setting up local warehouses and are good at. This requires a in terms of market penetration and dealer networks as well as integrating strictly managed strategic share. Improvement activities are local warehouses and dealer development process that more long term and concentrate on networks into their planning, considers the market specifics. defending an existing competitive sourcing and reverse-logistics position. They also have the potential processes. Additionally, the Indian to gain market share whenever market does not provide significant explorers are struggling or are too volume nor very demanding late in their improvement efforts. customers. This indicates that efforts in the operational level can be In China , low-performing companies managed with cost focus and that concentrate on improving all aftermarket champions prioritize
28 their efforts in this market according Exhibit 22: Network Structure in the Emerging Markets to the current market maturity stage. Density of the network structure They seem to hold back until this market really becomes attractive. Low Medium Dense
What is the structure of Eastern Europe Organizational Design Lever warehouse locations in the aftermarket? Russi a Similar to Western Europe, each China emerging market requires a specific Indi a organizational design. The organizational design starts with What is the structure of Eastern Europe integration and control of different wholesaler locations in levels. Whereas in Western Europe the aftermarket? Russi a the existing industry structure makes China it difficult to control all levels, the Indi a structure in the emerging markets is not fixed and companies can try to Eastern Europe control more levels efficiently. This What is the structure of service centers in the Russi a starts with setting up a central aftermarket? warehouse, participating in wholesale China channels and investing in own repair Indi a and service shops. Aftermarket Champions Exploiters Explorers (High performer) (Medium performer) (Low performer) The difficulty comes from the cost- intensive set-up and control of the Capgemini Consulting various levels. But as the comparison of aftermarket champions and explorers indicates, this creates essential competitive advantages. tier cities but also third- and fourth- Specifically in Russia, China and tier cities due to either regional scope India the number of control levels or very high customer requirements. differentiates aftermarket champions Key Finding and explorers. In these markets, Further differences can be found in The early market phases of the aftermarket champions tend to favor the warehouse and wholesaler more control levels than explorers. location structure. In addition to the emerging markets offer a unique To a lesser extent, this also applies fact that high performers run a opportunity to control more for Eastern Europe. denser warehouse, wholesaler and value levels and to collaborate service center structure, companies intensively with wholesalers. Supply Chain and Distribution approach the aftermarket in different Network Lever ways. Here, infrastructure as well as This helps to build a customer- In the emerging markets, setting up a distance from the central warehouse centric organization to finally dense network seems to be a seem to play an important role. turn into an aftermarket determinant for success. This Whereas Western, Eastern Europe champion. especially applies for service centers. and Russia are easier to reach, the However, in Eastern Europe and Asian markets are harder to supply China, the difference in the density from Europe and suffer from a lower- of service centers between quality infrastructure. aftermarket champions and explorers is smaller than in India and Russia, The described trend of density of as shown in exhibit 22. This means warehouse and distribution network that in both India and Russia, is contradictory when it comes to aftermarket champions and explorers sales and distribution networks. often cluster their network around Companies can either use existing first- and second-tier cities and have and proven sales channels and not strongly penetrated the more distribution networks or create new rural areas in both countries. In channels and networks, depending contrast, Eastern Europe and China on their current situation. High are characterized by high performers performers often start by setting up a covering not only first- and second- joint venture with a partner, who
The Aftermarket in the Automotive Industry 29 Key Finding Exhibit 23: Design Networks in Emerging Markets In early market entry phases, Percentage of companies concentrating on the outlined concepts companies should avoid Use existing and proven sales channels and 0% 50% 100% investments in own sales distribution network and implement in the new channels, but should rather rely market on joint ventures with access to Use existing sales channel s proven sales channels. and distribution network fo r 0% 50% 100% adapting and installing an own network
Create new sales channels 0% 50% 100% and distribution network downsized to market need s
Aftermarket Champions Explorers (High performer) (Low performer)
Capgemini Consulting
runs those networks. In addition, successful entry, companies should Key Finding they also invest in adapting these start to adapt the existing network. Standard IT solutions have a networks to fit their own needs. Information Technology Lever superior cost-benefit ratio over In contrast, explorers often Even if the emerging markets show individual IT solutions and are underestimate the investments unique characteristics, companies do supportive in building up a needed to create complete new sales not necessarily have to invest in individual IT solutions. Both winning governance structure channels and distribution networks or simply are forced to make these aftermarket champions and explorers that gives transparency and investments because of difficulties in, recognize that standard IT solutions simultaneously allows for example, finding the right partner offer well-accepted and beneficial flexibility on the to deal with, as illustrated in exhibit functionality. Also, individual IT solutions might create further market 23. The high investments are not likely to lead to corresponding higher benefits, but those do not outweigh side. returns. Thus, the study recommends the higher costs for implementation using existing sales channels and a and maintenance. Standard and distribution network as a market individual IT solutions do not entry for the aftermarket in differentiate aftermarket champions emerging regions. and explorers, but all participants After a seem to agree that using standard IT solutions is a road to success in the developing regions.
30 Strategic Initiatives Participants also were asked to Companies often face limited evaluate the ability to fully financial and personnel resources. participate in the market growth in Thus, it is important for them to the various emerging regions. Here, understand which strategic initiatives aftermarket champions and explorers they should invest in to best allocate responded differently. Most explorers people and budgets. indicated they were not really prepared for exploiting the growth in Exhibit 24 illustrates that each region these markets whereas aftermarket requires a different set of strategic champions said they were fully initiatives. This map can serve as a prepared. This explains why in basic investment guide since the general the importance of the priorities of the various initiatives can implementation of the following be identified. strategic initiatives is relatively high across all four emerging markets. Further evidence arises from the preparation for exploiting the market growth in various emerging regions.
Exhibit 24: Investments in Aftermarket Initiatives Across Different Emerging Markets
Eastern Europe Russia
4 A 4 A
G 3 B G 3 B
2 2
1 1
F C F C
Exploiter AM Champion E D E D Explorer Explorer Scale: 1 = very low to 4 = high Legend China India
A Improving and extending the service o ffering 4 A 4 A B Optimizing the planning processes among central, regional and decentralized organizations G 3 B G 3 B
C Improving the relationship with wholesalers 2 2
D Improving the relationship with dealers and 1 1 workshops E Increasing the market penetration by setting up F C F C local organizations F Establishing cooperation to achieve competitive advantages G Adapting the service o fferings to local requirements AM Champion AM Champion E D Explorer E D Explorer
Capgemini Consulting
The Aftermarket in the Automotive Industry 31 The results of the study make it clear It should be noted, however, that the Key Finding that each market profile of the most study participants weighted items 2 High performers have already important initiatives in which the and 3 the same and the difference transformed or at least aftermarket champions allocate their compared to item 4 was only very budgets shows similarities, but each minor. This indicates that the are transforming their after sales still can be considered a unique set- strategy for the Russian market business from a cost- to a up. The exceptions are Russia and includes a mixture of market share profit -and -loss -centered India where the set of the four most increase and stabilization with a clear organization. Explorers relevant strategic initiatives appear to tendency towards stabilization- be the same regardless of the order of oriented initiatives, as again the last need to evaluate whether initiatives within the set. The major three initiatives are more oriented to this organizational change is a overall difference is the priority these market share stabilization. relevant option as well. investments are given. Whereas the respondents’ investments in the Russia is the only emerging market in strategic initiatives were, on average, which explorers already follow the the highest in the Chinese market, strategy of the high-performing the average investments in the other companies in terms of initiative markets were ranked somewhat prioritization. They only need to lower, with a difference of 15% to increase the effort to follow up. Here, 35%. Again, Eastern Europe is they can make up for competitive different in that no aftermarket disadvantages if they increase their champions could be identified. effort in adapting the service offerings to local requirements by As indicated before, due to the almost 40%. specific situation in the Eastern European market the study The Chinese market shows a slightly concludes that explorers should different set-up when it comes to the orient towards business practices of main initiatives: exploiters, which, in turn, should 1. Improving the relationship with refer to aftermarket champions in wholesalers Western Europe. If strong explorers 2. Adapting service offerings to follow the practice of the exploiters, local requirements this could be a shortcut for explorers and provide them with a chance to 3. Increasing market penetration form the future group of aftermarket through setting up local champions. This requires a strong organizations focus on marketing to be able to 4. Improving and extending the analyze customer habits and to service offering transfer these findings in the adaptation and creation of new The main difference is basically the service offerings. sequence of selected initiatives and the inclusion of building up an own The participants weighted the local organization to better penetrate priorities for Russia somewhat the market. The strategy is a mixture differently, yet the same initiatives of securing increased market share still apply: and winning new share through the 1. Adapting the service offerings to third initiative. As explorers are local requirements focusing on adapting service offerings to local requirements, which is also a 2. Improving the relationship with market share stabilization strategy, dealers and workshops they are advised to change their 3. Improving and extending the focus to better improve the service offering relationship with their wholesalers. 4. Improving the relationship with wholesalers
32 Finally, in India the focus of the dealers and workshops, which is participants is to shape an voted second by the aftermarket Key Finding established platform from which to champions. And of course their push In the beginning, explorers conquer additional market share. The in these investments is very different should consider a tight first three initiatives again are typical since they basically invest with an market share stabilization strategies average prioritization factor of 2.6, partnership model to leverage and only the fourth is somewhat compared with 3.2 for the economies of scale and build a more expansion oriented: aftermarket champions. strong execution model. 1. Improving the relationship with wholesalers Summarizing, the study indicates that, on the one hand, explorers are 2. Improving the relationship with well advised to follow up on dealers and workshops initiatives that help stabilize their 3. Improving and extending the market position, as aftermarket service offering champions on average paid the most 4. Adapting the service offerings to attention to balancing their effort to local requirements both stabilize increased market share as well as to expand their footprint. As can be seen, a similar situation On the other hand, explorers already applies for India as for Russia. The set basically the right focus because picture is again a mixture of the initiatives they paid the most stabilization as well as expansion, attention to regularly are chosen by although the focus shifts to more aftermarket champions as well. The stabilization-related topics when biggest difference in this case is the considering the first three initiatives. consequent push that is required to Only the last one focuses on market implement these initiatives. It’s clear acquisition. Furthermore, the that explorers have to improve quite intensity to follow up the initiatives a bit in order to become aftermarket is almost 10% lower in India, champions and reach a higher compared with Russia. Explorers position in CHAMP. might need to rethink their investment behavior since their highest priority is on improving the relationship with
33 7 Conclusions
Bringing together the findings on for repair, maintenance and parts how companies can strengthen their services will most probably require a position in the mature Western consolidation of the sales and European aftermarket and also can distribution channels and networks. challenge in the emerging regions In addition, keeping existing leads to the following key wholesalers and dealers loyal can be implications: accomplished through fundamental loyalty programs based on improved In Western Europe, markets are service quality, customization of mature and most respondents’ services and service branding. companies have already reached the exploiter or aftermarket champion Explorers should focus on their key level. Nevertheless, the position of an strengths, know their customers’ aftermarket champion has to be requirements in order to catch up defended daily and requires strong with champions and try to build up efforts in innovating new services. governance structures to better New service innovations should go manage the organization. This course beyond traditional offerings and of action can also be applied to the concentrate on the emerging emerging markets. Wherever technologies in the field of possible, partnering models should telematics, navigation and be applied to profit from economies entertainment. The expected of scale. stagnation in the traditional demand
Exhibit 25: Summary of the Aftermarket Approach in Western Europe
• Innovate new services • Restructure sales and distribution channels Aftermarket • Implement loyalty programs for wholesalers and dealers Champion • Improve service quality and service customization at dealer and repair shop levels • Create brand awareness for services • Reduce the network density
• Improve service quality of repair shops and parts logistics performance Exploiter • Increase the density of dealer and repair shop network • Extend the breadth of wholesaler activities with independent dealers and repair shops • Increase the usage of standard IT solutions
• Set up basic infrastructure at a central organizational level • Define marketing and sales processes for services Explorer • Establish cooperation with wholesalers • Create a network of dependent repair shops • Define basic logistics functionality for planning, distribution and reverse logistics
Strategic Initiatives in Western Europe
Operational Organizational Information Network Excellence Design Technology
Capgemini Consulting
34 Exhibit 26: Summary of the Aftermarket Approach in Emerging Markets
• Run and control dense networks of dealers and wholesalers beyond first- and second-tier cities Aftermarket • Adapt standard IT solutions to more dense networks and extended service o fferings Champion • Continually improve the planning, sourcing, distribution and reverse-logistics processes • Let the local aftermarket management break free from headquarter formalities
• Try to break free from former joint venture partner and invest in own networks of dealers and wholesalers Exploiter • Adapt service offerings to specific requirements of each market • Redesign the marketing and sales processes and consider advanced and adapted services offerings • Optimize the warehouse network, parts availability and service level
• Set up central warehouses to guarantee basic parts availability • Establish joint ventures to penetrate the geographically disperse emerging markets Explorer • Define basic services o ffered in each emerging aftermarket • Define planning, sourcing, distribution and reverse-logistics processes • Define preliminary sales and marketing processes • Introduce standard IT solutions
Strategic Initiatives for the Emerging Markets of Eastern Europe, Russia, China and India
Operational Organizational Information Network Excellence Design Technology
Capgemini Consulting
Typical pitfalls on the way from not entail specific solutions for each exploiting the aftermarket to region. Across all emerging markets, aftermarket champion come from it is sufficient to set up standard IT emphasizing individual IT solutions solutions in the early stages of and trying to control too many levels exploring and exploiting the of the value chain. The additional aftermarket. In addition, aftermarket benefits offered by individual IT champions across all emerging solutions do not seem to cover the regions have strongly penetrated the corresponding higher costs. The market and try to control the various historical development of the value levels starting with central to Western European aftermarket regional and ending up at a industry with strong players and decentralized level. For explorers and fragmentation limits companies to exploiters to catch up they have to control every level of their value carefully plan their investments due chain. Instead of trying to penetrate to limited resources and should the aftermarket with an own adapt the aftermarket champion’s organization it seems to be more strategies wherever meaningful. important to cooperate with wholesalers and dealers. The In any case, these companies should cooperation should be focused on try to avoid taking the same learning improving their loyalty by strongly curve as aftermarket champions and emphasizing a loyalty program. rather try to identify shortcuts or development leaps. This is a complex A similar summary can be task. formulated for the emerging markets. The main dimensions such as IT, Differences across the emerging network or organizational design markets can be found in the have strong global attention and do operational layers. Aftermarket
The Aftermarket in the Automotive Industry 35 champions in Russia have to respond warehouses, optimizes planning and to customers’ strong brand purchasing processes across the awareness, whereas Eastern Europe network of local warehouses, and should be approached with an uses worldwide quality standards aftermarket model focusing on costs. across local dealers/repair centers. China seems to be the most demanding market where all With regard to future market processes including marketing and developments, both the results of this sales, sourcing, planning, distribution study and the current economic and reverse logistics are designed to situation highlight that there is no achieve low costs and high service traditional path for achieving success. levels. Finally, all respondents are Market players have to break through waiting for India to show significant their traditional course of action and growth rates. Customers there seem focus more on developing true to honor a strong focus on unique selling propositions – standardization through their simultaneously making sure they prioritization of service requirements don’t lose focus on the consumer’s and an attractive price/benefit ratio. requirements. One key element in this can be looking for new These various activities lay the collaboration that opens up the value foundation for achieving global chain either horizontally or vertically aftermarket excellence. As global and especially focusing on aftermarket champions, companies continually developing service transform into a profit-center innovations – for example, through structure and maintain optimized collaboration with insurance aftermarket activities across various providers. regions/countries fitting their individual set-up. They also integrate Whatever the future scenario of the different local approaches into a automotive industry will be, a greater regional or one global stronger investment in the aftermarket approach. They operate, aftermarket is imperative. OEMs and for example, optimized multi- OESs will be continually challenged echelon networks of warehouses and to defend and even more to further use worldwide benchmarks to develop their business models. Being transfer best practices among a global aftermarket champion warehouses, dealers and repair becomes a vital success factor for centers. The central aftermarket unit delivering outstanding business incorporates a major integration of results. central and decentralized
36 37 Contacts
For more information please contact:
Capgemini University of St. Gallen Frank Tennstedt Prof. Dr. Heiko Gebauer +49 162 - 2344589 +41 (71) 224 72 42 [email protected] [email protected]
Steffen Elsässer +49 162 - 2343646 [email protected]
Ralf Betke +49 162 - 2343168 [email protected]
About Capgemini’s Global Automotive Practice About Capgemini Capgemini’s Automotive practice serves 14 of the world’s 15 largest vehicle manufacturers and 12 of the 15 largest automotive suppliers. The sector generates value for clients through global delivery capabilities and Capgemini, one of the world’s foremost providers of automotive-specific service offerings such as Marketing consulting, technology and outsourcing services, & Sales Optimization, Strategic Service Management, enables its clients to transform and perform through Supplier Transformation, Optimization of Dealer-Focused technologies. Capgemini provides its clients with Operations, Global Emerging-Market Sourcing, insights and capabilities that boost their freedom to Organizational Development as well as Operating Cost- achieve superior results through a unique way of Cutting Strategies. working, the Collaborative Business Experience ™. The Group relies on its global delivery model called For more information: www.capgemini.com/automotive Rightshore ®, which aims to get the right balance of the best talent from multiple locations, working as one team to create and deliver the optimum solution for clients. Present in more than 30 countries, Capgemini reported 2008 global revenues of EUR 8.7 About ITEM-HSG billion and employs over 90,000 people worldwide. Founded in 1989, the ITEM-HSG operates a program focusing on the development of problem and application Capgemini Consulting is the strategy and orientated research concepts and using the “St. Gallen transformation consulting division of the Capgemini Management Concept” as a holistic reference framework. Group, with a team of over 4,000 consultants The ITEM-HSG maintains close links to the industry worldwide. Leveraging its deep sector and business through intense collaboration with Swiss and European expertise, Capgemini Consulting advises and organizations by means of major research and consulting supports organizations in transforming their projects. Results from publications and theses flow business, from strategy through to execution. directly into courses while students can develop real Working side by side with its clients, Capgemini world research through collaboration in the institute’s Consulting crafts innovative strategies and industry projects. transformation roadmaps to deliver sustainable performance improvement. For more information please visit www.item.unisg.ch
More information is available at www.capgemini.com/consulting
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