Auto Care Insider Volume 92 - (Page 20)

MARKET INTELLIGENCE By Steven H. Ganster, Managing Director, Technomic Asia Photos: Aftermarket Auto Parts Alliance, Inc. Warehouse, Little Rock, Ark. CHINA'S AFTERMARKET DCs - A LONG WAY TO GO CHINA'S distribution structure is struggling to keep up with aftermarket demand growth, as I have cited in previous articles. As the vehicle parc expands both in number and geographic breadth, parts suppliers and distributors have scrambled to develop an appropriate infrastructure to get the right part to the right customer at the right time. This goal is especially challenging, given the parc's fragmentation in vehicle models, with many of these vehicles having relatively low volumes on the road (and being relatively young in age as well). As the spine can be considered the center of the human skeletal structure, the distribution center (DC) or warehouse can be looked at as the hub of the aftermarket's distribution system. In this regard, China has a long way to go in the development and modernization of its DCs. First, 20 AUTO CARE INSIDER | VOL. 92 little investment has been made in warehouse development for the independent aftermarket, the latest figure being ~10 percent of all logistics investment. From a physical standpoint, DCs tend to be small. Warehouses are mostly limited to less than 30,000 square feet due to China's construction code for warehouse buildings. It is common for most distributors to use multiple shelves and lots of floor stock. Compared to a large DC in the U.S. which may carry well over 100,000 SKUs, the bigger distributors in China handle only about 30,000 SKUs. From an equipment and technology standpoint, almost no conveyor systems are used (we recently saw one in Shenyang that was ~100 meters long, but this was a rare citing). Almost no independent aftermarket distributors use commercial WMS (warehouse management system). WMS is at a very early stage in development, mostly being a small function of an in-house designed IT system. The OES channel is a different story, though it too has its challenges. In addition to the OEMs' own warehousing systems, some large players like Anji-Ceva and Sinotrans have fairly sophisticated and large DCs and operating systems. In order to satisfy the growing demands of the independent aftermarket in China, DCs will have to advance on all levels. The auto parts cities must give way to larger, more sophisticated warehouses in order to provide competitive logistics. Independent distributors will struggle and may balk at the forward investment needed to take their DCs to the next level of efficiency and scale. A clear competitive advantage may be the reward for those with the courage to take leadership here.

Table of Contents for the Digital Edition of Auto Care Insider Volume 92

President's Message
Association News-YANG Connect
Association News-www.autocarecaeers.org
Market Intelligence: e-tailing infographic
Inside Technology-social influencer program
Member Profile-Kathleen George
International Focus-looking at Latin America
Toolbox-professional headshots
Government Affairs-advocacy leadership team
Impact Awards-Brandi Gardner
Head of the Class-Olympus Imported Auto Parts Corp.
Market Intelligence-checking in with China
An Industry Treasure-Be Car Care Aware

Auto Care Insider Volume 92