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Parts and distribution: Parts battle to heat up for factors

B ack in 2003, AM published a news story suggesting the age of the ‘superfactor’ was imminent.

Paul Daly, Vauxhall aftersales director, had already used the term at an earlier AM/Sewells aftermarket conference, and the findings of an AM/Castrol survey suggested half of the top 20 retail groups were preparing huge parts operations to challenge traditional factors.

So what’s happened since? “Slowly but surely we are seeing franchised dealers’ parts businesses starting to take the independent motor trade market away from traditional motor factors. It is still a big opportunity for franchised dealers, although it may take longer than first thought, despite all the speculation about ‘superfactors’ that followed the changes to block exemption,” says industry analyst, Chris Oakham.

“It’s interesting that some dealer groups aren’t that bothered about parts, Pendragon being a prime example. These larger groups are going to have to focus on the fact that they need to consolidate their franchises. With so many franchises it’s difficult to see how you can establish a cohesive parts operation.”

Catalyst for change

Brooklyn Direct, the winner of this year’s AM Factor/Distributor award, certainly is bothered about parts.

In 1999, its parts business was divided across each franchised dealership and it was only processing around 7,500 orders a year. Block exemption proved the big catalyst for change: Brooklyn re-engineered its parts business to accommodate the changing marketplace and the result was a new venture called Brooklyn Direct, which was launched in 2002.

“Parts was always a problem for Brooklyn. Stock management, marginal pricing and unpredictable customer demands made it one of the company’s least profitable business units,” says John Leeden, parts director for Brooklyn Direct.

“The parts business was scaled down but still lost money. A new approach was needed – instead of each parts department working against each other, they needed to work as one.”

Initially, Brooklyn opened a centralised warehouse in Worcester to focus on Ford business. This has doubled in size to include other franchises, while the company has also set up a call centre in support.

The final element was the move into factoring, and this was developed in response to Brooklyn’s multi-franchised element. The company can now offer a one-stop service with access to workshop consumables in addition to branded manufacturer parts and accessories.

“We aim to be Worcestershire’s leading parts distributor, and its first and only superfactor,” says Leeden. “We are well on the way to achieving that. We have reduced obsolete stock, increased our stock turnover, and maximised manufacturer bonuses through volume business. We also have a very loyal and active customer base.

“We’ve been responsive both to customer needs and the further changes to the aftersales market, exploiting the expertise in supply chain management and customer service developed in the past two years.”

Establishing a trade business

Reg Vardy has also exploited the changes to block exemption. In August 2002 it moved its entire parts business into a 16,000 sq ft distribution base in Sunderland. Branded Parts Solution, it is the largest franchised parts distribution operation in the north-east – it holds £600,000 of stock across 12,000 product lines – and it opened up a new market for the group.

“The challenge then was in juggling the competing demands of establishing a trade business and making sure we gave a high level of service to our dealerships. We are still looking at our processes to improve this day to day,” says David Crane, franchise development manager for Reg Vardy.

“We have a fleet of vans each covering a particular part of the region. They can deliver parts from all franchises and even improve the service overall by making more deliveries each day. Customers have one point of contact and one bill.”

Depth of franchise knowledge

Together with the warehouse team and delivery drivers, the Parts Solution operation also includes a telesales centre where staff are divided into smaller teams for each franchise.

The majority of staff were recruited from Reg Vardy dealerships for their depth of franchise knowledge, so are able to offer a professional service for customers.

“It’s taken a period of time to make people realise that we can deliver a better level of service by having a larger stock base, better delivery capacity and people dedicated to the telephones,” says John Reay, Vardy’s parts specialist.

“We are now selling tens of thousands of pounds worth of parts and our articulated lorry is packed to the roof, every day. With these volumes, we are achieving a stock well above the industry average.”

Sector dominated by larger players

Chris Oakham believes there are parallels to be drawn between the factor sector and bodyshop industry.

“The majority of factors are quite small and it is a sector dominated by larger players.

Independent motor traders are the mainstay, but many of these are moving away from traditional repairs and into other areas such as used car sales, fitting stereo equipment or becoming specialists in certain fields, such as air conditioning,” says Oakham.

“Independent factors cannot exist if the independent traders are losing market share. Franchised dealers have an opportunity to get into parts wholesaling – mainly to other franchised dealers. “This is where the larger dealers need to be seeing the opportunities.”

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