Whether your organization is just starting its Retail Inventory Management (RIM) program, or you’ve outgrown your in-house solution, it is imperative to have a comprehensive strategy in place. It is about understanding what an effective RIM program entails, why it’s essential for OEMs today, and what benefits you can expect to see—at the OEM, dealer, and customer levels.
What is Retail Inventory Management?
On the highest level, it’s simple: RIM is a technology-enabled program where the OEM collaborates with dealers to ensure the right parts are stocked in the right locations. From the OEM’s perspective, RIM also creates visibility so they can see what’s happening at the dealer end. (You can learn more about how it works in our Back to Basics series—check out RIM fundamentals part one and part two.)
Why is RIM important?
Both the OEM and the dealer are responsible for—and rely on—keeping end customers happy, and parts availability at the dealer plays a big role in customer satisfaction. Both the OEM and dealer want to sell more parts. They want to create brand loyalty so they can increase new product sales. And they want to minimize the inventory investment. A good RIM strategy considers all of these goals and implements a robust technology solution to meet them. Every OEM that delivers products and services via a dealer network needs a RIM solution. This includes not only the automotive industry, but also makers of construction equipment, agriculture equipment, and so on.
What challenges does RIM help overcome?
Most OEMs have a customer satisfaction problem. In the OEM supply chain, they probably have very high availability at the central warehouse—around 99.5%. It drops to around 98% at regional warehouses. But when you get to the dealer network level, they rarely are able to measure availability with accuracy —and you can’t solve what you can’t see.
The first thing RIM provides is insight into the dealer availability rate. When you start measuring that, it’s often around 30-40%. That’s a real problem. The closer you get to the consumer, the higher you want availability to be. Once you start to measure service, inventory, and so on, you can figure out what needs to be fixed, manage the exceptions, and start to set consistent KPIs across the network.
Making the pitch: What’s in it for dealers?
Most dealers often spend quite a lot of time in the Data Management System (DMS)—and often end up with excess inventory and low availability. RIM helps dealers reduce excess stock while improving availability and customer satisfaction. By ensuring they have the right parts in the right place, it can also help increase sales volume. And with an exception-based, best-in-class RIM system, they can manage their inventory in approximately 15 minutes a day. That means they have a lot more time to spend with customers. Plus, terms and conditions designed to get dealers on board can provide even more benefits—for example, waiving critical order fees.
Why OEMs win, too
The biggest benefit for manufacturers is supply chain visibility. Without a RIM program, OEMs rarely know what happens to their parts after they sell them to the dealers. Implementing RIM helps them better understand inventory volumes and what’s selling at the retail level. The other key benefit is that improving availability so close to the consumer can also help to improve sales volume—just a 1% improvement in availability can boost sales by 0.5%, which makes a significant bottom line impact.
Better availability builds brand loyalty, which matters for both customer acquisition and retention. So, ultimately, a good RIM program can even help OEMs boost new product sales. Other benefits include significantly lower return volumes, reduced expediting costs, and a better managed load on parts distribution centers, enabling more efficient delivery to the dealer network. For example, many dealers place big orders on Monday which can create backlog at the primary distribution center. With a RIM solution, OEMs can calculate out all those order lines across all dealers and figure out which ones are critical and which ones can wait a day or two. That makes managing day-to-day work in the parts warehouses easier, too.