Product Data Standards

Improving Inventory Tracking, Storage, Ordering and Access

By Dan Jondron, Published in SEMA News, February Edition

There is an increasing disconnect between the way many of us live, work and communicate on a day-to-day basis and the way business is conducted in the automotive aftermarket and in many other markets as well.

Without proper product tracking and inventory procedures, even a computerized counter operation may not alert the counterperson that a product is on his store's shelves. The loss in sales resulting from bad data and lag time in delivery of that data to the parts counter has been estimated at $6.7 billion each year.

It may be surprising to the techno-hip, those who carry Blackberries and cell phones and use broadband connections in the office and at home, that many businesses in the aftermarket today are still sending and receiving order information via fax and telephone. A typical order process might consist of someone faxing a purchase order to a manufacturer or WD and receiving a fax back (if the buyer is lucky) to confirm the order and shipping date. If things aren't quite right with bar codes, part numbers, quantities or packaging, this electronic conversation devolves into a game of phone tag to address the discrepancies. Sound familiar?

Once the discrepancies are handled, the supplier or manufacturer enters the information by hand into the ordering system software. The order is then packed and shipped. The problem is that the wasted time it takes to deal with discrepancies in the ordering process (not to mention data-entry errors) costs the aftermarket a staggering amount of money.

In a white paper authored by the Automotive Aftermarket Industry Association (AAIA), Aftermarket Council on Electronic Commerce (ACEC) and Profile Systems (now Comergent), called "The Cost of Unsynchronized Product and Pricing Data," annual losses to the industry were estimated to be $1.7 billion per year. This represents a loss of 1% of sales for the average manufacturer and .75% for the average reseller, according to the report.

The Data Audit Certification (DAC) program is designed to test a product database for compliance with the Product Information Exchange Standards (PIES). Current DAC participants include Dana, Arvin, ASC, Cardone, Global Accessories, Melling and NGK. Information on the program is available at www.aftermarket.org/eCommerce/ Pies/Pies_DAC.asp.

In addition, there is another multi-billion-dollar loss related to the time lag in data reaching the parts counter. Marlen Silverii from Arvin Meritor made a presentation at an industry forum last year in which he quantified the dollar value of the problem on the strut business. Silverii pegged annual industry-wide lost sales resulting from just a six-month lag in data to be $33 million at retail. If you assume that struts account for as much as 5% of total retail aftermarket sales, you project more than $5 billion in lost sales annually, directly attributable to slow distribution of catalog data.

Bob Moore of Bob Moore and Partners, a top industry analyst, tells the story of trying to buy an oil filter for his 2004 Mini Cooper at the local parts counter. The counterman told him that there was no application data for his 2004 in the computer. Bob then called his friends at a major filter manufacturer and discovered that the part number for the 2003 car was the same as the part number for the 2004, and he also discovered that the part for his car was on the shelf at the parts store that he visited. The part was on the shelf, but it couldn't be sold due to lag time in data delivery.

As we all know, when either the mechanic or the consumer visits the parts counter and the part is not available, the dealer is the next stop and perhaps the first stop on the next occasion. The dealer has accurate data, and the correct parts are often in stock.

In the performance and accessories side of the aftermarket, we have another factor that compounds the potential loss. According to SEMA research reports, new truck buyers, for example, accessorize their vehicles within three months of purchase and spend an average of $1,500 on those accessories. Consumers who don't find the accessories they want might wander down the street and spend that money on a new Palm Pilot, barbecue or set of golf clubs, and that performance or accessory sale may be lost to the aftermarket forever.

Thus, we have an industry loss of somewhere in the neighborhood of $6.7 billion each year due to two issues: bad data and lag time in delivery of that data to the parts counter.

What To Do and How

In the early '90s, a group of industry participants from AAIA, SEMA, the Motor and Equipment Manufacturers Association (MEMA), HDeXchange (HDX), Profile Systems and a number of other aftermarket trade associations and companies formed the ACEC. Its goal was to create industry standards for the description of automotive aftermarket parts data and for vehicle description standards. The industry's top minds have been meeting ever since to hash out issues related to data standards and to ensure that these data standards are compatible with those of the OEMs and other industries. The outcome of these meetings was the creation of the Product Information Exchange Standards (PIES) and the extension of the AAIA vehicle description tables into an accurate set of descriptions now known as the AAIA Catalog Enhanced Standard (ACES). ACES was launched in 2003 and is continually under industry review and enhancement. In addition, AAIA recently completed an agreement with Comergent to create a Data Audit Certification (DAC) program. This program is designed to test a product database for compliance with the PIES standard. Current DAC participants include Dana, Arvin, ASC, Cardone, Global Accessories, Melling and NGK.

Consumers who don't find the auto accessories they want at their local speed shop or parts store might wander down the street and spend that money on computer gear, housewares or sporting goods, and that performance or accessory sale may be lost to the aftermarket forever.

So all a business has to do is get its data straight and in PIES-compatible format, then take the next step and have it certified as compliant. Simple, right? You may be in for a surprise. The reason we recommend the additional step of certification is that it is really a way to find and fix errors that a company might otherwise miss. No one in the certification process so far has passed on the first run.

Let's look at how a company might take advantage of these standards to increase its profits. We can look at bad data as a cost (the glass is half empty) or look at data cleansing as a way to increase profits (the glass is half full). Who among us couldn't benefit from a 6% increase in the bottom line?

As an example, let's say the company is a manufacturer. It saves 1% through accurate data, according to the white paper, and an additional 5% by getting its information to the market in a timely manner, according to Mr. Silverii's estimates. If the company's sales are as little as $5 million per year, its savings through data clean-up is $300,000 each and every year. It might cost all of that gain in the first year and, of course, the costs are front-loaded, but think of the benefits of being able to send a data file to anyone in seconds and sending updates within minutes of having a new product released. If our $300,000 figure turns out to be reasonably accurate, the company's next project is to estimate the cost of cleaning up its data.

Let's look at some of the issues that might affect that cost. Fortunately, when Dana and O'Reilly went through this process recently, they published a white paper that outlines the tasks and pitfalls in data clean-up. The 94-page document is called the "Technology Enhanced Standards-Based Trading Report," which is freely available for download at www.aftermarket.org/eCommerce/eCo-mmerce.asp. (If you are still awake when you have finished reading it, you are an obvious candidate for PIES compliance.)

Here are a few points to be considered in the data-cleanup process, which may impact a company's decision. The first two are quotes from the TEST Report.

-"Central among the findings of the TEST team was that cultural issues, not technological issues, were the greatest impediments to effective implementation of standards-based trading. It seemed that more time had to be spent selling the idea of adopting standards than on the actual compliance with them."

-"Probably the most obvious finding of the TEST group is the amount of redundant functions that exist between the manufacturer and the reseller in the area of data management. Reduction or elimination of those redundancies will lead to substantial savings. Additionally, enhancements to existing programs and significant new opportunities are facilitated by the existence of accurate and synchronized product data. These include category management, collaborative forecasting, Internet parts ordering and automated replenishment."

-The TEST Report also points out that the data necessary to comply with the 82 minimum PIES fields necessary for compliance may live on different servers in different geographical locations, even running different operating systems. Think in terms of packaging information (size, shape, weight) residing on servers at your packaging contractor, product specifications residing on servers in the engineering department and product information related to sales residing on servers in marketing. All of this data needs to be located, updated and normalized, and connections have to be built between the various servers and the PIES database for ongoing updates. The TEST Report calls this "a formidable task."

In July 2004, The Alliance, O'Reilly, Advance, CSK and Autozone sent out letters encouraging their suppliers to become PIES compliant and DAC certified. Here is an excerpt from that letter: "...we want to join our suppliers in initiatives that drive down our respective costs of doing business. We want to eliminate the barrier that bad product data poses and make progress towards a goal of end-to-end product data synchronization in the aftermarket.

"Because the data for the products we sell begins with you, we ask that the first steps towards cleansing and certifying your data be made by you. AAIA has announced an industry service called Data Audit and Certification (DAC). This service will allow you to identify any deficiencies in your product information, correct them and earn an annual certification status for PIES.

"(We are) convinced that suppliers who are PIES Certified will experience fewer errors on processing PO's, will enjoy faster time-to-market for new product introductions and will experience lower returns due to errors in order and shipping quantities."

Dana and O'Reilly published a white paper that outlines the tasks and pitfalls in data clean-up. The 94-page document, "Technology Enhanced Standards-Based Trading Report," is available for download at www.aftermarket.org/eCommerce/eCommerce.asp.

Here is one more quote from Mike Williams at O'Reilly, who led his company in preparing to receive data from Dana in the TEST program: "If a manufacturer is not currently doing business with O'Reilly, that manufacturer will have a distinct market advantage with O'Reilly if their product information is PIES compliant and DAC certified."

So, to be realistic, there is a problem...and an opportunity. A company may spend what will probably be some serious resources in the near term to increase its margins and increase its competitive advantage for the foreseeable future or wait until it is forced to do so by its trading partners.

The good news is that companies don't have to go it alone. There are a number of sources of support within the industry for assistance. Check out ACEConline.org for information related to the industry standards, PIES and ACES. Comergent (www.comergent.com) was responsible for assisting Dana with data sourcing and normalization for its PIES project. There are a number of other industry data mapping companies available to assist you with PIES-compliant data mapping. These companies include DCi, Quantum Data Services, JNP Soft, and GCommerce to name a few. Both SEMA and AAIA have information on their websites and will be hosting Webinars and seminars addressing these issues. The University of the Aftermarket is holding a two-day seminar on Industry Standards for Aftermarket Data. Those interested should sign up early for the March session, which will be hosted by Denso on March 13 and 14 in Long Beach, CA. According to the website at www.univaftmkt.org, "This comprehensive program gives participants the training necessary to successfully implement AAIA's new enhanced e-CAT Standard on Day One and PIES (Product Information Exchange Standard) on Day Two." You can also get support at www.aftermarkethink.com.

Once manufacturers have their data in standardized format and that formatting is certified through DAC, there is the possibility of storing all of that data in a single Industry Data Warehouse where it can then be accessed by participants in the industry who have the approval of the manufacturer for that access. The purpose of this centralized data bank would be to provide an efficient model to make rich, standardized data available to the broadest possible constituency of aftermarket practitioners at the lowest possible cost. Is this an idea whose time has come? There are a number of industry leaders who think so. Keep your ears to the ground on this one.

Dan Jondron is president of Advanced Digital Strategies (www.digstrat.com) and has over 20 years experience working with companies in the automotive aftermarket. Since 1995 he has been teaching eMarketing and technology topics for SEMA, other trade organizations and private companies. ADS provides eMarketing and technology-related consulting services in the automotive aftermarket for companies large and small. E-mail: Dan at danj@digstrat.com Telephone: 360-770-6615