Evolving Parts Distribution to Improve the Customer Experience

Parts distributors in years
past could succeed by supplying just a handful of profitable parts in one or
two product categories. To remain competitive today, distributors must offer a
wide variety of parts, along with value-added services.

It wasn’t that long ago that our operations
were run with DOS-based computer systems and manual inventory checks.  Years ago we didn’t need much more than a
phone, fax, warehouse and firm handshake to make it in this business. 

But times have
changed.  In the current market
environment, any parts supplier that hasn’t diversified their product offerings
(especially in the consumer electronics sector), and isn’t providing value
beyond distribution, is likely no longer in business or is quickly becoming obsolete.

With some manufacturers still
expecting their own in-house parts operations to improve their bottom line, savvy
parts distributors know that to remain relevant, they have to offer a strong
value proposition and services that enhance the customer experience and exceed
the capabilities of the manufacturers they represent.

The most forward-thinking
manufacturers know that parts distributors are crucial to creating a variable
parts supply chain cost structure, while protecting their brand equity at the
same time.  If consumers can’t get their
products fixed fast because replacement parts aren’t readily available – and
affordable – how likely are they to repurchase that brand? In a day when
word-of-mouth spreads like wildfire over the Internet and social media, it’s
more important than ever to provide superior aftermarket support for their
products.

Many manufacturers realize
that parts are really far more of a drain on their limited resources than they
are a profit center.  When I first got
into the parts business, nearly every manufacturer managed an internal Parts P&L.  At that time, product prices were higher so
consumers typically chose to repair their products rather than replace
them.  And healthy parts margins more
than offset parts infrastructure costs.  Today
we know that’s no longer the case.

Diversification is another key way
distributors can improve their value. At one time, Encompass was strictly a CE
Parts Distributor.  However, we knew that
to survive – and more importantly thrive – in this business, we would have to
change our model, infrastructure, and overall way of thinking. Just because it
had worked for dozens of years, doesn’t mean it would work going forward, and
we had to provide products and services that our customers and prospects
actually needed. As a result, we started adding new product categories to
diversify the vertical markets we serve. This has included expansion into Large
and Small Appliances, HVAC, Computers, Imaging, Health & Wellness, Security
and many other products to serve new customer segments.

To keep costs down and supplement the
parts supply chain with hard to find parts, many distributors are harvesting
key components from products that may otherwise be unrepairable and/or not cost
effective to repair. This not only helps control costs, it greatly reduces the
amount of environmental waste that may ultimately end-up in landfills.  Customers like reclaimed parts because
they’re less expensive than OEM Parts, and OEMs are beginning to view them as
an option for parts that would otherwise be no longer available.

Effective warehouse
management is one of the most important areas that have evolved to help
distributors deliver top notch customer service.  You’ve got to be able to quickly and
efficiently receive incoming inventory, ship parts orders and process returns.
Encompass has implemented the latest automation tools available in the distribution
space, and we’ve made changes to our warehouse layout configuration to maximize
efficiency. Our goal is to move a larger volume of orders each day to get them
in the hands of our customers as fast as possible.

Consumer expectations have taken off in
recent years as technology has increased their awareness of the overall service
experience. Technology has also helped innovative
distributors improve the parts service experience.  Encompass, for example, provides
sophisticated, real-time inventory access, intuitive ordering processes, comprehensive
data, and email/chat/social media solutions.

We have also integrated our
technology systems with third-party administrators and service management companies
to help servicers get the parts they need quickly and efficiently to expedite
consumer repairs, while also simplifying the claims filing and validation
process.  Perhaps the greatest
integration benefit is that everyone involved has complete visibility
throughout the entire service experience.

While technology has been critical to
improving the customer experience, good old-fashioned people skills are still
just as important to attracting and retaining customers as they were 60 years
ago. Ensuring staff has both parts knowledge and customer rapport is key. 

As long as there are products to
support, distributors must continue to look for ways to further improve our
operations and change the way we do things to provide the best possible service
to all our customers. If we take our eye off the customer experience and fail to
make changes, we will not survive in this market.