Production to Aftermarket:Transition services
Production to Aftermarket:Transition ServicesRisk With Changing LandscapeThe U.S. automotive aftermarket isa 240 billion business that manyautomakers rely on to strengthentheir bottom line. While new car salescontinue to deliver slim profit margins,aftermarket sales generate up to onehalf of profits for major automakerswhile accounting for only one-thirdof total revenue. Superior customerand aftermarket service is critical tomaintaining customer satisfactionand brand loyalty, thereby drivingnew vehicle sales. There are very fewexperiences that negatively impactcustomer loyalty more than waiting forpowertrain parts while a vehicle is notoperational. This makes excellence inaftermarket sales and service an integralpiece of the OE value proposition andan attractive growth opportunity.However, there are currently anumber of market forces that may impactthe ability of automotive companies tomaintain a high level of customer serviceand maximize aftermarket profitability.The increasing age of light vehicleson the road, recovered sales volumesaffecting production capacity, and newtechnology introductions to meet fuelefficiency targets are likely to negativelyimpact the automotive industry’s ability tosatisfy customer demand for high qualityreplacement components and systems.2Changes in consumer behaviourAverage length of ownership trendSource: IHS Automotive 2015 IHSVehicle Age on the RiseThere are more than 257 millionvehicles on the road today. In 2014,new vehicle registrations outpacedscrappage by more than 42 percentand analysts do not see this trendreversing any time soon. As a result,the average age of all operationallight vehicles in the U.S. has climbedto 11.5 years. Consumers are lookingto own their vehicles longer, whichwill require a longer service life, andtherefore a higher level of aftermarketservices to maintain the agingvehicle fleet.Production to Aftermarket: Transition ServicesGrowing Demand for New VehiclesVehicle demand in North America hasrecovered to pre-recession levels. However,industry capacity has been slow toramp-up, and may never return to pre2008 levels. During the past five years,U.S. light vehicle demand has increasedby more than 5 million units. Lookingforward, most analysts agree that vehicleproduction will level off at approximately17.5 million units. In addition, there are 53new vehicle launches planned for 2019.To support the production for these newmodels while meeting increased demand,automakers are forced to carefully look atmanufacturing strategy and find strategiesto free capacity as quickly as possible forproduction programs.
US LV SalesPent-Up demand declines and affordability impacts towards 2020IHS Center for Automotive Research Management Briefing Seminars August 2015Legislation Impacting InnovationCorporate Average Fuel Economy(CAFE) standards were first enactedin 1975 by the federal governmentto reduce oil consumption throughfuel economy regulations for vehiclesproduced for sale in the United States.In 2012, new CAFE regulationsfor model year 2017-2025 vehicleswere finalized. This introduced themost stringent emission and fueleconomy reduction the automotiveindustry has experienced to date.Frequently referenced by the 54.5 mpgfuel economy target, the legislationrequires automakers to achievespecific emission and fuel economyrequirements across their vehicle fleets.As a result, vehicle manufacturers inthe U.S. have turned to new innovativetechnologies, including light weighting,alternative fuels and new innovativepowertrains, to improve vehicle fueleconomy while reducing emissionsand maintaining (or even improving)performance. The rapid implementationof new technologies, combined withcontinuous improvements to meetchallenging legislative targets leadsto shorter program lifecycles forpowertrain systems.The Aftermarket ChallengeCombining an aging vehicle fleet,increased demand for new vehicles,new model launches, and legislationincreasing the speed of changewithin the industry, automakers arefacing a pinch point in terms of theirability to supply the aftermarket partstheir customers demand. Coupledwith increasingly extended warrantyofferings, these variables are leavingOEs with significant challenges inpredicting the required service partsto support Powertrain programs overthe full service life. The supply anddemand dynamic has been alteredfrom historical norms, putting OEs ina precarious position in supportingtheir aftermarket requirements, oftenresulting in critical part shortages. AsOEs experience a dwindling inventoryof legacy components and systems,manufacturing capacity and capabilityfor these items often no longer exist,which impacts the ability to effectivelyservice vehicles.Although suppliers play a criticalrole in the automotive industry byengineering and manufacturing manyvehicle components and systems,a number of key vehicle assembliesare still developed and producedin-house by the automakers. Withlimited manufacturing capacity, today’sautomakers are facing the criticalchallenge to balance the manufacturingof new products for future vehiclesand legacy products for aftermarketand service. As Tier 1’s increasinglymove into powertrain assemblyvalue-add manufacturing activities, theyare beginning to encounter the sameconstraints.Production to Aftermarket: Transition Services3
Automaker responsibilitySupplier responsibilityBody panelsInterior componentsChassis componentsEngine 3 CsOther engine partsTransmission case, gear machiningOther transmission componentsAxlesVehicle manufacturers are forcedto balance legacy programs withnew programs at an increasing rate.Priority of new program launchesoften causes OEs to model expectedservice demand, run all (or somederivative) of these requirements, andmake the decision to retool or removemanufacturing lines of legacy productsto meet demand for new products. Thisdecision seems logical to meet growingconsumer demand for new vehiclesas well as legislative requirements.However, with production of legacyproducts no longer an option, it leavesthe automakers’ aftermarket groupvulnerable to part shortages and/orinventory carrying costs associated withdemand modeling errors.As a result, vehicle manufacturersare facing an increasingly complexdemand modeling exercise to estimatefuture inventory needs for service life.The traditional production to service4strategy of running a final service runwithin the manufacturing facility andscrapping tooling may no longer be theappropriate way to handle aftermarketrequirements. The success or failureof this strategy depends largely on theaccuracy of demand estimation whichis significantly impacted by difficult topredict variables. The result of theseforecasting errors are non-trivial relaunch investments to remedy criticalpart shortages. Automakers are forcedto redesign, resource, retool andrevalidate components for low-volumeservice. To accomplish this, automakersface a number of challenges: Redesign – Components will oftenneed to be redesigned from theoriginal high-volume manufacturingprocess to meet the designrequirements of a new low-volumemanufacturing process.Production to Aftermarket: Transition Services Complexity – A product is made upof many different components andvariations based on the packagingfor various vehicle configurations.This complexity drives a uniqueapproach to engineering, sourcingand validation for limited runcomponents. Sourcing – As the demand for newvehicles continues to be strong,suppliers are operating at capacitydeveloping original equipmentparts. As a result, most suppliers donot have the interest or capabilityto manufacture aftermarketcomponents in low volumes.Increasingly, OE’s are makingthe decision to retool or removemanufacturing lines of legacy productsand relaunch these programs with newsuppliers, whom are uniquely qualifiedto produce lower volume runs.
Challenges and Considerationsfor Production to AftermarketTransition ServicesUnderstanding the challenges relatedto end-of-life manufacturing canassist automakers in better preparingfor and handling the challengesaround aftermarket service ofcomponents and assemblies forthe aging vehicle fleet. Followingare best practices that should beconsidered.End-of-Life ChallengeProduction to Aftermarket ConsiderationScoping the size of theissueGather and analyze relevant information,including component inventory, componentfailure rate, existing supply chain and timing of”demand humps” for vehicle service.Component redesignAllocate significant resources to validate orredesign replacement components to ensurelegacy designs are the best option for lowvolume production.Cross-functional teamCreate a cross-functional team, includingpurchasing, engineering, design, quality andfinance to develop and lead the processto design, source and manufacture thereplacement partComplex problem solvingIdentify best practices and manage thecomplexities and demand of designing andproducing replacement components.Inadequate stock ofreplacement componentsMap the value stream of servicing assembliesincluding internal and external remanufacturingresources; identify hidden stakeholders; andidentify responsibilities for service supplyelements to determine when inventory or eachcomponent will be depleted.Resourcing requiredIn addition to using traditional componentsuppliers, identify new vendors – prototypemanufacturers, machining specialists andtooling houses dedicated to low- or mid-rangevolumes.Production to Aftermarket: Transition Services5
Case StudyAs one of the few componentslargely manufactured by automakers,transmissions are a fitting example ofthe growing challenge. The industry isexperiencing significant transition intransmission technology to meet theimpending CAFE legislation. Duringthe past 10 years, four- and five-speedtransmission penetration has droppedfrom 93 percent in light trucks and carsto less than 10 percent. In comparison,eight and nine-speed transmissions areon the rise.As a result of this transition,automakers have been forcedto remove or retool the legacymanufacturing lines to make spacefor the new, in-demand, transmissiontechnologies.Today approximately 50 millionvehicles on the road feature fourand five-speed transmissions andthe average life of a transmission is8-10 years. This results in substantialdemand of replacement transmissioncomponents for the next five years.After SalesStrike TeamFinanceDesignQualityIn one case, faced with thesemarket pressures, a major OEM foundit did not have the transmission partsinventory to meet the current andfuture service demand. The OEM madeit a priority to develop a solution andprevent the risk of declining aftermarketbusiness or worse, of alienating brandloyal customers.To mitigate the problem andensure the automaker could continueto service vehicles with 4- and 5-speedtransmissions that are no longer in19%19% of vehicles on the road today have a 4- or 5-speed transmission6EngineeringPurchasingPutting Best Practices in Placewith Automotive TransmissionsProduction to Aftermarket: Transition Servicesproduction, Ricardo established anaftermarket strike team of subjectmatter experts to audit the situation,identify a solution, design thecomponents, source the materials andlaunched the product. This uniqueteam approach allowed Ricardo toimprove cost reduction opportunityidentification, identify and preventrisks early in the project and accelerateproblem resolution.Throughout the project therewere numerous challenges the Ricardoteam faced while developing a solutionthat was both technically sound andaffordable. Lack of required information – Inmany cases the requirements toreplicate complex parts were missingkey pieces of information due torapid plant closure and poor data
retention processes. To overcomethis obstacle, Ricardo worked withsuppliers, key OEM contacts, legacypart samples and subject matterexperts to assemble and verify partrequirements for new suppliers toproduce service parts for on-timedelivery. Obsolete processes – For many ofthe parts and systems assessed, thelegacy processes were either nolonger widely used in the supplybase, unsuitable for low-volumeproduction, or required significantinvestment to replace scrappedlegacy tools. The Ricardo teamworked collaboratively with keystakeholders at the OEM to identifyand propose alternative processes forreview and approval. For example, inthe case of valve body covers wherethe legacy dies were scrapped whenthe legacy supplier went bankrupt,a new casting methodology wasproposed and approved that reducedthe tooling cost by hundreds ofthousands of dollars.Additionally, the unique crossfunctional Ricardo team leveragedseveral best practices to mitigate costand develop high quality replacementtransmissions, including a commoditybased sourcing strategy. In order tomaximize buying power on low volume,highly complex components, Ricardolooked to combine similar componentsinto a single request for quote (RFQ)creating total volumes that appealto more suppliers. The team used itssourcing experience and selectionmatrix to assess each RFQ by the totalpackage cost, supplier quality/trackrecord, technical viability and leadtime. This methodology allowed theability to identify and recommendlow cost, capable suppliers.Throughout the project, theRicardo team remained alignedwith the OEM through continuouscommunication and was able to assistin creating a solution for developingreplacement transmissions for theautomakers aftermarket activities.Conclusion - Avoiding theAftermarket CrunchThe boundary conditions used toestimate aftermarket inventory arerapidly changing, due to constrainedproduction capacity, increasedvehicle sales, increased vehicle life,and a high volume of new productand technology launches. Vehiclemanufacturers face a strong challengeto ensure profitability and consumersatisfaction.To ensure automakers areprepared in terms of aftermarketinventories, it is critical that theyaudit their current state, implementa traceability program and leveragelow-volume product developmentbest practices. An automaker’scontinued aftermarket profits hingeon the ability to identify the inventoryshortage and create a solution beforeit becomes a costly issue.Why RicardoRicardo is a global strategic, technicaland environmental consultancy. Italso is a specialist niche manufacturerof high performance products. Thecompany employs more than 2,000professional engineers, consultantsand scientists who are committedto delivering outstanding projectsfocused on class-leading innovation incore product areas of engine,transmission, vehicle, hybrid andelectrical systems, environmentalforecasting and impact analysis.Ricardo’s services cover arange of market sectors includingpassenger car, commercial vehicle,rail, defense, motorsport, motorcycle,off-highway, marine, clean energy andpower generation and government.Clients include the world’s majortransportation original equipmentmanufacturers, supply chainorganizations, energy companies,financial institutions and governmentagencies.Services include: TechnicalConsulting, Performance Products,Environmental Consulting, RicardoStrategic Consulting, Ricardo Softwareand Ricardo Knowledge.For more information on Ricardo’sstrategic consulting solution firstname.lastname@example.org.Production to Aftermarket: Transition Services7
Delivering Excellence Through Innovation & Technologywww.ricardo.com
The U.S. automotive aftermarket is a 240 billion business that many automakers rely on to strengthen their bottom line. While new car sales continue to deliver slim profit margins, aftermarket sales generate up to one-half of profits for major automakers while accounting for only one-third of total revenue. Superior customer
aftermarket radio (if equipped). Connect the auxiliary RCA cables into the aftermarket radio (if equipped). Plug the Data cable to the data port of the aftermarket radio. Insert the Audio cable into the iDatalink 3.5 mm audio jack of the aftermarket radio. NOTE: In Pioneer radios: plug Audio cable in auxiliary input of the radio. STEP 6
It is an exciting time to be part of the automotive aftermarket and AASA is honored and privileged to represent such innovative and in uential suppliers. AASA is committed to its mission of championing the aftermarket and the business interests of its supplier members. AASA, the voice of the aftermarket supplier community. Welcome to the 2019 .
The total aftermarket has grown at a CAGR of 14% over 2013-2018. The vibrant automotive sector drives the growth of the automotive aftermarket in India and is estimated to grow at INR75,000 crore by fiscal year 2020. Automotive Aftermarket Drive Transmissi on and Steering, 21% Engine Compone nts, 18% Electricals, 18% Suspensio n and Braking, 15 .
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Aftermarket services may help offset these pressures on original equipment margins, as these services are typically less impacted by changes in the external environment and can provide stable cash flows in times when economic activity is slow. Today, the average operating margin from the aftermarket business globally is about 2.5 times the
average age of cars will increase from 3 years to 4.5 years, the age when spending on aftermarket parts and services typically peaks. At the same time, the number of 'out of warranty' cars will almost triple during the same period, further driving demand for aftermarket products and services. Figure 1 China Automotive Sales by Type* (2002-12)
Elements of aftermarket lifetime value may vary by industry. 1 Mainly reflects spare parts. 2 Average value. 3 Lifetime penetration is a function of attach rate and share of lifetime under OEM service. Typically most intra-industry variation is in lifetime penetration. Source: McKinsey Aftermarket ifetime alue Benchmarking database 20-50 18 .
adventure tourism (ISO 21101 and TR 21102)2 addresses adventure travel specifically, and none of these standards or quality assurance systems cover all the aspects necessary for excellent adventure travel guiding. In the absence of a global qualification and performance standard, a variety of approaches to managing adventure travel guiding can be