Money in the aftermarket Top Indian automaker triples aftermarket revenue with Allcargo’s custom-designed solution
lobal car makers will see their aftermarket revenues rise steadily at a CAGR of 12.4 percent in the next five years, according to a recent Frost and Sullivan report. Consumption of routine maintenance parts will also continue to grow 10 times faster in India than in North American and European markets. For global automakers looking to tap this momentous opportunity, a strong local partnership to effectively deal with aftermarket supply chain demands will be a decisive factor.
When scouting for local support, automakers must assess their potential partner on three important parameters: infrastructure and technology investments, ability to provide last-mile connect and ensure superlative customer service, and a proven track record in managing similar aftermarket responsibilities for local auto makers.
This case study tells you how spotting challenges early and getting a seasoned partner on board, helped Ashok Leyland, India’s second-largest commercial vehicle manufacturer, to consolidate aftermarket operations and expand its market share amid stiff competition and a depressed market.
The fragmented inventory challenge
Effective aftermarket service delivery is a vital plank in Ashok Leyland’s growth strategy that has helped the automaker to expand its market share from 15 percent in the previous fiscal to 18.5 percent in 2015-16 in the commercial vehicles category.
The journey to achieve this milestone was not easy. The Indian automaker started out with many aftermarket challenges. “Multi-location warehouses spread across Nagpur, Jaipur, Kolkata and Delhi were pushing up costs, without actually meeting the aftermarket demands of customers. Inadequate infrastructure bred inefficiencies into the inventory visibility and management process. They also exposed the aftermarket value chain to risks such as, inventory damages and inaccurate dispatches,” points out Mr Raman, AGM, Sourcing, at Ashok Leyland.
Fragmented inventory led to order losses — often, orders could not be fulfilled, as they would come to one warehouse while the inventory would be lying in another. Holding a high stock in every warehouse was not an option, as that would escalate costs. The inefficiency had an impact not only on revenues but also on brand reputation and credibility.
Quickly tackling the challenges was crucial for this automaker. “We wanted to improve our warehouse operations while optimising the cost of operations and minimising risks. Our core objective was to improve customer service delivery,” continues Mr Raman.
The automotive company decided to bring all its warehouses under one roof, as a single, consolidated ‘master’ store at its manufacturing facility in Alwar, Rajasthan. This warehouse would cater to all of Ashok Leyland’s customers through its nationwide distributors and dealers.
How Allcargo did it:
A project rollout of this volume and nature needed a fool-proof implementation plan, appropriate resourcing, and interplay of technology and analytics to deliver efficiencies and predict demands.
Allcargo put together a robust implementation roadmap to ensure that operations stabilised within 90 days of taking over, despite the initial chaos of running operations in a partially done warehouse. The Allcargo Project Execution Team (PET) comprised people with specialised skills in rolling out projects, infrastructure management, training, documentation and SOP, and inventory management. The PET rolled out the operations, working closely with and training the ground ops team.
Building this advanced warehouse was segregated into phases to deliver value at each level. The first step focused on stability. The second phase focused on delivering services and creating value for Ashok Leyland while making the Warehouse Management System (WMS) compatible.
Getting the right partner on board
Ashok Leyland chose Allcargo Logistics to set up and manage its aftermarket warehouse at its Alwar facility. “Our needs were urgent. We needed a partner that would understand our requirements and quickly get to work with the right kind of infrastructure. We benchmarked several logistics service providers and zeroed in on Allcargo,” explains Mr Raman.
Creating a state-of-the-art, dynamic aftermarket warehouse
“Plain-vanilla consolidation was certainly not an option,” points out Mr V Balaji, COO, Contract & E-commerce Logistics at Allcargo. “We needed to infuse a series of value-added services and bespoke solutions to create a state-of-the-art and dynamic aftermarket warehouse for Ashok Leyland that would meet global standards and support the auto manufacturer’s distributors and dealers across India,” he explains.
Apart from developing an efficient warehouse, Allcargo’s custom-designed solution for the automaker includes value-delivering features such as emergency orders and express service management, unit conversion management, and composite kit creation and management. Analytics forms a crucial aspect of solution delivery.
Building blocks of Allcargo’s solution for Ashok Leyland
- Efficient warehouse layout and advanced infrastructure
- Emergency orders and express service management
- Unit conversion management
- Composite kit creation and management
- Analytics and reports
Multi-fold business impact
“Designed, developed and stabilised within a very short span of time, the Alwar warehouse stands differentiated in the automotive industry as a dynamic aftermarket warehouse, with advanced abilities,” says Mr Raman, talking about the impact Allcargo’s solution has had on Ashok Leyland’s aftermarket value chain.
The value is visible at multiple levels:
- Revenues have tripled: Revenues from the Alwar warehouse have shot up to INR15 million a day, from the INR5 million-level in just one year. The revenue impact is a direct outcome of value-added services such as composite kit creation, express service management and emergency order management within the warehouse.
- Productivity and efficiency have improved: Advanced infrastructure options such as racking and bin-mapping have improved pick efficiency by three times to 60 per hour per man day, from the earlier number of 20 per hour per man day. Maintaining low order lead time is a challenge for automakers, worldwide. The time taken for order fulfillment is usually three weeks. Allcargo helped Ashok Leyland bring down order lead times by minimising delays in the warehouse with responsive infrastructure design elements. The standard order fulfillment time in the warehouse is 24 hours. For emergency and express orders—as in the case of DTC—it is three hours, which is an industry-best number.
- Customer service delivery is at its best: While streamlined and well-managed warehouse management processes have impacted efficiency and productivity, value-added services have enhanced customer service delivery by several folds. For instance, composite kits ensure superior vehicle experience for Ashok Leyland’s customers, directly impacting revenues and brand loyalty.
“The solutions and services Allcargo provided have impacted our core business outcomes. The biggest change is the transformation into visually managed control of operations. It has translated into revenue impact and more importantly, improved customer service delivery. I would rate Allcargo as an innovative, futuristic, and client-centric logistics solutions provider,” concludes Mr Raman.
The way ahead
Allcargo is currently in the process of rolling out the Warehouse Management System (WMS) in the facility. After the implementation, AllCargo will provide Ashok Leyland with intra-warehouse visibility, in the form of published structured messages on mobiles. This change will take order management to a whole new level.