Parts Model

Application of the model

The model has various potential applications and variations to the existing generic model:

• Output by dealer where the vehicle population relevant to each dealer is allocated to a catchment area and the associated potential determine
  • This is the most advanced version of our model and is showcased here
• Output by engine number where the vehicle population associated to a particular engine number is used to determine parts potential and changes thereof

Virtually any permutation of existing parameters can be changed to accommodate client customisation needs.

 Concept explained

The concept of the model was developed over many years of experience in the field of parts consumption in the aftermarket. It became clear that a critical element in determining future demand, was the size of the vehicle population on the road (parc). Not only is the size of the parc critical, but also the age profile of the parc since vehicles consume parts, or quantities of parts, differently during its life span and consequently demand is not a function of the amount of vehicles on the road, but also the particular age of those vehicles.

Download an example of the model. Ensure that your macro security allows for macros to run. The model requires Microsoft ® Excel ®  to run (can be adapted for earlier versions).

Furthermore, the supply of these parts also differ significantly over the life span of the vehicle. In other words in its first year, a vehicle is 95% likely to consume genuine parts, supplied by the agent, and in it’s 20th year only 10% of total consumption will be supplied by the agent.

The below profile serves as an example of service part consumption and the different supply probabilities over the life span of the vehicle. The three typical channels of supply

Why use this approach?

Fundamentally the statistical method for forecasting is invalid, particularly in the parts industry.Unlike other industries where historic sales gives clear indication of future trends, the consumption of parts (and fuel) is in essence a elastic or semi-elastic demand.In other words, halving the price will not double the demand. A particular number of vehicles have a fixed potential for consuming parts.Within a certain extend, that demand will differ and this is measurable, but fundamentally the size and particularly the age profile of the parc are the key drivers to demand.

Thus applying historic data assumes that the same parc, and more importantly the same age demographic, is still available to consume parts, which in essence is not true.It is not true as the vehicle age demographic has shifted as vehicles aged and a percentage of vehicles have been scrapped.As the vehicle ages, so does its propensity to consume parts in other word the demographics of the vehicle
population changes.

In the parts environment, this change is severely evident and even though the size parc remains fairly constant, the fact that the parc ages results in a change in total consumption.Changes in vehicle sales, influencing the vehicle parc, lags the demand for parts consumption and particularly in line with peaks in troughs in the demand patterns for parts.

Our model

The above principle has been comprehensively developed by Knowstosis in order to determine outputs per parts category (service parts, engine parts, etc.), per region (i.e. Gauteng, Western Cape), sub-region (West-rand, East-Rand, Jhb CBD, etc.), licensing district and distribution channel (i.e. OEM, Alternative or pirate part distributors).This information can be obtained for different vehicle distributors (i.e. BMWSA, DaimlerChrysler SA, etc.) or vehicle makes and models (i.e. BMW 3-series, Land Rover Discovery, Mercedes-Benz C-class, etc.).

This model is developed in a Microsoft ® Excel ® environment and has a user interface which is very user-friendly.  It is also customised for individual subscriber needs.  The below capture shows the interface. 

Conclusion

Utilising this approach, gives more accurate forecasts and using the model, various “what-if” scenario’s can be investigated in order to do strategic planning.

Download an example of the model. Ensure that your macro security allows for macros to run. The model requires Microsoft ® Excel ® to run (can be adapted for earlier versions).