It is easy for many do-it-yourselfers to take for granted that their local car parts store will be able to provide the parts they need to maintain their vehicles. Usually, even for aging vehicles, we can order the parts and have them in hand in a matter of days. Whether or not we have an appreciation for all the effort and foresight that goes into keeping the auto part stores supplied, we take it hard when we aren’t able to find that last part we need to make our car road worthy. This is when the do-it yourselfer’s natural curiosity kicks in and asks, “How do these parts get around”?    

Major automotive companies such as BMW or Ford often manufacture little to none of their end product. Instead, they assemble systems and components from their hundreds of suppliers and focus on the distribution of the end product. Indeed, professionals from BMW have even remarked to me, “We’re not a manufacturing company, we’re a logistics company.” Thus, the actual production of parts to be assembled at these major automotive companies falls to the Original Equipment Manufacturers (OEMs). All large automotive companies (let’s call them the ‘customers’) want to see the lowest unit price possible from the OEM before they grant them a contract to supply the parts for a new model vehicle. OEMs, relying on a very high volume of sales, are able to competitively bid for new model contracts at extremely low prices (such as entire washer systems for just a few dollars). This bidding usually occurs 2-3 years before the model will begin production, since OEMs need these contracts before they can justify spending hundreds of thousands (if not millions) of dollars acquiring the necessary equipment to produce parts.

The Automotive Aftermarket, known in the industry as the ‘Service’ market, has quite a job keeping up with the frequent changes to vehicle designs. Indeed, there is no limit to the number of Engineering Change Requests (ECRs) an automotive system may undergo in a given year. As a result, it’s possible for multiple versions of a part to exist in a given year if the designer found a better way to make the part. Usually, an effort is made to make the versions interchangeable on your vehicle, but it doesn’t always work out that way.

In addition to producing staggering quantities of parts for use in new vehicles, the OEMs and customers will also have ‘service’ production included in their new contracts. This service portion accounts for only a small percentage of their production, often less than 5%. These service orders are shipped and sold to their customer much as the other parts are, as systems including relevant components. A good example of such a system would be a washer reservoir system, which for new BMW models includes not only the bottle, but a float, sensor, cap, multiple pumps, hoses, harnesses, and bushings. All these components are assembled at the OEM and sold as a complete system, ready to be installed into the body from at the customer’s plant. The task of distributing the service parts lies with the customer, and often includes export from their headquartered plant. For example, BMW’s service parts are exported from their plant in Dingolfing, Germany, to dealerships worldwide. This organization ensures uniform supply to all associated dealerships, but can also comically result in service parts being shipped across the world, only to end up in the same region as the OEM who produced it.

Inevitably, the ‘customer’ will cease production of the model, and they will no longer need hundreds of thousands of units annually in the mass production of vehicles. Instead, the volumes drop to mere thousands or even hundreds per year, which are only intended to support aftermarket activities. As significant overhead costs of production exist, this dramatic drop in volume would normally be unsustainable for the OEM to support if they didn’t stipulate a massive unit price increase for these low-volume service parts. The OEM’s price of service parts can sometimes be as high as 10 times the series price! Without this increase, however, OEMs would not have enough revenue to justify operation of their now semi-obsolete machinery. Even with it, some OEMs either fail or refuse production of service orders, and they sell or transfer the machinery and/or contracts to another company willing to assume the role. Due to potential inexperience producing those specific parts, it’s possible for such third party manufacturers to be forced to balance design, equipment maintenance, and material quality against their sale price in order to justify the investment. After all, aging equipment tends to need much more maintenance than equipment in its prime.

Only a keen insight into all that goes into aftermarket supply can prevent irritation at the cost of repairing a broken down vehicle. First, a realization of the foresight that was provided by the contract writers. If the service portion of the contract were neglected, or if it lacked a contractual price increase, few OEMs or other manufacturers would be both willing and able to produce so few parts at a reasonable price. Second, these parts are needed and shipped worldwide, the cost of which is generally added to the end sale price. Conversely, if the parts did not have a global system of distribution, then back orders would be far more commonplace. Not only that, but a more reactive approach to the supply would undoubtedly cause increased expedite costs and inefficient load planning worldwide, further adding to the end sale price. As worldwide transit (even loads shipped by sea, the cheapest method) will generally cost many hundreds of dollars per load, it’s a wonder aftermarket parts are available so consistently and at the prices they’re available. With such an expansive worldwide network designed to supply any part a mechanic could possibly need, I can’t help but smile when the parts I need are marked: “In Stock.”

About the Author:

David Rabideau is the Supply Chain Manager for Geiger Automotive, an international parts manufacturer with prominent customers in the U.S. such as BMW and Continental Automotive. He has experience in new production processes, international shipment coordination, as well as in maintaining his own vehicles. Currently living in the Charlotte, N.C. area, he continues to seek to share his experience to help others better understand the automotive market. Check out another article by David at The Culture Surrounding Automotive Recalls