Customer Claims in Automobile Spare Parts Industry – A 3PL Perspective

Abstract

Automobile OEM (Original Equipment Manufacturer) has two key lines of business. One being the main equipment sales and the other being spare parts associated to the original equipment. This line of business is either called as After Sales Market / After Market / Spares Market. As part of wear and tear of spare parts of original equipment service and replacement of spare parts comes into picture. A 3PL organization is selected by OEMs to manage their after sales service. Primary responsibilities of a 3PL includes warehouse management where the spare parts of OEMs are received, stored, order processed and delivered to OEM’s end customers. Hence, 3PL companies have major share in ensuring accurate delivery of spare parts to OEM’s end customers. Any wrong or shortage or excess delivery (which is termed as Customer Claims) impacts the customer satisfaction level and adds up logistics cost to both 3PL organization and OEM. This paper aims at evaluating the core reasons behind customer claims. In completing this research, the population selected for study is from 3 leading automobile OEMs and 1,00,000 samples. The results have shown that the key drivers of customer claims are due to stock management in warehouse managed by 3PL organization in following areas of operation.  Inbound (Gate entry of vehicles, Unloading, Physical verification of unloaded stock, Physical putaway of parts in warehouse storage locations)  Outbound (Customer order registration, Picking instructions from the sales order processing system, Physical picking of parts, Packaging of picked parts, Despatch and Delivery at customer end) In the above-mentioned key process areas ERP (Enterprise Resource Planning) application or WMS (Warehouse Management System) or Inventory Management application plays a significant role in avoiding or minimizing customer claims. Apart from applications and Information Technology systems, skill of staff and operatives, discipline of operatives, system controls influence extensively in customer claims to be generated. Background/Objective: To investigate deeper into causes that impact customer claims from 3PL service provider view. Methods / Statistical analysis: The results are based on about 1,00,000 samples for a periodicity of 6 years from 3 major automobile industry linked 3PL organization. Results/findings: The claim samples showed significantly higher due to pick issues ~ 41.7% and wrong labelling issues ~ 42.34%. Other reasons contribute about 15.96% Conclusion: The analysis offers a clear distribution of root causes in the collected samples.