A&M expert analysis: Aftermarket is becoming a margin driver: Why many
Suppliers leave millions in potential unused
NY/Munich (ots) –
– Every third aftermarket component operates with negative margins
– A&M identifies significant profit potential through transparent cost data
and structured pricing processes
Expert insight from Geng Wu (https://www.linkedin.com/in/geng-wu-0bba5213/),
Managing Director at Alvarez & Marsal
(https://www.germany-alvarezandmarsal.com/)
Rising costs, volatile demand and increasing competitive pressure are a burden
the profitability of automotive suppliers. One area is always moving
more in focus; the automotive aftermarket. Alvarez & Marsal (A&M) shows
based on recent projects and developments, which are often significant here
There is unused margin potential, especially in the period after
End of Production (EOP).
The current analysis shows that many suppliers are still expanding the aftermarket
Price levels from series production, although the underlying
underlying costs after production (EOP) fundamentally change. Low
Quantities, manual production and higher logistical effort lead to
that supposedly profitable parts actually cause significant losses.
ERP data distorted profitability for years
In the context of various projects, A&M has repeatedly found that
Standard costs in ERP systems do not really reflect real aftermarket conditions
reflect. A case study with a European Tier 1 supplier shows:
A component that, according to the ERP system based on CM2, was almost cost-covering,
caused a loss of more than 20 euros per unit when actually recalculated.
Around a third of everyone worked across several product groups
analyzed parts with negative margins caused by obsolescence
Pricing structures and lack of responsibilities in the post-EOP process.
Up to 50% higher CM2 margin through structured pricing work
A&M worked with the company to develop an aftermarket-specific one
Cost model, validated margins at part level and prepared transparent
Price discussions with several OEMs.
The result:
– A CM2 uplift of over 50% for identified parts,
– An EBIT increase in the aftermarket business of 2.9 percentage points,
– The establishment of clear ownership structures and continuous
Margin tracking.
The A&M 5-Step Methodology: Structured approach for sustainable
Margin increase
1. Create cost transparency Record real aftermarket costs – included
Effects from small series, manual processes, set-up times and logistics.
2. Quantify margin gaps & define target prices, reassess CM2 margins,
Identify loss leaders and an aftermarket-specific cost model
build up.
3. Internal coordination & clear ownership and clearly define responsibilities
Closely interlink sales, finance, operations and program management.
4. Involve customers constructively in fact-based, transparent business cases
develop and position price adjustments as a win-win solution.
5. Monitor impact & anchor processes through dashboards and regular reviews
implement to permanently monitor and secure margins.
The aftermarket becomes a stabilizing profit pool
With extended model cycles and continued cost increases, the wins
Aftermarket strategically important. Nevertheless, he remains in many companies
commercially underdriven.
With a structured, data-based approach, the aftermarket can be addressed
develop an effective margin lever for automotive suppliers. Through
Consistent monitoring and clearly anchored processes turn a long one
neglected area a stable, predictable profit pool. Especially in one
Market environment characterized by cost increases and high competitive pressure,
The aftermarket therefore offers a key opportunity to sustain profitability
to strengthen.
About Alvarez & Marsal
Alvarez & Marsal (https://www.alvarezandmarsal.com/de/global-locations/germany)
was founded in 1983 and is a global leader in…
professional services. The company is known for its
Leadership quality, his committed, result-oriented actions – leadership,
Action, Results and offers consulting, performance improvement and
Turnaround management services. Alvarez & Marsal delivers practical solutions
for the individual challenges of its customers. With its worldwide
Network of experienced employees, first-class consultants and experts
many years of experience in regulatory authorities and industrial companies
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drive forward, minimize risks and add value in every growth phase
create.
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