This year, the domestic excavator market has once again encountered a cold winter, while the overseas market is thriving, with export sales exceeding domestic ones. Many Chinese brands have begun to re-layout the overseas market.
A few years ago, many Chinese engineering machinery enterprises had already set their sights on overseas markets, recognizing that there is the next decisive battle between Chinese brands and international well-known brands, but we seem to lack enough awareness of the difficulties faced by overseas markets, such as: service and parts supply.
Some Chinese brands think parts supply is too simple. “Before the soldiers and horses move, the grain and grass go first.” In order to ensure the timeliness of overseas service and maintain the reputation of the brand in the international market, Chinese enterprises build parts warehouses overseas, regardless of the cost, and put a large number of parts inventory into overseas markets, thinking that the more inventory, the more timely the supply. They did not expect to fall into the trap of inventory mismatch.
After a Chinese brand successfully entered the European market, technical experts listed hundreds of items worth millions of yuan as initial inventory and put them in the European parts center warehouse. A few years later, 90% of the initial inventory was still lying quietly in the warehouse.
This phenomenon is not accidental. The turnover rate of many Chinese brands’ overseas parts warehouses is less than 0.5 times/year, which reduces the turnover efficiency of the company’s parts by more than one time. When a product breaks down and urgently needs parts, the warehouse is often out of stock, so it has to be urgently airlifted, which not only increases transportation costs, but also causes equipment downtime and customer dissatisfaction, affecting brand reputation. There is no problem in setting up parts warehouses overseas. The problem is that we cannot rely on experience, but must rely on data to do inventory planning.
Why is parts supply so difficult in overseas markets? There are many reasons for this.
First of all, overseas markets are far away from the mainland, and parts delivery time is long. About 90% of global trade relies on sea transportation, and delivery time under normal circumstances is 10 days to 45 days. If the parts delivery time in Africa is two months, then the parts warehouse must at least guarantee two months of demand, otherwise it may be out of stock. Affected by factors such as COVID-19 and war, freight rates and punctuality rates are full of uncertainty, which also requires overseas parts warehouses to have higher safety factors and poses greater challenges to parts spot rates.
Secondly, China’s overseas parts inventory is not based on data, but on technical experts based on experience. Considering that overseas delivery time is longer, inventory list safety factor is larger, inventory mismatch risk is higher, but experience is far less reliable than data. The inventory list suggested by experts contains many assembly parts instead of secondary parts commonly used in maintenance. Once a fuel injector is removed for fault maintenance, the whole engine cannot work, so the parts utilization rate is very low.
Finally, many Chinese enterprises export small batches of models with high degree of customization. There are hundreds of export models, which are very unfavorable for parts inventory planning. Putting inventory at risk of stagnation or not putting inventory at risk of shortage are often difficult choices for enterprises.
China is our domestic market with fast parts supply and a huge socialized parts store as a supplement. The supply chain problem is not big. But overseas, we are grabbing customers from international brands. Although Chinese brands have cost-effective advantages, price can only impress customers once. The winning hand of competition is still high-quality service and customer experience. The key for Chinese brands to gain a foothold overseas is the timeliness of parts supply. Who can make customers use conveniently, service timely, experience better and make money? They will naturally have stickiness to this brand.
Imagine what would happen if a user had to wait for parts and cause equipment downtime for a month?
Today, although some Chinese enterprises have put billions of yuan worth of inventory overseas, customers still complain most about parts shortage problems. This proves that ensuring overseas parts supply at all costs is still not a solution to the problem.
Service and parts supply have become one of the biggest shortcomings of Chinese brands in overseas markets. Blindly increasing parts inventory will lead to increased risk of stagnation. Stagnant parts are difficult to deal with. Inventory mismatch can not only fail to meet customer needs but also bring huge losses to enterprises and dealers.
China’s products need to adopt modular design and use the same mature components in domestic and foreign markets. This way there will be sufficient demand and fault data as a reference to help overseas markets do a good job in inventory planning. In the era of big data and artificial intelligence, accumulating and analyzing data is a work that Chinese enterprises must pay attention to. Peter Sondergaard, senior vice president of Gartner Research Institute has a very classic saying: “Information is the oil of the 21st century, and analysis is the internal combustion engine.”
We not only need to see that overseas is the next decisive market, but also need to see that big data and artificial intelligence are the next decisive track. Only by doing a good job in parts inventory planning through digital transformation and improving the parts supply chain in overseas markets can Chinese brands gain a foothold in the international market. If we waste the “oil of the 21st century” in vain, Chinese enterprises will not be able to build world-class brands.
Reference:www.cehome.com/news/20230710/289543.shtml
