Balancing the need to support these bespoke requirements while avoiding unnecessary inventory costs is increasingly difficult. The costs associated with warehousing large volumes of unused spare parts are significant, tying up capital, increasing overhead, and reducing profitability. Additionally, OEMs risk losing future revenue to grey-market suppliers when they cannot ensure the availability of their parts. These suppliers offer so-called "genuine OEM part alternatives," which can erode OEMs' aftermarket business opportunities.
Traditional redundancy part models no longer offer the security they once did. Poor part availability reduces service levels, diminishing customer trust, impacting new equipment, and eliminating aftermarket business opportunities. OEMs need a sustainable approach to ensure long-term competitiveness.
For years, OEMs have relied on two primary approaches to spare parts availability: stockpiling spare parts and leveraging distributor networks. Maintaining excess inventory to avoid shortages requires significant working capital investment and incurs ongoing operational costs, such as warehousing, logistics, and handling. Distributor partnerships expand reach but require additional resources, including investing in partner training, marketing materials, and offering rebates to maintain service levels. However, this approach also means losing direct access to end users. While these methods have historically provided reliability, today’s unpredictable market conditions make them costly, rigid, and inefficient.
Several factors have contributed to the pressure on traditional redundancy models. Global supply chains are more fragile than ever, with geopolitical instability and shipping bottlenecks affecting part demands and making stockpiling and sourcing unreliable. OEMs are under increasing financial scrutiny, making excess inventory harder to justify as profit margins shrink. Technology is accelerating product lifecycles and a part designed today may become obsolete in a few years, rendering excess stock ineffective. With sustainability and waste reduction initiatives gaining traction, stockpiling can lead to compliance risks due to the inefficient usage of resources and the amount of waste generated.
Aftermarket revenue loss occurs when customers shift to other OEMs or grey-market suppliers. This results in reputational damage when customers perceive the OEM as unreliable. Higher customer churn rates result in frustrated customers looking for more flexible alternatives.
If nothing changes over the next six months, more customers will turn to other OEMs or grey market solutions, making it harder for OEMs to win them back. Aftermarket revenue will continue shrinking as competitors offer faster, more accessible alternatives. Service contracts will become less valuable, leading to further erosion of customer relationships. OEMs will struggle to maintain control over their own parts supply, losing their revenue streams. The longer OEMs delay in addressing these vulnerabilities, the more difficult it becomes to recover lost opportunities. Poor part availability is not just a minor inconvenience—it is a slow erosion of business that, left unchecked, will only accelerate.
Forward-thinking OEMs are moving beyond stockpiling and distributor networks by adopting more agile models.