"Changing the model?
Building effective distribution in a multi-channel world"

Global vehicle production & supply is a mature industry, with producers competing for a static demand for vehicles & parts, through a proliferation of distribution channels. The core of the traditional distribution system, the franchise dealer model, is under increasing threat, particularly if overseas markets provide any
guide. ICDPA, through feedback received from Members, has identified that there is a clear need for a quantum improvement in operational effectiveness in retail distribution (matching reforms seen in production methods over the last decade), particularly at the dealer level, both to reinforce profitability & to improve customer fulfillment & value.

In this context, there is a need for answers & for specific solutions to problems,
such as:

• Distributors & repairers are facing increasing levels of cost & complexity, &
declining margins & reduced freedom for local initiative
• Manufacturers & national sales companies are struggling to retain control over
the channel to market, & also to manage the trade-offs between short-term
volume priorities & longer-term value creation
• Suppliers of all types are facing relentless cost pressures from customers &
competitors alike.

Progress will be possible only by breaking through what are currently regarded as
inevitable trade-offs & by establishing new ways of thinking & operating.

Core Research Programme Themes

Based on Member input, the research programme through 2007-2009 will focus on four major themes:

• Understanding customer's requirements from the distribution system. This will entail:
– Continuing to explore the ingredients of customer satisfaction & fulfilment by research & measures & their attainment, in theory & across other retail & service sectors
– Analysing the relevance to customers of franchise network packages & policies, including
• Standards for sales & after sales facilities, customer facing processes & service levels
• Taking account of varying requirements by customer segment. For example, luxury, volume
– Looking at market trends & requirements in particular, the evolution of the aftermarket, both franchise & independent operators
– Assessing the impact of new systems, communications & vehicle technologies on customer requirements, & on the capability of the distribution system to fulfill these innovations
• Updating the dealer model in response to growing strains. This will entail:
– Analysing dealer network effectiveness & profitability for vehicles, parts, service & finance & insurance
– Assessing the future prospects for the various drivers of profit alongside the ongoing requirements for investment, training & the development of capabilities
– Reviewing distributor & repairer formats & structures, including the development of dealer groups, & examining the impact of multi-branding & additional outlets
- Furthering benchmarks of the new vehicle supply system, including
identification & exploration of leading edge practices.
• Evolving distribution channels. Exploring the issues involved for all players managing the complex web of relationships including:
– Analysing the role & importance of national sales companies, as well as other service providers in the sector
– Exploring possible models of cooperation involving dealer groups & other intermediaries
– Continuing assimilation of lessons from other retail sectors & geographies
– Charting the development of processes & capabilities throughout
the distribution system.

All the above will feed into a consideration of longer term system evolution, the outlook for new business models & players, & the development of channel scenarios for sales & aftersales beyond 2010.

• Living with regulation. This will involve:
– Monitoring & analysing regulations applicable to the automotive sector
– Analysing & commenting on social & environmental obligations
– Keeping a watching brief on developments with the European Block Exemption & assessing its possible impact on the Australian market.

ICDPA will adapt details of the research programme to meet changing needs & interests of Members as these needs evolve.

To find out more about our completed research to date, follow the link on the left to the programme outline and our report, ICDP Australia Research to 2007.