Taking stock of parts inventory for an agricultural equipment manufacturer

AGCO had several burning issues it needed to address. The low level of system integration between AGCO and its dealers meant parts planning was often a guessing game that reduced the first-time fix rate, leaving customers frustrated and dealers losing sales.

These barriers between AGCO, its dealers, and end customers also meant that a lot of point-of-sale (PoS) information was missing, making it harder to detect problems with machinery, gain insights into customer consumption and loyalty, and understand the competition.

Meanwhile, because some inventory wasn't moving, dealers felt the impact on their profits and needed more working capital. In addition, keeping track of parts was a physical chore that took time and effort without, in their view, adding value. Warranty claim handling, service and technician management and administration also reduced time spent with customers.

Without the necessary spare parts, customer equipment was out of action for longer than average, unless they were willing to pay for expensive emergency orders. And because they didn't have reliable service schedules, they were reactive rather than proactive when their equipment failed.

Genpact initially found gaps as high as 30% in the fill rate – the percentage of customer orders filled from current stock – despite AGCO having made several investments to try to close this gap. Parts were available in the manufacturer's warehouse, but dealers weren't requesting them, and customers couldn't buy them.

Our first action was to find out why dealers didn’t have parts available, so we looked for weaknesses in the way they gathered and processed inventory data. We knew that the way to enhance end customer experience and satisfaction was to create clear visibility of parts and that connected AGCO to its main service channels – dealers, distributors, and retailers.

So, we set to work helping AGCO design and implement a global planning and collaboration solution to transform parts planning and replenishment processes – AGCO MDI. This AWS-hosted, micro-service system architecture tailored for large-scale dealer integrations connects over 1,750 dealers across six continents working on more than 75 ERP solutions. With this business-program support and maintenance model, the system is up and running over 99% of the time.

The solution includes real-time interfaces for data integration, data validation, and quality monitoring for parts – with automated notifications and system corrections. This enables seamless operations across the ecosystem.

The program also includes:

• Best-in-class forecasting and inventory optimization
• Advanced reporting and visualization of inventory availability for dealers across the globe in real time
• A transformed process for submitting and validating dealers' warranty claims
• Tools to execute services more efficiently – track opportunities, schedule appointments, resources, skills, and manage parts
• Tailored planning/replenishment approaches and workflows, from original equipment manufacturer-dealer collaboration to full planning and replenishment automation
• Service and asset management support for customers – from dealers’ service intake to execution

Since we put the program in place, the gap between the dealer-facing fill rate and the customer-facing fill rate has dropped to under 10%. That means the customer-facing fill rate went up from 60-70% to over 85%. This translates to a lot more part sales and a lot fewer lost sales for both dealers and AGCO. Other benefits include:

• A better mix of inventory for dealers. A 9% decrease in non-moving inventory and parts sales increases of 15% – or about $50 million USD – has reduced their working capital needs
• Time-saving automation on lower-value activities saves dealers two-to-three hours a week. Time they can spend with customers instead
• More proactive and accurate central inventory planning based on PoS data means sales of core parts have increased by 3% and AGCO can identify machine quality issues and carry out preventative maintenance sooner
• Customers are happier too:
  • Parts availability has gone up from about 65% to 86%, cutting repair time by one-to-two days
  • They’re saving money with fewer emergency orders
  • And they can now proactively arrange service maintenance through the solution's workshop management feature
• Better PoS data has unearthed new opportunities for cross-selling and marketing, and claiming warranties has become easier and faster

AGCO’s commitment to continuously develop the business value of the solution for dealers has paid off, winning several innovation awards so far.