NewStream Enterprises is your cost-effective solution for kitting, packaging, warehousing, and distribution needs for private-label aftermarket parts. The below article outlines the value of this niche product from the viewpoint of the OEM.
Weighing the Value of Private-Label Aftermarket Parts
January 31, 2017 | By Denise Rondini
The further we get from the engine, the greater the likelihood that fleets will use private label parts, contended Stu MacKay, president of market-research firm MacKay & Co., during a talk at the recent Heavy Duty Aftermarket Dialogue event in Las Vegas.
McKay’s remarks, given ahead of a panel titled “The Current Architecture of the Private Label,” were based on a MacKay survey in which 16% of the respondents said they use private-label parts.
Hugh Charvat, CEO of AP Exhaust and panel moderator, said, “This will always be a branded industry, but private label has carved a niche.” He said private-label parts account for 20% to 25% of the $30 billion truck parts aftermarket.
According to James Chenier, vice president parts sales and marketing for Volvo Trucks, people think of private-label parts as the “good” in the good-better-best continuum. But he added that there are a number of reasons other than cheaper price for selecting private-label parts.
Terri Roseman, director of category management and marketing at FleetPride said, “Private label does not always mean cheaper. We can define features and benefits of [our private-label products]."
Regardless of the reason, Carlos Junquera, vice president of North American sales for Navistar, said that quality has to be there when it comes to private label. He said that Navistar uses the same quality standard for its branded and private-label parts.
David Danforth, general manager and vice president of Paccar Parts, explained that when the company launched TRP parts, its private-label line, “We validated and tested products.”
Charvat asked the OEMs on the panel why they created private-label parts lines. “We have vehicles that last 25 years and [private-label] parts allow me to do business at a price point. I want to be relevant for 25 years and allow the customer to stay with us for the long term,” Chenier said.
He added that OEMs need a good-better-best offering “to be meaningful to the customer through the vehicle’s life cycle.” Private brands can address that issue.
Danforth echoed that sentiment, saying that Paccar wants “to have products for the second and third truck owner and for other brands of trucks.”
Mike Epps, managing vice president of parts at Rush Enterprises, told the group that “it is difficult to build these [private-label] brands” and added that Rush tracks warranty and failure rates for its private-label products to ensure quality.
To people who are concerned about the impact of private-label parts on the trucking industry, Roseman said, “Private label introduces more competition which drives innovation.”
Charvat remarked that he believes that “as manufacturing has gone global, some content in [private-label programs] will likely be subject to tariffs.”
One question that gets raised about OEM private-label parts is whether they are allowed in a warranty repair. In many cases, the answer is no. Danforth said that in 2016, Paccar changed its policy on that and moved from not allowing private-label parts for warranty repair to allowing them.
However, Volvo's Chenier said, “As a rule, private brands are not allowed for warranty, but if uptime is an issue we will allow them.”
About NewStream Enterprises (NSE) | NSE, a subsidiary of SRC Holdings Corporation, was formed in 1990 to provide customized supply chain management, such as kitting, packaging, light assembly, warehousing, distribution, and fulfillment, to the world’s leading On and Off Highway original equipment manufacturers (OEMs). It is an employee owned company which truly believes in the power of a workforce when each has a stake in outcome. NSE can manage all or any segment of your supply chain process. Our services are customized to fit your requirements. From materials management, to direct order fulfillment, NSE becomes a seamless extension of your business.