Finding the right balance between cost and speed is crucial in every supply chain, especially in the OEM and aftermarket auto parts market. Distributors often face the dilemma of choosing between cheaper parts from overseas and faster, more reliable, yet more expensive domestic options. In this article, we’ll discuss how to set up a supply chain that balances these competing interests.
The gray market refers to the trade of genuine parts that, while legal, may not be authorized by the manufacturer. While these parts are often sourced from legitimate manufacturers, they bypass official distribution networks, resulting in lower prices.
Gap sourcing is the strategy of purchasing from a domestic, higher-cost supplier to cover a shortage while waiting for overseas or gray market materials to arrive. This approach helps maintain service levels and avoid stockouts during periods of extended lead times at the expense of gross margin. Having a secondary gap source —- even if they are a competitor — is a must when utilizing import suppliers and gray markets in your supply chain.
Balancing the cost and speed of your supply chain requires a strategic approach that incorporates various sourcing options, including gap sourcing. By understanding when to use domestic suppliers to cover shortages and how to set up an effective gap sourcing program, you can maintain high service levels and customer satisfaction while managing costs. Implement these strategies to navigate the complexities of the parts supply chain and achieve a competitive advantage.
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