advance auto parts vic stewart assistant vice president corporate purchasing

Advance Auto Parts

Vic StewartAssistant Vice PresidentCorporate Purchasing

DM MeetingSeptember 29 - October 1, 2000

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Business to Business Marketing

“The Buyer’s Perspective”


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Advance Auto Parts

• Founded by Arthur Taubman in 1932

• Headquartered in Roanoke, Virginia

• 3 Stores– 2 in Roanoke, VA– 1 in Lynchburg, VA


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The Advance Promise

“With quality parts and dedicated people, our goal is to serve you better.”


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Advance Auto Parts Business Philosophy

• Make Advance Auto Parts a Special Place to Work!

• Serve Our Customers Better than Anyone Else!

• Make Enough Profit to Accomplish #1 and #2!


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Who is Advance Auto Parts?


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Advance Auto Parts

• Nation’s 2nd Largest Automotive Aftermarket Retailer

• $3.4 Billion in Sales

• 2420 Stores in 37 States, Puerto Rico, and Virgin Islands

• Trade as Advance Auto Parts, Discount Auto Parts, and Western Auto Parts (PR and VI)

• 500 + Western Auto Wholesale Stores


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Company Growth 1995 - 2000

• 1995 - $602,559,000 - 536 stores

• 1996 - $705,983,000 - 649 stores

• 1997 - $848,108,000 - 814 stores

• 1998 - $1.22 Billion - 920 stores– Acquired Parts America/Western Auto 10/98

• 1999 - $2.2 Billion - 1617 stores

• 2000 - $2.29 Billion - 1729 stores


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Company Growth 1995 to 2000

• Sales grew $1.685 Billion or 379%

• Store count increased 1193 stores or 323%


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Company Growth 2001

• Reported Record Sales and Operating Income

• Comp Store Sales Increase of 6% led Industry

• YE Sales – $2.5 Billion – 1802 stores

• Top 80 Retailer in U.S.


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• Project Continued Growth

• 2002 - $3.33 Billion - 2412 stores– Open 125 New Stores/Convert 200



• 2005 - $4.365 Billion - 2937 stores– Open 200 New Stores


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• Acquisition of Discount Auto Parts– 675 Stores– 420 in Florida and 255 in GA, AL, LA, MS, SC

• Projected Sales Increase – $1.86 Billion or 74.2% over 4 Years

• Projected Store Location Increase– 1135 stores or 62.9% over 4 Years

• Top 65 Retailer in U.S.


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Personal Career Info

• Joined the Company in March 1985 as Parts Manager in Chesapeake, VA– 68 Stores

• Became a Store Manager in 7 months

• Managed four different locations over 6 years– Chesapeake, VA; Roanoke, VA; Blacksburg,VA;

Burlington, NC


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• Promoted to Division Manager over 14 stores in November 1991– based in Florence, SC

• Promoted to Special Projects Manager in 1992 – Reporting direct to President of Company

• Managed Special Projects, Corporate Communications, Media Relations from1992 - 1995


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• Promoted to Director of Budget & Expenditure Control in 1995

• Promoted to Assistant Vice President Corporate Purchasing in 1997


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Corporate Purchasing Department

• Responsible for Procurement of all “Non-Retail” Products, Goods and Services


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• Total Expense Management Responsibility – Exceeds $100 Million Annually

• Capital Asset Management Responsibility– Exceeds $1 Billion


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• Supplies for Offices, Distribution Centers, Stores– $14 Million Annually

• Travel for all Team Members– $11 Million Annually

• Uniforms– $2.5 Million Annually


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• Waste Management– $3 Million Annually

• Company Auto Fleet– $6 Million Annually

• Company Meetings– $5.5 Million Annually


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What is Business to Business Marketing?


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What is the difference between “Buying” and “Procurring”?


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Buying - the act of acquiring in exchange for money or its equivalent;to purchase

(American Heritage Dictionary)


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Procurement - to obtain; acquire. (latin) to take care of for someone else

(American Heritage Dictionary)


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Our Definition -

Anyone can buy.

But Procurement requires a complete understanding of the “Big Picture”.


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To procure you must understand the following:

• Customer Need & Budget

• Product Knowledge– Quality– Make Up

• Perspective Vendor Market– Vendor Capabilities & Needs– Delivery Mechanisms

• Price and Terms


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Procurement Requires 4 Steps

• Identify Customer Needs

• Pre-Qualify Potential Vendors

• Formal Bid Process– RFP/RFQ/Reverse Auctions

• Post-Validate Potential Vendor Bids


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Identifying Customer Needs

• Form of Internal Marketing

• Define Scope and Type of Need– “One on One” Discussion

• Special Requests, Large $ Purchases, New Items

– Requisition Process• Standard Product Requests like Equipment, Furniture,

etc...

– “On-line” Ordering• Office Supplies


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Pre-Qualifying Potential Vendors

What are the “Most Important” Issues?


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Pre-Qualifying Potential Vendors

• Vendor Reputation and Integrity

• Product Quality

• Manufacturing Capability/Availability– Manufacturer Direct vs Third Party Distributor

• Delivery Mechanisms– “Just In Time” vs “Make and Hold”– Delivery Fleet vs Common Carrier

• Price and Terms


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Vendor Reputation and Integrity

• A Successful Vendor Will Focus on the Customer’s Needs, NOT Making the Sale

• A Successful Vendor Will “Under Promise and Over Deliver”

• A Successful Vendor Will Deal Reputably and with Integrity

• A Successful Vendor Will Know Their Limitations and Say “NO” If They Can Not Meet the Customer’s Needs


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Price and Terms

When do “Price and Terms” Become the Single Most Important Issue?


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Price and Terms

• “Price and Terms” Become the Single Most Important Issue When Purchasing a “Commodity” Item


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Formal Bid Process

What is a Request for Proposal/Request for Quote?


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Formal Bid Process

• A formal written document presented by the “Procurement Specialist” to a “Perspective Vendor”


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Formal Bid Process

• The Document should contain:– Well-Defined Explanation of Product Need– Time Parameters

• Length of Agreement

– Delivery Expectations• How, When, Where?

– Product Usage Information (Expected Annual Qty)– Terms


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Formal Bid Process

“The Cutting Edge” in Procurement

• Internet Based B2B Trading and Procurement– Ariba, Commerce One, Global Net Exchange and

Others

• Two Types– “Pre-Determined” Vendor Groups– Reverse Auctions


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Internet B2B Trading and Procurement

• Expedites the Procurement Process

• Reduces Internal and External Costs

• Reduces Product Costs


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How do the B2B Trading and Procurement Sites Work?


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• “Pre-Determined” Vendor Group Sites like Ariba and Commerce One– Allow Business to Procure from Other Companies

Direct via Internet– Both Buying and Selling Companies Purchase

Memberships – Streamlines Process and Reduces Expenses


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• “Potential Pitfalls”– Valid Suppliers may not be Members– Limits Availability– Can Not Always Negotiate Price and Terms


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• “Reverse Auction” Networks like Global Net Exchange (GNX)– Allow Business to Procure from Other Companies

Direct via Internet– Buying Company Purchases Membership– Selling Companies May Purchase Memberships if

Desire to Join Vendor Database – Streamlines Process and Reduces Expenses


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• Difference in “Reverse Auction” Networks like Global Net Exchange (GNX)– Selling Companies May Be Invited by Buyers to

Participate at “No Cost”– Multiple Vendors Participate Simultaneously in “Real

Time” On-line Auction– Competitive Market “Almost Always” Creates Lower

Prices– Buying Company Pays % of Total Auction Volume to

GNX as Auction Fee


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Strategic Business Initiatives

• Determine Strengths and Weaknesses– Bundling vs Unbundling


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• Bundling vs Unbundling– 1995 Bundled Majority of Supplies

• Gain Control• Gather Information through Reporting• Reduce Costs

– 1998 Began to Unbundle• Store Bags - Direct from Manufacturer• Achieved Costs Reduction Exceeding $250,000

Annually

– 2001Continued Emphasis on Unbundling and Buying Direct From Manufacturer


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• Determine Strengths and Weaknesses– Bundling vs Unbundling– Define Core Competencies

• Eliminate Inefficiencies– Improved Technology

• E3 Procurement Technology

– New Store Kits• Direct Ship vs Staging Warehouse


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• Electronic Summary Billing– Goal of One Detailed Summary Bill for Vendor

• Continue Managing Consumption While Decreasing Unit Cost– 2002 - 2005 Goal - Reduce Costs by $3.0 Million per

Year

• Extended Terms


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Strategic Business Opportunities

• SKU Mix Product Review– Eliminate Unnecessary Items– Question Product Use and Life

• Develop Storenet– Provide On-line Catalog of SKUs– Use Vendor Graphic Support

• Develop New Process– Identify Efficiencies and Shared Savings


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Other Marketing Opportunities

• Sports Marketing– NASCAR and NHRA Auto Racing– Major League Baseball, NFL Football, and NBA

Basketball– Collegiate Programs– Local Community Programs


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• Leadership Conference– 3450 Attendees

• Vendors• Store Managers• Corporate Management Team

– Four Days in Orlando, FL– $4.8 Million Event


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• Gender & Ethnic Marketing– Community Cultural Events– Concerts– Special “Customer Appreciation” Training Seminars


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• Commercial Customers– Garage “Mechanic’s Night”– Volume Purchase Discounts– Commercial Credit Programs– Special Product Buying Programs


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Advance Auto Parts

Our Future Success Depends on Developing“Winning Partnerships” With Our Vendors

advance auto parts vic stewart assistant vice president corporate purchasing

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