Last winter, when China ordered tens of millions of people back into a pandemic lockdown, executives inside the $170 billion automotive aftermarket parts industry took a deep breath.
Jeff Shepherd, CFO of aftermarket giant Advance Auto Parts, says that the possibility of another China shutdown had just not been part of Advance’s procurement calculus. Still, parts “in stock” at Advance stores during 2022 have dropped only a few percentage points from their usual inventory level in the “mid-90th” percentile, according to Shepherd, who credits the anticipation of yet another China-related event as further evidence of Advance’s astute procurement practices.
“The last time China hosted the Olympics, they shut the power down and they shut the factories down. So, during the Games, you can’t get product out and it’s not being manufactured,” explains Shepherd, who notes that Advance’s procurement team anticipated a China shutdown in February due to the Beijing Olympic Games.
“We started doing a lot of buying late last year and very early this year,” comments Shepherd, who reports that not unlike those of its competitors, Advance’s 2021 supply chain troubleshooting efforts were related mostly to bottlenecks at U.S. ports and a confounding shortage of truck drivers.
“We’re not out of the woods now—I will tell you that it’s not perfect,” remarks Shepherd, regarding the existing supply chain challenges inside the U.S. However, if Advance’s “in stock” levels stay in line, the company may have a read on future developments in China.
Says Shepherd: “I can’t take credit for knowing those things, but we were indeed able to get out in front of the China shutdown, and our ‘in stock’ percentages are now nearly back to their pre-pandemic levels.” –Jack Sweeney
