Despite challenges such as inventory shortages and the rise of online shopping, the US dealer network market is expected to reach $257.3 billion over the next five years, with a compound annual growth rate (CAGR) of more than 4%, according to Statista. However, in a rapidly changing business environment, staying ahead of the competition means not only managing your dealer network, but also optimizing it with the latest technology. For example, did you know that companies using AI in supply chain management have seen a 15-30% increase in the accuracy of demand forecasting?
The point is that in order to increase their efficiency in the context of digital transformation, companies need to process a large amount of data to anticipate and meet future market needs, in addition to meeting current customer needs. This is where the application of AI comes into its own, providing more accurate predictions that in turn improve interactions in the chain of suppliers, distributors, and customers. Whether you are a franchised or independent dealer, an online platform or a car manufacturer, everyone benefits from the dealer network development. But how exactly does AI affect dealership management? Let’s break it down.
AI and demand forecasting: Smarter forecasts for better stock control
With the development and spread of digital technologies, and in particular their penetration into commercial processes, the very structure and logic of interaction between parties in a commercial relationship has changed. However, the use of AI has taken this logic one step further in the direction of demand forecasting. Where companies previously relied on manual methods or traditional analytics to predict future sales trends, AI has not only changed the game, but the rules. In the past, human error often led to inaccurate forecasts, resulting in either excess inventory or product shortages, which in turn affected profits and, to a lesser extent, retailer satisfaction.
Now comes AI, a tool capable of analyzing vast amounts of data. Databases for AI processing include historical sales, market conditions and even consumer behavior patterns. As a result of this depth and granularity, dealers can forecast demand with much greater accuracy, down to specific makes and models of cars, parts and accessories, seasonal fluctuations and regional patterns. For example, forecasting demand for auto parts in California: you can predict high demand for batteries and components for electric vehicles, as well as filters and oils for hybrid and conventional cars, all conditions considered. Brake pads and discs are in demand before summer and winter, as cars prepare for long journeys.
Key benefits:
- Real-time insights: AI algorithms process data instantly, providing up-to-date information on market changes.
- Increased efficiency: More accurate forecasts mean more precise inventory management and lower operating costs.
- Adaptability: AI-based models can adjust forecasts based on sudden changes, such as economic shifts or new market trends.
Yet all this can be predicted without AI, you say. But only AI will tell you the makes and models of cars, parts for which demand is growing, with accuracy down to the year of manufacture, the location of physical stores or warehouses of online platforms, depending on the geography of their operations. Implementing AI and data analytics in inventory management and demand forecasting can increase revenues by 10-15%, according to Technavio. Such a solution eliminates out-of-stocks and ensures constant availability of goods, which translates into high trading efficiency for retailers.
Automate dealer affiliations: Building stronger relationships
In SECL Group’s experience, the company, which has confidently declared itself in the field of development of a dealer network, the biggest bottleneck for dealer networks is communication. This is because managing dealer networks involves a myriad of interactions — from informing them of inventory levels to notifying them of shipment schedules. As the network grows, communication channels become overwhelmed and inefficient. Add in fraud prevention, improved customer service, and new customer acquisition, and you have a whole host of dealer challenges that AI is designed to solve.
How does AI work? Artificial intelligence built into the platforms themselves creates databases of customers and products, as well as seasonal fluctuations and changes such as new technologies entering the market. At the same time, AI accesses these databases to automate routine tasks, such as sending shipment notifications, notifying merchants of inventory changes, or answering frequently asked questions. By performing these repetitive tasks, AI provides dealers with guaranteed up-to-date information. It keeps dealers in the loop with a focus on communication that is timely and accurate. This frees up time for dealer teams to focus on more valuable activities, such as strategic planning.
Key benefits:
- Improved communication: Automated messages keep dealers in the loop, reducing frustration and confusion.
- Save time: Automation frees up your team’s time, allowing them to focus on critical tasks.
- Consistency: Dealers receive standardized, accurate information, increasing their confidence in your processes.
Some proponents of traditional management methods may argue that automation depersonalizes interactions. But AI doesn’t replace face-to-face interactions; it simply helps you complete routine tasks faster and more efficiently by removing administrative burdens and ensuring that dealer teams have more time for meaningful conversations.
AI data analytics: Gain visibility into dealer performance
In addition to forecasting and communication, AI can fill another important role that has traditionally been the manual work of middle managers. They spend an entire month, if not a quarter, collecting data on sales, inventory, and customer satisfaction to conduct dealer performance reviews. Not only was this time-consuming, but it often lacked the accuracy needed to provide actionable insights.
In this regard, AI tools are much more efficient, comprehensive and objective in their ability to aggregate and analyze dealership performance data, all in real time. Top dealership managers get a detailed view of how each dealership is performing. With this information, they can quickly identify inefficiencies in the chain and solve problems before they impact the company’s bottom line. The good news is that the most effective dealers can be rewarded on a daily basis, encouraging them to maintain or improve their performance and generally increasing loyalty to the company.
Key benefits include
- Performance tracking: Artificial intelligence replaces real-time data on the performance of each link in the dealer chain, so inefficiencies are identified immediately.
- Trend analysis: Dealer performance information is used to optimize strategic decisions.
- Data-driven decisions: With actionable data, you can accelerate the communication of prospecting results and expand resources.
The bottom line
Artificial intelligence is transforming dealership management by providing businesses with a smarter and more efficient way to forecast demand, automate communications, and analyze dealership performance. Overall, AI is just one of the factors helping dealerships evolve toward automation, personalization, and autonomy. The next step in the dealership revolution is integrating AI with the Internet of Things (IoT) to create a smart dealership network where devices and systems interact in real time, but that’s a topic for another article. Companies that are already using AI today will be better prepared to meet the challenges of tomorrow’s digitized marketplace. Read more about the integration of AI, machine learning, and data-centric smart environments from a dealer network perspective at Springer.
Addressing potential issues (the most frequently asked questions to SECL Group experts):
- Is AI difficult to implement? — Today’s AI-based solutions are designed to be easy to integrate and provide a quick ROI.
- So far, we’ve gotten by without AI — why change? — AI can help you stay competitive by providing new levels of efficiency and accuracy.
- Is AI secure? — Yes. Leading AI systems follow strict data protection protocols to keep your information safe.