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North American Remanufactured Rack and Pinion Aftermarket
Frost & Sullivan, June 2003
Increasing Consolidation among Distributors Creates Tighter Profit Margins for Remanufacturers
Increasing consolidation among distribution channel participants means that remanufacturers have fewer, more powerful customers. These major clients leverage their bargaining muscle to secure price concessions. Remanufacturers are pressured to offer quality products at low profit margins, a difficult task against escalating costs. The position of remanufacturers is further weakened because consumers value rack and pinion units only as base commodities. Non-existent support for brand premiums, due to low levels of product differentiation, call for countermeasures planned with marketing foresight.
This new research service from Frost & Sullivan analyzes the North American remanufactured rack and pinion aftermarket and provides market intelligence to help remanufacturers identify opportunities for business development. The research service provides strategic analysis and forecasts, discusses drivers and restraints, competitive environment, and industry trends along with potential market impact.
Consigned Inventories Redefine the Landscape of Remanufacturing Businesses
Distribution channel leaders have begun pressing remanufacturers to own their inventory until it is paid for / 'scanned' by the consumer at checkout. AutoZone's pay-on-scan (POS) proposal, for instance, would like to see consigned inventory systems become more widely implemented. Customary inventory management practice entails that the retailer owns and pays for the inventory when received from the remanufacturer. “If this practice becomes adopted, other large retailers can be expected to follow AutoZone's lead. They will need to do so in order to remain competitive in paring down inventory management costs,” says the analyst of this research service. This new development is likely to negatively influence warehouse distributors, jobbers, and independent retail stores.
“As the implementation of POS expands throughout the industry, it will become even harder for remanufacturers to sustain competitive advantages,” adds the analyst. This situation will result in regional remanufacturers being forced to exit the market. Niche businesses may provide a viable alternative to enable smaller remanufacturers to thrive.
Remanufactured Rack and Pinion Aftermarket Moves Toward Growth and Stability
Over the past five years, remanufactured rack and pinion unit prices for domestic applications have fallen by approximately 50 percent. The exit of small, price-cutting remanufacturers has alleviated some of the price pressures that other remanufacturers face, and led to a slight increase in industry revenues.
Product quality is an especially critical issue in the remanufacturing industry. As distribution channel customers increasingly recognize the appeal of quality remanufactured products, remanufacturers are better able to justify price increases. Good quality remanufactured products, which are at a lower price than comparable new products, offer consumers excellent value for money. As consumer appreciation of these products rises, demand for remanufactured rack and pinion units should grow.
Additional InformationThe following technologies are covered in this research:
Rack and Pinion Steering Unit: A rack and pinion steering unit converts rotational motion (as with turning the steering wheel) into linear motion, which helps move the wheels. The mechanics of rack and pinion units also provide gear reduction, facilitating the ease with which to turn the wheels. Some key components of a rack and pinion steering unit include the rack, which is a toothed bar; and the pinion gear, which rotates upon the rack teeth to transfer the rotational motion to linear motion.
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