How an Auto Parts Distributor Eliminated Stockouts with Real-Time Inventory

Company Background

Bhardwaj Auto Components Pvt. Ltd. is a regional auto parts distribution company headquartered in Ambala, Haryana. Founded in 2006 by Rajiv Bhardwaj, the company distributes aftermarket automotive spare parts — brake components, suspension parts, engine gaskets, filters, and electrical items — to over 1,800 retail counters, garages, and fleet operators across Haryana, Punjab, Himachal Pradesh, and Chandigarh.

The company operates four warehouse-cum-distribution centres:

• Ambala (headquarters): Central warehouse — 18,000 sq. ft., serving as the primary stocking point and redistribution hub
• Chandigarh: Regional depot — 6,000 sq. ft., serving the Tricity (Chandigarh, Mohali, Panchkula) and parts of Punjab
• Karnal: Regional depot — 5,000 sq. ft., serving the Karnal-Panipat-Sonipat corridor
• Shimla: Small depot — 2,500 sq. ft., serving Himachal Pradesh's hill-station markets

With an annual turnover of INR 42 crore and a catalogue of approximately 8,500 SKUs sourced from 65 suppliers, Bhardwaj Auto occupies the challenging middle ground of auto parts distribution — large enough to face real complexity, but not large enough to afford the enterprise-grade systems that national distributors use.

Prior to the SAP B1 implementation, the company used Tally for financials, a standalone inventory management application (developed by a Chandigarh-based software vendor in 2014), and inter-branch stock visibility was managed through a daily Excel file emailed between branch managers every morning.

The Challenge

Auto parts distribution is a uniquely demanding business. A single vehicle model might require 200+ distinct parts, and a distributor serving multiple vehicle brands across commercial and passenger segments needs to stock thousands of SKUs — many of which are slow-moving but essential. A garage that cannot get a specific gasket or seal from you today will call a competitor within the hour.

Bhardwaj Auto's challenges were both operational and financial:

• Stockout rate of 23% across all branches — meaning that nearly one in four items requested by a customer was not available at the branch they were purchasing from. The industry benchmark for a distributor of this size is 5-8%. Each stockout represented not just a lost sale but a potential permanent customer loss to a competitor
• Simultaneously, dead stock worth INR 1.8 crore sat unsold — the paradox of distribution: stockouts on fast-moving items coexisted with excess inventory of slow-moving items. The root cause was identical — a lack of data-driven demand planning
• Inter-branch transfers were ad hoc and expensive — when a branch ran out of a fast-moving item, the branch manager would call Ambala and request a transfer. The transfer happened 2-3 days later via a hired tempo. These emergency transfers cost INR 8-10 lakh annually in transport alone, not counting the lost sales during the 2-3 day wait
• Demand planning was based on previous year's sales, adjusted by gut feel — the purchasing manager used last year's monthly sales figures to predict this year's requirements. This approach completely failed to account for new vehicle models entering the aftermarket, declining demand for older models, seasonal variations (battery demand spikes in winter, AC part demand spikes in summer), and competitive dynamics
• No visibility into total network inventory — the Ambala team did not know what was available in Chandigarh, and vice versa. A customer calling the Chandigarh branch for an item that was available in Karnal would be told "out of stock" because the branch manager had no way to check other locations in real time
• Supplier lead time variability was not factored into ordering — some suppliers delivered in 3 days, others took 3 weeks. The ordering system treated all suppliers identically, leading to either premature orders (tying up cash) or late orders (causing stockouts)

"Every morning, my branch managers would call me with the same complaint — 'we do not have stock of this, customer is going to the competitor.' And every quarter, my accountant would tell me I have too much stock. Both were right. We had the wrong stock in the wrong place at the wrong time."

— Rajiv Bhardwaj, Founder & Director, Bhardwaj Auto Components

The Solution

Indivar Software Solutions implemented SAP Business One across all four locations with a focus on demand-driven inventory management and multi-location visibility.

Phase 1: Unified Inventory and Multi-Branch Architecture (Weeks 1-8)

A single SAP B1 instance was deployed, accessible from all four branches via secure cloud hosting. The architecture provided:

• Real-time inventory visibility across all four warehouses from any location — a salesperson in Shimla can see stock available in Ambala, Chandigarh, and Karnal before telling a customer "out of stock"
• Each branch configured as a warehouse group with sub-locations (main shelf, fast-moving rack, bulk storage, return/defective zone)
• Inter-branch transfer requests workflow — a branch manager can request stock from another branch directly in SAP B1, and the request routes to the sending branch for fulfilment. The transfer is tracked from request to dispatch to receipt
• Customer-facing stock availability check — counter sales staff see consolidated stock across the network, with the ability to offer same-day delivery from the local branch or next-day delivery from another branch

Phase 2: Demand Planning and MRP Configuration (Weeks 9-14)

This was the most impactful phase — replacing gut-feel ordering with data-driven demand planning:

• ABC-XYZ classification of all 8,500 SKUs based on revenue contribution (ABC) and demand variability (XYZ). A-X items (high revenue, predictable demand) receive tight reorder points with frequent replenishment. C-Z items (low revenue, unpredictable demand) receive minimum stocking with order-on-demand policies
• Branch-level reorder points calculated individually for each item at each branch based on that branch's historical sales velocity and the supplier's lead time. Ambala's reorder point for a popular brake pad is different from Shimla's because the demand patterns are different
• Seasonal demand factors configured for items with known seasonal patterns — batteries (November-February), AC compressors and belts (April-July), wiper blades (July-September). MRP adjusts reorder points automatically based on the month
• Supplier lead time tracking — SAP B1 records the actual lead time for every purchase order. Over time, the system builds an accurate lead time profile for each supplier, which feeds directly into MRP calculations
• MRP runs scheduled weekly, generating purchase recommendations that the purchasing team reviews and converts into purchase orders. The recommendations factor in current stock, pipeline stock (existing POs not yet received), confirmed customer back-orders, and the branch-specific reorder point

Phase 3: Counter Sales and Customer Management (Weeks 15-18)

A simplified counter sales interface was built within SAP B1 for the sales team:

• Vehicle model-based part search — the salesperson selects the vehicle make, model, and year, and the system shows all compatible parts with current availability
• Customer credit limit enforcement — the system checks outstanding receivables against the credit limit before allowing a new invoice
• Loyalty tracking and volume-based pricing — pricing tiers adjust automatically based on the customer's purchase history
• Integrated e-invoicing and e-Way Bill generation for every transaction

Results

Results were measured over the first five months post go-live, comparing against the same period in the prior year:

• Stockout rate reduced from 23% to 2.8% — an 88% improvement. The remaining 2.8% stockouts are primarily on newly introduced vehicle models where demand history does not yet exist
• Dead stock reduced from INR 1.8 crore to INR 65 lakh — a 64% reduction achieved through identification and clearance of truly obsolete items (discontinued vehicle models) and redistribution of slow-moving items to branches where they had higher demand
• Emergency inter-branch transfers reduced by 72% — proactive replenishment through MRP replaced reactive transfers. Annual transport cost savings of approximately INR 6 lakh
• Overall inventory turns improved from 4.2 to 6.1 per year — a 45% improvement meaning the same revenue is being generated with significantly less working capital locked in inventory
• Working capital freed: approximately INR 95 lakh — the combined effect of reduced dead stock, better inventory turns, and elimination of overstocking released nearly one crore of cash that was previously locked in shelves
• Revenue increased by 14% year-on-year — driven primarily by serving customers who would previously have gone to competitors due to stockouts. The company estimates that approximately 60% of the revenue increase is attributable to improved product availability
• Average order fulfilment time reduced from 15 minutes to 4 minutes at the counter — vehicle model-based search and real-time stock visibility dramatically reduced the time sales staff spent locating parts and checking availability
• Supplier negotiation improved — with accurate demand data and forward visibility, the purchasing team secured 3-5% better pricing from key suppliers by committing to quarterly volume forecasts

"The transformation in our fill rate alone justified the entire investment. Our garage customers now know that if they call us, the part will be available. That reliability has brought back customers we had lost to competitors over the past three years."

— Rajiv Bhardwaj, Founder & Director

Key Learnings

• Stockouts and excess inventory are two sides of the same coin. Both stem from the same root cause — a lack of demand-driven inventory management. Fixing one without the other is not possible. MRP-driven replenishment solves both simultaneously by ensuring the right quantity of the right item at the right location
• ABC-XYZ classification is the foundation of distribution inventory management. Treating all 8,500 SKUs with the same replenishment logic is guaranteed to produce poor results. Differentiating your inventory strategy by item characteristics — high-value predictable items versus low-value erratic items — is the single most impactful analytical step
• Multi-location visibility turns potential stockouts into fulfilment opportunities. Before SAP B1, a stockout at one branch was a lost sale. Now, it is a transfer opportunity — the customer gets their part (from another branch) and the company retains the revenue
• Supplier lead time data improves over time. The MRP engine becomes more accurate with every purchase order cycle because it builds a richer picture of actual supplier performance. The first MRP run uses estimated lead times; by the sixth month, it uses proven data
• Counter staff training determines adoption speed. Auto parts counter sales staff are typically experienced but not technology-oriented. We invested in a full week of hands-on training at each branch, using real customer scenarios, and stationed a support person at each branch for the first two weeks after go-live

Struggling with Stockouts in Your Distribution Business?

If your distribution company is losing customers to stockouts while simultaneously carrying excess inventory, the problem is not your purchasing team — it is your systems. SAP Business One with demand-driven MRP can transform your inventory performance within months. Contact Indivar Software Solutions for a free inventory health check across your distribution network.