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Car Makers Used Software To Raise Spare Parts Prices (engadget.com)
An anonymous reader writes: Ever had the nagging suspicion that your car's manufacturer was charging outrageous prices for parts simply because it could? Software might be to blame. Reuters has obtained documents from a lawsuit indicating that Jaguar Land Rover, Peugeot, Renault and other automakers have been using Accenture software (Partneo) that recommended price increases for spare parts based on "perceived value." If a brand badge or other component looked expensive, Partneo would suggest raising the price up to a level that drivers would still be willing to pay. It would even distinguish parts based on whether or not there was "pricing supervision" over certain parts (say, from insurance companies or focused publications) to avoid sparking an outcry.
See for example Hillier and Liebermann, Introduction to Operations Research, "Inventory Theory" (chapter 18 in 8th edition) This is basically managing the components of the inventory model to where the value of filling the order yields maximum profit. It might be really annoying (like when I got charged $1500 for a replacement wiring harness for my truck), but it should not be a big surprise to anyone who thinks about this.
Ever had the nagging suspicion that your car's manufacturer was charging outrageous prices for parts simply because it could?
Suspicion? No. It's a well known fact. There is a reason car dealers have terrible reputations for ripping of their customers. Of course the markups on service parts is huge. Anyone who didn't know this is an idiot.
My day job is running a small manufacturing company that makes (mostly) car parts. I know what the markup is on the stuff we sell. As a crude rule of thumb you can take whatever they charge you and divide by 8 and chances are good that's about how much the company that actually made the part sold it for. My company makes wire harnesses and I've seen products that have maybe $5 worth of material content and maybe double that in labor and overhead being sold for north of $300. One of the sales reps we work with from a big distributor told me a story about how he saw a guy buying a harness for his car ahead of him in line at the dealer. He started laughing and when they asked him why he said "I sell every component that goes into that harness and you are holding maybe $4 in material". The sale price on the harness was $540.
Damn those silly algorithms and expressions organizing themselves in a way to make extra money for a completely uninvolved party who happened to deploy them. The nerve of them!
The practice may be automated now, but it's been going on for literally decades. Even as far back as the 1980s and 1970s, you could swap parts between Corvettes and other cars. The part numbers would be different, but the equipment itself would be functionally identical. Funny how the part for the Corvette always cost several times as much; I'm sure it's purely because there were fewer Corvettes on the road (than, say, Citations or Skylarks), so the manufacturing costs were higher, right? Riiiiiiight
The price of a thing is always cost plus, where "plus" is defined by what the market will endure. If you can keep the cost hidden (see also: US healthcare) or obscure the availability of a thing (nearly-identical parts with different labels, with only one label approved for your application), the market will endure a hell of a shafting until the house of cards comes down.
Pining for the days when The Glorious MEEPT!!! graced SlapDash with his wisdom.
A while back, Toyota claimed I needed a new exhaust pipe for my Echo - $2,900 for the part alone. Quote from a reputable 3rd party repair shop: $400 including labour. It was just a bent pipe after all.
Final cost? Free. I took it into a repair shop and he just welded over the holes, used old wire hangers. It took him so little time he didn't bother charging me.