A new computer system at a massive, high-tech parts warehouse in Kassel, Germany, was designed to speed parts to Volkswagen and Audi dealers around the world.
Instead, software glitches caused parts arriving from suppliers to pile up. Since September, customers in the United States have had to wait for days, sometimes weeks, for parts.
Volkswagen of America Inc. acknowledged the problem and said dealers should see some relief in the next few months.
'It's a huge problem,' said Jerry Miller, an Audi dealer in Conshohocken, Pa., in suburban Philadelphia. 'They're sincerely working on it, but there is no quick fix. From the customer's point of view, it looks like incompetence. It's caused a real credibility problem with dealers.'
The shortage has been compounded by robust sales in North America. Some Volkswagen and Audi suppliers have not been able to keep up with the demand for replacement parts.
The difficulty in obtaining parts has become the No. 1 concern among dealers, said Miller, past chairman of the Audi National Dealer Council.
Indeed, dealers are taking the brunt of the heat from angry customers.
'What are you going to do? The part's not here,' said dealer Bob Kissick, at Boardwalk Auto Center in Redwood City, Calif. 'They get angry at us. Then they calm down when we explain the problem, and they're usually pretty understanding, especially when we give them a free loaner car.'
But sometimes it takes a little more to soothe frayed nerves, Kissick said. He sent roses to one customer's house.
The problem surfaced in September, when Volkswagen launched a new operating system in its huge Kassel parts warehouse, said Eric Johnston, executive director of service and parts at Volkswagen of America. The operating system is based on software from SAP AG, the software giant of Walldorf, Germany. Volkswagen enhanced and modified the program, Johnston said.
The new system eventually will make the central warehouse more efficient in receiving, processing and managing inventory, Johnston said.
'We launched with some problems, and they've been working ever since to resolve them,' Johnston said. 'It was probably a much bigger undertaking, in terms of the launch of the system, than they had anticipated. It's a very complex system.'
A bottleneck was created at the point where suppliers deliver parts to the warehouse.
'Stuff was literally not getting brought into inventory when it was in fact there,' Johnston said.
A team of specialists from Volkswagen's information technology division was dispatched to Kassel from world headquarters in Wolfsburg.
'They've made dramatic improvement in the system, and now the material is starting to move,' he said. 'While it's not over yet, I think the systems part of it is pretty much behind us.'
STRONG U.S. SALES
The volume of back orders in January, compared with December, has gone down about 30 percent, he said.
Volkswagen's rapid growth in North America also has contributed to the parts shortage, he said. Volkswagen of America orders parts from Kassel based on sales forecasts.
'We probably understated some of our forecasts and have grown at a rate higher than we had expected, and that put additional burden on Kassel,' he said.
Volkswagen initially projected U.S. sales of 295,000 during 1999. But it sold 315,563 Volkswagens last year, up 43.6 percent from 1998. It was the first time in 25 years that VW sales have topped 300,000. Including Audi, which was up 38.8 percent last year, the group's U.S. sales totaled 381,522.
'Any time you have an increase in sales as dramatic as Volkswagen has experienced, you're going to have some parts problems,' said dealer Bob Lewis, of Bob Lewis Volkswagen in San Jose, Calif. His dealership carries $600,000 worth of Volkswagen parts.
'It has been a problem, but I think the worst is over,' Lewis said.
Volkswagen acted quickly by assigning special 'expeditors' to various dealerships to help them find critical parts, Lewis said.
'The expeditor will search the system to find a dealer who has that part,' Lewis said. 'He'll call dealers; he'll call Germany to find the part. When the factory calls to get a part from you, that's a little different than when you call a dealer in another state and ask if he'd send it to you.'
Ten expeditors operated a hotline established in early January, Johnston said.
Dealers are giving customers free loaner cars when they must wait on delivery of a part, and their car is inoperable, Johnston said. Dealers also can request a 'gift amenity' and a letter from Volkswagen of America addressed to the customer apologizing for the delay and clarifying why it has occurred, he said.
Said Kissick: 'By and large, it's embarrassing. But when you are growing so fast, it's just overwhelming.'