On the behalf of a Tier One commercial vehicle parts supplier, Commercial Motor Vehicle Consulting (CMVC) constructed a commercial vehicle (CV) parts aftermarket sales leading indicator (PLI) designed to forecast inflection/turning points in (CV) parts aftermarket sales due to changes in fleets’ business environments as a result of cyclical changes in the business cycle – expansion, recession and recovery. PLI was not designed to measure changes in trend factors, such as CV population, that have a medium and/or long term influence on parts aftermarket sales, as PLI was designed to identify periods when cyclical factors overwhelm trend factors in determining parts aftermarket sales.
Trend factors are not good predictors of changes in CV parts aftermarket sales related to changes in fleets’ business environments. CMVC constructed a composite index to signal turning points in CV parts aftermarket sales, since the contribution of one data series over time differs from parts aftermarket sales, so a composite index comprise of multiple data series is a better predictor of fluctuations/turning points in parts aftermarket sales as the composite index gains better predictive powers from diversification.
