Smart Parts 2012: The Year In Review

Here we are, winding down yet another year in our ever-changing world of the automotive industry. We have seen changes ranging from many new model introductions with advanced fuel economy without sacrificing horsepower to the on-going advancement of the hybrid and electric vehicles leading the way into a new age of technology.

With all this said, how much does all this really impact the way we have always conducted our business as Parts Managers? Do we really have to change with the times or should we stick with proven methods that have gotten us to where we are today?

In our final issue of "Smart Parts" 2012, we are going to take a look back at this years past issues and blogs to see if we have really maximized on what we know as "good practices" in conjunction with setting the bar for the future.

We will highlight each issue's topic with some key points that have impacted the way we do business in the Parts Department. We will close each following month with a "challenge question" that relates to the topic and hopefully lead to our own self-evaluation.

Here we go "Smart Parts" readers!...it's a long blog, but it may prove worthwhile! If you have missed any of our past issues, visit our website for more information...

January 2012: 2012: "A New Beginning"

In January, 2012, we focused on our Parts Set Ups & Controls. Each year, our inventory resets to what I refer to as "Ground Zero". All of our inventory analysis information ranging from True & Gross Turns, Stock Order Performance, Level of Service, "First Time" Off Shelf Fill Rates, etc. resets to ZERO.

This means that this would be the best time of the year to review and modify these Set Ups & Controls as they will yield immediate results at the end of the first month of the year. Most Parts Managers rarely review and/or modify these Set Ups & Controls on a periodic basis which often leads to unwanted obsolescence and reduced "First Time" Off Shelf Fill Rates.

January's Challenge Question: Did you review and/or modify any of these Set Ups & Controls?  

February 2012: Hope Or Change: "We have To Make A Decision!"

In February, 2012, we continued to focus on our Set Ups & Controls by reviewing the results of the changes or modifications we made in January of 2012. If no changes were made?...then how can we expect a different result?

If changes or modifications were made, then what did the results reveal and how can we use this information moving forward? Do we just "hope" that the same Set Ups & Controls will lead us forward, or do we "change" for the future? Remember, the "life cycle" of parts isn't anywhere near what it was years ago.

February's Challenge Question: Have you been doing the same thing for several years, or have you really been just doing the same thing every year, several times and expecting a different result?

March 2012: What Is My Parts Department's "Rate Of Change?"

The March issue of "Smart Parts" was one of our "most read" blogs of the year as this term is not often heard of, or referred to in the Parts Department.

I've found that the majority of Parts Managers haven't even heard of the term "Rate Of Change" Quite simply, it's the number of "add and delete" adjustments that have been made in our Inventory Management System versus the total number of part numbers in the Inventory Management System (I.M.S.).

Too many adjustments may lead to inventory discrepancies and dollar values between the controlled inventory values versus what's on the dealers financial statement. It could also indicate pilferage or accounting issues in the Parts Department if the "Rate Of Change" exceeds 10%.

March's Challenge Question: What's your Parts Department's "Rate Of Change"?

April 2012: Dealing With "The Cycle Of Change"

In April, it was the end of the first quarter of 2012, so we focused on the first "Activity Cycle" of our parts inventory as every three months completes one parts inventory "Activity Cycle".

 What did the first three months indicate? What did the business ratios such as True & Gross Turn, Stock Order Performance, Level Of Service and "First Time" Off Shelf Fill Rate reveal? Do I need to go back and review or modify any of my Set Ups & Controls moving forward? Are my profit structures in line to my first quarter goals and expectations?

April's Challenge Question: Do you perform an inventory evaluation after each "Activity Cycle" in 2012?

May 2012: Maximizing Parts "In-Coming Phone Calls"

May's "Smart Parts" article also drew a lot of attention as many dealers and parts managers DO NOT track in-coming parts phone calls. How many in-coming parts phone calls are received where there is just information given with no follow up?

How many of these calls could be transferred to the service department for potential service appointments? An insurmountable number of calls are received each day by parts departments everywhere that go without an accountable follow up system.

May's Challenge Question: Do you have a follow up system in place to track in-coming parts calls?

June 2012: Is Your Dealer Management System, (D.M.S) "Telling The Truth?"

June's "Smart Parts" blog may have "touched a nerve" with some, but it was one of my personal favorites in 2012. As an industry consultant and trainer, I perform many parts department evaluations and it is quite interesting to see some of these dealers Parts Monthly Management reports.

Many dealers don't even know how to read their D.M.S. Parts Monthly Analysis reports. They tend to believe what they are reading, even though the parts manager isn't reporting the information correctly. As the old saying goes..."garbage in, garbage out"!

I could go on and on with this subject, but for more information, read the June 2012 "Smart Parts" article! For you dealers out there...it's a MUST READ!

June's Challenge Question: Is YOUR Dealer Management System, (D.M.S.) Telling The Truth?

July 2012: "Shrinking Parts Gross: Who's To Blame?"

In July, we explored parts gross in general, but with the main focus on our increasing "Express Service" business. With more and more manufacturers "mandating" an independent express service department within our existing fixed operation, it has led to many challenges.

 Many vehicles manufactured today are requiring less and less maintenance with fewer dealer visits.We have to remain competitive, but we also have to have the right pricing in parts that can balance these "competitive items" along with the "captive items" in order to retain proper gross margins.

The parts escalation matrix should be utilized "wisely" and like other Set Ups & Controls....reviewed and modified often.

July's Challenge Question: How often do you review your parts pricing guidelines and escalation matrix?

August 2012: Guidelines To Sidelines: "Where DO We Draw The Line?"

In August, we kind of went back to basics with a review of industry guidelines versus the goals and guidelines we set for ourselves in each dealership.

It's important that we are measuring ourselves with a combination of individual standards along with our individual manufacturers' as well as national guidelines set by the National Automotive Dealers Association, (NADA) for example.

The most important lesson in this particular issue is, if in fact we ARE measuring our performance constantly and do we set goals above normal or reasonable expectations"?

August's Challenge Question: Do you set performance goals and guidelines and most important, do you hold yourself and your staff accountable to these expectations?

September 2012: Express Service: "The Parts Impact"

September's issue was kind of a follow up to the July issue of "Smart Parts" We focused on how we can overcome some of the issues of shrinking parts gross due to the "Express Service" impact by embracing it instead of fighting it.

As we know, gross pays the bills and we have to look at this new found opportunity with some different perspectives on what our expectations should be concerning retained parts gross. Quite simply, would you rather have 30% of $20,000.00 or 40% of $5,000.00?

By selling more in volume at a more competitive rate, maybe, just maybe, we can attract and retain more business opportunities.

September's Challenge Question: Are you really maximizing the "Express Service" parts opportunity?

October 2012: Parts Inventory: "Active, Idle or Obsolete?"

Our October issue of "Smart Parts" also caught the eyes of many as we explored the three most common parts classifications. The most interesting part of these classifications is how "Idle" and "Obsolete" are often confused, or even how long an "Active" part is actually considered "Active".

By drilling down these classifications in this issue, we were able to properly identify each of these categories and how to properly manage them to maximize True Turns and most importantly, get the highest parts Return On Investment.

October's Challenge Question: Do you know the difference between "Active, Idle and Obsolete" inventory? 

November 2012: O.E.M. VS. Aftermarket Parts: "The Choice Is Simple"

Last month we explored another "hot" topic that's really been around for years and that is the choice of offering aftermarket parts versus O.E.M. parts as a viable competitive option.

For the most part, we all "stick to our guns" by maintaining the image and belief that there really is no replacement for the manufacturers' replacement part and I would have to agree. With that said, I also agree that our customers deserve a choice on certain competitive repairs or maintenance where, quite honestly, the aftermarket option has similar quality, but at a more affordable price to the consumer.

I believe that if we offer more options to our customers, we have a better chance of keeping them. After all, if a vehicle needs brakes...someone is going to get the repair job...why not you?

November's Challenge Question: Do you provide other parts options to your customers on qualified, competitive repairs and maintenance?

In conclusion, for this December issue, I have one last question:

"Did you answer NO to any of the above Monthly Challenge Questions"?

If you did answer "NO" to any of this years challenge questions, maybe it's time to make a commitment moving forward into 2013. Contact ACG's "Smart Parts" and make 2013 your "Best Year Ever!"

Happy Holidays from "Smart Parts" and We Wish All a Very Prosperous New Year!

Dave Piecuch is the Vice President of Automotive Consultants Group Inc. and is the Head Coach for Smart PartsTM. The only "Results Based" High Return Training, Coaching, and Consulting company in the world!  Dave can be reached at Cell 786-521-1720 or E-mail at dave@smartservicetraining.com Vist our Website at www.smartpartstraining.com

O.E.M. vs. Aftermarket: The Choice Is Simple

For many years, dealer parts managers have had to play a "juggling" act when comes to choices between stocking only Original Equipment Manufacturers parts, (O.E.M.) to mixing in some aftermarket parts into their inventories. There are many reasons for both sides of the argument, pending on market areas, demographics, competition or just plain common sense decisions.

First of all, I am a true believer that O.E.M. parts are best for the overall performance of the vehicles manufactured today. They also provide the best "fit" and in most cases, are backed by the best warranties in the industry. Most would also agree that O.E.M. parts are the top choice of most technicians when it comes to the overall quality of repairs.

With the infiltration of many "counterfeit" parts vendors today, parts managers have to consider the quality of the parts manufactured as well, which makes the choice rather easy for those "O.E.M. Only" parts managers. It is also much easier from an accounting standpoint with manufacturer invoicing, discounts and return allowances as well inventory protection programs.

This all sounds good except that we have left "choice" out of the above equation, thus leading to the title of this article..."The Choice Is Simple". I believe that in some cases, we need to give our customers more of a choice, when it comes to their vehicle repair options. Many of the manufacturers' pricing policies on some highly competitive parts are much higher than aftermarket competitors parts of equal quality.

One case in point that comes to mind is the pricing of brake parts with some manufacturers. I'm not going to single out any particular manufacturer, but I do believe a better job can be done in order to be more competitive. Standard brake repairs can vary by hundreds of dollars, thus resulting in "lost repair opportunities" and more customer "price shopping" at aftermarket facilities.

Even though some manufacturers offer some "good, better, best" parts options, in some cases, a high quality aftermarket part can out perform the lesser of these manufacturer options. Even though many of us believe that price shouldn't be an issue, we still have to be competitive and be somewhere "in the ballpark".

Another little tidbit that we all have to be aware of is that many parts are made by only a few different vendors and labelled by the individual manufacturer for re-distribution. Each year, vehicle manufacturers constantly bid with outside vendors on many replacement parts as well as original equipment parts.

We have to look back at how we lost so much of our repair and maintenance business to aftermarket vendors in the first place. We all know how much convenience, quality service and value has played in getting some of that business back, now we have look closer at providing those same three principles with even more competitive pricing.

Giving our customers more of a "choice" in some of these basic repair and maintenance items will lead to more sales because we are giving them options "within" our stores. In many cases, we have only given them the option of choosing "where" they will have their vehicle serviced.

So, the choice IS simple when it comes to some of these basic repair and maintenance items...give your customers more of a choice. We need to think "OF" our customers, not "FOR" our customers!

Dave Piecuch is the Vice President of Automotive Consultants Group Inc. and is the Head Coach for Smart PartsTM. The only "Results Based" High Return Training, Coaching, and Consulting company in the world!  Dave can be reached at Cell 786-521-1720 or E-mail at dave@smartservicetraining.com Vist our Website at www.smartpartstraining.com

"Parts Inventory: Active, Idle or Obsolete?"

The final quarter of 2012 is upon us and as I mentioned in the introduction, many Parts Managers are getting ready to perform their end of year Parts Physical Inventories. In my opinion, he "Physical Inventory Process" goes well beyond just counting part numbers and quantities.

In most cases, it's an overall evaluation of how well we have managed our dealers' number two asset, second only to the Used Vehicle Inventory.

A recent article by the Management Study Guide (M.S.G.) states that "Inventory Management is a very important function that determines the health of the supply chain as well as impacting the financial health of the balance sheet"...

As a former Parts Manager, this is a pretty overwhelming statement that draws my attention to just what factors may determine my overall "financial health" of my parts inventory. In order to determine this, I would first need to define and identify the "breakdown" of my inventory value and potential "Return On Investment".

Next, I would need to separate and categorize my inventory into three basic areas which are determined by movement in order to maximize the "Return On Investment" and "Inventory True Turns".

These three areas are categorized as "Active, Idle & Obsolete" and if I were to ask ten parts managers to define each of these three categorized areas, I would most likely get ten different definitions.With that said, we need to turn to some basic facts and industry guidelines in order to define these areas.

For many years, I have referred to guidelines set by Mike Nichols, the National Automotive Dealers Association (NADA) and individual manufacturers' to set the standard on these areas. The interesting thing is that not much has changed over the past several years except for "Parts Activity Cycles".

Approximately thirty years ago, the "Parts Activity Cycle" for an "active part" was anywhere from twelve to eighteen months as many parts fit many models for several years, thus extending the "active life cycle" of a part much further than today.

Today, with so many manufacturers and so many models available, the average "active life cycle" of many parts has been reduced to six months or even less!

With all this in mind, let's define these three category areas:

ACTIVE PARTS

"Active Parts" should have movement within six months or less. Mike Nichols and NADA both agree that 98% of the parts inventory should have "active movement" in the 0 - 6 month category. To define it a little further, 75% should have "active movement" in the 0 - 3 month category and 23% "active movement" in the 4 - 6 month category.

• FIRST FACT: If a part has not sold within this six month time frame, there is a 49% chance of NO FUTURE SALES.

IDLE INVENTORY

First of all, in my opinion, Idle Inventory" is a "non-category"! No disrespect to any that use this term, but this is where I believe "common sense" has to come into play as I explain further. I believe that ALL parts inventory is idle, with the exception of some special orders that do not experience any "shelf time", thus, no holding costs are attributed, even though acquisition costs may be higher. Others believe that "Idle Inventory" may be parts with an "activity cycle" over six months and beyond. Mike Nichols and NADA also agree that parts with an "active movement" cycle of 7 - 12 months should represent only 2% of the total inventory annual "activity cycle".

• SECOND FACT: If a part has not sold between nine and twelve months, there is a 75% chance of NO FUTURE SALES.

OBSOLETE INVENTORY

Bottom line is...if the part doesn't sell within the above parameters?....it's basically obsolete! It doesn't get any simpler than that! The Mike Nichols and NADA guideline on parts with an "activity cycle" over twelve months should represent 0% of the total inventory annual "activity cycle".

• THIRD FACT: Inventory with an "activity cycle" over twelve months has a 98% chance of NO FUTURE SALES! 

Of these three categorized areas, I believe that "Idle Inventory" is most confused by parts managers. Many manufacturers and consultants still use this term and to me, I believe they still use this term because it leaves much to their discretion.

This discretion allows them to determine what is actually "active" or "obsolete" based on manufacturers data, not the dealers. Many manufacturers offer "Stock Replenishment Programs" where they maintain control of what dealer parts managers have on their shelves, not regarding the individual dealers Dealer Management Systems, (DMS) stocking criteria.

ALL inventory is idle for a period of time as even an "active part" can be "Idle" for three months before it sells, but may still remain "Active" because it has sold in the 0 - 3 month category.

If a part has not sold for twelve months?...it's "Obsolete" with close to no chance of selling...plain and simple, regardless of what definition you use for "Idle Inventory"!

In conclusion, I'm QUITE sure that the dealer is more concerned about what's selling and what's NOT selling in order to gain the highest "Return On Investment" as well as maintaining proper annual Gross and True Turn numbers.

I'm also QUITE sure that the dealer will not be pointing the finger at the manufacturer, or anyone else if the inventory and stocking criteria hasn't met the expectation. Each parts manager has to take ownership for their individual dealers parts inventory investment.

Dave Piecuch is the Vice President of Automotive Consultants Group Inc. and is the Head Coach for Smart PartsTM. The only "Results Based" High Return Training, Coaching, and Consulting company in the world!  Dave can be reached at Cell 786-521-1720 or E-mail at dave@smartservicetraining.com Vist our Website at www.smartpartstraining.com

Express Service: The Parts Impact

One of the most "debatable" topics that I have heard from dealers and managers this year has definitely got to be the idea of automotive dealers offering their customers "Express Service", even though each manufacturer has their own "tag name" for the process. The question is..."How does it impact the Parts Department"?

Though "Express Service" is not really new in our dealerships, a few manufacturers introduced this concept or process as far back as the late 80's and early 90's. Much was learned in those early years, some good and some not so good as well as the overall impact that it had from the beginning.

I believe that one of the biggest impacts that "Express Service" has had on our Parts Departments is the shift in the main three customer pay sales categories. These categories are usually defined as Competitive, Maintenance and Repair and for years, we have seen percentage breakdowns led by Repair, followed by Maintenance and Competitive carrying the lowest percentage of the customer pay sales mix.

Today, we are seeing many dealerships experiencing a "total reversal" of their customer pay sales mix shifting over to the Competitive and Maintenance category. One of the most obvious reasons is the quality of the vehicles manufactured today versus "yesteryear" has significantly improved. We are also seeing this trend by watching our warranty parts sales diminish slowly year after year.

So how does this all play out for the Parts Department and what is the next step? I believe that the old phrase "go with the flow" has to be the number one "brutal fact" that we have to deal with. We have to realize this shift and rethink once again where we need to focus our marketing strategies, profit margins and most importantly...our support to the "Express Service" Department.

Even though I see many dealers now offering this service, they seem to forget that if "competitive" and "maintenance" are now the leaders within the overall customer sales mix, why aren't they competitive?

In many cases, parts managers are still pricing these competitive and maintenance items much like their repair or "captive" customer sales with the exception given to the oil & oil filter. Many parts managers seem to have it "bred" into them that they have to retain at least a 40% gross margin on all customer pay sales.

I realize that in many cases, price is not necessarily the issue, but I DO believe we need to be at least "in the ballpark" on these prices. I have performed many pricing comparisons as part of the training I provide and I have personally seen prices vary on the SAME parts and services up as much as 100%!

In an "apples to apples" comparison, that would be like paying twice as much for that same apple! People will notice and then it becomes a "trust" issue and they will feel like they are being taken advantage of. Many more of our customers are doing their research and may know more than we think they do.

One of the best ways to get our prices in line is to have all these competitive and maintenance parts "weighted" to one price and at a "competitive" price. We should accept a lower gross margin on these items even though we don't want to be the cheapest, we DO want to be the best with the right quality parts.

Here's a question I have..."Why is it that many parts managers are okay with  "wholesale" gross margins anywhere from 18% - 22%, but don't have that same belief in these "competitive" customer sales?" Are we not in "competition" with our wholesale customers? Why not "wholesale pricing" to the public on these "competitive" parts and services?

Lastly, we all know that no matter how well the vehicles are manufactured today, they will still break down at some point. The average vehicle ownership is surpassing ten years so the "repair" side of the mix will always be there.

The question is, do we want to offer the best service and price on the first two categories in order to gain and earn that customers' "repair" business? Or, do we "price" ourselves out of the opportunity in the first place, only to lose that "repair" business down the road.

Request a No-Charge Express Lube Evaluation

Dave Piecuch is the Vice President of Automotive Consultants Group Inc. and is the Head Coach for Smart PartsTM. The only "Results Based" High Return Training, Coaching, and Consulting company in the world!  Dave can be reached at Cell 786-521-1720 or E-mail at dave@smartservicetraining.com Vist our Website at www.smartpartstraining.com

Guidelines to Sidelines...Where DO We Draw the Line?

I have always been intrigued by our industry standards and guidelines because it seems to me...at some point back in time, or maybe even perhaps more recently, someone had to "set the bar" on performance in our various fixed operations departments. 


I guess we have all just grown accustom to these guidelines and run our dealership operations focused on these target initiatives.

Personally, I believe that we should all have individual standards, guidelines and goals in our stores based on the manufacturers' and industry experts expectations, but I also think that we should keep them in perspective to our individual situations.

I recently received an "Ask Dave" question from one of our "Smart Parts" Readers that I would like to share. I have also consulted with this particular Parts Manager in the past, so I am familiar with his unique situation as well as his Inventory Analysis.

This may shed some light to what I believe is how we should  use these industry guidelines, but with respect to the "individuality" of each dealer. 

The question and response are as follows:

Question:

"Dave, you know my inventory pretty well by now, but even though my First Time Off Shelf Fill Rate is doing very well and my Over Twelve Months Inventory is virtually non existent, My Gross and True Turns are still below my goals of 7.0 and 4.0 respectively. My current averages are approximately 6.0 and 3.0 for 2012 and my Stock Order Performance remains below 40%! Am I missing something here?"

Response:

Actually, all the facts that you state make perfect sense...let me explain...

.

First of all, the key thing that you stated was that your "Over Twelve Month" inventory is pretty much non existent. This combined with your lower than desired Gross and True Turns, low Stock  Order Performance can only mean one thing. 


You are overstocked with your most common  items which is really not a bad thing because you are on a  "Weekly Stock Order" as opposed  to a "Daily Stock Order" as many other dealers are on. This also allows you to take advantage of your factory promotions in order to gain additional discounts and allowances.

This is kind of a "double edged" sword because on one hand, you are taking great advantage of factory promotions, gaining those extra discounts and allowances. On the other hand, you are overstocking your inventory, even though, overall it's not hurting your investment as these items  have an activity cycle less than twelve months. 


In your case, you have "earned" the ability to overstock your inventory to gain additional profit without sacrificing the "liquidity" of the investment, which will always bring your dealer a great return on his or her investment.

You can slowly manage the increase of your Gross and True Turns as well as your Stock Order Performance by systematically cutting back on your Days Supply of those "fast moving" items in order to get these numbers up. 


Keep in mind that you are on a Weekly Stock Order and you  may incur "stock out" situations. The main reason that your Stock Order Performance is lower than expectation is because you have more than an ample supply on hand, thus requiring less stock order replenishment.

Lastly, if I were in your shoes, with the fact that you are on a Weekly Stock Order Program, I would make my OWN Guidelines on where YOU should target Stock Order Performance  as well as Gross and True Turns. Your overall investment is solid and "liquid" as long as you  maintain a "zero" tolerance policy on over twelve month obsolescence.

In your case, I am reminded of the "old days" when the Guideline for "Gross Turns" was 6.0 turns per year and the "True Turns"  Guideline was 3.0!...and the reason was?...Back then, most of us were on a Weekly or Bi-Monthly Stock Order as in your case at your dealership today! 


Most of these "Guidelines" were increased over time as more and more manufacturers' began overnight "Dedicated Delivery" which is not an option for you.

Keep up the great work, I know most dealers would LOVE to have those "First Time Off Shelf Fill Rate" numbers AND a solid "Return On Investment"!!! 

             

Dave Piecuch is the Vice President of Automotive Consultants Group Inc. and is the Head Coach for Smart PartsTM. The only "Results Based" High Return Training, Coaching, and Consulting company in the world!  Dave can be reached at Cell 786-521-1720 or E-mail at dave@smartservicetraining.com Vist our Website at www.smartpartstraining.com

"Shrinking Parts Gross?...Who's To Blame?"

I recently "polled" quite a few Parts Managers as well as some Dealer Principle on what their main concerns in the Parts Industry are today and I received an over-whelming response to their concerns.

Not only are they concerned about their parts gross retention, they are mostly concerned with their "total" parts gross profit in all areas.

If you think about it, almost every area of parts gross profit has been impacted or "hit hard" over the past 10 years or so and not positively I might add. Let's take a look at some of the areas that I'm referring to.

Wholesale parts sales and gross has diminished heavily as more and more parts managers "opt out" due to low gross retention, high acquisition and holding costs, reduced return allowances from the manufacturer and even auto insurance companies taking control of parts distribution and pricing.

In many cases, it has become an accounting nightmare as well, chasing down past due accounts, excessive parts returns and often times, damaged parts that cause even more administration costs and deferred credits.

The second area to me, that has actually been hit the hardest is the evolution of manufacturers' getting into the "Quick Service" business. The higher demand for customer convenience has actually driven down parts and service sales per repair order nationwide which to me, has becomes a "double-edged" sword.


Even though I truly believe that we need to provide the best in customer service by offering "Quick Service" options as well as to remain competitive with aftermarket facilities, there is a right way and a wrong way to implement this "Quick Service" option.

In many recent studies, including those done by the National Transportation Safety Board, upwards to 15% of all traffic accidents are due to mechanical failure from normal "wear and tear" parts or lack of proper maintenance.

Another recent study by the National Automobile Association (NADA) in their 2011 "State of the Industry" Report revealed that since 2000, New Vehicle Registration fell 28.0% while Total Vehicles in Operation increased by 16.8%. This illustrates to me that the average age of total vehicles in operation is most likely ten years or older. 

With that said, it brings me back to the right way and wrong way that we should be offering "Quick Service" in the first place. It seems that the "Parts Sales Mix" has drastically shifted to "Competitive Parts Sales" versus Maintenance and Repair Parts Sales.

Oil filters, air filters, cabin air filters, tires, wiper blades, etc. are leading the way on parts sales in the "Express Service" side of things, all of which are low gross items and have to be sold in volume to make any impact in overall parts gross.

This added to the fact that manufacturers are reducing maintenance requirements more and more each model year. Warranty repairs have also reduced over the past few years as new vehicle quality has improved, thus resulting in another overall parts gross reduction.

What are we missing here? Well for one thing, the manufacturers are happy because the're keeping their projected maintenance costs down, but are we so focused on "getting them in and getting them out" that we are missing basic inspection items on these "older, out of warranty" vehicles?

Could we be actually contributing to that 15% of these automobile accidents that are caused by mechanical failure or lack of proper maintenance because we fail to perform a proper inspection?

Some of the most common causes of these accidents in the study on mechanical failures were; brake failure, worn steering linkage, tire issues, worn ball joints and wheel bearing failure just to name few.

I also realize that various manufacturers' maintenance guidelines are minimal and may contradict many dealer maintenance guidelines, but ultimately, the servicing dealer is responsible for the doing what's right for their customers, whether their vehicle is under factory warranty or not.

We should never take the Courtesy Inspection Process lightly, even though the customer may be in a hurry to leave.

All of the above have impacted the parts department's sales and gross heavily. Fewer wholesale opportunities, fewer warranty repairs and a "Parts Sales Mix" that is shifting to lower parts gross and retention. Even "over-the-counter" sales are becoming more competitive as customers are "price shopping" more than ever.

With the majority of parts sales in most dealerships coming from the Service Department, the "right way" to provide excellent service and maximize our parts opportunities is to get back to basics.

If we do have to have an "Express Lane", we need to provide the same service as our main service drive with quality service advisors, technicians and equipment to perform the necessary maintenance and repairs.

 We CAN provide the convenience AND reduce the sense of urgency on getting the customer "in and out". In my opinion, we should never sacrifice quality for quantity, we just need a better plan.

Dave Piecuch is the Vice President of Automotive Consultants Group Inc. and is the Head Coach for Smart PartsTM. The only Results Based High Return Training, Coaching, and Consulting company in the world!  Dave can be reached at Cell 786-521-1720 or E-mail at dave@smartservicetraining.com Vist our Website at www.smartpartstraining.com

"And Like a Good Neighbor?"...One Parts Blogger's Opinion

Like many of you, I have recently been reading a lot of blogs and articles concerning the recent implementation of the State Farm Parts Trader Pilot Program. It has obviously created quite a stir in both the Collision Center service industry as well as for parts providers.

The State Farm Parts Trader Program is already in the pilot stages in a few markets in the United States in many Collision Centers. Many automotive dealer's parts managers have already dropped out of the program for obvious reasons. 


I’m not going to comment on the particulars of the program as many prominent industry “bloggers” and writers have done so well in getting the message out, but I have done my research and here’s “One Parts Blogger’s Opinion”.

Many of you may or may not know that I do a fair bit of travel throughout the United States and Canada, providing Service & Parts Training in automotive dealerships. When I started reading and researching the State Farm Parts Trader Program, it drew my attention quickly as this program has a lot of similarities to the collision industry in a couple of Provinces in Canada.

In these Canadian Provinces, the automobile insurers control the purchase, sale and distribution of collision parts to the collision centers, all the way to the eventual repair of the customers’ vehicle. 


As in the State Farm Parts Trader Program, collision parts are put up for bid for parts suppliers and the winning bidder becomes the area’s OEM parts supplier.

Even though the intentions of their program are similar to what State Farm is claiming to achieve, many of these concerns paint a different picture and goes beyond any article or blog that I have read thus far concerning the State Farm Parts Trader Program.

As expected in the concerns I have read, lead times and cycle times increased as well as the administrative time while parts profits decreased. 


What I did not consider is how these changes would affect the overall method of doing business in the Collision industry or what it may lead to in the future. It has already changed the automobile collision industry to some degree with our good neighbor to the north.

One of the areas, for the most part that has not been mentioned to my knowledge is the possible changes in the way the insurance claim is written in the first place. 


I personally know quite a few experienced insurance adjusters that are being replaced by lesser experienced, lesser paid adjusters to cut costs. This may also lead to even more supplements, longer cycle times and administration costs.

I believe there is a distinct possibility that we will also see the eventual elimination of the adjuster position as we know it, being replaced by digital imagery for authorization. 


Who knows?...in the near future we might even see collision centers having to perform “tear downs” prior to the initiation of writing the claim in the first place.


I also wonder if this direction in the parts end of the collision industry will eventually include paint and materials as well. To me, it only makes sense to include paint and materials in the overall equation right along with the overall control of the parts warehousing, pricing  and distribution idea.

In conclusion, I think we are definitely heading into a new evolution in the collision industry and it may be here to stay. Fewer Collision Centers, Satellite Repair Facilities, Central Parts Warehousing and Centralized Digital Estimating Centers are just a few of what I see coming in the future. 


The one thing that NEVER changes, but will be highly affected by all this is “Customer Service”. I for one believe that these evolutionary changes will impact the  ability to provide the excellent service to collision centers and ultimately, the consumer.


Dave Piecuch is the Vice President of Automotive Consultants Group Inc. and is the Head Coach for Smart PartsTM.  Dave can be reached at Cell 786-521-1720 or E-mail at dave@smartservicetraining.com Vist our Website at www.smartpartstraining.com

Is Your Dealer Management System (D.M.S.) Telling The Truth?

Recently, I was asked by a Service Manager to perform an evaluation of his dealership's Parts Department. He  was very concerned because it appeared to him that they never seem to have the "right parts at the right time" and he was tired of putting his customers in rental cars while they waited for parts to come in the next day.

On top of that, his shop productivity was suffering because of all the technician "down time" going back and forth to the Parts Department, bringing vehicles in and out of the shop or just waiting for the Parts Department to chase down a part.

Unfortunately, I have heard this from MANY Service Managers' around the country and led me to the title of this month's "Smart Parts" article. It all begins with the Parts Manager's "belief system" and just how he or she is  reporting to the Dealer Management System. (D.M.S.)

In this particular dealership's Parts Department Evaluation, I first noticed that ALL D.M.S. parts orders were receipted as STOCK!...No "Customer Orders" reported, No "Emergency Purchases", No "Lost Sales", or as I refer to as "Potential Missed Opportunities".

The only "clue" or variation that I detected was that over 50% of the receipts were "Outside Purchases"! Aha!....a little bit of the actual truth is coming out now! 

In this case, less than HALF of the parts orders are being filled by STOCK, let alone the "Customer Orders" that are being ordered, receipted and classified as STOCK as well. These "Outside Purchases" are receipted differently because the original order was not generated by the D.M.S., they were purchases through other vendors or dealers to fill a potential "Emergency" situation.

Here's where the "Common Sense" of this evaluation is now coming to a head! Does it make sense that ANY Parts Department would have NO Customer Orders, Emergency Purchases or Lost Sales? Better yet, have you seen ANY Parts Department fill over 99% of their orders from STOCK, or at least, that's what this report indicates.

This would mean that over 99% of the time, this Parts Department fills the order from STOCK on the first demand for a 99% "First Time Off Shelf Fill Rate". I guess the old saying is true..."Garbage In, Garbage Out"! Remember, just because the information is on the report, it doesn't necessarily mean the information is true or accurate. 

Many Parts Managers report in this same way because in their minds, that's the way they order ALL their parts to get the best discounts and allowances. They don't realize, or often care about the adverse effects their reporting procedures have on CSI, additional expense, lost productivity and most important, profitability.

On most dealerships, Service Departments' lose at least 15% in shop productivity, not counting the added expense due to these improper reporting practices, which by the way, highly outweigh a little extra parts discount.

Lastly, many of these types of situations are becoming more common because of what I call the "Double Edged Sword" which is the manufacturers' "over night dedicated delivery service".

 It's obviously a good thing because parts are more available with shorter lead times, but the bad thing is that more and more parts managers are stocking less, overriding basic set ups and controls because they don't have to stock it now...they will just order it overnight!

The D.M.S. Parts Monthly Analysis Report can tell us a lot, or expose a lot. Bottom line is that we need to be reporting correctly and honestly in order to have efficient and proper "First Time Off Shelf Fill Rates" and a higher parts "Return on Investment"

Need to know more?....Contact us at www.smartpartstraining.com


Dave Piecuch is the Vice President of Automotive Consultants Group Inc. and is the Head Coach for Smart PartsTM.  Dave can be reached at Cell 786-521-1720 or E-mail at dave@smartservicetraining.com Vist our Website at www.smartpartstraining.com

Maximizing Parts In-Coming Phone Calls

Have you ever wondered how many phone calls are coming in to the dealership Parts Department on a daily basis? How many of these calls actually end up in parts sales?

Are we "maximizing" our opportunities by measuring our "Parts Phone Call Closing Ratios?" Lastly, are the Parts Counter people "trained" to sell parts, or are they just "order takers"?

These are just a few of the questions I had to ask myself on a recent dealer visit when the owner asked me to find new ways to increase his overall parts sales and gross. I decided to get "back to basics" on just where we could improve on opportunities that might go unnoticed.

I realized that the biggest opportunity that most dealerships miss in the Parts Department is "In Coming Parts Phone Calls". 

After performing a "Mystery Phone Shop" of the Parts Counter Staff I noticed that not only are the people answering the phone not trained in "how to" answer the phone, but they never asked me for the sale!

I do know that it's not "New News" and  we have all heard the infamous "Parts Hold" scenario, but there is a proper way to answer the phone, even if the in coming caller has to be placed "on hold" for a moment. 

The interesting thing about calls to the Parts Department versus calls coming in to the rest of the dealership is, in most cases, it's the ONLY department that doesn't have a "back up" person like a receptionist to answer these calls when they are busy!

They are EXPECTED to answer the phones, take care of the technician counter, look up parts, prepare estimates and so on.

The problem is that most other people in the dealership seem to think they stand around most of the day and are not being productive, but I can assure you that they have many, many moments during the day when they are expected to multitask.

So where is all of this leading to and what are the answers to the questions asked in the beginning?

First of all, we have to train our staff to answer the phones properly with a Phone Script that includes not only a friendly greeting or how to properly ask a customer if they wouldn't mind being placed "on hold" for a moment, it must contain specific questions that will help to measure the "Sales Closing Ratio" for proper follow up as well as building "Parts Sales Incentives".

Secondly, we already know that most Parts Counter people keep a "note pad" close to where the work, near the phone to write information down when the phone rings, or maybe to write down information from technicians or customers at the counter.

We are simply going to create a "Scripted Note Pad" for the Parts Counter Person that will provide a friendly greeting reminder and specific questions to ask that will give us all the information we need to follow up with customers and measure our "Sales Closing Ratios".

Here are some specific items that should be included in your Parts Counter Person's "Scripted Note Pad":

• Friendly Greeting with Introduction 
• Specific Friendly Greeting for Customers who are put "On Hold"
• "How Can I Help You?"
• Customer Phone Number (for follow up)
• Vehicle Information (Year,Make, Model, Vehicle Identification Number, etc.)
• Part(s) Requested? Y/N
• Parts In Stock? Y/N    If Not, Parts Ordered? Y/N
• Customer Installing Part(s)? Y/N (Possible Call Transfer to Service)
• Price Quoted? Y/N
• Discount Given? Y/N (Offered in Lieu of Losing the Sale) 
• Sold Part(s) Y/N
• If Part(s) Sold, include Invoice Number
• If Part(s) NOT Sold, Give Reason (i.e. cost, availability, estimate, etc.)
• Close The Sale ("Thanks for Calling, My Name Is ___________)

The results of the implementation of this Parts Counter Person "Scripted Note Pad" were astounding! We created a simple excel reporting system to measure the "Closing Ratio" of these in coming calls with the "Scripted Note Pads".

Each Counter Person was required to turn in their "Scripted Note Pads" at the end of  each day for follow up. The Parts Manager reviewed all the "Scripted Note Pads" and actually phoned customers who had elected not to purchase for the reasons noted. Lo and Behold, the Parts Manager was able to "capture" sales that would have gone unrealized!

Customers were AMAZED that the Parts Manager was actually calling them back to follow up, asking why they didn't purchase. One customer in particular called for prices on brake pads and did not purchase because they were "price shopping" and didn't know the difference between the "factory" brake pads versus the lesser expensive economy brake pads.

The customer was actually a Service Customer that owned two vehicles purchased AND serviced at the facility! The Parts Manager actually "sold the service appointment" to the customer and the vehicle was serviced the next day with the "factory" brake pads at the dealership!

I believe that we need to "re-think" our philosophy on parts sold over the phone, or our "over the counter" parts sales. In many cases, I have found that "Counter Retail Sales" have traditionally been a "high gross, low sales" category on the dealers' financial statement.

Are we really "maximizing" our "over the counter" Parts Sales opportunities? Is your Parts Counter Staff  "trained" to sell?

In most dealerships, the "over the counter" retail sales average less that $10,000.00 per month, with an average gross retention of 38% - 42%. With that said, I wondered if we focused MORE on this opportunity and tracked the "Closing Ratios" of these in coming parts calls, even if we did have to give up a little gross percentage.

Would I rather have 40% of $10,000.00 or maybe 30% of $40,000.00? Gross pays the bills, but it seems that we get caught up on the "NORM" with percentages and low counter sales instead of being competitive, training "ALL" our sales staff and retaining our customer base. 

Dave Piecuch is the Vice President of Automotive Consultants Group Inc. and is the Head Coach for Smart PartsTM.  Dave can be reached at Cell 786-521-1720 or E-mail at dsp0417@aol.com Vist our Website at www.smartpartstraining.com

  

Dealing With The Cycle Of Change

Over the past few months, I have highlighted articles that were based on "change". I couldn't help myself when I was recently asked to write an article about the "state of the union" so to speak concerning not only the Parts side of our business, but our industry in general. 


This was an exciting task because when you think about it...the more our industry changes, the more it stays the same! This "Cycle of Change" is constant and we have to be ready to adapt to these changes just to keep up with the competition, especially in the aftermarket. 


The "state of the union" in our industry has always seemed to revolve around NADA (National Automobile Dealers Association) and they have been a staple on our industry's standards and guidelines. This is where "the more things change, the more they stay the same". The "change" part of this phrase is how NADA is constantly giving us new information to help us with "dealing with the cycle of change". 


The "same" part of the phrase is where their consistent wealth of information along with their many groups of dealers that provide these standards and guidelines. Even though NADA is not sponsoring this particular article, I could not help but pass this information on as a great resource for strategic business planning.


In preparing this article, I decided to go to NADA's most recent "State of the Industry Report" for 2011 and I was amazed how much information was available as I "drilled down" some specifics.


 I have used this information in the past, but I had to stop and think that "years ago" we were not privileged to this much data, graphs and comparisons unless the dealer was an NADA Member, which of course, many are today. Even the average consumer has the same access to this information which has always been a "secret" in the past. 


I started my research for this article and here are some of the facts I found not only about the Parts side of the business, but also some pretty interesting observations about the "dealership as a whole" in their many national comparison reports. The results are compiled from NADA's latest "State of the Industry" Report for 2011, which compiles information through 2010.

• Overall Parts & Labor Sales: Up 5.2% (Due to Warranty & Internal Increases)
• Customer Labor Down: 4.8%
• Number of Dealerships Open with Weekend Hours: 46%
• Average Number of Hours Open for Service:  56
• Dealers with a Collision Center: Down 10% since 2000
• Total Vehicles in Operation in United States: Up 16.4% since 2000
• New Vehicle Registration in United States: Down 28% since 2000
• Newspaper Advertising as a % of Total Dealer Advertising: 2010: 22%  2000: 52%
• Internet Advertising as a % of Total Dealer Advertising: 2010: 23.7%  2000: 4.6%
• T.V. and Direct Mail Advertising: 5% - 6% 2000 - 2010  

NADA also stated in this report...."The recovery from the recession continued at a modest pace in 2010. Dealers continue to compete with independent service outlets for far less frequent periodic service and repairs required on newer, more sophisticated vehicles..."

So what does all this information mean? I know many of you are probably thinking..."So what?....this isn't new information!!" The real question is what are we doing with all this information?


 I know one "bullet point" that sticks out to me is that the "Weekend Service" option is slowly becoming a new standard and if your Service Department is NOT open as many hours as possible on the weekend, you are probably losing business to the aftermarket. 


How about the fact that many dealers are eliminating their Collision Centers?...does the cost of operating the Collision Center outweigh the bottom line? These are all great questions and they are just a few items that are in this report which I could have spent hours researching and planning.

One last one to bring up...New Vehicle Registration is down, but the overall Vehicles in Operation are up! I know that we all know that the average vehicle life span is up, but why aren't we "targeting" more advertising for these "older vehicles" and not just the customers in the first, second and third tiers who may have missed their last service? 


I realize retention is one of the primary issues today, but we need to "enhance" that target and utilize the internet more in our advertising budgets. The internet is less expensive and one of the primary sources of communication and will be for years to come. 

So, based on the NADA information above, how much of your dealership advertising budget is dedicated to the internet? These are just a few "bullet points" on the information that is provided at no cost by NADA at your fingertips.


 I would even go as far as to say that most dealers and managers probably know about the availability of this information, but how many actually use it to build your business plan and most important...how to "Deal With The Cycle of Change".

If you haven't visited the NADA website recently, you need to!...simply go to www.nada.org and go to the "Data" section to look for the "State of the Industry Report 2011" The latest industry standards and guidelines are also readily available at the NADA website. 


Dave Piecuch is the Vice President of Automotive Consultants Group Inc. and is the Head Coach for Smart PartsTM.  Dave can be reached at Cell 786-521-1720 or E-mail at dsp0417@aol.com Vist our Website at www.smartpartstraining.com

Five Steps to a Higher Parts Return on Investment

LIMITED OFFER!!

Okay!...so here we go! The "Five Steps to a Higher Parts Return on Investment"!! Pure and Simple, here are the Program Details:

Step One:

• Sign up for this exclusive "one time" offer for one low price of $395.00*                      (Expires April 15, 2012)

Step Two:

• Complete and send in ACG's "Smart Parts" one page Evaluation Form provided via email upon sign up. Include your latest D.M.S. Monthly Analysis Summary, Sales & Gross Information as stated on the Evaluation Form. Within five business days upon receipt of completed Evaluation Form and required information, you will receive a comprehensive Parts Department Evaluation based on ACG "Smart Parts" and NADA Guidelines performed by "Smart Parts" Coach Dave Piecuch.

Step Three:

• Attend a "One-On-One" Webinar with Dave Piecuch to prepare individual Dealer Parts Department "Action Plan" based on Evaluation Results. Future date set for implementation of "Action Plan" items based on Parts Manager and "Smart Parts" Coach schedule.

Step Four:

• Implementation Date Webinar to complete agreed "Action Plan" between Dealer Parts Manager and "Smart Parts" Coach Dave Piecuch. All modification and/or changes to Dealer Management System (D.M.S.) implemented by Parts Manager via "gotoassist.com" (no sign up or additional fees required by dealer).                                            

Step Five:

• Attend a 30 Day Monthly Management Report Webinar with "Smart Parts" Coach Dave Piecuch for review, modifications and/or changes based on D.M.S. Parts Monthly Analysis Summary Report results.  

Training and Implementation Program Duration: 30 - 45 Days  






Program Features & Benefits

• No Consultant or Trainer Expenses
• All Training Completed "In-Dealership" Based on Parts Manager's Schedule
• No Contracts or Long Long Term Agreements. One Time Fee Only!
• "One-On-One" Training with one of the industry's leading experts in the field of Parts Management and overall Fixed Operations. Dave is the author of ACG's "Smart Parts" and has written articles in Fixed Ops Magazine and has conducted numerous seminars for NADA. 
• NO DEALER MANAGEMENT SYSTEMS (D.M.S.) intervention by "Smart Parts" Coach Dave Piecuch. All modifications and/or changes to Dealer Set Ups & Controls input by Parts Manager.
• "FREE" Monthly Analysis Report and Financial Review if needed for six months with "Smart Parts" Coach Dave Piecuch, Parts Manager and Dealer via phone conference call.
• Broader Inventory Coverage, Higher "First Time Off Shelf Fill Rates", Increased Service Shop Productivity, Increased Sales & Gross Profits and HIGHER Parts Return on Investment!

Training Program Topics & Highlights

• Lost Sales Reporting
• Emergency Purchases
• Monthly Sales Analysis
• Phase-In/Phase-Out Criteria
• Source Ranking/Stocking
• Days Supply
• Stock Order Performance/Sales-To-Stock Ratio
• Level of Service/Off Shelf Fill Rates
• "FIRST Time Off Shelf Fill Rates"
• Parts Productivity to Service
• Parts Escalation Matrix
• True & Gross Turns
• Obsolescence Control
• Parts Staffing Metrics
• Special Order Aging
• Parts Counterperson Phone & Sales Scripts
• NADA & Smart Parts Guideline Review

REGISTER NOW

* Dealer will receive a "one time" invoice of $395.00 to include all above program details. Program details and completion as stated guaranteed by Automotive Consultants Group, Inc., 8362 Pines Boulevard, Suite 340, Pembroke Pines, FL  33024. "Smart Parts" is a trademark of Automotive Consultants Group, Inc. 

What's Your Parts Inventory "Rate of Change?"

"What in the world are you talking about?....Parts Inventory Rate of Change"? Believe it or not, that's usually the response I receive when I ask most parts managers that question. Change has been the topic in my first two E-Newsletters of 2012 and I want to finish it off this month by not only talking about change, but also how we measure the "Rate of Change". 


Many parts managers and dealers do not realize that there is a guideline to how much and how quickly our parts inventory should change throughout the course of a year. In this issue of "Smart Parts", we will not only discuss why "Rate of Change" is important, we will also show our "Smart Parts" Readers how to calculate their own Parts Inventory "Rate of Change".


Let's start off by looking at some basics...the average automotive dealership carries anywhere from 7,500 to 15,000 different part numbers with a total number of parts upwards another ten times these figures. Secondly, there are more transactions in the parts department in a single day than there are in the whole dealership in a single month! 


That being said, how "vulnerable" is your parts inventory to mistakes, accounting errors, pilferage, frozen assets and lost sales just to name a few. Here's a couple more questions to ask yourself as the dealer....Is my parts inventory keeping up with my sales demand?...or, How much "blue sky" is there in my second highest business asset?


To be quite honest, most dealer owners don't even pay much attention to their parts inventories as much as they should. I'm quite sure they pay a lot of attention to the New & Used Car Inventories, so why should the parts inventory be any different? 


Change is constant in the parts department and we should keep a "watchful eye" on how much that asset is changing on a monthly basis. This is why the "Rate of Change" is a pertinent indicator as well as important tool to measure the change in parts inventory.


 I have always thought of it this way, if  I had to "sell off" my parts inventory, what would it really be worth, how much CASH could I really get for it?...and even more important, does the inventory value on my financial statement reflect my Dealer Management System (D.M.S) inventory value?


Now that we have struck a chord, so to speak, let's explore how we calculate and measure the parts inventory "Rate of Change" and what guidelines we should use. We will also explore what these numbers reveal and how we can keep our parts inventory "Rate of Change" manageable as well as how to avoid those parts inventory discrepancies when physical inventory time rolls around. 


Here's the formula:

Total Number of Plus & Minus Adjustments X 12 months, divided by the Total Part Numbers in the System (D.M.S) 

Source: D.M.S. Parts Monthly Analysis Report 

Industry Guide: 5% or Less

So what does it mean if the parts inventory "Rate of Change" is higher than 5%? It simply means that there are more than an acceptable amount of "manual changes" to the parts inventory by parts department personnel that may effect the total inventory value. Here are a few examples:

• Inventory Count Corrections (overages/shortages)
• Manual Orders/Receipts/Returns
• Part Number Changes (supersessions)
• Posting Errors
• Poor Housekeeping Practices
• No Parts Employee Posting Restriction Policy 

The "Rate of Change" calculation can and should be performed monthly once the Parts Monthly Analysis Report has been run by the Dealer Management System (D.M.S.). As you can see from the examples above, a lack of control in any of these areas can and will lead to asset liability concerns as well as other financial implications. 


Most importantly, a high "Rate of Change" may indicate a lack of proper management, asset security and a less than desirable return on investment. The "Rate of Change" calculation is one of the best ways for dealers and parts managers to "police" the parts inventory investment as well as maintaining a low discrepancy percentage when it comes time to perform the physical inventory.

Change is on going and inevitable, especially in our parts departments, we just need to manage and control this constant change in order to maximize the investment and profits. So?....What's Your Parts Inventory "Rate of Change"?   


  Dave Piecuch is the Vice President of Automotive Consultants Group Inc. and is the Head Coach for Smart PartsTM.  Dave can be reached at Cell 786-521-1720 or E-mail at dsp0417@aol.com Vist our Website at www.smartpartstraining.com

Hope OR Change...We Have to Make a Decision!

Last month, I talked about January 2012 being "A New Beginning" for Parts Managers, or what I referred to as "Net Zero" Time. This month, I want to talk about "Hope OR Change"...that's right!...Hope OR Change! I know that we are in an election year here in the United States and I'm not here to particularly endorse any candidate or party, but as I thought about it...Hope AND Change just don't go together.

Let me explain further, I was thinking last month about the new beginning and how much January really impacts the whole year ahead. As Parts Managers, we attain valuable new information on trends such as gross and true turns, first time off shelf fill rates, parts sales activity and so on.

There is no month like January to make changes or modifications to major parts inventory Set Ups & Controls. These changes we made in January will be noticeable on February 1, 2012 in our Inventory Management System (I.M.S.) Parts Monthly Analysis Report and our Sales, Gross and Net numbers realized when the first Financial is released somewhere around the 10th of February.

Here's where "Hope OR Change" comes into play. If the changes or modifications we made in January do not meet our expectations then what do we do? Do we "Hope" that these numbers will get better next month? Do we "Hope" that the changes and modifications that we made last month will be different?

Or, do we review the information, learn from what these changes or modifications made in January and "Change" the parameters with some more "tweaking" in the right direction. That's what it's all about!...it's not just the physical act of running reports and reviewing them, it's what we DO with the information and move ahead to making more "Changes".

Having a successful plan in 2012 must involve three key ingredients which are; Evaluation, Planning and Execution. I've seen many successful Dealer Managers in all departments take the first two (Evaluation, Planning) very seriously, but they don't carry it through to the Execution part which is the most important. It's the most important because it requires the "Expected Results" our Dealers and GM's are looking for.

The Execution part also requires constant "Change" moving forward, not just the"Hope" that things will happen to achieve the desired result. Many of you have may have heard the the phrase: "There are only three types of people: "Those who "WATCH" what happens, Those who "WONDER" what happened and finally, Those who MAKE things happen"! I'm not sure who the author of this phrase is, but it's so true and everyone of us should ask ourselves which one of these three best fits who we are as managers.

The most successfully run Parts Departments are managed by people with these basic core principles. Making adjustments in our Set Ups & Controls is on going and never ending. I'm not talking about simple adjustments on inventory amounts or bin locations which occur on a daily basis. I'm referring to changes and modifications to Phase-In/Phase-Out Criteria, Days Supply, Pricing Escalations and Source Ranking, just to name a few.

 Although, I would recommend that any changes or modifications be done to one part or one source at a time in order to see if the results meet the expectation. Changes or modifications to a single part number, source or pricing base will reveal immediate results to review and most importantly, if the results don't meet expectation, it's much easier to go back to correct or make new modifications.

This is why "Hope AND Change" don't go together in my opinion. Of course, we can "Hope" the changes and modifications we made in January will lead us to the expected results at the end of month, but there again, we should know what the results will be as we monitor these changes throughout the month. If we don't see the expected results, we have to make a "Change" or modification.

Not only is this true about the changes and modifications we make as Parts Managers to our Set Ups & Controls, it is also true in how we manage all the aspects of our roles as department managers. Areas including personnel management, expense management and forecasting future growth, they should all follow this same philosophy; Evaluate, Plan & Execute.

If we all know that "Change" is inevitable, let's embrace it and expect it. Let it be part of "what we do" as managers to achieve our goals that lead to "desired results". Let's not just "Hope, Wonder & Watch" what happens, let's "Make" things happen by doing something with the information provided in our reporting systems.

Lastly, February is here...did the "Changes" or modifications lead to desired results? What did you do with information provided in in your January Parts Monthly Analysis Report? What worked and what didn't? These are just a few questions to ask yourself, then after this Evaluation?...Make your Plan and then, Execute your plan.

Don't put "Hope and Change" together...make a decision because "Change" will always lead you forward to desired results and if the proper changes are made, desired results will be achieved and expected, not just  "Hoped" for.

Dave Piecuch is the Vice President of Automotive Consultants Group Inc. and is the Head Coach for Smart PartsTM.  Dave can be reached at Cell 786-521-1720 or E-mail at dsp0417@aol.com Vist our Website at www.smartpartstraining.com