2017: "What Can We Expect?"

In December of every year, things get pretty busy, not only in our dealerships, but in our home lives as well as the holiday season approaches. With the hustle and bustle of both, we seem to get more consumed with the everyday stuff and before we know it....Boom!...here comes 2017!

With that said and looking ahead to 2017, I believe this coming year will not only be prosperous, it will be a "break out" year for our industry. As I mentioned in the intro, I believe there are a lot of indicators out there to support my opinion, including some stats and analysis from some prominent industry experts.

Each year, as many "Smart Parts" Readers already know, I take the time each December to do my research on what the current year has revealed as well as what it means looking ahead to the new year. Consistent to the past few years, 2016 showed continued growth in auto sales, even though it looks like it will fall a little shy of the new vehicle sales records of 2015.

My first question, or should I say concern is...when will we reach the peak and start the downward slide? Many of us in the industry know that our business seems to go in seven to eight year cycles where we experience a down slide in vehicle sales. This "trickle down" of lower vehicle sales can be felt dealer wide and all of a sudden, the fixed operations becomes even more of a necessity in dealership profitability and survival.

Are we at that point in history again? Could we have already seen the peak of new and used vehicle sales in 2015 and now be looking at that dreaded period in time again? Most importantly, if true, are we ready to survive the pitfalls and struggles yet once again?

To find the answers to these and perhaps many other questions and concerns looking forward, I once again turned to a source that has consistently led our industry, celebrating 100 years of service in 2017 and that source is the National Automobile Dealers Association, (NADA)

In November of this year, NADA Chairman, Jeff Carlson wrote an article that is available to all on the nada.org. website titled "The Next 100 Years of Evolution is Here". In his article, he expands on the future of our industry and how NADA "will continue to be proactive and forward looking in it's mission to advocate for the franchise system and provide dealers with the resources they need to succeed."

As part of NADA's commitment and on their behalf, Glenn Mercer, a highly regarded automotive consultant is currently conducting a thorough and researched look at what our industry has to look forward to by the year 2025. Not only will this study look at our end of the industry, it will also give us a perspective of what automotive retailing will look like from the dealer, consumer and manufacturers standpoint.

In Mercer's preliminary findings, he believes that we will see more evolution, but not revolution over the next 10 years with sales remaining consistent, while direct sales efforts will be focused on higher end vehicles. He also believes that private dealer ownership will continue to dominate in a slightly shrinking overall dealership total of approximately 16,500 by 2025.

Forecasts also indicate that light vehicle sales will be in the approximately 17-18 million with a continued decline in profit margins, much like today which will require dealers to focus, once again on the fixed operations to provide necessary revenue to survive and prosper. Mercer's research and perspectives are scheduled to be completed early in 2017. 

Chief Economist for NADA, Steven Szakaly predicts likewise as far as the projected light vehicle sales at 17.1 million units, thus predicting a "stable market" ahead and not a growing market. He also believes that the industry has "achieved record sales and pent up demand is effectively spent".

Szakaly continued with his economic outlook for 2017 as remaining strong with projected gross domestic product, (GDP) growth at 2.6 along with employment numbers increasing and gasoline prices remaining stable. He also added that increased infrastructure spending and certain tax cuts from an incoming administration could also mean a better long term outlook.

Some areas of concern he has though looking forward is rising interest rates, increased loan terms to an average of 68 months may lead to a slower, but still strong sales pace. This may also impact and increase new vehicle lease purchases and declining residuals and used car values.

Overall, the future is stable, with a potential for even higher growth pending any changes that may be implemented by the new administration. In my opinion, we just may "dodge a bullet" this time around as to our cyclical patterns of the past have proven.

So what does all of this have to do with us "Smart Parts" Managers?

Quite simply, once again, our dealers are going to look to us and all the fixed operations to "foot the bill" and to remain profitable overall. Fixed Coverage, or Service Absorption percentages are going to be the main topic in training from in-dealership all the way up to the NADA University level.

Here at ACG, we have already seen a drastic increase for training at all levels and most of all...parts training. The Parts Department has one of, if not the highest "net to gross" percentages in most dealerships today. As a dealer, if makes perfect sense to insure my Parts Department Managers and Staff have all the necessary training to maximize department profitability.

We experienced a very high training demand this year at ACG, with the highest increases in Parts Management Training. The demand was so much higher that it was felt all the way up to the NADA University level. I was fortunate enough to participate in the NADA University's first, but not last Parts Summit this past September to address this very issue of expanding parts training overall

Partnering up with NADA, along with other distinguished industry parts experts was definitely a great recipe for advancing the agenda and curriculum going forward. Opening this "round table" forum to new ideas was, as I mentioned in previous articles, one of the best ideas put forth by Chris Bavis and Mark Michalski, University Instructors at NADA.

The future looks very bright in my opinion for "Smart Parts" Readers and Managers! The upcoming year of 2017 could actually be a record year for training and overall fixed operations growth. With a steady sales forecast, projected strong economic growth and strong consumer confidence levels, 2017 could just be your "Best Year Ever!"....and ACG "Smart Parts" can help get you there!

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

Vendor Managed Inventories: Could The Manufacturers Really Be "Missing The Boat?"

As I do in many of my articles, I start out by referring to how things were "back in the day" and once again, I find it very apropos to start that way again in this month's issue of ACG "Smart Parts" when referring to how we get our stock replenished today versus years ago.

The one thing I do know is that "back in the day", we only received what we ordered, with very little intervention, or interference from the manufacturer. We may may not have had all the ways track parts history, trends or demands that we do today, but it was much simpler back then. Although, I will say that having the right mix of parts on the shelf was very difficult.

In many ways, Vendor Managed Inventories, (V.M.I.'s) were and are a welcome sight as we now have a way to somehow get a "consensus" as to what we should stock and what we shouldn't stock based on all this demand being recorded by the manufacturer. We can even earn added discounts by keeping within program "compliance" as well as spending less time creating and sending our stock orders.

Vendor Managed Inventories, (V.M.I.'s) also gave the dealer an added sense of security by "protecting" these purchases of qualified parts over a period of time. So how can we go wrong?....less effort, inventory protection, added discounts, allowances and much more!

As I mentioned in the introduction, I have written on this topic several times and have answered many of the common questions that Parts Managers have concerning Vendor Managed Inventories, (V.M.I.'s), but I haven't really "dug deep" into the "why" and "how" these programs work in the first place.

The first question is how a particular part becomes "qualified" to be a part included in a particular V.M.I. Program. That seemed to be a pretty simple one as just like most other parts in our own Dealer Management Systems, (D.M.S.), criteria must be attained in order to be a "qualified" part. The only difference is that a "collective" of demands have to be met by a number of dealerships in order for parts to qualify for the most part, but not all.

Knowing this going in, that answered the question to me as how parts are "phased-in" to any particular V.M.I. Program, but it didn't answer the question as to which dealers are to stock certain parts and which ones weren't. On top of that, what would be the determining factors to the Best Stocking Levels, (B.S.L.) and Best Reorder Points, (B.R.P.)?

This was where the research came in as I found that many Parts Managers were receiving Recommended and Suggested Stock Orders on parts that may only have one "hit" or "demand" in the last seven or eight months. 

How could this be that any V.M.I. Program should suggest stocking parts that have not even met my own phase-in, phase-out criteria? How could they possibly even know what my Best Stocking Level, (B.S.L.) and my Best Reorder Point, (B.R.P.) be on a part that doesn't really even qualify or even have enough history to know the answers to any of these questions?

Now, at this point, I'm really getting intrigued and inquisitive as to the "hows" and the "whys" these parts are ending up on more shelves than ever before. I do know that the pressure being put on Parts Managers in this case study by the manufacturers to meet and exceed "compliance" levels was very apparent. It almost seemed like they didn't even care whether or not the dealers' inventory levels on this "asset" were skyrocketing and actually adding to the dealers obsolescence numbers.

Even though these V.M.I. Inventories are protected and all can be sent back after a period of time at no additional cost, (not counting acquisition and holding costs, of course) we have to ask ourselves one important question....

"Why would I even buy parts to "test them" over a period of time, just to send them back at a later date?...I thought we were supposed to buy parts to sell them at a high rate of turn?"

Hmmm....interesting question, especially when I thought, as a Parts Manager, that I was supposed to be trying to have the right mix of parts with a high "First Time Off Shelf Fill Rate" and high True Turn numbers.

Not to be misunderstood, I do realize that these Vendor Managed Inventories DO help Parts Managers with those parts that are good or fast movers, but I am only referring to what's missing and that's why I believe the manufacturers' could be "Missing The Boat".

Let Me Explain...

During my research, I started to take down some notes as to the similarities in all these ten stores and I noticed a few things;

• All had excess inventory amounts in the 7 - 12 Months, "No Sales" Activity Area.
• All had inventory amounts in the over 12 Months, "No Sales" Activity in excess of 25%
• All had "Non Stocked" inventory amounts in excess of 50% of their total inventory
• All had at least 30% of these "Non Stock" were added parts from their V.M.I. Program.
• All of these added V.M.I. "Non Stock" Parts had a B.S.L. and a B.R.P. of ZERO!
• All of these Parts Managers DO NOT generate D.M.S. Stock Orders on a regular basis.
• All of these Parts Managers make little, if any adjustments to their V.M.I. Stock Orders.

With all of this information, it's no wonder how so many Parts Managers got to the point of "over valued" inventories, lower gross and true turn numbers, lower First Time Off Shelf Fill Rates and even lower Service Shop Productivity.

Here's What's Missing...

The one thing that was consistent in all these parts departments was when I asked them to run a D.M.S. Stock Order, they either forgot how, or they hadn't run one for a LONG time. Once we created the "in-house" D.M.S. Stock Order, lo and behold....look at all those great part numbers that we need on the shelf!

Why aren't they already on the shelf you might ask?....well!...these parts that are selling at a high rate in this particular store are not qualified, V.M.I. parts! So, rather than stock them and have no protection, let's just special order them when we need them, thus tying up the shop once again to wait for a part to arrive overnight that we should have had on the shelf in the first place.

The other thing that was missing that I hadn't figured out to this point was..."How can a part be suggested on my V.M.I. order and come into my inventory with a 0/0 B.S.L. and B.R.P.? In most D.M.S. Systems, this isn't possible unless these 0/0 B.S.L. & B.R.P. parts are actually forced in by the Parts Manager.

So, how does this happen?...

I recently figured out, or at least in my opinion, that parts that are on a particular V.M.I. suggested order that may have only one demand in my D.M.S. System, may actually have several, "qualified" demands in the V.M.I. Group as a whole. Even though the part hasn't met my criteria, it has met the group criteria and if I don't catch it before it gets ordered?...you guessed it!...I have now bought that part to sit on my shelf until it's reached it's qualified return period.

Even though there is no technical B.S.L. or B.R.P. in my system for these parts, they are forced in as a B.R.P. of zero and B.S.L. of one by the group criteria. Overall B.S.L. and B.R.P. is determined by either the V.M.I. criteria as a group for the B.S.L. and B.R.P., or the my own Dealer Management System's, (D.M.S.), whichever is greater.

So, if you are not watching or paying attention these V.M.I. Suggested Orders, it won't take long for it to get out of hand and overload you with lots of inventory as well as acquisition and holding costs that will skyrocket.

If the manufacturer really wanted to maximize on their parts sales, they would encourage Parts Managers to use both programs to get the best stock order efficiency from their V.M.I. and the dealers' D.M.S. Systems. 

In the last few months, I have actually created and generated over twenty D.M.S. Stock Orders for Parts Managers that had a wealth of part numbers that they all said they would normally stock. Only because they had stopped running their own stock orders on their own systems caused these great "stock out" situations. In fact, I found that many of these D.M.S. stock orders had many more suggested order lines than the V.M.I. suggested order had!

One other item I noticed in my research was that Parts Managers were actually "running out" of V.M.I. Parts! Once I explained to them that just because the V.M.I. Suggested Order has your fast moving part listed, it's very possible that the Best Reorder Point, (B.R.P.) may need to be adjusted as the V.M.I. Program for the most part, is only picking up your "Default" Source Settings on Low and High Days Supply and not your Source Ranking by Piece Sales Settings.

I believe that the manufacturers are missing out on additional sales as they are now steering Parts Managers away from their normal duties and responsibilities when it comes to basic parts ordering procedures. In order to have the right mix of parts, we have to use all of our tools in our tool boxes, both vendor managed and in-house programs.

In my opinion, there is no substitute for plane old, good Parts Manager skills, reporting Lost Sales, Emergency Purchases, doing Bin Checks periodically, running "in-house" Stock Orders, etc. I guess you could say that we had it pretty good "back in the day" and just maybe, it wouldn't hurt if we carried some of those "good practices" on into today's Parts Manager's day!

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

October 2016: Inaugural NADA Parts Summit - September 27-28, 2016

Back in April of this year I had the privilege to meet with Chris Bavis and Mark Michalski, both NADA Academy Instructors in their booth at the NADA Convention in Las Vegas. As "Parts People" do, it wasn't but a minute or two when we were in deep discussions about parts in general.

It was at that time they both mentioned that they were putting a meeting, or "summit" together at the NADA Academy with a format that I think was not only a great idea, but also much needed. A format that would invite those of us working and training "in the trenches" along with the people responsible for most of our industry standards today.

I was not only fortunate enough to get invited to this inaugural event, but I was also encouraged to contribute and bring my own ideas from ACG "Smart Parts". I can't remember a time or if I've ever seen a time where the people responsible for our industry standards "opened the door" to new ideas and concepts.

Chris Bavis and Mark Michalski, NADA Academy Instructors facilitated the summit along with a host of NADA Instructors, 20 Group Facilitators, Directors and Marketing Staff. NADA was well represented right from the start and as I noticed from day one, this was going to be great! NADA's vision for the summit was as follows;

"To invite leaders in the parts consulting and education venues to NADA to discuss the critical issues facing today's dealers in their Parts Departments, so we can collectively provide current and relevant answers to those critical items and improve all educational offerings to NADA members."

I want to start out with listing the other names of those attending and contributing to this Inaugural NADA Parts Summit along with their affiliations to our industry. Some came with presentations to share on various topics and some, like myself, came to listen, share and comment on all topics.

Invited Attendees;

Robert C. Davis, CPA & Partner at Dixon, Hughes & Goodman, (DHG), Memphis, TN
Mark De Lucia, Inventory Management Specialist, Dealermine Corporation, Clackamas, OR
Keith Ely, Commercial Dealership Consultant, KEA Advivors, Lawrence, KS
Carroll "Scooby" Barbre, Commercial Dealer Consultant, KEA Advisors, Lawrence, KS
Kent Ely, Commercial Dealer Consultant, KEA Advisors, Lawrence, KS
Greg Finn, Commercial Dealer Consultant, KEA Advisors, Lawrence, KS
Frank Burrows, Partner, Automotive Business Solutions LLC, Haymarket, VA
Kevin Burkhimer, Partner, Automotive Business Solutions LLC, Haymarket, VA
Mark Garafoli, Consultant, ADMI, Inc.
Richard L. Owen, Regional Fixed Operations Director, Group 1 Automotive, Kennesaw, GA
Dave Piecuch, Vice-President, Automotive Consultants Group, Inc., Pembroke Pines, FL

Topics of discussion and individual presentations included the following;

Obsolescence - How we got it in the first place, how do we get rid of it and how do we keep it from happening over and over again? Mark De Lucia's presentation illustrated how to actually turn dealers' "garbage into gold" by reinvesting cash received from bought up obsolescence back into active inventory that turns at a much higher rate.

Vendor Managed Inventories, (V.M.I.) - Chad Royston from NADA provided us all with great information on how to get the most out of individual manufacturer vendor managed inventory programs. Further discussions with those attending also brought out that too many Parts Managers are relying exclusively on the manufacturers' to control their inventories through these various programs and excluding their own Dealer Management Systems. Combining both the manufacturers' V.M.I. Programs AND the dealers' D.M.S. for optimum ordering procedures was the general consensus in the group.

E-Commerce & Wholesale - Is it right for me?...and just who benefits? This open topic for discussion brought out a LOT of information in my opinion. Many, including myself, offered various calculators to see if wholesale and/or utilizing companies like E-Commerce and Ebay are actually worth it to begin with. Are we actually considering all the costs including acquisition and holding costs?....obsolescence?....personnel?, etc. Great topic with great results from the group as the answer to this question can be easily determined and available to those "Smart Parts" readers out there.

Obsolescence in "Buy/Sell" Agreements - If anyone would have told me going into this Summit that I would be totally "blown away" by talking about obsolescence in a "Buy/Sell" Agreement, I would have bet against it. Robert Davis from D.H.G. had a great presentation loaded with factoids, information and comment on the "legal" side of things when it comes down to dealers in a "Buy/Sell" Agreement. I also didn't realize how evaluating and putting a cost on inventory that includes obsolete parts inventory could be so intense. Great stuff and great job Robert!

Parts & Labor Pricing/Inventory Mix/Guides/Theories - Another great set of topics were discussed on how we price our services, both parts and labor as well having the right mix of parts inventory in order to achieve a high "First Time Off Shelf Fill Rate" level. Richard Owen from Group One Automotive provided some great examples of utilizing a labor and parts matrix to maximize profitability while remaining competitive in the market. Even though this topic is not new to most of us, it was a great topic to discuss as far as which and what matrix works best as a general consensus in the group.

Parts Inventory Reconciliation - This topic wasn't really supposed to be a topic in the first place when I looked at the agenda, but when the topic came up?....Wow! Parts Inventory Reconciliation ended up being one of, if not the top topic when it came down to training needs. In most dealerships, the Parts Manager and the Office Manager do not speak the same language when it comes down to parts and accounting integration. There will definitely be more to come on this topic in the future as NADA, along with those at the Summit will be adding this topic to their training and educational curriculum.

Hiring and Managing the Millenneal Generation - Another great topic that was extremely informative with this presentation made by Jim Phillips and Chad Royston from NADA. As I learned from the information and facts provided, we can't take this generation lightly as it is growing each and every day. As in my "baby boomer" generation, there are characteristics to each generation and we tend to only look at how we do business through our own eyes, or "generation". Once again, information now available to "Smart Parts" Readers from any of us in attendance. 

Parts Bar Coding - Some may call "bar coding" the way of the future, but as Frank Burrows and Kevin Burkhimer from Automotive Business Solutions, LLC explained, it's actually been out there for over 35 years! Think about it, we all know what UPC Labels are, (Universal Price Code) as we see them in supermarkets, department stores and other retail outlets. It only makes sense that this technology needs to grow in our industry as well when it comes down to efficiently managing our parts departments. Great presentation and great stuff once again...I highly encourage "Smart Parts" Readers to research and check out Frank and Kevin's product.

Lost Sales Reporting & Special Order Parts - I purposely saved these two topics for last on purpose. If you can imagine, on Lost Sales for example, how many definitions we have all heard over the years? Now, can you also imagine a room full of industry leaders in the area of parts coming to a united consensus on the definition of a parts "Lost Sale"?...of course not! 

One of the most fun times at the Summit was discussing this topic and believe it or not, some left with a different definition than what they came in with. The bottom line on reporting Lost Sales, which I define as "Potential Missed Opportunities" is if whatever the definition the Parts Manager puts on it AND gets the results in at least 5% - 10% reporting (as a cost of sales), then THAT's the correct definition for him or her.

Getting that extra "demand" recorded is critical and that's really the most important part of recording these "potential missed opportunities" in the first place. Recording "questionable" or "maybe" Lost Sales won't hurt in the long run as these parts don't just jump on the shelf. They just get in front of the Parts Manager's eye in order to make the proper decision whether to stock them or not.

Special Order Parts was also a surprise to me as it's not really anything new, but it was amazing that it drew a lot of conversation in the group. It was also amazing to hear how many dealerships struggle with controlling Special Orders and how much they impact obsolescence. 

Many simple controls and processes were discussed and I believe the general consensus on this topic was to have a process and controls with consequences in the first place. As discussed, most failed Special Order Programs in dealers were actually a result of not having one at all.

In Conclusion:

In closing out this special edition of ACG "Smart Parts", I once again want to say "Thanks" to not only Chris Bavis and Mark Michalski, but also all those attending and the information shared among all of us. I know that there will be more of these to come in the future and I hope I'm fortunate to get invited as well. 

I believe that getting our biggest leader in setting our industry standards, that being NADA and those of us "in the trenches" working with you each day is definitely a recipe for success going forward. A first in my opinion, especially in a "round table", Summit format.

I know for a fact that new education and training programs from NADA in cooperation with those of us in the field will be coming soon and I recommend all of NADA's Members, especially to the dealers out there, to keep an eye on what's ahead and how you can make your Parts Department more profitable and a more "liquid" asset in the future.

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

September 2016: Special Order Parts "A Necessary Evil?"

As far back as I can remember, I have always thought of Special Order Parts as "A Necessary Evil" that I had to deal with each and every day. It was just one of my duties & responsibilities as a Parts Manager...it was just part of my job.

What I didn't realize though was the differences, in my opinion, dealing with Special Order Parts "back in the day" being so much different than it is today. Back then, Special Orders Parts represented the majority of all parts orders as proper stocking levels were much harder to maintain.

Longer lead times, greater intervals between stock order due dates and lower manufacturer "fill rates" highly contributed to the daily dilemma of having the right parts at the right time for our customers. In addition, Dealer Management Systems, (D.M.S.) didn't provide the necessary data to phase-in parts to inventory, or maintain a proper days supply.

Fast forward to today, with all our technology, information and even lead times less than two days in many dealerships, we are still dealing with this "Necessary Evil". In many cases, Special Order Parts has gotten even worse than it was "back in the day."

In my opinion, it all started years ago, first with "dedicated delivery" being offered by many manufacturers. Follow that with what I call the "nail in the coffin" when manufacturers started to provide their own stock replenishment programs, or "Vendor Managed Inventories", (V.M.I.)

There are many great advantages to both programs with some Manufacturers' V.M.I. Programs perhaps better than some others. One common thread in these programs though is that it's obvious that many Parts Managers have "lost control" on the basic fundamentals of Parts Management, which is protecting and maximizing the dealers investment.

Before we get to our main topic on Special Order Parts, let's work our way down to the how we got to the point of Special Order Parts becoming the "New Necessary Evil". After all it didn't happen overnight it appears that it's not going away soon.

First, let's start with the manufacturers offering "Dedicated Delivery" in order to cut down "lead times" and offer the customer a higher "Level Of Service". This was obviously a winner right from the start and most other manufacturers followed suit once introduced.

Dealers and Parts Managers alike "jumped on the bandwagon" with our first major contributor to increased Parts Special Orders. "Dedicated Delivery" provided an alternative to higher inventory values as parts were now available overnight. No need to stock as much because worse case scenario, we can get it overnight without added shipping and holding costs.

Even though this may have not been the intent of the manufacturer, the opportunity swung into the favor of the dealer, while the manufacturer absorbed the added cost of delivery and maybe even higher inventory holding costs.

Net result?...potentially more Parts Special Orders due to lower dealer stocking levels. Even though lead times were shortened, shop productivity is lowered as more and more vehicles are "tied up" overnight waiting for parts.

One other problem was born when "Dedicated Delivery" came about and that is that "Special Order Parts" seemed to disappear! All of a sudden, "Special Order Parts" got added to the overnight Stock Order and thus....got receipted as Normal Stocking Parts because these "Special Orders" were added to the Stock Order.

I noticed this "epidemic" soon after "Dedicated Delivery" started when researching various D.M.S. Monthly Management Reports. All of a sudden, I'm seeing Parts Departments that have NO Customer Orders recorded and a 99.9% Level of Service and Stock Order Performance, or Sales From Stock Ratios also near 100%!....Wow!...the perfect Parts Department!

So now, not only are we lying in our reporting on the D.M.S., we are are now reporting inaccurate "First Time Off Shelf Fill Rates" and "Stock Order Performance". This, of course also leads to false "Gross and True Turn" numbers. Eventually, it will also lead to higher obsolescence as the epidemic continues.

Now, let's move on to the second phase of what will lead us to the "Necessary Evil" part of Special Order Parts and that is the Manufacturers Stock Replenishment Programs, or "Vendor Managed Inventories", (V.M.I.). 

Here's where, in my opinion, the score sheet gets balanced between the manufacturer and the dealer. Dedicated Delivery provided the dealer overnight parts at no added delivery expense or added holding costs, so now the manufacturer will "manage" the dealers inventory....part two of how to increase Special Order Parts, our "Necessary Evil".

Even though "some" of these V.M.I. Programs work well, we have to remember one important thing. They do not completely replace the dealers own Inventory Management System, (I.M.S.) as both the V.M.I. and I.M.S. programs need to be managed properly.

To support my theory, I've asked the following two questions to many Parts Managers who rely solely on the manufacturers V.M.I. Programs;

Question One: "Have you ever had your V.M.I. Program recommend stocking parts that have not met your own Phase-In Criteria with little or no sales activity?"

Question Two: " Do you have active parts in your I.M.S. System with normal or high sales activity that you do not stock and are not "qualified" in your manufacturers V.M.I. Program?"

I have yet to meet a Parts Manager that has not answered "Yes" to both questions. As a matter of fact, I have seen "Lost Sales" Reports that have lost sales recorded on "Normal Stocking Parts" with very active parts life cycles, but due to the fact that these parts were not "qualified" V.M.I. Program parts?...you guessed it!...Now, these parts become Special Order Parts!

Not only are "Special Order Parts" on the rise, controlling them is another major problem. You would think that after all these years, we would have this situation under control, but that is definitely not the case in many Parts Departments today.

"Special Order Parts" are still ending up op on the shelf, in hopes that they will sell one day, but to no avail, they just add to the obsolescence problem. Lack of controls in dealing with "Special Order Parts" is still the major reason these parts end up on the shelf.

If you are a Parts Manager that is fortunate enough to have a manufacturer that accepts monthly returns on these parts, it is, of course much easier to limit the damage that these "Special Order Parts" can have overall.

Having a system in place, or process in handling "Special Order Parts" is crucial to minimizing the negative effects in the first place. In fact, most Dealer Management Systems, (D.M.S.) offer programs to electronically control "Special Order Parts", making it much easier to manage this "Necessary Evil".

Whether you have a system to electronically control these "Special Order Parts" or not, there are still some basic guidelines that are required to manage them properly. Customer deposits, prepayments, future service appointments, handing and return fees are just a few basic guidelines used by most Parts Managers to control the "Necessary Evil".

In my opinion, the "bottom line" is that even though we have some of the best technology and services available to us today, the problem still exists. In some respects, it's gotten even worse with so many more part numbers today needed to service so many makes and model vehicles.

One thing is for sure though, as "Smart Parts" Managers, we cannot overlook our basic fundamentals in managing our dealers parts inventory. We cannot let the manufacturers totally control our ordering procedures and most importantly, we cannot lose control of one of our dealers biggest assets.

Regardless to what some might think today...our dealers' still want their Parts Departments to be very profitable, with an expected high return on investment, limited or no obsolescence and a high customer level of service...the more things change, the more they stay the same...

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

August 2016: "Maximizing Order Efficiency"

Some of you "Smart Parts" Managers out there utilizing your Manufacturers Stock Replenishment Program may think you are already maximizing your order efficiency, but in my opinion, if you are not utilizing your own Inventory Management System, (I.M.S.) to compliment their programs, you just may be missing the boat.

I believe the question I asked in the introduction is a legitimate one because it appears that we, as "Smart Parts" Managers may have forgotten our roots. In the past, we relied solely on our own Inventory Management System, (I.M.S.) to generate and send our Stock Orders.

I believe there are great advantages and disadvantages to these programs that we all need to be aware of. Advantages such as order simplicity, added discounts, allowances, return reserves and inventory protection may sound great, but I would have to add...."at what cost?"

These advantages have kind of spoiled us to some degree because we just feel we "have to do it" because we won't be in compliance, miss added discounts and cash rewards for our dealer. In some cases, being compliant to these programs is directly tied into overall dealer programs from sales to service.

Dealer status and compliance to these programs that may tie in sales, service and parts can add up to a lot of "dealer cash" and in some dealerships, it may even be the difference of being "black or red" on the bottom line of the dealers' financial statement.

We have to be careful though when our overall "state of mind" is being controlled by the manufacturer because, before you know it, we aren't just being compliant...we are becoming "obedient" to the manufacturer.

Let's take a closer look at what I'm referring to...

After looking at some of these advantages, let's take a look at the possible disadvantages and risks that we could be encountering by being "obedient" to these programs. After all, the manufacturers only sell two things...vehicles and parts...and they have no problem with selling you more of each than you really need as far a days supply guidelines go.

More and more Parts Managers today in these programs are overstocking their inventories because they are being 100% "obedient" to their manufacturers' suggested stock orders. Many may think it's okay to utilize their suggested stock order as they are utilizing your own Inventory Management System, (I.M.S.) Set Ups & Controls to create these suggested orders in the first place. 

On the contrary, there's a lot that many "Smart Parts" Managers don't know about these programs, or how these systems even calculate individual and overall demand. How does the manufacturer know what your individual needs are to begin with?... 

Before we get into what you may know or may not know about how these programs work in the first place...I have another question to ask "Smart Parts" Managers out there...

"If it were your own money, coming out of your own back pocket...would you still just accept and place these suggested orders that they are recommending?"

Most of these programs offered by the manufacturer utilize a combination of basic Set Ups & Controls that ultimately determine what you see on these suggested stock orders. They combine individual dealer demands along with other dealer demands to generate these stock orders and determine overall days supply.

If you are a "Smart Parts" Manager in one of these programs, there is one very important thing to know and remember, especially if the program your are enrolled in is stocking your inventory based on your own Inventory Management System, (I.M.S.)

One of the main reasons, if the the biggest reason for Parts Managers ending up with "overstocked" and "over valued" inventories is because of a lack of control when it comes down to managing Days Supply and how parts are Phased In in conjunction with these manufacturer programs.

Source Ranking by Piece Sales has never been more important than it is today when you factor in these manufacturers' programs along with the Dealer Inventory Management System, (I,M.S.). Unfortunately, not all Inventory Management System Vendors offer Source Ranking by Piece Sales.

Source Ranking by Piece Sales for those out there who may not be familiar, is basically an I.M.S. function that allows parts to automatically move parts to different sources based on sales movement. Parts movement is what determines the proper Days Supply after initial Phase In.

We will get back to Source Ranking by Piece Sales in a moment, but first, let's look at how parts are "phased in" to your system from the point of view of the manufacturer. Keep in mind what I said earlier about the manufacturers utilizing your own Inventory Management Systems Set Ups & Controls along with other Dealers' Set Ups & Controls.

This combination of Set Ups & Controls with all these dealers is what ultimately determines what you see on your manufacturers suggested stock order. This is why I have Parts Managers asking me this common question when it comes to these manufacturers programs...

"Why are they sometimes suggesting parts on my stock order that I have never sold while other times NOT suggesting parts that I do sell on a regular basis and aren't even qualified?"

That's just one of the dilemmas I hear quite often as the biggest dilemma is yet to come. Having the proper Days Supply after "Phase-In" is far and above the biggest concern a "Smart Parts" Manager should have when utilizing these manufacturers programs. This is where having the option of Source Ranking by Piece Sales come back into play.

So!...Let's do the math!...

For example, if I have a part that sells only 6 times a year, my Low Days Supply, or Best Reorder Point, (BRP) would be 60 Days Supply as the part only sells every other month on average. My High Days Supply, or Best Stocking Level, (BSL) may be set 75-90 Days Supply.

Now, let's compare that to a part that sells 24 times annually where my Low Days Supply, or Best Reorder Point, (BRP) would be 15 as this part sells on average every 15 days. My High Days Supply,

Best Stocking Level, (BSL) may be set at 100% of my Low Days Supply, which would be 30 days.

A part that is fast moving and sells in excess of 100 times per year will actually have a Low Days Supply, or Best Reorder Point, (BRP) of maybe 5-7 days, based on lead times and a High Days Supply, (Best Stocking Level, (BSL) of 10-14 days.

As these parts move through their life cycle and movement changes, this Source Ranking by Piece Sales option automatically controls the source which has the proper Days Supply at all times. This helps the "Smart Parts" Manager to control "overstocked" and "over valued" inventory situations.

This is why I suggest that Parts Managers run their own Inventory Management Systems, (I.M.S.) stock orders at least twice a week right along side of their manufacturers recommended stock order. This is also why I referred to this as having the "best of both worlds". 

Having both stock orders in front of you helps to keep the manufacturer "in check" on suggested quantities as well as making sure that parts aren't missed or maybe not "qualified" by the manufacturer's suggested stock order.

I've actually had some Parts Managers say to me..."But, if I buy a part based on my own stock order and not theirs, it may not be qualified and won't be protected!"

Each time I hear that question I have to cringe because personally?...I could care less if it's protected because if these parts have met demand in my I.M.S., I plan to "sell" these parts and not "protecting them, or "returning" them once they are obsolete.

Here's the sad part, many "Smart Parts" Managers do not have this option of Source Ranking by Piece Sales which is the huge dilemma I was referring to earlier. Keeping in mind the Days Supply examples I gave earlier, without the option to rank parts in separate sources based on their movement, all parts are then "created equal".

In other words, no matter how many times different parts move whether 6 times a year or over 100 times a year, they will have the same Low Days Supply, or Best Reorder Point, (BRP) and High Days Supply, or Best Stocking Levek, (BSL) which is normally defaulted to 15 and 30 respectfully in most stores I run into that don't have the option to rank parts by piece sales in separate sources.

This means running out of parts that you need most and overstocking parts you don't need as much of, even though they have met "Phase-In" criteria. Thus, the dilemma I mentioned earlier and of course, one of the biggest disadvantages in utilizing these programs.

Maximizing Order Efficiency is more complicated today than ever before. It was much easier "back in the day" as it was as simple as ordering as much as you could on your stock order to gain the best discounts, allowances and return reserves. There were no "compliance" levels or program criteria just to get even half of the discounts we used to get years ago for just ordering efficiently.

Maximizing Order Efficiency now requires "Smart Parts" Managers to utilize all their resources to squeeze whatever they can to earn discounts, allowances, return reserves and overall dealer compliance for additional profits for the whole dealership.

Maximizing Order Efficiency doesn't mean you have to be "obedient" in order to be "compliant"...it just means that you have to know how to play the game and play it wisely...you have to be a "Smart Parts" Manager.....

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

July 2016: "What Are You Waiting For?"

Have you noticed the Service "Waiting Area" lately?...or have you just passed by it, hoping not to have to talk to anyone on your way back to the Parts Department?...

Seriously though, have you ever actually counted the number of customers at the beginning of each day and maybe even right after lunch, that are sitting in the "Waiting Area" while their vehicle gets serviced or repaired?

I believe these are legitimate questions to ask the Parts Manager, not just the Service Manager because each time we have the opportunity to experience a "one-on-one" relationship with the customer, we have the opportunity to increase sales and gross profits.

For years, from a Service perspective, we have tried and tried to limit the number of Service Customers who would rather "wait" for their vehicle to be serviced as opposed to dropping their vehicle off for service.

We have also known for years the reason for limiting customer "waiters" was because average sales per repair order drops drastically when the customer chooses to "wait" versus leaving the vehicle for the day. Even though this has been the "norm" for many years, we are now seeing that trend start to shift in the other direction.

Customer convenience has and always will play a big role in customer retention and overall customer satisfaction. In many cases, it's the number one reason for the customers' overall choice in not only a vehicle brand, but also the dealer the choose to buy from.

More and more customers are "demanding" to wait than ever before, making it even tougher for Service Departments to control the overall  number of "waiter slots" available on the appointment schedule. 

Many manufacturers are offering and in some cases, mandating their dealers offer Express Service to their customers in order to provide added convenience and to increase overall customer retention and customer satisfaction. Once again...adding more and more pressure for the Service Department with more and more "Waiter" Customers.

In addition, customers are choosing to "wait" for more than just oil changes and other minor services. With more and more dealerships offering more and more conveniences, more and more customers are taking advantage of those conveniences by choosing to wait even more!

It has also led to longer and longer average "wait times" as many customers are "choosing to wait", even if it takes hours to complete their service and/or repair. They actually don't mind the longer wait, or maybe they drove quite a distance to get there and they have no choice but to wait.

Dealers have added conveniences like wireless internet, child play areas, big flat screen televisions, comfortable seating, various refreshments, up to date reading material, work stations, cafes, etc....you name it!

 I'm just waiting to see which dealer will be the first to offer "rest stations" next, like in many major airports where they can actually take a nap while waiting for their vehicle!

So how does this become a new opportunity for increasing overall parts sales and gross?

First of all, in my opinion, this is a "game changer" and we really have to redefine today's "Waiter Customer". To me, whether a customer "chooses" to wait in the "Waiting Area" for four to five hours, or they "choose" to wait in their own home, or even at the mall, that vehicle is a "Drop Off" in my mind.

What used to be considered a "waiter" is now a "drop off" in many situations and should change the job priority when dispatched. Services and/or Repairs that can be completed inside of the average, accepted "wait" time of an hour or less will have a higher priority over "waiters" left for longer periods of time.

Once the new "Waiter Categories" have been established, we now have new opportunities in front of us. We now have new opportunities to build customer relationships as they are in the dealership already for a longer period of time.

 More opportunities for "one-on-one" interactions will lead to more trust, which in turn leads to increased sales and gross profits.

Here are a few of the opportunities that I'm referring to and suggesting;

1.) Reviewing the Service Departments "next day" appointments in the Parts Department can reveal many opportunities for accessory sales on lower mileage vehicles scheduled as "waiters". We all know that there isn't a lot of gross percentage in accessory sales already, but there is gross opportunity. 

Why not introduce yourself as the Parts Manager while they are "waiting" and compliment their vehicle they recently purchased and offer a 10% discount on accessories? Have they even seen an accessory catalog or brochure on the accessories available for their vehicle in the first place? 

It is a known fact that most of the money customers spend on added vehicle accessories is done in the first year of ownership. This gives me, the Parts Manager at least two, if not three opportunities in their first year of ownership, while they are "waiting" to get their vehicle serviced, for accessory sales opportunities.

2.) After reviewing these "next day" appointments, as the Parts Manager, I can review all the appointments, especially the "Waiter Customers" to see what their concerns are to make sure that the more common concerns with higher "First Time Off Shelf Fill Rate" parts are available. 

Just like in New Vehicle Sales, sales are much higher if we have the vehicle on the lot with higher "point of purchase" opportunities. It's much easier for the Service Advisors to make their presentations on primary items and additional services and/or repairs if the parts are in stock. 

Believe it or not, to a customer, having the part(s) in stock is another convenience as it may save an additional trip back to the dealership, or even without their vehicle, down in the shop waiting for parts.

 It also increases overall shop productivity and efficiency as the vehicle services and/or repairs can be completed immediately, without waiting for parts.

3.) If logistically possible, as the Parts Manager, I would build my retail parts area to support my Service "Waiting Area". I'm not talking about just a few display items with some accessories, jackets, hats, miniature cars, etc...I'm talking about making my retail area "alive! 

I want to "draw" those customers into my Parts Retail Area with movement, such as television monitors, or maybe even a fan on low speed moving streamers or signs that show activity. Depending on the logistics and layouts, I would have to find a way to get traffic down over to the Parts Retail Area.

4.) Don't be shy!...and don't hide in the Parts Department all day! Get out there and meet those "Waiter Customers"! It's not just the Service Managers' responsibility to insure Customer Satisfaction, it's every employees duty and responsibility!

Take advantage of this opportunity to create a relationship, which has already been provided for you by the customer. They "chose" to come in and all we have to do is cease the opportunity. Dealers spend thousands upon thousands of dollars just trying to get customers to come into the dealership. 

5.) As the Parts Manager, I would develop a "Parts Department Brochure" that would be colorful and loaded with all the conveniences, benefits and commitments that I would offer. Think about it, do your customers know what conveniences and benefits you offer?....Here are a few examples;

• Current Inventory Amount
• Advertised Specials
• Parts Warranties
• In-Stock Accessories
• List and Pictures of Parts Department Employees, Tenure, etc.
• Parts Department Awards
• "Car/Truck Clubs" depending on Vehicle Model/Manufacturer
• Newsletters/ Social Media
• New Vehicle Owner Parts "Over-The-Counter" 10% Discount Card

The more "ownership" and "membership" that you offer your customers, the more likely you are to retain them. We can't do it by hiding "in the closet" every day, we have to be proactive and have the "want" to develop better customer relationships.

After all, they are already there, in your "Waiting Area" and growing more and more each day. We can either complain about it or we can seize this great opportunity for building better customer relationships. The results will positive if we have a positive mindset as increasing parts sales and gross profits are just a handshake and a smile away!

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

June 2016: Gross Profit: "A State Of Mind"

Many of us have heard this term before as to gross profit being just a "state of mind"...but what does it really mean, or even better....what does it imply?

In my opinion, this simple phrase of gross profit being a "state of mind" has always been just that...a mindset and a thought process that has always led me to "predictable and desired results" each month throughout my career.

Even though there have been times when the results were  not so desirable, or predictable, just having that "state of mind", the predictable and desired results far outweighed the few times that they were not achieved.

We could also carry this "mindset" into our sales and net profit categories as well and not just the gross profit "state of mind".

For example, in order to remain competitive, sales prices may have to be reduced, sacrificing the gross percentage in order to gain higher overall gross amounts. After all, we really can't spend a percentage, but we can spend overall gross dollars.

Quite simply, I would much rather have a parts gross of 35% of $100,000.00 as opposed to 45% of $50,000.00. Volume sometimes will send us into a gross "state of mind" leaning towards volume as opposed to the appropriate gross retention percentage.

I would prefer both of course, but that may not always be the case in certain circumstances.

Another example in parts would be accepting a much lower gross, or perhaps even "no gross" up front on the sale in order to gain the "back end" gross from volume purchase discounts and achieving overall sales goals....much like in the "front end" sales departments.

As a matter of fact, having a gross "state of mind" is very evident in the front end sales departments, especially with used vehicle sales.

Most used vehicle sales prices are usually priced "cost up", meaning whatever the cost of the unit is, along with reconditioning costs will ultimately be the determining factor of what the unit ultimately sells for.

This is not unusual, or even uncommon as the sales department also has their own guidelines as to average gross per vehicle, both "front and back". This is why the term "MSRP", (Manufacturers' "Suggested" Retail Price) is a common term today and not just in our business.

The Manufacturers Suggested Retail Price, (MSRP) is basically available to set guidelines for the consumer to shop and compare.

Living in a "free market" environment and economy allows competition to play up to it's potential and ultimately, better consumer prices and better products. To me, this is why, still to this day, people are always shopping for the "best deal", in all retail environments.

We also feel this gross "state of mind" in our Service Departments as well with overall labor gross percentages versus overall labor gross. Once again...would you prefer an overall gross percentage of 68% of $100,000.00, or 75% overall gross percentage of $50,000.00?...same "state of mind" applies.

Once again, I would prefer both and have always been a "goals & guidelines" type of manager, but we still have to keep things in perspective. We also have to have reasons for everything we do and having a true understanding always precedes the particular "state of mind".

We also have to be careful not to fool or confuse ourselves in our accounting practices as well. A good example of what I'm referring to was a recent question and comment that I received from one my customers concerning overall labor gross profit.

This particular dealer was very happy with his customer, warranty and internal labor gross percentages, which was well over guide in the the mid-70% range, but he didn't understand why his "overall" gross percentage was in the low-60% range.

I explained to him that there's this little thing, or account called "adjusted cost of labor" that was way out of control and even though the initial percentages were great.

Unapplied time, straight time technicians, tech incentives, guarantees, etc. were taking a big toll on his "desired result" area, which is of course, overall labor gross dollars.

In my opinion, any amount paid technicians, other than vacations, benefits, etc. should be considered a "cost of labor" and should be accounted as such. Whatever the gross comes in at is a real number and a real percentage.

If the gross attainment percentages or levels fall short of guide or "desired and predictable" levels?....then we fix it.

Adjustments or modifications may need to be made in overall service pricing such as competitive labor versus maintenance and captive, repair labor. Maybe dispatching is an issue or even the right mix of tech skill levels have to be addressed.

The most important thing is that we don't hide these things from ourselves just to make it "appear" to look better than it actually is.

It's also very difficult achieve "predictable and desired" results when we are not honest with ourselves, or perhaps we just didn't know to, in this case, have the proper accounting practices in place that can be measured accurately.

There are also many areas and accounts in the dealers' financial that is subject to not only personal preference, but also scrutiny and questions as to what is an expense versus a cost of goods or labor.

Should a straight time technician's "unapplied time" be expended in Service "Other Salary & Wages?"...or perhaps "Adjusted Cost of Labor?"...or lastly, the "Cost of Labor" account?...

If a clock hour tech works 40 hours and only produces 20 hours?....where does the time go? How is it accounted for? This is where just by having all these different options leads to different opinions and different results on various dealer financial statements.

This is where everyone is right and everyone is wrong, depending on the dealer, manufacturer or office manager.

Having the right "state of mind" also has to be communicated and understood by everyone as one "state of mind" for the group, team or dealership department. Everyone has to be on the same page, with the same goals and guidelines that can be measured.

Also, by having a unified "state of mind", everyone understands the numbers and percentages that these goals and guidelines represent and set for to begin with. Ultimately, this better understanding and honesty leads to hitting those "predictable and desired" results more often than not.

"Having the proper "state of mind" on gross profit isn't anything new for most of us...the real question is...what's your expectation?...because it's your "expectation" that ultimately determines your "state of mind"....

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

May 2016: "Is Your Parts Inventory Overweight?"

In our 75th edition of ACG "Smart Parts", I decided to wrap this month's topic around my analysis, comments and overviews on my visit to the NADA Convention, March 31st - April 3rd in Las Vegas, Nevada.

The timing of the convention couldn't have been better as I had already decided on this month's topic before attending and wanted to research the causes and possible solutions to what I believe is one of the biggest "epidemics" in the automotive dealers parts departments today.

We will expand more on the NADA Convention and how it plays into the root causes and solutions to this "epidemic" later in this article. The convention provided lots of information that I want to pass on to "Smart Parts" Readers.

The "epidemic" that I refer to, in my opinion is "overweight" and "overvalued" inventory in the parts department. Many parts departments are becoming "overweight" in the mid-section and is resulting in higher inventory carrying costs, (acquisition & holding), reduced dealer "cash flow" and lower inventory gross and true turns.

The "mid-section" I refer to is the sales activity in the 7 - 12 months category which often gets overlooked by parts managers and dealers alike. After all, aren't we more concerned about obsolete inventory OVER twelve months?

With today's shorter parts life spans and activity cycles, we have to get a handle on what's "coming down the pipe" far before parts in-activity hits twelve months. I'm "all in" on helping dealers with their obsolescence, but I am more concerned about "stopping the bleeding" first.

Even though many manufacturers offer "inventory protection" for obsolescence, they really don't offer any assistance in inventory "carrying costs", or sometimes referred to as acquisition and holding costs. My question is..."How much is that "inventory protection" costing the dealer in the long run?"

As I mentioned in last month's issue of "Smart Parts", the latest industry calculations on acquisition and holding costs are in excess of 25% - 30% of the total inventory value at cost! If you do the math on your own inventory, unless you are at or above industry guidelines on gross and true turns, you could be in a heap of trouble.

The biggest area of "lack of control" that I see from parts managers is that they seem to "trust" the manufacturers' daily suggested orders. They seem to believe that they "have to" accept these suggested orders because of compliance percentages, loyalty requirements and overall program utilization.

I'm totally okay with all of that and maximizing discounts, allowances and accruals, but not to the degree of  "over consumption" of spending the dealers money on parts and/or quantities we don't really need to meet demand.

Quite simply, we only need a 1.5 months supply, (45 days) of inventory value to meet demand and maintain industry guidelines on gross turns. True turns are another issue that compliments first time off shelf fill rates and stocking criteria, but we still have to "hold the line" on the total inventory value.

For example, if my average monthly parts sales at cost is $100,000 annualized, I only need to have an average inventory balance of $150,000, which equates to eight "gross turns" a year. In order to determine if your inventory is "overweight", you first have to determine your inventory's "desired weight".

The inventory "desired weight" or "value" is very easy to figure out. Basically, all you have to do is take your total average months cost of sales, (annualized) and divide by eight, which is the industry gross turn guideline. The net result from that equation should be your average months inventory value, or "desired inventory weight".

Any amounts over that are the result of obsolescence and "over stocked" inventory values, plain and simple. The truth of the matter is that if the math indicates "over valued" inventory, then we need to look at who is really benefiting from these "additional" purchases....the dealer, or the manufacturer?

Reviewing the stock orders whether in house, or combined with the manufacturers' stock replenishment programs, cannot be taken for granted. The suggested orders from the manufacturer are based on multiple dealer demands and not necessarily your own.

Sure, you may gain discounts and allowances, but is it really "tangible" if we are just padding our inventory? My "kudos" to those "Smart Parts" Managers that are realizing these benefits while having great gross and true turn numbers. That's the only way these "dollars" can be realized and tendered.

Now, for the good news!!!....here's some solutions that may help those "Smart Parts" Readers that may have parts inventories that may be "overweight!" 

As I mentioned earlier, I was looking to get some answers and solutions to this "epidemic" when I visited the NADA Convention in Las Vegas. Not only did I find some of the causes to the "epidemic" (thumbs down!)...I also teamed up with many to provide solutions to the "epidemic", (thumbs up!).

Thumbs Up!....

In general, the NADA Convention had some good things to offer for "Smart Parts" Managers and Readers in the way of getting the proper tools and industry help to do a better job in managing parts inventories. I thought that the NADA Academy offered lots of training in their parts curriculum, especially in the areas of inventory and financial management.

I was also pleased to get an invite to the NADA Parts "Round Table" this upcoming September. I will be visiting with other Parts Managers, NADA Academy Instructors as well as other respected parts industry experts and I appreciate the invite from Chris Bavis and Mark Michalski from NADA.

One company in particular, Bob Palcher and Dealer Solutions, Inc, (DSI), in my opinion, is the industry standard in the inventory management process as it relates to physical inventories, bar code scanning, perpetual inventories, bin set ups, etc...you name it...they can do it!

"Parts Eye", is in my opinion THE BEST manufacturers' stock replenishment program, far outweighing any other manufacturers' program. The "Parts Eye" Program allows for the utmost in program utilization and inventory protection while controlling Days Supply and On Hand Values over 9 months. The best of both worlds...inventory "breadth" without adding "over valued" inventory.

I was also pleased to get with Mark De Lucia from DealerMine Corporation as he had some really decent obsolescence buy back programs available.

 That's a tough business as dealing with this expensive dealer asset is never easy and turning frozen assets into cash can definitely be an option for some dealers who need to lose that parts inventory excess "weight" fast.

It's obvious there is a need for more training and information out there for many parts managers. Many parts managers I meet are obviously intelligent and have the skill.

They just haven't been given the opportunity or proper training, information, guidelines and tools for success as many were "thrown" into the parts manager position.

Thumbs Down!...

Just in general before I talk about the "parts related" portion of NADA that I observed...the 99th Annual NADA Convention, although extravagant, seemed a little over the top. Many of the same products and services all just dressed up a little differently.

Don't misunderstand, I felt that NADA put on quite a "gala" event and I was proud to be part of it as well as being a part of this great industry, but I felt that there was much more "solicitation" this year as compared to past years. It was surprising the methods used to get the dealers attention to say the least.

It seems that there was a LOT of money spent to lure dealers into the booth to see the latest that these industry vendors had to offer. I know that this is not unusual, but it seemed to be more obvious and extravagant this year to me for some reason...

From a parts perspective, I was really quite shocked that there wasn't much out there other than NADA Academy, Mike Nicoles and "yours truly" that even offer parts management training out there.

Even though it's always a big topic of discussion, especially when we talk about obsolescence, first time off shelf fill rates, parts purchasing programs, etc. 

Even though there is training available from the above mentioned, parts training compared to sales and service training is very minimal at best. I believe there are a couple reasons for the drastic difference in training opportunities for parts versus sales and service training opportunities.

For one thing, there aren't a lot of us "parts trainer guys" out here that really even know parts!...I mean really know parts! The second reason I believe there aren't many is that dealers seem to have a preconceived notion that......"Parts is parts and anyone can do it!...Who needs to be trained in parts anyways!"

Until there is a problem of course...obsolete inventory, improper inventory balances from the ledger to the controlled inventory, poor CSI due to parts not in stock, poor shop productivity due to low off shelf fill rates....the list could go on and on....

It just seems that more time, money and effort is spent on "cleaning up the mess" than it is being spent on proper parts manager training to "stop the bleeding" first! In my opinion, there wouldn't be any obsolescence out there if parts managers were trained properly in the first place. 

There would be no "overweight" parts departments with "out of control" inventory amounts out there if the proper training had been offered or utilized.

 Proper training on managing and/or modifying the proper set ups and controls, especially when it comes to the manufacturers having their hand in controlling stock orders and the dealers' money. 

Having the "right part at the right time" does not require having all the parts "just in case" they might sell according to someone else's "demand" and not my own.

Most importantly, we can't be buying parts just to get a check back from the manufacturer, unless the proper gross and true turns are achieved.

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

















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