If you talk to any "Smart Parts" Manager, they will all tell you how difficult it is to manage through these Supply Chain Issues. From the "trickle down" affects, all the way down to what's causing it and the stress of trying to find parts in general.
You may hear about the causes from the chip shortage, shortages of supply containers, truck drivers, Covid related shutdowns, struggles to find employees, employees out sick and so on. They will tell you about the never-ending backorder situation and how much time they are spending on the phone seeking alternative sources to fill parts demands.
We all also know about the increased demands on replacement parts due to new vehicle manufacturing, which has dropped by 7.7 million units worldwide, up from the 3.9 million predicted in the middle of 2021. The increased demand of replacement parts could have been pretty much expected as customers are keeping their vehicles longer than they would have if new units were available.
We have also seen an increased demand on used vehicles with prices skyrocketing to levels none of us would have ever imagined. Our whole world from a parts perspective has flipped upside down and one thing for sure is that almost all "Smart Parts" Managers have told me that it's not like it used to be "back in the day".
All the above being said, I would just like to pose this question...
"Can anyone tell me what I don't already know about this Parts Supply Chain Issue?"
Being in the car business has never been easy and there will always be something that will cause us to change from the normal and force us to adapt to what's going on now. Dealing with this Supply Chain Issue is no different and we have to do what we have to do in order to survive.
Even though as "Smart Parts" Managers, we have already adapted in many ways, but I still believe there is much more that we have to do. We have to have a positive mind set in dealing with this issue and we also have to expand our minds to the next level and not just accept the status quo.
So, let's get started...enough about talking about the problem, let's get down to the solutions to the problem"!
Let's start this solution process by mentioning one important thing. If we are relying solely on the manufacturer to get us through this, we will not succeed in surviving this current Supply Chain Issue. As previously mentioned in our February issue of ACG "Smart Parts", current DMS utilization factors are less than 25%, which means many Parts Managers are relying solely on the manufacturer for their stock replenishment needs.
That being said, let's start this solution process right here and continue with surviving and succeeding through this current Supply Chain Issue. Keep in mind that this Supply Chain Issue will be with us for some time and will require us to "think outside the box".
DMS Utilization:
Our DMS is the only tool that will determine what our individual stock replenishment needs are based on individual dealership demand and sales history. No matter what source we choose to buy for stock replenishment, our DMS will tell us what our demands are for phase-in and then ultimately, what stocking levels we need to sustain for our individual customers by posting Lost Sales and Emergency Purchases to industry standards.
With the right Set Ups & Controls, based on the math, our DMS, as it always has in the past, will provide the right information. Most importantly, we can easily manage our own demand as opposed to letting the manufacturer determine what we need based on a group of dealers.
The first step in overcoming these issues is to realize what we need and what resources we have to accomplish the task. In my opinion, we are not utilizing all of our options in getting our shelves refilled. It's just that we have grown accustomed to our current way of doing business and have blinded ourselves to what's available.
Supply Chain Options:
Aside from "factory specific" parts which are the exception to the rule, the majority of the parts that we are dealing with in this Supply Chain Issue can be obtained from other sources. Even though not all manufacturers offer another source such as AC Delco, Motorcraft, Marelli, or Mopar, there are still many other options.
When you think about it, there aren't a whole lot of parts vendors out there that actually make replacement parts as they just end up getting packaged differently to support the individual manufacturer. This translates to many other options including aftermarket vendors, suppliers and search options such as OEConnect, eBay, Rock Auto, O'Reilly's, AutoZone, Advantage, etc.
If properly set up, our DMS is telling us what we need, and our job is to get these parts at whatever means and yes...even if we have to shop other vendors. Even though we represent the manufacturer with factory parts and certified technicians, and if given the option, I would bet most customers just want their vehicle fixed if we would just give them the option.
Even through this crisis, some manufacturers are even honoring their warranties if factory parts are substituted with aftermarket parts if factory parts are not available. In some cases, even used, or remanufactured parts are allowed due to this Supply Chain Issue.
Dealing With Backorders:
The first thing that I want to mention about backorders is that it's a "state of mind". Don't misunderstand, I'm not referring to the fact that we have these backorders, it's just that we have to have a different frame of mind when we experience them. In other words, when we receive a backorder notice, it's not the end, it's actually just the start as the search begins in finding these parts by other means or sources.
In many cases, when a backorder notice is received, we may just have to upgrade or change the order status in order to get the backorder released and shipped. Even though we may incur added costs, I would much rather give up a little gross as opposed to losing all the gross, both parts and labor.
Even if there are no other options on a backordered part from the manufacturer, it just means that I will have to search harder, whether from another dealer, vendor or online ECommerce site, OEConnect, PartsVoice or even eBay to get the part, even if I have to pay a little more.
The only thing about this Supply Chain Issue that we really, really do not have control over are those VIN Specific Parts Orders that are limited to how many we can get and are tied to a specific vehicle, whether a recall part or high demand parts.
When you think about though, compared to all the Supply Chain Issues that we are dealing with, these VIN Specific Parts are more the exception versus the rule even though it seems that we are seeing more and more every day. In my opinion, all other options on Supply Chain Issues need to be utilized better.
Batteries, Oil & Filters:
These items to me are a "no brainer" as these three most popular part items are the most universal and all three are uniquely manufactured or refined for all manufacturers aside from packaging and labeling. This means that no matter what the brand is, or what the label looks like, I am not running out of these three basic items.
As long as the oil meets API oil weight standards, the batteries are the right group size and the oil filters meet quality standards for filtration, check valves, etc., we can't run out of these basic items. Again, even if I have to purchase them from another dealer, outside vendor, etc., we have to get the customer in the door on these basic services. We have to offer and have more options to keep them coming back.
Paying The Price:
This is another category that should go without saying...Yes!...we may have to pay the price to get these parts and reduce or eliminate stock run out. If you haven't noticed already, the "trickle down" affect in our current economy from fuel and food prices to outside services, everything is going up and we, the consumer are paying the price.
If given the choice in most cases, the consumer will pay the price for goods and services. Don't be mistaken, even the consumer is passing it on to other consumers. Depending on what we do for a living, or applying for wage increases in our jobs, consumer costs keep being passed down. People are job searching for higher wages at a rate now more than in recent history in order to do whatever it takes to survive in these times.
Parts Hoarding:
This is definitely a practice that many Parts Managers have enacted since this all began. Notice that I didn't say "Smart Parts" Managers when it comes to "hoarding" parts. One definition of hoarding is..."Amassing, hiding or storing valued objects".
In my opinion, there is a difference in "hoarding" versus having an "ample supply" of certain parts. The reason I say this is because at some point, the pendulum will swing the other way and if I'm "hoarding", I will end up with more obsolescence and overstock that I may not be able to get rid of.
After all, we are not in the business of "hoarding", protecting, or holding parts, we are in the business of selling parts. Having an "ample supply" of parts based on proper DMS Set Ups & Controls will give us a few Extra Days Supply, based on our individual "lead times" is the right way to avoid stock out situations and without the fallout and risk of overstocking and future obsolescence.
Our individual DMS Stocking Guidelines, or "Levels" can be easily managed day in and day out and adjusted to current Supply Chain Issues. Leaving that job up to the manufacturer will only lead to not having the right parts at the right time and more of the parts we don't sell all the time.
After all, what did we do before the manufacturer took control of our inventory and at what levels? The answer is simple as we ran our own Stock Orders and managed our own Stocking Levels based our own demand and sales history. Seems to be a lost art these days, but one that we should live by as Inventory Protection starts "in the house" and not "outside the house".
The Bottom Line:
In my opinion, we all have to ask ourselves if we are "in it to win it". Ask yourself if it were your own parts business, what would you do? Would we just be complacent and tell our customers that we are sorry, but your part is on backorder and we don't know when it will arrive? If your own personal vehicle was tied up and you had no other means of transportation, would you be upset?
Last question and most important...
"Are we going to lie down, waiting and watching what happens, or are we going to be the one who makes things happen?"
If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ www.smartpartstraining.com, or...just pick up the phone and call me at :
(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...
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