It's hard to believe that we are "winding down" this current year of 2022, but do we actually have that mindset of "winding down" this year, or are we "winding up" and preparing for the new year right around the corner?
It has definitely been a challenge this year, much like the past couple of years as we, once again are having to endure through struggles in our personal and business lives. Backorders and Supply Chain Issues still haunt us and just trying to cope with our current economic situations is more than anyone could wish to deal with.
That being said, and in my opinion, we have always adapted to our environment, especially in the automotive industry as we just pick ourselves up, brush the dust off our sleeves and get right back into the arena to battle yet another day.
In this issue of ACG "Smart Parts", we are going to focus on what 2022 has taught us to this point. We have already published ten issues thus far in 2022 through October and each issue has had a significant topic, meaning and focus to help guide us through these times.
Each month's topic has also included a solution to what we are currently dealing with, surviving through and most importantly, prospering through these times. Unfortunately, we don't often read between the lines, and we tend to complain, or have excuses for undesired results.
Quite honestly though, we are not alone as it rains everywhere, and we are all having to deal with backorders, supply chain issues, employee issues, manufacturer demands, increasing costs, customer demand and a whole lot more.
This month's issue will challenge all "Smart Parts" Readers as we will highlight each month's topic thus far in 2022 and give actual reason, benefit and result to each month's topic. In other words, we will resurrect the topic of each month and if, only if, we applied these recommendations from ACG "Smart Parts"...ask yourself this question...
"Where Would I Be Right Now?"
Let's begin with January 2022...
January 2022: The Top 10 "Do's & Don'ts" for 2022
There is no better way to start off any New Year, especially this year with what we should be focused on and what we should avoid. In January of this year, we highlighted our Top 10 "Do's & Don'ts" as Smart Parts Managers.
Starting at Number Ten and winding down to our Number One, we focused on proper Special-Order Processes to avoid adding more to our Obsolescence, then on to Ordering Parameters, Managing & Maintaining Proper Stocking Levels in order to stop Obsolescence before it happens.
We also focused on Updating Pricing Levels each month as costs is always changing, just like at Walmart, or any department store. So why don't we update our prices more often, or at least review our pricing strategies as often as we should? Unfortunately, many dealerships haven't updated their prices for many years due to the fear of losing customers to other dealers.
In my opinion, if we are worried about losing customers due to adjusting for these inflationary times, then we have other issues that may be causing low customer retention rates. Customers will always come back if we provide great service and a fair price.
Parts Monthly Reconciliation, Proper Posting of Lost Sales & Emergency Purchases led us down to our top "Do's & Don'ts" in January of this year along with providing more Parts Training, more aggressive Parts Pay Plans and Incentives topped out as our Number Two and Number One "Do's" for January of this year.
February 2022: D.M.S. Utilization:
D.M.S. Utilization was and is still a hot button in many dealerships today. For years, our Dealer Management Systems, (D.M.S.) have gone way underutilized. As a matter of fact, the average utilization factor for most systems is a shocking 20% - 25%! That means we are only using our system's capabilities up to a measly 25% at best.
Sad thing is that dealers are paying lots of money for these systems and they are not being used to their potential. One of the main reasons for these poor results is a lack of "proper" training on these systems, or what their capabilities are. D.M.S. Training Installations fall far short of the training needed to even come close to better utilization factors.
Sadly, many D.M.S. Installers don't even know what they are installing, especially in the Parts Department as "cookie cutter" set ups are installed that don't even meet basic math equations. On top of that, many D.M.S. Installers have never worked in a dealership before and can't even communicate on a dealership level.
March 2022: The Parts Department In The EV Revolution:
I have to admit, this was one of the most fun issues for me this year! I'm not saying I am for or against EV's, but it did challenge me to do the research on Electric & Hybrid Vehicles in general. I felt like I was in High School again as the research and information was amazing.
The topic in March was driven by many Parts Managers asking me...
"What kind of Parts are we Going to Sell on these Electric Vehicles?..."
This question led me on a quest to find that answer and lo and behold, I got more than I bargained for as I believe that we will be even more profitable in the Parts Department as these "EV's" evolve as they do require maintenance and will have "wear and tear" parts issues as well.
This issue probably has the most in-depth research of 2022, and you just may want to read it again as they will have a more significant impact to Parts Departments in the very near future. I know I learned a lot by doing the research as well as opening my mind to something fairly new.
April 2022: Dealing With Supply Chain Issues:
Our April issue still haunts us today as backorders, cross-ship parts, restricted parts, etc. are still huge issues. The key on our April issue is not so much that we have these issues, it's more about how we are dealing with these Supply Chain Issues.
First and foremost, we all have Supply Chain Issues, and we have to deal with it. We have dealt with many similar situations in the past such as Union Strikes, Petroleum & Refinery Strikes, Railroad Strikes and so on. We just have to have a mindset of dealing with it versus using it as an excuse.
In our April issue, we drill down hard on overcoming this on-going Supply Chain Issues. Backorders for example, do we just lay down when we see them pop up, or is our job just beginning as we now have to find this backordered part elsewhere?
Unfortunately, many Parts Managers are settling in and not taking the extra steps, or "effort" to do their job, which is providing parts to our customers. In my opinion, we can't just settle and tell our customers, or Service Manager that nobody has it and it's on national backorder. We need to have a "somebody has to have it" attitude.
May 2022: Mapping Out The Parts Department Floor Plan:
Our May issue was a little different and isn't often thought of as a crucial topic in the Parts Department, especially in these times. Ironically though, our Parts Department "Floor Plan" plays a key role in our overall theme this year
We just got through talking about Supply Chain Issues in our April issue and that alone directly dovetails into having the right Parts Department Floor Plan. Not only should our parts be conveniently "binned" from fast moving parts, to slower moving to bulkier parts, we need to have adequate "air space" to stock the parts we need.
On top of that, and especially in these times, we may have to carry the added Days Supply of the parts we sell the most. This means we need to have the adequate pace to stock these Extra Days of Supply, even if we have to "overstock" these hard to get, fast-moving parts, and store them in outside storage units.
Lastly, our May issue was a hot topic because many Parts Managers "understock" their fast-moving parts inventories due to a lack of space. That may have been okay a few years ago because we were replenishing our Normal Stocking Parts pretty much overnight.
It's a different situation these days as many manufacturers are experiencing much lower fill rates from their local PDC's compared to just a few years ago. We cannot afford to run our Days Supply of parts down below or close to our "Lead Time" Days that potentially lead to stock out situations.
June 2022: Expanding The Parts Inventory "Breadth"
If you haven't noticed by now, there is a pattern here and a progression in our issues in 2022. Expanding the Parts Inventory "Breadth" in order to have better inventory coverage and better "First Time Off Shelf Fill Rates" should be our Number One Goal as "Smart Parts" Managers.
Ensuring the right D.M.S. Set Ups & Controls, with the right math, allows to have better inventory coverage with higher "First Time Off Shelf Fill Rates". Expanding the inventory "Breadth" increases Cycle Times in our Service Departments and Collision Centers.
The best part is, having the part on the shelf lessons the chances of increased backorders, cross ship parts and restricted parts. Having the right part at the right time, during these times is a great advantage as the parts we make the most gross profit on are those parts that we normally stock, much like having the right vehicle on the lot.
July 2022: Managing The Tire, Gas , Oil & Grease Inventories
Our July issue was a little different as it took us down the road of Parts Reconciliation and Proper Accounting. Parts Reconciliation in general was and still is a very hot topic dating back to the beginning of the Pandemic.
Due to the Pandemic and economic changes over the last couple of years, dealers are getting even smarter, watching their expenses and maximizing on sales and gross opportunities more than ever. All this includes dealers getting smarter on their Accounting Practices.
The Parts Department asset in most dealerships today, is the second highest asset they have next to the Used Vehicle Inventory. Who knows, the Parts Inventory maybe the Number One asset for some dealers with shortages in finding vehicles in general to sell.
That being said, the Tire Inventory and the Gas, Oil & Grease Inventory usually have the most discrepancies when reconciling the parts inventory in general. In July, we broke it all down as managing all these parts inventories, especially reconciling them, can actually "make or break" a dealer if the Ledger Balance Inventory climbs well over the Controlled Parts Inventory on the D.M.S.
August: "Don't Take Your Foot Off The Gas!"
Here's where we started stepping up as in August, we challenged dealers and "Smart Parts" Managers to not laying down and accepting the status quo, or maybe just falling into the trenches with everything that's going on with all these backorders, supply chain issues, employee woes, etc.
"Enough Already!" is what I was hearing quite often as many parts managers have had enough as they were saying that it's not fun anymore. Day after day, fighting with manufacturers to get parts, answering that never ending, preverbal question all day long..."When is my part going to be in"?
All the while, in August, we sent out our battle cry to not only let these times not get the best of us, but it was also time to step on the accelerator of go to the next level. Backorders seem to be a way of life now and instead of complaining about them, we just have to deal with them as part of the job.
Instead of thinking that our job was over when we experience these backorders, it's actually just beginning as we have to do our best to either change, or upgrade the backorder status, find the part by other means, i.e. OEConnect, or even Aftermarket options if necessary.
"Are you Seeing a Pattern Here Yet?"
September 2022: "It's Time To Raise The Bar!"
Our September issue was a perfect follow up to August where we encouraged "Smart Parts" Manager to keep their foot on the gas. Now that we have our foot back on the accelerator, it's now time to raise the bar and take it up a notch.
This year has also seen many dealers going above and beyond normal industry guidelines. Used Vehicle Grosses have never been higher, and many dealers are actually more profitable now than ever! Who would have thought that enduring a crisis like a pandemic would reap these kinds of results? I, for one wouldn't have thought it would be like this.
You would think that just surviving through, (which many of us did) would be the primary objective, but it's going much higher and beyond that. Dealers are breaking records in sales and gross profit as retained gross percentages are climbing, especially in the Parts Department.
It seems that the mindset got to the point where dealers thought that they had to get what they could get, no matter what, in order to survive. Survival is one of our basic human instincts and it appears that when we got in "survival mode", something happened.... we made more money! What a concept!
September taught us that not only was it time to raise the bar, we realized that it was already happening all around us as we were finding ourselves achieving new and higher guidelines, or expectations. Now, we have to raise the bar just to keep up with everyone else! If not, we will just be left in the dust.
October: Managing Through Inflation In The Parts Department
We have now worked our way up to our last month's issue of ACG "Smart Parts" and if these past couple of years haven't been enough to deal with already with the pandemic, supply chain issues and the like, now we have to deal with Inflation and a potential Recession! It's now time to toughen up even more!...Seriously?
Our October issue took us through our "Top 10 Factors" that we have had to focus on in order to get through these inflationary times. On top of that, we learned not only how to get through these times, but we have also learned how to succeed and prosper through these times.
We started setting new and exciting Achievable Goals, we beefed up Parts Department Training and Staffing Needs. We added more Aggressive Pay Plans & Incentives, while Controlling Expenses even better. Finally, we started to utilize our Purchasing Power by Shopping Vendors and better controlling our Stocking Levels.
We also learned that we have to "constantly" review our Pricing Strategies in order to keep up with rising Inflation. We just can't afford to have a "set it and forget it" mindset as prices are always changing which means we have to keep up with these price changes. In order to maintain our gross margins, it just makes sense to adjust with the market as it is constantly changing.
Managing obsolescence is more important now than ever before as our assets, especially our parts inventory asset has to "turn" at industry rates, or even better. We cannot afford to hold onto obsolete inventory anymore as Acquisition & Holding Costs are rising at an alarming rate.
Returned, or sold obsolescence, even at $.50 cents on the dollar, or perhaps less can actually be re-invested on parts that turn several times a year and can actually bring back a "Return on Investment", (ROI) of well over 250% - 300%. Cash is king, especially in these times as well as getting the best return on our assets.
Lastly, in October we highlighted one of the most important factors of weathering this storm and that is accountability. First and foremost, we have to hold ourselves accountable before we can hold our employees accountable. It all starts at the top as we, the "Smart Parts" Manager has to set the example.
Our focus all year has been on this challenge that we all face and to not let these current events sway us from our overall goals and expectations. It's actually quite the opposite as we have to hit these challenges head on and consider them opportunities.
It takes a "Smart Parts" Manager to evaluate the situation, come up with a plan and then execute the plan to expected results. If you think about it, these past couple years are really no different than any other year because no one knows what lies ahead.
The only thing we do know is that we alone are ultimately responsible for our own destiny and results, no matter what the environment throws at us, just like it has always been. We can have all the knowledge and background training in the world, but if we don't have the desire to succeed, the environment will suck us in and dictate the outcome.
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...
