March 2023: " Is Anyone Fact Checking Your Stock Order?"

As we move on to March of this fairly new year, we are going to ask a question that has probably never been asked before of the Parts Manager. Why would any Parts Manager have to ask this question which is the title of this month's issue of ACG "Smart Parts"?

After all, it is one of the primary duties and responsibilities of the Parts Manager to "manage parts", which includes ordering, stocking and receipting automotive parts to sell.  One of the main differences in managing a Parts Department today versus years ago is that there are many more factors that come into play in having the right mix of parts.

For one, there are many, many more part numbers to manage in today's automotive parts inventory in order to provide for many more vehicle applications and manufacturers. Also, the life span of automotive parts today is much shorter than it ever used to be.

We have to trust the "facts" when creating and reviewing our Stock Orders. This means we have to trust the initial set ups and parameters that go into creating an accurate Suggested Stock Order to begin with. Are these set ups and parameters "factual" in giving us the results we want to see?

Even if these set ups and parameters are "factual" and accurate, are we going to trust that information and make the right decisions? Are we going to override what we see, or are we going to go with what we see? The answer to these questions have many variables that lead us to our final Suggested Stock Order decision.

Here's just a few questions that run through the Parts Managers mind...

• What if the part doesn't sell and becomes obsolete?
• Is the part too expensive or too big to stock?
• Do I need to stock that many of that part when I can get it overnight?
• If the part is on Back Order, do I wait until it becomes available?
• What if I get stuck with those "package quantity" parts that I can't return?
• I know I've sold a few of those, but do I really need that part?

If any one of these questions looks familiar, then you are not alone because these are some of the most common Parts Manager questions that run through their minds as they review their Stock Orders, especially if we are running our own Stock Order on our DMS.

The sad thing though is when the Manufacturers Vendor Managed Inventory, (VMI) Suggested Stock Order comes up, we tend to let it go through because it's so called "protected". The myth there is that many Parts Managers don't realize that they are just buying many of these parts just to hold and send back down the road.

Whether all of the above mentioned is either truth or speculation, then why do these two following questions come up over and over again in the Parts Department?...

"Why don't we stock these parts that we are selling all the time?"

"Why do we keep running out of this same part we are selling all the time?"

It's time to do some "Fact Checking"...

Let's start out with some "facts", or perhaps you could also say "truths" about our automotive parts industry, which doesn't make it any easier for the Parts Manager. Whether we are managing a Parts Department today, or many years ago...

1.) We will never have, or stock all the parts we need at any given time. That's why we report Lost Sales to begin with in order that we may achieve a First Time Off Shelf Fill Rate, (FTFR) of 75% - 85%. Reporting those Lost Sale Demands is the only way to achieve the right inventory "breadth" and FTFR.

2.) All parts will eventually become obsolete as obsolescence is and has always been a thorn in the side of most Parts Managers. It's not a matter of parts becoming obsolete, it's more a matter of how we manage obsolescence before and after it happens.

3.) There have always been and will always be backordered parts, even though we have more now than ever before. In my opinion, backorders are becoming more of an excuse for not doing our jobs as Parts Managers. Though frustrating and time consuming, managing backordered parts has to be a mindset where when they happen, our job has not ended...it's just beginning.

4.) Having the Proper Set Ups & Controls in any DMS, or Manufacturers Vendor Managed Inventory, (VMI) is crucial to getting the right "facts" out of any Suggested Stock Order. Phase-In/Phase-Out Parameters along with the right Source Ranking by Piece Sales Set Ups is where the math meets "facts" in determining accurate results, no matter today or many years ago.

And now...the million-dollar question!

"I'm the Parts Manager, why do I need anyone Fact Checking my Stock Orders?"

Earlier, I mentioned six common questions that go through the Parts Managers while reviewing a Suggested Stock Order, even though there are perhaps many more. As Parts Managers, our thought process, or Behavior Patterns are generally different from other department managers. We tend to be Critical Thinkers and perhaps "over-think" many things.

This most common Parts Manager "Behavior Pattern", or Personality Profile is both a blessing and a curse when reviewing any Suggested Stock Order. Reviewing all this Suggested Stock Order data requires a lot of research and math before making the right decision.

A blessing in a way that a Parts Manager has to be a Critical Thinker when managing the Parts Department as it involves managing several thousand part numbers as well as managing the dealers second highest asset in most dealerships. There are more transactions in the Parts Department in a single day than in the entire dealership in whole month.

It's also a blessing because we tend to be overprotective, non-trusting, cost conscious, and anti-obsolescence minded and that's a great thing! Especially in the eyes of the dealer because the dealer has to trust the Parts Manager, just like the Office Manager, or Comptroller.

On the other hand, our personality could be a curse as Parts Managers with this Personality Profile tend to "over-think" many things as logic tends to weigh heavily in their decisions. If things aren't "black & white", this tends to lead into "over-thinking" many decisions, which isn't a bad thing, it's just the way it is.

This "over-thinking" is very evident in the six questions I mentioned earlier that run through a Parts Managers mind when reviewing their Suggested Stock Orders. The "what if" always comes into play when trying to predict outcomes that we haven't experienced yet.

So!...Who should be fact checking the Stock Order with the Parts Manager?

Being that many Parts Managers look at things one way as we have reviewed, we need another set of eyes to get a different perspective. What better choice than the Service Manager, or perhaps the Lead Counterperson? The Service Manager tends to see trends of what jobs are selling and the Lead Parts Counterperson because of the several number of transactions they experience each day.

In order for this to be a success though, the relationships between the Parts Manager, Service Manager, and/or the Lead Parts Counterperson has to be one of trust and openness. Personally, I have always welcomed that second pair of eyes in order to get the best results from what I'm stocking on the shelves.

Many Parts Managers are reviewing their Stock Orders, primarily looking at total demands, history, price, type of part, make, model and year usage, return status, etc., but the Service Manager looks at what they are selling up front and overall Service Cycle Times.

Just to be clear though, we are not suggesting that the Service Manager be the final say as to what the Parts Manager should be ordering, we are just looking for another set of eyes to give the Parts Manager a second opinion on the facts that lie within the Suggested Stock Order.

The Lead Counterperson is looking at repetition, trips to the same bin location, stock outs situations, Lost Sales entries, chasing the same parts, in-coming phone calls, etc. All of which play a big role in what we are experiencing each day versus what we are seeing on that Suggested Stock Order.

Ultimately, it should definitely be the Parts Manager that has the last say on what the final verdict should be when actually placing the final edit version of the Stock Order. Offering suggestions, adding input, listening to our customers, and communicating back to the Parts Manager is where the "fact checking" is defined as "assisting" in the Stock Order Review.

The same goes for the Service Manager when developing, adding or modifying their Labor Ops and Service Menus. The Parts Manager should be "fact checking" and assisting in those decisions as well, especially on final "out the door" pricing on Service Menus and Labor Ops. 

In my opinion, we need to humble ourselves and let our pride out the window and welcome these other sets of eyes, even though we are ultimately responsible for the parts inventory asset, controlling obsolescence and parts profitability. We cannot be closed minded when it comes to maximizing our opportunities.

After all, Parts Inventory is not an expense that we need to trim down, it's an asset that the dealer expects to turn several times a year, especially Parts True Turn. In my opinion, it's time to share this information and stop trying to predict potential future results that we have no control over.

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...

 

February 2023" The "Origin" of Lost Sales

Reporting Lost Sales, or even the mention of Lost Sales is not "unfamiliar" to any of us, but what is "peculiar" about this topic is, if it's supposed to be so important, why aren't we reporting any or enough Lost Sales? If reporting Lost Sales is supposed to be one of the most basic duties as Parts Manager, why are these results so low?

We will answer these two basic questions and more as we move on with our February issue of ACG "Smart Parts", but before we do that, we will have to trace this whole issue of reporting Lost Sales back to it's origins and how we got to this point.

Even though there are many "Smart Parts" Managers out there that do a great job on reporting Lost Sales, it appears that they are still the minority, even though they are reaping the many benefits from these reported Lost Sales.

Whether these negative results are due to lack of proper training, definition, accountability, or even the sense of urgency, there is a "common thread" in all this. Our "Belief Systems" is where it all starts as most Parts Managers learned from previous Parts Managers how to become the manager in the first place.

Even though our "Belief Systems" do not lead us back to the "Origin" of Lost Sales, our "Belief Systems" can prevent us from going back to where these Lost Sale opportunities all start and how we can improve these numbers.

Unfortunately, and in my opinion, the lack of basic training plays a big factor in these less than desired results in Lost Sales Reporting. Even the basic terminology on what a parts "demand" is and how these demands play a huge role in having the right inventory at the right time.

Let's get started on this journey back to where Lost Sales originate and how we will learn why it isn't really any surprise that even though we know what they are, we will learn "why" they aren't being posted at all or even close to enough.

That being said, let's start it all off by asking the big question...

"What is the true "Origin" of Lost Sales and why aren't we seeing the results that we should be"?

The "true" origin of a potential Lost Sale actually doesn't come from any person, whether in the Parts Department, Service Department, or a phone call with someone checking on a part. It all actually starts, or "originates" with a "vehicle" in need of repairs and requires a replacement or added part such as an accessory.

There are only two reasons why we don't have a needed part as we either ran out of the part or we never stocked the part in the first place. This is where our Lost Sale "opportunity" starts as we now discover that there is a "need" for a part at the time of inquiry and one of four things are going to happen... 

1.) We either have the part and the customer chooses to buy, or not buy the part.

2.) We don't stock the part and the customer chooses to Special Order the part.

3.) We don't stock the part and the customer wants us to chase the part.

4.) None of the above three happens and results in a Lost Sale Opportunity

The next step requires human decision making and this is where we start to see the lack of Lost Sales Reporting that dates way back as far as I can remember and for many reasons. This "human decision" process that leads to a lack of Lost Sales Reporting are listed as follows and not in any particular order.

1.) Lack of Proper Lost Sales Training & Definition:

Even though we just listed the proper definition, in my opinion, there really hasn't been any proper training on Lost Sales Reporting for years. We have learned from our predecessors how to become a Parts Manager and for many years, there hasn't been really any "sense of urgency" in reporting them in the first place.

Many Parts Managers and Parts Counter Staff don't even know what a parts "demand" really is, which is either a Sale or a Lost Sale and both can trigger a "hit" on a part. So that means that a Sale of a part is the same as a Lost Sale in the Dealer Management System, (DMS). Each of these two demands are necessary for gathering enough history on a part for potential stocking of the part.

2.) Fear of "Double Posting" Parts:

This one is big one as many Parts Managers I have spoken to do not report enough Lost Sales as they fear that a single part may be "double posted", meaning that we recorded a Lost Sale, and then the customer eventually purchased that same part, resulting in two "hits" on one eventual transaction.

They seem to have this fear that if we post more Lost Sales, eventually this will end up with more parts "jumping" on the shelves that we will never sell and eventually become obsolete. What many of these Parts Managers don't know is that "double posting" the same part happens more often than they would think.

Case in point, we may have a customer that comes to our counter to check on a part that we don't stock and doesn't order the part, basically just inquiring to see if we have it or not, and rightly so, we post a Lost Sale. That afternoon that same customer comes back and Special Orders that same part we posted as a Lost Sale earlier from a different Counter Person, thus resulting in a "double posting" of the same part.

News Flash!...it doesn't matter! We could "double post", or even "triple post" that same part as the parts Phase-In Criteria requires two or three separate "events", in different months over the course of several months before it even triggers for Phase-In. Even then, it doesn't "jump" on the shelf as the Parts Manager decides whether to accept the part or not for normal stocking.

3.) Added D.M.S Steps in Lost Sales Reporting:

This is also another big one as many Dealer Management Systems require way too many steps just to post a Lost Sale, which results in many Missed Opportunities for posting Lost Sales. This is probably the most common reason for lack of posting, so this is why I recommend having a simple Lost Sales Log right next to the computer so when in doubt, we just right it down.

This is also the way we used to record Lost Sales "back in the day" before we had computers to begin with. Difference is, of course we didn't have a computer to record these Lost Sales, so we just collected the data on these sheets and manually added them up to see if there was enough Lost Sales demand over a period of time and added them to stock.

At the end of the day, the Parts Manager can review these Lost Sales Logs from the Parts Counter Staff and enter them all in at one time. Also, the Parts Manager can review these lists to see if he or she wants to even post some of these Lost Sales for those possible exceptions such as sheet metal, engines, transmissions, or any other part that we would not stock.

Now that we have traced the "origin" of where Lost Sales begin, it's now time to seek out the "source" of where we can actually "find" Lost Sales. Keep in mind that reporting Lost Sales is a good thing and we shouldn't worry about double posting, or whether it is a Lost Sale or not. I would much rather see it and not need it versus needing it and not seeing it.

Lost Sales Opportunity Sources:

1.) Incoming Phone Calls:

These calls from customers inquiring about on a non-stock part that doesn't result in either a Special Order, or purchase from another dealer or vendor should be posted as well. Best time is the first time to enter that "Potential Missed Opportunity", or Lost Sale, even if they do come back to order the part.

2.) Service Department Quotes:

Big, BIG resource for gathering these "Potential Missed Opportunities" for recording Lost Sales. Basically, we just need to print off an extra copy of the Service Department Quote and keep one in the Parts Department. 

At the end of the day, we simply match up these quotes as to what was purchased and wasn't purchased and if these parts not purchased were not in stock, all should be entered in as Lost Sales. We shouldn't even question these missed opportunities, especially in our Service Department as in most dealerships, over 70% of our parts sales are from Service.

3.) Sales Department Opportunities:

Yes, we do have Lost Sales Opportunities from our Sales Department whether in Accessories, or just basic inquiries from those Sales Customers as it once again provides another resource as customers that are shopping for a New or Used Vehicle are in a "buying mode" and we shouldn't let those opportunities slip away.

4.) Technicians & Service Advisors:

If we are not utilizing our techs and advisors as a resource for Lost Sales Opportunities, we are truly missing the boat. They are the ones that are most involved and most exposed to our customer base, and we should be encouraging them to provide us with as much information as possible and giving them positive feedback for their participation.

Posting Lost Sales is no different today than it was "back in the day" even though they have become much easier to post. Though some of these reasons for not posting them hasn't changed, we still have to have that sense of urgency. 

Lastly, it is a fact that posting Lost Sales is the Number One ingredient in expanding our parts inventory breadth and increasing our "First Time Off Shelf Fill Rate" to at or above industry guide of 75% - 85%. That being said, if we are not posting at least 10% of our total cost of sales, we just aren't getting it done.

This why Lost Sales still tops the charts in most 20 Group Meetings across the nation when we start talking about Parts. The question is always why we aren't reporting enough and oddly enough...these are the same Parts Departments that have low "First Time Fill Rates", lower percentage of Normal Stocking Parts and higher obsolescence...seems to be a pattern here!

Find & Report Them!...Don't Ignore Them!

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...