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...