September 2023: Pandemics, UAW Strikes, Backorders..."How Do We Deal with All of This?"

Here we go again with yet another crisis, especially for Parts Managers as we face this impending UAW Strike. In my opinion, this is actually much worse than what we dealt with during the Pandemic. 

During the Pandemic, we all had to deal with the effects of what Covid-19 dished out with employee shortages, supply shortages, and prices sky-rocketed effecting our whole economy and daily lives, whether at home or at work.

In retrospect, comparing this impending UAW Strike to the Covid-19 Pandemic has a much different feel to it as it will put the Parts Manager on center stage. The Covid-19 Pandemic had everyone on center stage as we all had to bear the brunt of effects, whether in Sales, Service or Parts.

On the other hand, from a Parts perspective, we will most likely have to handle this UAW Strike much like we did during the Covid-19 Pandemic. We are actually still feeling that Parts impact as we are still dealing with Supply Chain Issues and never-ending Back Order Situations.

Hard to believe that things may actually get worse as the projected 45 - 60 Day UAW Strike predicts that Back Orders will multiply. Chasing parts once again will be the normal each and every day during this UAW Strike.

How we manage our way through this may have us looking back a few years ago to see how we did it the last time, but in my opinion, we have to be much smarter than the last time. History should have told us that we need to prepare better when these times hit us.

So!...How Do We Deal with All This?...Again!

Let's Begin!...Again!

One thing for sure is that the lessons of the past should always help us in preparing better in the future, even though this particular crisis puts Parts Managers on Center Stage with the fingers only pointing in our direction.

That being said, we have to keep logic on the forefront in managing our way through this and fortunately we have math on our side. Unlike other dealership departments, the Parts Department's Inventory Performance is highly dependent on history, math and algorithms.

Much like preparing our families for impending storms, whether hurricanes, winter storms, or any other impending weather issue, preparation is key. Once we get wind of what's coming, we all head to the grocery store for extra supplies and food.

Preparing for this UAW Strike is no different in nature, except for the fact that we are looking at a Parts Inventory of anywhere between 3,000 to 8,000 different parts numbers that sell at various Annual Piece Sale Rates.

That's much different than making out a grocery list and increasing our normal supply of milk, eggs, bread, water and other supplies in preparation of upcoming weather events. Having that many part numbers to prepare for in this event requires the right math on Lead Times and Days Supply.

It also requires proper modifications in the DMS to accommodate the added Days Supply needed to survive, in this case, an additional 45 - 60 days of the UAW Parts Strike Shutdown. In comparison, we have to plan on an extra 45 - 60 days of food and supplies to get through this storm.

Talk about preparing for a storm!...

The only way to prepare for this accurately is to use our DMS to do the math for us. Problem is, most dealership DMS Set Ups do not have ABC Source Ranking Set Ups installed into their DMS.

Even if they do, often times the math is not set up correctly based on Annual Piece Sales. Most DMS's are set up to one overall default settings on Low Days Supply, or Best Reorder Point, (BRP), and High Days Supply, or Best Stocking Level, (BSL).

ABC Source Ranking allows us to set the proper Best Reorder Points and Best Stocking Levels of all parts that sell at different rates throughout the year with the proper math. Parts sell at different rates and numbers, thus requiring different Reorder Point and Best Stocking Levels.

Having just one Default Setting for Best Reorder Points and Best Stocking Levels does not allow for parts that move at a different rate. For example, a part that sells 100 times a year is due to sell on average every 3.65 days or rounded up to every 4 days.

In other words, if an oil filter sells an average of 10 a day, that would mean that when this oil filter gets down to a 4 Days Supply of 40, the DMS would kick in at the Best Reorder Point and order that oil filter back up to it's Best Stocking Level of at least 100% at 80 for the Best Stocking Level.

Compare that to a part that sells only 12 times a year, with an average sale every 30 days, which requires a different BRP and BSL, (see above). In other words, that particular part can sell down to zero before ordering back to a Stocking Level of one based on current Lead Times.

The whole key is Lead Time Days as we have to allow at least 4 Days of Lead Time. One day to order, one day to receive, one day to stock the shelf and one day of Safety Stock. Even though in most cases, we receive them overnight, or in a couple of days.

If the dealer only has one "Default Source", then only one set of Stocking Levels can be applied, which is usually set to a Low Days Supply, (BRP) of 15 Days and a High Days Supply, (BSL) of 30 Days.

Having just one set of these Stocking Level Parameters leads to stocking too much of what we don't need and not enough of what we do need. This makes this whole UAW Strike battle even worse to overcome.

Having ABC Source Ranking allows the Parts Manager to simply add the number of Days Supply predicted in the UAW Strike. In other words, and using the above example of the oil filters, we would just need to add 45 - 60 days to our High Days Supply, (BSL).

Even though the Reorder Point never changes based on how many Annual Piece Sales, we can adjust the High Days Supply, (BSL) to include the added days of the UAW Strike Shutdown. 

So, instead of when those oil filters get down to a 4 Days Supply of 40 and reorder up to 80, (100%), we would just add another 45 - 60 Days, bringing the High Days Supply, (BSL) to 85 - 100 to allow for the Extra Days needed during the UAW Strike.

This math would apply to all ABC Source Ranked Piece Sale Ranges, especially the Fast-Moving Piece Sale Ranges above 50 Piece Sales Annually. These ranges include 50 - 74 Annual Piece Sales, 75 - 99 Annual Piece Sales, and 100+ Annual Piece Sales.

We can now see how important ABC Source Ranking is, especially when preparing for this impending UAW Strike, but what do we do if we don't have ABC Source Ranking installed into our DMS? How do we adjust all the Annual Piece Sale Ranges with only one Default BRP and BSL?

Well?...if you haven't figured that one out yet, then you might as well just plan on doing the added Days Supply needed during this UAW Strike manually. Although, I'm not just saying to use the SWAG method that I mentioned earlier.

There is a "right" way of doing it, even though we may not have ABC Source Ranking installed into our DMS. That method would be what we did "back in the day" and that's setting Minimums & Maximums, otherwise referred to as MIN/MAX Set Ups.

By reviewing history for each of the Faster-Moving Parts, which I would recommend running a Parts Piece Sales Ranking Report which is available in most systems to determine which parts are selling the most annually.

After determining these faster moving parts in Parts History, we can then pull up each individual part number and set the MIN/MAX numbers, (especially the minimum) to accommodate the added predicted Days Supply needed during the UAW Strike.

Keep in mind though, whether we add the Days Supply via the MIN/MAX method or adding Days Supply via ABC Source Ranking, we need to "reset" these parameters back to their original settings after creating the Stock Orders to accommodate the UAW Strike.

This is definitely a procedure that we don't want to "set & forget" because the ramifications after this crisis could get even worse in an adverse effect as adding more inventory when it is not needed may lead to over stocking and additional obsolescence.

As mentioned, preparation is the key to success and surviving yet another crisis depends on the math in this case and should never rely on guessing our way through which may just lead to over stocking and future obsolescence as mentioned.

We got through this before and we can do it again!

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...

August 2023: Today's Parts Manager/Service Manager Relationship

It wasn't uncommon years ago to hear many people in our industry say that they had a "wall" between their Parts Department and their Service Department. Even though, unfortunately, there are still some walls between these two departments in some dealerships today.

I will say though that today, we are seeing this relationship building more and more as one Fixed Operations Unit with both the Parts Manager & Service Managers "crossing over" to the other side, getting more involved with each other's Duties & Responsibilities.

Over the years, I have seemed to witness this transformation a little more each year all the way up to as recent as last week. As I was training in my last dealership a week ago, and the owner told me that he had just one department he called his Fixed Operations Department, run by two managers.

This would also explain why the Service Manager took part in this dealership's Parts Manager Training for the whole three days last week. This is actually not something new as I'm actually seeing more and more "other" Department Managers participating in our Parts Training Program, including some owners believe it or not!

So, why all the fuss over the Parts Department and why all the fuss about these two Fixed Operations Managers learning more of what the other ones does? Why do we need "dual" Fixed Operations Managers as each one has their own unique skills that should be applied in their own "skill" area?

In my opinion, it's about time that we join these two forces, or departments and actually call them one Fixed Operations Team. Over the years, I have always welcomed other managers opinions, suggestions and ideas into my role, whether I was the Parts Manager, Service Manager, or Fixed Operations Director.

So, let's get down to basics, shall we? 

If we are going to "join up" our forces to create one mega Fixed Operations Department run by two skilled experts, what are the areas that we need to focus on together? Who will take the overall "lead role" and be the "Boss" of the Fixed Operations?

The answer to those two questions and more will be explained as we move on down through our ACG Smart Parts "Fixed Operations Essential 10 Areas of Joint Leadership". I think after we run through our list of 10 Essentials, we will know who the boss is...

Let's Get Started!...

Coming up with the "Fixed Operations Essential 10 Areas of Joint Leadership" was actually pretty simple as we will see moving down our list. We will see that these two managers already manage these two departments together. It's just a matter of putting two minds together with perhaps some different, but often valid ideas & opinions.

That being said, this already answers the question of "Who's Boss?" There is only one word that can make these dual roles work and that word is "respect". There is no room for pride when it comes down to dual management roles as skill, ability and knowledge have to be a given fact.

As we break down each one of our "10 Essential Areas", we will include the Parts Manager's and Service Manager's role, or "part" of each one of the essential areas. Thus, not requiring any "boss" or "role leader" as each has their own responsibility in each essential area.

Also, please keep in mind that these "Fixed Operations Essential 10 Areas of Joint Leadership" are not listed in any order of priority as all of these areas are a priority at it's right time. Inclusion is the key to the success or outcome of any essential area.

Service Absorption/Profitability:

Parts Manager: The Parts Manager is responsible for the profitability of not only the Parts Department, but also covering its "share" of the overall Fixed Operations Service Absorption. Depending on the manufacturer and if the dealer has a Body Shop or not, the Parts Department can be responsible for "covering" 20% - 30% of the dealer's expense absorption.

In most dealerships today, the Parts Department is the most profitable department by percentage of all other dealership departments. The Parts Manager must maintain the dealer's guideline for gross profit percentage while managing expenses to achieve a net to gross profit percentage of anywhere from 35% - 45% depending on the manufacturer.

Service Manager: Just like the Parts Manager, the Service Manager must also cover his/her share of the dealer's Service Absorption percentage, but at a higher percentage than the Parts Department. As in most dealership's the Service Department usually generates more overall gross than the Parts Department does.

In most dealerships, the Service Department has to cover anywhere from 30% - 40% of the overall absorption percentage, once again, depending on the manufacturer. The Service Manager also has a huge role compared to the Parts Manager as he/she has to start it all with enough Service Productivity to generate Labor & Parts Sales.

Service Productivity/Parts Productivity:

Parts Manager: Yes, in my opinion there is a thing called "Parts Productivity". The Parts Manager has to do their job by having the "Right Parts at the Right Time" at least 75% - 85% of the time on a first-time basis. Having the right D.M.S. Set Ups & Controls with the right math is the only way to achieve these First Time Fill Rate Percentages as we have mentioned several times in past issues.

In the Service Productivity "crossover" role, the Parts Manager has to do their due diligence to get those cross-ship parts and backorder parts as efficiently as possible to reduce Service Shop "down time" and increase "cycle time". Time is money and effects both the Parts & Service Departments Overall Profitability.

Service Manager: The Service Manager has to ensure that Service Shop Productivity is running at peak capacity and at a productivity level set by the dealer and the manufacturer. Expected productivity levels can range from 120% - 150% depending on the manufacturer and technician skill levels. Having the right mix of technicians also insures labor gross percentages at or above industry guidelines.

In the Parts Productivity "crossover" role, the Service Manager should be involved with the Parts Manager reviewing Parts Stock Orders as the Service Manager and Parts Managers look at Stock Orders differently.

The Parts Manager looks at the parts history, parts cost, number if overall demands, parts space restrictions, etc. and may actually "over-think" the Stock Order. The Service Manager has a different set of eyes and views on the Stock Order.

The Service Manager is looking at the type of part and what parts are holding up the shop, no matter what the parts cost, history or year, make model usage...the Service Manager just wants the part. This is why this process or "essential" deserves two sets of eyes and joint leadership.

 Special Order Aging, (30 Days or Less):

One might think that this is strictly the Parts Manager's job, or role, but as you will see, both the Parts Manager and Service Manager are equally responsible.

Parts Manager: The Parts Manager's role in this one is to simply stick to the Special Order Guidelines and hold all those responsible for ordering parts accountable. There must be deposit guidelines, pre-payments, and especially, parts should not be Special Ordered unless they are attached to an Open Repair Order, or a Future Appointment.

All returned parts to the manufacturer also have to have consequences in the way of handling fees being expensed to the appropriate department or person responsible for the part being returned. Technicians do not order parts as they can tell us what parts the vehicle needs, and only authorized personnel can actually order the parts such as management, advisors, or the customer.

Service Manager: The Service Manager has a huge dual role in this essential area as not only authorizing these Special Orders in the Service Department, as they are also responsible for getting these parts on the vehicle. Both the Parts Manager and the Service Manager have to be one when it comes down to scheduling these Special Order Customers.

Work In Process:

Parts Manager: The Parts Manager plays a big role in this essential area also. You would think that when we mention "work-in-process", we are referring mostly to a Service terminology because it involves "adjusted cost of labor".

Actually, the Parts Manager is just as responsible for the "work-in-process" as the Service Manager is. Often times, the repair order is on the WIP Report because of a part that is on backorder, and they can't complete the job. The Parts Manager must do all they can do to process these repairs orders through and off the WIP Report.

Service Manager: The Service Manager is responsible for the "flow through" of all repairs in the Service Shop and has to work closely with the Parts Manager to combine all the assets from having the parts on site and the technicians available to complete the repairs.

Both the Parts Manager and the Service Manager have to communicate on areas such scheduling issues, part arrival times, customer availability and shop capacity. All of which takes a team effort from both in managing this essential area.

Menu Pricing:

Parts Manager: The Parts Manager starts this essential area as the parts pricing has to be determined first, before the labor portion gets applied to come up with our final, "out-the-door" price to the customer. 

The Parts Manager has to break down all the parts required for each menu package and perform what's called "weighted average pricing" to allow one price for each category of parts such as oil filters, air filters, cabin air filters, wiper blades, etc.

Service Manager: The Service Manager then has to apply the right labor time and labor sale amount that will achieve the desired labor gross and effective labor rate. Once combined the "weighted average parts price", they can now have one, "out-the-door" menu price that will satisfy all sales and gross targets and be competitive.

Pricing Strategies:

Parts Manager: Once the Parts Manager and Service Manager have developed the menu packages and pricing, they now have to have a Pricing Strategy for the Retail Service Shop Repairs and Over the Counter Retail Parts on those "captive" repairs and parts.

Applying the "right" Cost Plus Parts Matrix is the only way to ensure the parts gross profit margins to balance out those menu and competitive price parts and to achieve industry retained gross profit percentages.

Service Manager: The Service Manager's "Matrix" so to speak is called a "Labor Grid", which works much like a Parts Matrix. Each increment of labor time can add a "gradient" percentage which slowly increases the effective labor rate as the overall labor time for each repair job increases.

Together, the Parts Manager and Service Manager have developed an overall Pricing Strategy that includes a competitive Menu Package Pricing Strategy and a Retail Pricing Strategy that will achieve expected sales and gross margins on parts and labor.

Marketing:

Parts Manager: Marketing is another really important "Essential Area" that the Parts Manager and Service Manager must work together on. For years, advertising, from the Parts side, has been an area that we were not usually involved in as Upper Management and the Service Manager pretty much handled it.

Nowadays, this old way of marketing without Parts involvement is just that...old thinking. With many manufacturers offering what I call "back end funny money", these incentives for advertising often times weighs heavily on Parts Department performance.

Service Manager: Developing any market promotion, or advertising in general relies on "open-minded", or "out-of-the-box" thinking. In my opinion, the more minds the better as capturing new customers and retaining them requires value, integrity, experience, and a trust that can't be left to one person making these marketing decisions.

Housekeeping/Security:

Parts Manager: Out of all of our "Essential Areas", this one has always seemed to fall on the shoulders of the Parts Manager. After all, which department needs to be secure the most, and be organized and orderly?

This, of course, comes without mention, but when you add in the Service Manager in the mix, security doubles with another set of eyes. The Parts Manager, of course is front and center in this area that requires an "inside manager", but let's see what the Service Manager can bring to the table.

Service Manager: Believe it or not, there is a lot of responsibility that the Service Manager has in this category as well. When you think about the housekeeping side of this category, you might as well just add the word safety in as well.

Keeping the shop clean is keeping the shop safe as poor housekeeping practices can lead to accidents in the shop and much worse. Security is also huge for the Service Manager when you look at all that expensive shop equipment which could be the same as the Parts Manager protecting the inventory.

Items ranging from lift equipment, alignment machines, cameras, technician and advisor tablets, wheel balancers, engine & transmission hoists, special tools, etc. as the list goes on and on. In many dealerships today, the Service Shop has more invested in equipment than the total value of the parts inventory.

Pay Plans:

No need for separating roles in this one as both the Parts Manager and the Service Manager are equally a part of both departments pay plans. Fixed Operation Pay Plans in general are becoming "one" that includes both departments.

This category in general is getting more and more popular today as more Fixed Operations Pay Plans are "crossing over" from the Parts Department and the Service Department. Parts being paid on Service and Service being paid on Parts is becoming more of an incentive option for managers and owners.

Parts personnel getting incentives on either Labor Sales and/or Service Productivity is a welcomed addition, in my opinion. For years, the basic, old-fashioned Parts Pay Plan was pretty much an hourly wage, or weekly salary with maybe a little bonus at the end of the month.

Now, when we add in some of those Service incentives, all of a sudden, the attitude in the Parts Department changes to doing whatever we can to get the part, or perhaps delivering parts to the technician, or whatever we have to do to get the job out the door.

Same goes for Service getting incentive on Parts Sales as we see more emphasis on the "right" repair that may involve replacing parts, instead of "repairing", or "overhauling" because perhaps their pay plan leans more towards the labor side.

These "crossover" pay plans definitely involve both the Parts Manager and Service Manager as each departments sales and gross profits rely on each other. Coming up with the right "crossover" pay plan incentives requires research, sales history and shared overall dealership goals by both managers.

Customer Satisfaction:

Our Number 10 and last "Essential Area" goes without saying as having great Customer Satisfaction is where the rubber hits the road. Without it, all else fails as it won't matter what the Parts Manager and Service Manager do with our other 9 "Essential Areas" because we won't be in business without customer retention.

I will say though that out of the two Fixed Operations Managers, the Service Manager is the one mostly in the limelight. The Parts Manager is usually behind the scenes, and they are not often exposed directly to the customers coming in for Service.

This is where, in my opinion, the Parts Manager needs to play a huge support role for the Service Manager. Taking time to track down and acquire back-ordered parts, talking directly with customers on parts delays, and not putting these tasks on Service Personnel as these are parts issues.

In order for all these "Fixed Operation Essential 10 Areas of Joint Leadership" to succeed, this last area is the most important. In my opinion, Parts Managers need to be more visible, even in the Service Drive greeting customers.

In the same way, Service Managers need to be more available to review Parts Stock Orders with the Parts Manager. They also need to help locate some of these hard to find, or "back-ordered" parts in the way of providing more resources they may have used in past.

Lastly, and perhaps the success of this new era of Fixed Operations Team Managers relies mostly on that wall coming down. Each manager needs to have the same respect for each other. They need to rely on each other and be another set of eyes over each department with equal management authority.

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...