tag:blogger.com,1999:blog-329554339706066652024-03-13T06:42:13.185-07:00Dave's Smart Parts BlogDave's Smart Parts Bloghttp://www.blogger.com/profile/04660849016453127899noreply@blogger.comBlogger152125tag:blogger.com,1999:blog-32955433970606665.post-36391767123845318542024-03-13T06:41:00.000-07:002024-03-13T06:41:41.757-07:00March 2024: Vendor Managed Inventories, (V.M.I.): "How to Play the Game"<p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Since the early to mid 90's, many of us have gotten used to working with the Manufacturers' Vendor Managed Inventory, (V.M.I.). Prior to the V.M.I. Introduction, Parts Managers like myself relied totally on our own Dealer Management System, (D.M.S.) to run our Daily and/or Weekly Stock Orders.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Fast forward to today, and if your manufacturer offers their own V.M.I., we are now subjected to these Manufacturers recommendations on just what parts we should stock. Even though these V.M.I. Programs do utilize individual dealers' sales information as well as the dealers recommended Stocking Levels as set up on the D.M.S.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">In this issue of ACG "Smart Parts", we are going to drill down and break down just how these V.M.I. Programs work and more importantly, "How to Play the Game" in getting more of the rewards from these programs with less risk.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Even if your manufacturer does not offer a V.M.I. just yet, don't be surprised if they do in the near future as many manufacturers are joining in such as VW, BMW, Ford just to name a few. Software Programs such as RIM, ARO, Partseye, SRD, and others are now the tools manufacturers are using to create their Stock Replenishment Programs.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Even though the individual manufacturers set ups and qualifications may be different, they may use the same "vehicle". For example, RIM is not just a GM Sponsored V.M.I. as Ford, VW, Mitsubishi and Nissan and others have their own versions of the same software used in RIM, (Retail Inventory Management).</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">There are also some V.M.I. Programs that are better than others such as PartsEye and FCA's ARO Programs. It all comes down to how they are set up initially as well as program qualifications, benefits, penalty's, guidelines and one of my favorites which is "compliance", which I actually call "obedience".</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Another great selling point for these programs is the word "protection" or "inventory guaranty", as both of these terms are deceiving. If these programs offer this protection, or guaranty, then why are there still many of these "qualified" program parts still on the shelves at dealers several years later? Where is the protection, or where is the inventory guaranty?</span></p><p style="text-align: justify;"><span style="font-family: arial;"><span style="font-size: medium;">The truth is all these V.M.I. programs include a "Return Policy", and not "Protection" or "Guaranty" Return Policy. <b>All return parts</b> include restrictions, guidelines, criteria and return qualifications just like any other Manufacturers Return Policies, whether regular monthly returns, or V.M.I. returns.</span></span></p><p><b style="font-family: arial; font-size: large;"><i>Let's get started on how these V.M.I. Programs work....</i></b></p><p style="text-align: justify;"><span style="font-family: arial;"><span style="font-size: medium;">Creating the software V.M.I. "vehicle" such as RIM for example all starts with the collection of sales data from the dealers Dealer Management Systems, (D.M.S.). Some V.M.I.'s will also collect "total demand" data which includes Lost Sales Reporting.</span></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">This demand data is collected from dealers nationally, regionally, demographically and weighed utilizing algorithms to measure and initiate parts "phase-in" as a group. The next step, which varies from manufacturers and V.M.I., is what will "trigger" the initial parts "proposal", or recommended Best Stocking Level, (BSL).</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">In most V.M.I.'s, it only takes one sale in either 12 or 24 months on a "qualified" V.M.I. part that has met overall "group" phase-in criteria. For example, normal individual dealer parts phase-in criteria may be "at least 1 demand in 3 separate months over a period of 7 months to phase-in".</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Group phase-in follows these same guidelines in the above example except "multiplied" by several dealers' total demand. So, instead of "at least 1 demand in 3 separate months over a period of 7 months", the demand may have to be "143 demands in 3 separate months over a period of 7 months".</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Then, after "qualifying", parts are then weighted for average daily demand through algorithms and is called "Weighted Daily Demand", (WDD), or even "Cycle Demand" and "Lead Time Demand" algorithms.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">This all sounds pretty complicated, but it really isn't and the problem with all this is that technically, a part may qualify with those 143 demands in the group as listed above, without any demand in my dealership. </span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">In other words, when we do finally sell just 1 of these "qualified" parts, the V.M.I. will recommend stocking that part after just 1 sale in either 12 or 24 months. So, then the next question would be...<b>"Should we stock a part that we've only sold once in 12 or 24 months, and will it really be protected?"</b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">The above example can also go in the other direction on a part that has met my criteria for phase-in with several "hits" but is still not a "qualified" V.M.I. part because it hasn't met the total group demand criteria. This is why we still need <b>our own</b> D.M.S. to track <b>our own</b> demand.</span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><b>Let's now look at "The Good, The Bad, & The Ugly" on these V.M.I. Programs</b></span></p><p style="text-align: justify;"><b><u><span style="font-family: arial; font-size: medium;">First, The</span><span style="font-family: arial; font-size: large; text-align: justify;"> Good:</span></u></b></p><p style="text-align: left;"><span style="text-align: justify;"><span style="font-family: arial; font-size: medium;">It's always been a good thing to see what parts are selling out there to get a good sense of what we may be selling in the future. Collective demand information will give us a "road map" for sure, but demand varies from dealership to dealership and may lead to understocking or overstocking and obsolescence.</span></span></p><p style="text-align: left;"><span style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Discounts and Allowances is also a good thing as these V.M.I. Purchase help us earn discounts and build return reserve. Depending on the manufacturer, additional "back end" money may be available as these programs may also be tied into overall dealer "cash back" programs.</span></span></p><p style="text-align: left;"><b style="text-align: justify;"><u><span style="font-family: arial; font-size: medium;">Second, The</span><span style="font-family: arial; font-size: large;"> Bad:</span></u></b></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">One of the first "bad things" that I see quite often due to these programs is that many Parts Managers rely on these programs 100% for all their Stock Replenishment. What they may not realize is that most of these V.M.I. Programs offered by the manufacturer only provide approximately 50%-55% of their total manufacturer parts inventory "breadth".</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">In other words, they cover mainly the A and B type parts and miss a lot of what I call the "meaty parts" like some sensors, gaskets, bolts, tensioners, adjusters and so on. Many of the parts that are tying up the Service Department and slowing down Service "Cycle Times".</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">These "meaty parts" can only be picked up by our own D.M.S. with the Proper Set Ups & Controls and running our In-House Stock Orders like we did before these V.M.I.'s were even out there. Unfortunately, many Parts Managers have transformed away from their own D.M.S. and are missing the benefits of their own D.M.S. with the right set ups & math.</span></p><p style="text-align: justify;"><b><u><span style="font-family: arial; font-size: medium;">Lastly, The Ugly</span><span style="font-family: arial; font-size: large;">:</span></u></b></p><p style="text-align: justify;"><span style="font-size: medium;"><span style="font-family: arial;">The Ugly side of many of these Manufacturer V.M.I. Programs is unfortunately the lack of understanding of how these programs work and "How to Play the Game". The results of not knowing how to play the game leads to a lot of overstocking of these V.M.I. parts and more </span><span style="text-align: left;"><span style="font-family: arial;">obsolescence.</span></span></span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: medium;">Overstocking in the ways of maybe having too many Days Supply of even faster moving parts, i.e. having 10 Brake Rotors of a part number when we only need 4. Overstocking doesn't just mean having too many of a fast-moving part as having just 1 of a part number that I don't sell could be too many.</span></span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: medium;">In many of the stores that I have visited, the overstock of V.M.I. parts are as much as 10%-15% of the total parts inventory. All the while, that additional investment on overstocking investment could be directed more towards parts that will strengthen the "breadth" of <b>our</b> parts inventory to increase overall "First Time Off Shelf Fill Rates".</span></span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: medium;">Another "Ugly" is that many of these dealers that utilize a Manufacturers V.M.I. Program is increased obsolescence. Even though these programs promise "Inventory Protection", that is just not the case as I've witnessed over and over again.</span></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Although, there are a couple of these V.M.I. Programs, such as PartsEye that actually "discourage" the stocking of Aged V.M.I. Parts, which is great. Maintaining the proper level of Days Supply and Aged V.M.I. Inventory is encouraged and rewarded with more Program Benefits.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Unfortunately, in some other Manufacturer V.M.I. Programs, dealers are being led to being the Manufacturers Second Warehouse and admittedly so from some of my conversations with some manufacturers.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Knowing "How to Play the Game" also requires knowledge of "Riding the Curve". Compliance Levels require the Parts Manager to know what to stock and what not to stock in these programs that lead to overstocking and accruing more obsolescence while staying "Compliant", or "Obedient" to these Programs.</span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><b>Knowing "How to Play the Game" is a "juggling act", and we need to take advantage of the benefits while protecting our dealers second highest asset, which is the Parts Inventory.</b></span></p><p style="text-align: justify;"><span style="background-color: white; font-family: "times new roman"; font-size: large; text-align: center;">If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ </span><span face="arial, helvetica, sans-serif" style="background-color: white; color: blue; font-size: large; text-align: center;"><i><b>www.smartpartstraining.com</b></i></span><span style="background-color: white; font-family: "times new roman"; font-size: large; text-align: center;">, or...just pick up the phone and call me at :</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"></span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"></span></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: medium;">(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...</span></p><p style="text-align: left;"><span style="font-family: arial; font-size: medium;"><br /></span></p><p style="text-align: left;"><span style="font-family: arial; font-size: medium;"><br /></span></p><p style="text-align: left;"><span style="font-family: arial; font-size: medium;"><br /></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><br /></span></p><p style="text-align: left;"><span style="text-align: justify;"><span style="font-family: arial; font-size: medium;"> </span></span></p><p><span style="font-family: arial; font-size: medium;"><br /></span></p><p><br /></p>Dave's Smart Parts Bloghttp://www.blogger.com/profile/04660849016453127899noreply@blogger.com0tag:blogger.com,1999:blog-32955433970606665.post-29822826023701276872024-01-31T06:26:00.000-08:002024-01-31T06:26:03.547-08:00February 2024: Dealer Management Systems, (DMS) Rankings for 2024<p style="text-align: justify;"><span style="font-family: arial; font-size: large;">In my opinion, one of the most challenging decisions that today's dealer owner has to make is which Dealer Management System, (DMS) is right for their dealership.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">It was much easier years ago as their where just a handful of DMS Vendors out there such as Reynolds & Reynolds, ADP, (Now CDK), UCS, Coin Convergent Systems, and perhaps Arcona, which evolved into today's Dealertrack DMS.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">The pricing of these Dealer Management Systems was just what it was as dealers didn't really have many options as DMS competition was held pretty tight with just a few systems out there.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Dealers had to have a Dealer Management System, so the choice of which system to purchase became just a matter of preference. Price wasn't a major factor on which system was eventually selected as being familiar with system operation was the priority.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Fast forward to today, Dealers have lots of options, in a way, maybe too many options. It has led to choices being made based on price, or perhaps, Office Manager, or Comptroller preference, no matter what the price.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Office Managers and Comptrollers often dictate which DMS the Dealer will choose, regardless of the price due to Conformity and Accountability to their standards they are familiar with in basic Dealer Accounting.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">That being said, if Accounting is a main priority, with price coming in second, what about usability in all other Dealer Departments? What affect does this choice of which DMS have on the Fixed Operations Departments, primarily the Parts Department?</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><b>It's Time to Find Out....Let's Do This!</b></span></p><p style="text-align: justify;"><span style="font-family: arial;"><span style="font-size: large;">I will say that the choice made definitely impacts both the Parts & Service Departments. Some are better than others and many lack basic needs of each individual department.</span></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">In this issue of ACG "Smart Parts", we will break down each individual DMS out there with their "pros and cons". There may be more systems out there that are not mentioned, but for the most part, we will cover all but a few, if any.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">We will not list these Dealer Management Systems in any order of personal preference as many dealers are perfectly fine with their choice. We will simply list the positives and negatives with each system out there from a Parts Perspective.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">So, let's get started with our own ACG "Smart Parts" Perspective on what these Dealer Management Systems have to offer and what they lack. </span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">If we had the opportunity to put the best of each system wrapped all into one DMS, we would then have the perfect Dealer Management System out there, which someday, I would personally love to be a part of.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Each DMS that we review will be in alphabetic order and will not be listed in any order of preference. We will list our "Thumbs Up" and "Thumbs Down" on each DMS most utilized by Dealers today in 2024.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Although, ACG "Smart Parts" will "rate" each DMS with our "5-Star" Rating, One Star being the lowest rating, all the way up to our highest rating with Five Stars.</span></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><b>Let's Begin...</b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><b><u>Adams:</u> ★</b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><b>👍: Thumbs Up</b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Adams Dealer Management System is not widely utilized but is an efficient DMS overall. It does provide ABC Source Ranking by Piece Sales and the basics as far as integration with Accounting are there and provisions for Matrix Pricing Options. </span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Somewhat User Friendly but does require a lot of extra keystrokes to go from program to program, but not a major issue. Parts and RO billing is fairly easy, and Source Management is manageable and basically effective on Best Reorder Points and Best Stocking Levels.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Lost Sales Reporting is available but requires too many extra steps to get them recorded. Also, there are no prompts to report Lost Sales if parts aren't stocked initially.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">👎:<b> Thumbs Down</b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">One of the main "Thumbs Down" in Adams is a lack of Reporting Options. Most of the "canned reports" lack enough significant information for daily operations. </span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">"Drill Downs" are just not there on Parts Gross Profit Issues, Parts Detail Information, Parts History, Supersession Links, Special Orders, Source & Batch Moves, etc.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Constant manual updating is also required for most information such as Best Reorder Points and Best Stocking Levels as real time updating is lacking.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Not a bad choice if you are a smaller dealer and just want the basics as we will see in many other DMS Options as we continue forward. </span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">A detailed Special Order Program is also lacking in Adams, almost like an afterthought with little detail and links to Customers and Open Repair Orders and Appointments.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><b><u>AutoMate:</u> ★★★</b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">👍: <b>Thumbs Up</b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">I will say that AutoMate has come a long way in the last several years. They have "upped" their game to become a significant player in today's DMS battle.</span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: large;">Definitely</span></span><span style="font-family: arial; font-size: large;"> very "User Friendly" with a very simple dashboard to direct anyone to where they need to go. All the key elements are there that a Parts Manager needs. </span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Source Management with ABC Source Ranking, Batch Moves, Parts Matrix with Cost Plus, List Plus and List Pricing Options within the same Matrix, which is not common, but beneficial. Very good DMS overall with a few drawbacks they need to work on.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Lost Sales Reporting does take a couple extra keystrokes which will tend to lower the actual true Lost Sales numbers due to that extra step, but Lost Sales are easy to post in AutoMate.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">👎: <b>Thumbs Down</b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">As mentioned, AutoMate has made many improvements, especially in Parts over the last several years. One of the items they need to work on is Parts Receipting.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">In AutoMate, Parts receipts are either for Stock, or whatever else. In another words, there is no breakdown in Supplemental Stock Orders, "In & Out" Orders, Other Orders, etc.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">AutoMate also lacks their own "Report Generator" that can be utilized by dealer personnel. They do have "Report Mate" where AutoMate can generate specific reports for the dealer at an additional cost.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><b><u>AutoSoft:</u></b> ★</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">👍: <b>Thumbs Up</b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">AutoSoft is very "User Friendly" with Parts Counter Tickets and Repair Orders very easy to navigate. Moving parts from RO to RO, or line to line very easy.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">AutoSoft is probably one of the easiest to learn, primarily due to the fact that it's extremely simple to navigate through. The Action Buttons and Menu Driven Software is easy to read through and figure out.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">AutoSoft does offer Source Movement by Piece Sales that is updated automatically in Sub-Source Management, but with limited levels of Source Movement by Piece Sale Ranges.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">👎: <b>Thumbs Down</b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Unfortunately, there are many negatives with AutoSoft, especially in Parts starting with the reporting. Monthly Management Reports are not updated automatically. If the Parts Manager does not archive the Month End Report?...they are lost forever.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">AutoSoft has limited ABC Source Ranking Levels with only six levels offered. The minimum amount of ABC Sourcing Levels required based on the math requires at least eight levels.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Same goes for the Parts Matrix as only twelve levels are offered with no ability to add more based on different sales ranges. Monthly Management Reports lack lots of information needed for properly managing the Parts Department.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Unfortunately, there are many disadvantages with this DMS are far as Parts & Service goes beyond what we could list in this issue. They have a long way to go, but it's much more affordable for the Dealer with adequate Accounting Integration options.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><b><u>CDK - Drive:</u></b> ★★★★</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">👍: <b>Thumps Up</b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Formally ADP, CDK Drive is still one of the most prominent, popular and longest lasting Dealer Management Systems out there today for many reasons.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">CDK offers everything for all Dealer Departments, especially in Parts. ABC Source Ranking, Parts Matrix Pricing, Parts Ordering from Stock Orders, Supplemental Stock Orders, In & Out Purchases, E-Purchases, Lost Sales Reporting, etc.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">No matter what the size of the dealership, CDK will provide all the needs. Daily & Monthly Reporting is outstanding in both Parts as in Service. Installing Parts Set Ups, though not easy and recommended for the average user, they are there.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">CDK is still evolving over to their "Drive" format, but the old "Green Screen" is still required in certain Parts Set Ups. Most Parts Set Ups are fairly easy in their MSSO and IRO Set Up Functions.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">CDK also provides "Weighted Price Averaging" which allows parts sales history to be "weighted" over the last twelve months. This provides the most recent sales information, especially on parts seasonal sales, not offered by many Dealer Management Systems.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">👎: <b>Thumbs Down</b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">One of the more "pricier" systems out there, and as mentioned above, CDK is still evolving from their "DOS-Based" System from years ago over to their newer Windows Based Drive System. This process is still on-going and hopefully will be completed in the near future.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">CDK does not allow the "mixing" of a Cost-Plus Parts Matrix with an "out of grid" default to List as AutoMate does, which is a great option. CDK also does not have a "Flat Price" override to Matrix Pricing as Dealertrack offers.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Flat Pricing can only be utilized by moving Flat Priced Parts into a different Source but doing that will sacrifice ABC Source Ranking & Movement. Source Ranking Movement also requires running the SCS Function Daily to allow Source Movement as it is not done automatically.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><b><u>Dealerbuilt:</u></b> ★★★</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">👍<b>Thumbs Up</b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">This DMS, in my opinion is one of my "Sleepers" on our list of Dealer Management Systems. I was actually surprised when I first started working with this system as it does what a basic, affordable DMS should do.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">All departments will benefit from this system in a general way, but without the detailed information available in other systems like Reynolds & Reynolds, CDK and perhaps Dealertrack.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">On the Parts side of things, it is pretty much complete in all aspects although some Applications require several extra keystrokes, but overall...a "good bang for the buck" in all dealership applications.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">👎: <b>Thumbs Down</b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Dealerbuilt does lack detailed report information if you are a manager that likes to "drill down" information as the "canned reports" have limited information, other than the basics.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Having the ability to create "specific" reports with "specific" information provided in other systems, whether Report Generator, Advanced Reporting, Dynamic Reporting, or an "English Statement" back in the old ADP days.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Today's Dealer Managers require more than just the "canned reports" that are provided by most Dealer Management Systems. Dealers in general are requiring their managers to "drill down" more and perform at an even higher level than years ago.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><b><u>Dealertrack:</u></b> ★★★★</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Dealertrack, in my opinion, and from the Parts side of things has become one of the top, more affordable Dealer Management Systems available. Even though they are still lacking some key components as we will list, they are climbing that DMS ladder rather quickly.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">As far as DMS Conversions, and in the hundreds of dealerships that I have visited over these last five years, Dealertrack has taken over more systems out there, with few converting from Dealertrack to other systems.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">This alone makes a statement about this system in general. User friendly, great "drill down" features, Parts Set Ups & Controls without adding additional Sources, (Stocking Groups) for Source Ranking by Piece Sales.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Dealertrack also has one of the best Special Order Parts Programs available with great detail, more than any other system out there in my opinion.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Weighted Parts Averaging, Simplified Parts Matrix, Pricing Strategies, Lost Sales Reporting, Stocking Group Management, Parts Ordering, etc. are all top notch and easy to navigate. Definitely one of the best systems out there for Parts.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">👎: <b>Thumbs Down</b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">As with any new Product, or Service out there, there are still some "growing pains" to work through. One of which is that Dealertrack still does not have a "Batch Move" function in a "canned report" feature.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">They can do Dynamic, or Advanced Reports specific reports such as Batch Moves. In other words, we can't move all parts from one Stocking Group, (Source) into another Stocking Group. Dealertrack has to build and perform these specific reports individually. </span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">It requires downloading parts into an excel document and reloading into another Stocking Group, (Source). This may not sound like much, but it is a HUGE inconvenience for Parts Managers.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">They also don't have a lot of Order and Receipting options with only NG, (Negative) SO, (Special Order), EP, (Emergency Purchase), or Stock Orders. The NG, or Negative Purchase Sales also have to be managed as they will remain at a negative quantity without constant </span><span style="text-align: left;"><span style="font-family: arial; font-size: large;">maintenance.</span></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">In their Sales Analysis Section, Dealertrack does not separate Customer Pay Service Repair Orders from Collision Center Customer Repair Orders as they are looped into the same report, even though they can be separated in Accounting on the Financial. </span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Lastly, Dealertrack does have great reports, but they do not have one "catch all" Parts Monthly Management Report as most all Dealer Management Reports have. Even though all the information is available in separate Monthly Reports, they are not inclusive on one Parts Monthly Management, or Monthly Inventory Management Report.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><b><u>Dominion/VUE:</u></b> ★</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">👍: <b>Thumbs Up</b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">To be quite honest, and in my opinion, this DMS is definitely lacking in so many areas, but on the positive side of things, it is a Menu Driven, Windows Based System that is easy to navigate.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">It does offer ABC Source Ranking by Piece Sales, but parts that meet Phase-In Criteria have to be "manually" posted as Normal Stocking Parts as "Automatic Phase-In" is not available.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Dominion/VUE does offer all the basics such as Matrix Pricing, Lost Sales Posting, Special Order Program, Daily Sales & Gross Information and pretty much all that a DMS needs to offer, but not to any great depth.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">👎: <b>Thumbs Down</b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Dominion/VUE Parts Manager Reports are extremely vague and they lack the simplest information. For example, they do not have a Parts Ordering and Receipting Report at all. </span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">In other words, we do not know what parts were receipted as Stock Orders, Special Orders, Emergency Purchases, In & Out Orders, Other Orders, etc. </span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Stock Order Performance is a Key Performance Indicator for Industry Guidelines and is not available on this system. Many of their Parts Monthly Management Reports contradict each other and lack trustworthiness.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">For Parts, we could go on and on with the "Thumbs Down" categories for this system. Although, these comments do not reflect potential benefits for other Dealer Departments and Accounting, but from a Parts perspective, this system lacks quite a bit, even the simple things.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><b>PBS:</b> ★★★</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">👍: PBS is my other DMS "Sleeper" out there as this system, much like Dealerbuilt has everything a Dealer would need in a Dealer Management System for the most part at an affordable price.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">It does have a few flaws in the area of Parts, which we will discuss, but overall, and for the price, there is value in this system versus the big guns like Reynolds & Reynolds and CDK.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Parts Monthly Reporting is also very complete and the reports provide all necessary reporting information, or Parts Key Performance Indicators required for Industry Guidelines.</span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: large;">Accessibility</span></span><span style="font-family: arial; font-size: large;">, User Friendly and ease of all aspects of Parts Billing, Ordering, Receipting, Lost Sales Reporting have ease of functionality. For the money, one system I would consider.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">👎: <b>Thumbs Down</b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Parts Set Ups & Controls as we all know are crucial to getting the right information out of any system. PBS does lack the "ease" of implementing the right Phase-In/Phase Out Parameters, Low & High Days Supply, also referred to as Best Reorder Points, (BRP0 and Best Stocking Levels, (BSL)</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">If not done properly, as the "language" of this system is quite different from most other systems will lead to improper Suggested Order Quantities, especially in Source Ranking by Piece Sales.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><b>Reynolds & Reynolds - Ignite:</b> ⋆⋆⋆⋆⋆</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">👍: <b>Thumbs Up</b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">Even though this DMS is our last one listed </span><span style="text-align: left;"><span style="font-family: arial; font-size: large;">alphabetically, it is our ACG "Smart Parts" choice as our 5-Star recipient of Dealer Management Systems available, even though, most likely to be the most expensive one out there.</span></span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: large;">Much like CDK, Reynolds & Reynolds is still transitioning over from their old "Blue Screen", DOS-Based System over to their new Windows Based Ignite Program. Even though there really isn't a perfect DMS out there, this one is the closest in my opinion.</span></span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: large;">From all the existing features still in the old "Blue Screen" to the newer on-screen features and dashboards in Ignite, they have it pretty much covered.</span></span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: large;">Order Types, Receipt Types, In & Out Receipts & Sales, Lost Sales Reporting, Batch Move Capabilities, Source Ranking by Piece Sales, Advanced Reporting all are available and more in Reynolds & Reynolds.</span></span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: large;">Their Special Order Program and Reporting is only second to Dealertrack in my opinion. The ability to bill Parts to Appointments and track by the customer is also a plus.</span></span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: large;">Reporting in Reynolds is far superior to most systems as well with their sheer number of custom, canned reports are at a very high level. This allows Parts Managers to drill down more than most other systems. </span></span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: large;">The addition of Ignite has allowed Reynolds to become more User Friendly without all the excessive keystrokes required in the old "Blue Screen" version.</span></span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: large;">👎: <b>Thumbs Down</b></span></span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: large;">The biggest downfall to this Dealer Management System is price. With new ownership in Reynolds a few years back, they have gotten even more expensive with contract requirements to system updates and even higher prices which has driven many loyal customers to other systems.</span></span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: large;">The other drawback is that Reynolds still requires the addition of Parts Sources to implement ABC Source Ranking by Piece Sales. Updating is still required manually by running Program 2105 to update Source Movement in the old "Blue Screen".</span></span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: large;">Other than the continued conversion of the remaining, old DOS Screen Programs, they still have most of what the Parts Department needs, no matter what the dealership size.</span></span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: large;"><b><u>Other Systems Available:</u></b> ★★★</span></span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: large;">Other Dealer Management Systems that I am familiar with include Quorom, Lightspeed, UCS and Dealer Socket. All of which, even though I am familiar with have had limited usage overall with Dealers, but with the same "Thumbs Up" features and "Thumbs Down" lack of features.</span></span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: large;">Tekion is the newest to enter into this mix of systems available. From what I have seen thus far, they are pretty much have everything with some nice features with more they are still working on. That being said, the jury is still out on what this system will reveal going forward.</span></span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: large;">Lastly, no matter what DMS you currently have, the overall "Utilization Factors" on all of them is a staggering 20% - 25% of what they are capable of. This all reverts back to proper Installation and Training.</span></span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: large;">Challenge is, and from my experience, these DMS Vendors need to start with their own people, training them on what they are actually installing. In my opinion, many don't even know their own product well enough to the point where they are more concerned with "functionality" instead of what the system is "capable" of doing.</span></span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: large;"> </span></span><span style="background-color: white; font-family: "times new roman"; font-size: large; text-align: center;">If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ </span><span face="arial, helvetica, sans-serif" style="background-color: white; color: blue; font-size: large; text-align: center;"><i><b>www.smartpartstraining.com</b></i></span><span style="background-color: white; font-family: "times new roman"; font-size: large; text-align: center;">, or...just pick up the phone and call me at :</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"></span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"></span></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: medium;">(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...</span></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><br /></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><br /></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><br /></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><br /></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><br /></span></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><br /></span></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><br /></span></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><b><br /></b></span></p><p style="text-align: justify;"><br /></p><p><br /></p><p><span style="font-family: arial; font-size: large;"> </span></p><p><span style="font-family: arial; font-size: large;"><br /></span></p><p><span style="font-family: arial; font-size: large;"><br /></span></p><p><span style="font-family: arial; font-size: large;"><br /></span></p><p><span style="font-family: arial; font-size: large;"><br /></span></p><p><span style="font-family: arial; font-size: large;"><br /></span></p><p><span style="font-family: arial; font-size: large;"><br /></span></p><p><span style="font-family: arial; font-size: large;"><br /></span></p><p><span style="font-family: arial; font-size: large;"><br /></span></p><p><span style="font-family: arial; font-size: large;"><br /></span></p><p><br /></p><p><span style="font-family: arial; font-size: large;"><br /></span></p><p><br /></p>Dave's Smart Parts Bloghttp://www.blogger.com/profile/04660849016453127899noreply@blogger.com0tag:blogger.com,1999:blog-32955433970606665.post-71616685774974369012024-01-10T06:05:00.000-08:002024-01-10T06:05:03.229-08:00January 2024: 2024: "Thoughts & Predictions"<p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">First & foremost, we would like to wish all of our ACG "Smart Parts" Readers a Very Happy, Safe & Prosperous New Year as we march into yet another year with our 166th Edition of ACG "Smart Parts". Thanks so much for your support and constant dedication to Parts Excellence!</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Our first issue of the New Year, as in each year, is devoted to looking ahead to get some idea of what we may expect going forward. As in previous years, we gather our personal data along with other industry analysts to give our readers a condensed and concise analysis of what may lie ahead.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">First of all, our title of our first issue of 2024 cannot be simpler. We all have our own opinions, whether based on facts, personal experiences, previous results, or whatever. Bottom line, we all could answer this simple question...</span></p><p style="text-align: center;"><span style="color: #2b00fe; font-family: arial; font-size: medium;"><b><i>"What Do You Think Will Happen?"</i></b></span></p><p style="text-align: justify;"><span style="font-family: arial;"><span style="font-size: medium;">The answer to that question ends up being our title of our first issue. Everyone seems to have their own "Thoughts & Predictions" of what may happen in the future. Hopefully, we can provide some insight and perhaps help shape your own "Thoughts & Predictions".</span></span></p><p style="text-align: justify;"><span style="font-family: arial;"><span style="font-size: medium;">Our goal in this month issue of ACG "Smart Parts" is to provide our readers with the latest data and insight so we can all shape our own thoughts, opinions and predictions as to what may lie ahead in 2024.</span></span></p><p style="text-align: justify;"><span style="font-family: arial;"><span style="font-size: medium;">How much will Battery Electric Vehicles, (BEV's) and Fuel Cell Electric Vehicles, (FCEV's) impact our future, not only in Sales, but also in the Service & Parts Departments?</span></span></p><p style="text-align: center;"><span style="font-family: arial;"><b><span style="color: #2b00fe; font-size: medium;"><i>The Answer to These Questions and Many More!...</i></span></b></span></p><p style="text-align: center;"><span style="font-family: arial;"><b><span style="color: #2b00fe; font-size: medium;"><i>Let's Begin!</i></span></b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">We will start with research from our well-respected team of industry analysts on their forecast of New & Used Vehicle Sales, including the rise of Battery Electric Vehicles, (BEV's) and Fuel Cell Electric Vehicles, (FCEV's) in 2024.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">The "rise or fall" of BEV's and FCEV's, no matter how you look at it will change our whole perspective of these vehicles in the Aftermarket. How will we be servicing these vehicles and what parts will we need? What additional safety and training will our technicians require?</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">When we add in these BEV's and FCEV's into the mix of our overall up-front Sales Forecasts, and eventually the Aftermarket, it's pretty obvious that the impacts will be felt overall.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Before we get the impacts of BEV's and FCEV's, let's take a look at what forecasters and analysts think about Front End Sales in general for 2024.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Analysts at <b><i><span style="color: #2b00fe;">Edmunds.Com</span></i></b> forecast and expect "Clashing Market Forces in the New Year, and Forecast 15.7 Million New Vehicles Will Be Sold"</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Their December 13th, 2023 article goes on to say...</span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><b><i>"The car shopping experts at Edmunds say opposing market forces are expecting to keep new vehicle sales relatively steady in 2024, forecasting that 15.7 million new cars will be sold. The Edmunds data represents a 1% increase from their estimate of 15.5 million new vehicle sales in 2023. EV market share is expected to tick slightly higher to 8% of total new vehicle sales in 2024, up from 6.9% in through November of 2023."</i></b></span></p><p style="text-align: justify;"><span style="color: #2b00fe; font-family: arial; font-size: medium;"><i><b>Jessica Caldwell, Edmunds Head of Insights also goes on to say...</b></i></span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><b><i>"2023 experienced improved inventory levels from pandemic-era lows combined with pent-up demand to deliver strong sales estimated up 12.7% year over year. While the year ahead holds the promise of further increased inventories and enticing deals that consumers have eagerly awaited even though 2023's interest rates are expected to linger..."</i></b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Lastly, and based on their data, "<b><i>Edmunds experts put together their list of three biggest industry trends they predict will shape the road ahead in 2024, along with some direct consumer shopping guidance."</i></b></span></p><p style="text-align: justify;"></p><ul><li style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><i><b>"The Covid-19 pandemic spurred a series of significant price hikes...but Edmunds data reveals pricing has peaked, as we improved inventory has driven incentives back into the market."</b></i></span></li><li style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><i><b>"Shoppers seeking options on the affordable side of the new vehicle market...according to Edmunds, days-to-turn data, vehicles transacting below 50K are selling more quickly, (30 days) than vehicles above the threshold, (47 days), which is a reversal of that trend from the fall of 2020 through the fall of 2021"</b></i></span></li><li style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><i><b>"Lastly - Consumer Callout: Edmunds experts say 2023 models will be selling out sooner than expected as many automakers have rolled out 2024 models early and aggressively..."</b></i></span></li></ul><div><span style="font-family: arial; font-size: medium;">So, from our perspective here at ACG "Smart Parts", we can expect a continuation and a slight rise in New Vehicle Sales in the year ahead. This news just fuels our Aftermarket Parts & Service Sales as vehicle maintenance will still be on the fore front.</span></div><div><span style="font-family: arial; font-size: medium;"><br /></span></div><div><span style="font-family: arial; font-size: medium;">But, what about Used Vehicle Sales?...</span></div><div><span style="font-family: arial; font-size: medium;"><br /></span></div><div><span style="font-family: arial; font-size: medium;">A recent blog by Anthony Allen at <b><i><span style="color: #2b00fe;">www.boltontechnology.com</span></i></b> that more vehicle owners are buying older cars...</span></div><div><span style="font-family: arial; font-size: medium;"><br /></span></div><div style="text-align: center;"><span style="font-family: arial; font-size: medium;"><b><i>"In recent years, there has been a noticeable shift of vehicle owners, as they are increasingly opting to hold on to their vehicles for extended periods of time. However, what's even more intriguing is the buying behavior of consumers. According to industry experts, there is a projected surge in used car sales, with a robust growth rate of 9% expected between 2019 - 2025."...As a result, there is a steady and continuous demand for maintenance and repairs, creating a lucrative opportunity for service shops."</i></b></span></div><p></p><p><span style="font-size: medium;"><br /></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Now we come to <b>our</b> portion of our "Thoughts & Predictions" for 2024 as we delve into the Auto Parts Aftermarket and Service Repair side of things looking ahead.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">As Anthony Allen was closing out his recent blog, he also mentioned that <b><i>"as we approach 2024, it's crucial that technicians, service advisors, dealership owners, and repair shop owners stay ahead of the curve in a rapidly changing industry."</i></b><br /></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">I think most of us are pretty aware of Anthony's comments, but how will the "rapidly changing industry" effect our future Parts Sales? Where will our Parts Sales come from?</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Our last contributor and industry analysts may just have those answers we are looking for, <b><i><span style="color: #2b00fe;">databridgemarketresearch.com</span></i></b> has provided us with some interesting facts the consider...</span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><b><i>The global auto parts manufacturing market attained a value of 701.57 Billion in 2023, driven by a rising demand for passenger vehicles. The market is expected to witness a further growth in the forecast period of 2024-2032, growing at a Compound Annual Growth Rate, (CAGR) of 5.7% - 6.1%</i></b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">The article goes on to say...</span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><b><i>"Major factors that are expected to boost the growth of the auto parts and accessories market in the forecast period are incentives taken by the government and the rise in the regional demand. Furthermore, the easy availability of raw materials is further anticipated to propel the growth of the auto parts and accessories market. On the other hand, a global slowdown is further projected to impede this growth in this timeline period..."</i></b></span></p><p style="text-align: justify;"></p><div style="text-align: center;"><i style="font-family: arial;"><b><span style="font-size: medium;">"Global auto parts and accessories market was valued at 660.21Billion in 2022 and is expected to reach 877.12 Billion USD by 2030, continuing to register CAGR rates of 5.7% - 6.1%."</span></b></i></div><div style="text-align: center;"><i style="font-family: arial;"><b><span style="font-size: medium;"><br /></span></b></i></div><div style="text-align: justify;"><span style="font-family: arial; font-size: medium;">We also have to consider or keep in mind that these projected increases in Parts Sales also includes BEV's and FCEV's as front-end sales increase on these vehicles, so will the need for replacement parts & service.</span></div><div style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><br /></span></div><div style="text-align: justify;"><span style="font-family: arial; font-size: medium;">For a more detailed report on this "EV Revolution", you can visit our website at <b><i><span style="color: #2b00fe;">smartpartstraining.com</span></i></b> where all past issues of ACG "Smart Parts" are available and since April 2010. Our March 2022 issue titled "The Parts Department in the EV Revolution" was devoted completely to this new wave of vehicles.</span></div><div style="text-align: center;"><span style="font-size: medium;"><br /></span></div><p></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">From an ACG "Smart Parts" perspective and experiencing the "in the trenches" view with Parts & Service Managers all over the country this past year, I believe there is still more to these "Thoughts & Predictions".</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Although we appreciate the expert opinions and analysis from these great sources, in my opinion, we need to include more based on what we have been experiencing now for the past few years since Covid-19.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">The everyday experiences of Parts & Service Managers over these past few years can't go unnoticed and to some degree, I believe will continue into 2024, in order to keep our customers satisfied.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Supply chain issues for some manufacturers, back orders, chasing parts, continuous parts price increases, having enough techs, maintaining competitive <b>and</b> profitable to industry guidelines, etc. will be on-going in 2024 in my opinion.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">There is no doubt that even though the future looks positive from an industry standpoint, our jobs as Dealers & Managers will continue to be tougher than in previous years.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Our "Thoughts & Predictions" are surely important as the research can surely shape them, but what's most important is how we end up at the end of it all, in this case, December of 2024 when we do it all again!</span></p><p style="text-align: center;"><span style="color: #cc0000; font-family: arial; font-size: medium;"><b><i>Happy New Year from ACG "Smart Parts!"</i></b></span></p><p style="text-align: center;"><span style="font-size: medium;"><span style="background-color: white; font-family: "times new roman";">If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ </span><span face="arial, helvetica, sans-serif" style="background-color: white; color: blue;"><i><b>www.smartpartstraining.com</b></i></span><span style="background-color: white; font-family: "times new roman";">, or...just pick up the phone and call me at :</span></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"></span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"></span></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: medium;">(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...</span></p><p style="text-align: justify;"><br /></p>Dave's Smart Parts Bloghttp://www.blogger.com/profile/04660849016453127899noreply@blogger.com0tag:blogger.com,1999:blog-32955433970606665.post-78918618514824938172023-12-06T06:35:00.000-08:002023-12-06T06:35:19.725-08:00December 2023: The Year In Review - "What Have We Learned?"<p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">What a year it has been again for ACG "Smart Parts" Managers, and for our industry in general. From Sales, to Service, Collision Centers and our Parts Departments, 2023 has dealt quite a hand to all of us, whether dealing with the UAW Strike or not.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">The UAW Strike just added to what many of us were already going through prior to and have been going through now for quite some time dating back to Covid-19. Although, I have noticed that during these last few years, we have definitely changed how we manage our dealerships, especially in the Parts Department.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">The "status quo" has changed and is much different today than it was just a few short years back. In my opinion, the culture in the average automotive dealership is where the big change has evolved. Dealership managers have become even more sharper and more educated than prior years.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Department Managers are becoming more involved in other departments in multi-lateral ways and support. Parts Managers learning more about Service, Service Managers becoming more involved in Parts, and lastly, and more importantly, Dealers becoming more involved in Fixed Operations than ever before.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">I'm not talking about Dealers just getting involved from the financial side, I'm talking about getting involved literally in the Parts & Service Departments. In the Parts Department, they are actually learning how to run reports and create Stock Orders. When has this ever happened?</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">More importantly, what have we really learned these last couple years, especially this year that has taken this all to a new level? What <b>has</b> changed us, and perhaps for many years to come on how we manage and run the Parts Department?</span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><b>It's time to review this last year and finish it off with a bang with our December 2023 issue on the "Eight Essential Habits" of the New Generation ACG Smart Parts Manager!</b></span></p><p><span style="font-family: arial; font-size: medium;"><b>Let's Begin!...</b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">In this issue of ACG "Smart Parts", we will detail what I refer to as the New "Eight Essential Habits" of the New Generation ACG "Smart Parts" Manager. We will learn from a collective of new "tricks of the trade" from dozens and dozens of Parts Managers that I have had the privilege of working with over this past year during these tough times.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">In the Parts Department, it all starts with providing the part. When that technician, advisor, customer or manager comes to that counter looking for a part, our job has just begun. The tough part is yet to come as hopefully we have that part 75% - 85% of the time, but either way having the part, or finding the part is always our challenge.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Believe it or not, this simple process is not so simple anymore as we start with our first "Essential Eight Habits" of the New Generation ACG "Smart Parts" Manager!...</span></p><p><span style="font-family: arial; font-size: medium;"><b><u>#1.) Parts Ordering/Acquisition</u></b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Whether we are ordering the part from the manufacturer, or trying to locate the part, this simple task has changed enormously. This simple task just got more complicated as we now have to know what "order type" will get us that part more efficiently.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Ordering parts through our normal channels doesn't get us that part anymore as we have to now know the new "tricks of the trade" in order to acquire certain parts. Otherwise, they may just sit on back order for weeks and even months.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">On locating parts, we now have to have all the necessary links like D2D Link, OEConnect and all the latest vendor lists to find those parts that are not available from the manufacturer. Price has become no object as cycling jobs through the Service Shop and the Collision Center has taken center stage.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Parts Departments are going out of their way more than ever to acquire parts, and Service, Collision Centers and Dealer Principle should show their appreciation for their efforts. This is also a "culture change" from what we have been used to seeing in many Parts Departments in the past.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><b><u>#2.) Increasing Stocking Levels</u></b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Here's another "culture change" that has hit us these last few years, especially if you are a dealer that just endured the last UAW Strike. Even if your manufacturer was not involved, Parts Stocking Levels of <b>fast-moving parts </b>appear to be on the rise.<br /></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">The industry guideline of 45 Days Supply is slowly increasing due to Supply Chain Issues, Strike, or no Strike. Emergency Purchases are rising as well as this industry guideline of 10% or less is also rising, Strike, or no Strike.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">All of a sudden, just getting or having the part is the Number One Priority, and quite honestly, it should have always been the Number One Priority. It seems for years, and I hate to say this, but many Parts Managers have never had that "sense of urgency" until recently.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><b><u>#3.) Hoarding/Hiding Parts</u></b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">This new "Eight Essential Habit" has now become an "Eight Essential <b>Daily Habit</b>". Parts Managers have now learned how to acquire certain parts that maybe other Parts Managers have not, thus the "hoarding" begins. After all, why sell a part to another dealer that we worked hard to get at less than retail?</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">The New Generation "Smart Parts" Manager has also learned a new "trick of the trade" on how to hide these parts from E-Commerce sites, OEConnect and D2D Link as well in their Dealer Management Systems, (DMS) under different Parts Sources, or other means hidden from view on these websites.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">This new practice is actually not uncommon for many dealers as they want to make sure that their customers are not compromised during these times, Strike, or no Strike. Thus, only releasing these parts to other dealers that "scratch each other's back" so to speak.</span></p><p style="text-align: justify;"><b><u><span style="font-family: arial; font-size: medium;">#4.) </span><span style="text-align: left;"><span style="font-family: arial; font-size: medium;">Profitability</span></span></u></b></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: medium;">Profitability in itself is no new concept and one might ask why this is our Number Four new "Eight Essential Habit", but what is new is that many, many of the Parts Managers I have worked with this past year have sustained, or even gained gross profit retention through all this.</span></span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: medium;">How can that be when we have to pay more for parts we have to chase, or even pay more for shipping, drivers, different order types or any other added cost in acquiring parts?</span></span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: medium;">We've all heard the term of passing on our costs down to the consumer, but we can't do that in many cases, especially on warranty repair orders. This sustainment or increased gross profit retention that these New Generation "Smart Parts" Managers are attaining simply comes from Smart Pricing Strategies.</span></span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: medium;">They are always up to speed on manufacturer and vendor pricing increases and updating competitive parts, menu parts, and price </span></span><span style="text-align: left;"><span style="font-family: arial; font-size: medium;">matrices and modifying when necessary. It's still amazing to me that even though parts, oil and tire prices keep rising, many dealers do not adjust their prices to compensate for these cost increases.</span></span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: medium;"><b><u>#5.) Manufacturer Loyalty</u></b></span></span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: medium;">Here is another <b>huge</b> culture change in our industry these past few years. In my opinion, it's actually a cultural change that has gone viral on the extreme side with both parties. Many manufacturers have expanded their grip on the dealers by requiring more qualifiers in their </span></span><span style="text-align: left;"><span style="font-family: arial; font-size: medium;">programs.</span></span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: medium;">They are tightening their belts by requiring more parts coverage, or "breadth" by the dealer. So called "Inventory Protection" is no more than a "Return Policy" as not all purchased parts in these programs are "protected". </span></span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: medium;">If they were "protected", I wouldn't see so many obsolete parts on dealers' shelves that were purchased on these Vendor Managed Inventory, (VMI) Programs. All because they didn't "qualify" for return,</span></span><span style="font-family: arial; font-size: large; text-align: left;"> resulting in increased dealer parts obsolescence as well as increased acquisition and holding costs.</span></p><p style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial; font-size: medium;">Many manufacturers are also increasing their penalties for noncompliance if they don't comply. This has resulted in a lot of "pushback" from many dealers and many of these dealers have actually "backed out" of many of these programs in defiance. </span></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Many dealers have actually done the math and weighed the cost versus the benefits and realized that the Return On Investment, (ROI) was simply not there. For many, the added cost from the penalties was far less than the added risk of Parts Inventory Over Stock and Obsolescence.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><b><u>#6.) Holding Obsolescence</u></b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Speaking of obsolescence, our Number Six "Essential Eight Habits" has to include Obsolescence Control now more than ever. With Parts Life Cycles shorter than ever and the cost of holding parts inventory rising, ridding and controlling obsolescence has moved to the forefront.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">In the past, many dealers wouldn't sell their obsolescence, especially on pennies to the dollar. This is a huge "culture change" that is a welcome change for any Parts Managers. This "Monkey on the Back" for many Parts Managers is now finally being addressed.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Dealers are finally seeing the actual cost of holding obsolete inventory that prevents them from obtaining industry guidelines in areas such as Inventory Gross & True Turns, First Time Off Shelf Fill Rates and Normal Stocking Parts Percentages just to name a few.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><b><u>#7.) Parts Storage Capacity</u></b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Our Number Seven "Essential Eight Habit" pertains to our ability to "house" the Proper Inventory Levels needed to meet customer demand. Often times, I witness that Parts Managers actually hold back from ordering the proper amount of parts inventory due to space restrictions.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">This, to me is one of the biggest "Cardinal Sins" that a dealer could commit or allow to happen. In dealer "layman's terms", I'm quite sure if the dealer was selling lots on New & Used Vehicles, but did not have a big enough lot, they would either buy, rent or lease additional land to park these New & Used Vehicles.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Same goes for the Parts Department, and finally, we are seeing more dealers "see the light" on this issue by actually working on better parts shelving capacity. Actually, many Parts Departments already have enough "air space". They just need to be a better plan on utilizing that air space more efficiently.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">There are actually many Shelving Companies out there that will perform an onsite "laser" evaluation of the existing air space in the Parts Department. Often times, existing Parts Inventory can be shelved and stocked in 40% of the existing air space utilizing more efficient, modern shelving equipment.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><b><u>#8.) Management Training</u></b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Our Number Eight "Essential Eight Habit" of the New Generation "Smart Parts" Manager is probably <b>the most essential. </b>In my opinion, and if we look back prior to Covid-19, Parts Managers were hardly ever involved in Parts Manager Training, or Dealership Training.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Parts Managers were rarely invited to 20 Group Meetings, reviewing Composite Information, or even involved with the overall status of the dealership as a whole. Parts Managers, unfortunately, and in my opinion, were not in the same class as other dealership managers.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Parts Manager Training was also on the back burner and low on the dealer's priority list. After all, how difficult can it be to manage a Parts Department? The answer to that question has drastically changed as dealers today are definitely changing their culture and thought process, especially in the Parts Department</span></p><p style="text-align: justify;"><span style="font-size: medium;"><span style="font-family: arial;">This welcome culture change has, in my opinion, can now bring the whole dealership into full </span><span style="font-family: arial;">circle. Now, the dealer's second biggest asset can now work for them with the right training, personnel and overall inclusion, along with Sales and Service.</span></span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><b>Are you a New Generation "Smart Parts" Manager and are these "Essential Eight Habits" Part of Your Playbook?...</b></span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><b>If Not...It's Time to Join the New Generation of "Smart Parts" Managers!"</b></span></p><p style="text-align: center;"><span style="font-size: medium;"><span style="background-color: white; font-family: "times new roman";">If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ </span><span face="arial, helvetica, sans-serif" style="background-color: white; color: blue;"><i><b>www.smartpartstraining.com</b></i></span><span style="background-color: white; font-family: "times new roman";">, or...just pick up the phone and call me at :</span></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"></span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"></span></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: medium;">(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...</span></p><p style="text-align: justify;"><br /></p><p><br /></p><p><span style="font-family: arial; font-size: medium;"><br /></span></p><p><br /></p><p><span style="font-family: arial; font-size: medium;"><br /></span></p>Dave's Smart Parts Bloghttp://www.blogger.com/profile/04660849016453127899noreply@blogger.com0tag:blogger.com,1999:blog-32955433970606665.post-72386457083895808052023-11-02T09:03:00.000-07:002023-11-02T09:03:39.914-07:00November 2023: Electric Vehicle, (EV) Sales: "Rising or Falling?"<p style="text-align: justify;"><span style="font-size: medium;"><span style="font-family: arial;">For the past couple of months, we have been focused on the latest UAW Strike from a "Parts Perspective". As Parts Managers, this is pretty obvious, but how is this UAW Strike effecting New Vehicles Sales from the interruption of New Vehicle Production & Manufacturing?</span></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Parts Distribution is not the only interruption caused by this latest walkout as it also included assembly line workers as well. You would think that this assembly line interruption would eventually lead to fewer and fewer new vehicles on our lots at the dealership, much like we felt during Covid-19 and the computer chip shortage.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">In this month's issue of ACG "Smart Parts", we are going to focus how this UAW Strike is affecting our New Vehicle Sales and especially how it's effecting Electric Vehicle, (EV) Sales in particular as new EV Sales have been on the rise even before the UAW Strike.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">In a recent article in <b><i><span style="color: #2b00fe;">NADA Headlines,</span></i></b> written by <b><i><span style="color: #2b00fe;">Automotive News,</span></i></b> our dealers' New Vehicle Inventories are continuing to build despite these production interruptions from the UAW Strike. </span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">The article also reports that consumer new vehicle shopping has also remained robust through the third quarter of this year. <b><i><span style="color: #2b00fe;">Cox Automotive</span></i></b> estimated that automakers began October with 2.1 million vehicles, up 150,000 from September.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Seems like the Automakers did pretty much what we did and stocked up before the UAW Strike hit in mid-September. That being said, it looks like, for now anyway, that dealers have an ample supply of New Vehicles for customers to choose from.</span></p><p><span style="font-family: arial; font-size: medium;">But, when you break this number of New Vehicles down, from Combustion Powered Vehicles versus Electric Vehicles, (EV's) and Battery Electric Vehicles, (BEV's), there appears to be some very different perspectives in the marketplace happening right before our eyes.</span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><b>So!...What About Electric Vehicle, (EV) Sales?....Are They Rising or Falling?</b></span></p><p><span style="font-family: arial; font-size: medium;">Back in March of 2022, ACG "Smart Parts" focused on the Parts side of this EV Revolution with our issue titled "The Parts Department in the EV Revolution". In that issue, we focused on just what parts we may be stocking for these EV and Hybrid Model Vehicles.</span></p><p><span style="font-family: arial; font-size: medium;">Now, in this issue, we are going to focus where this "EV Revolution" is, and where industry analysts are saying it may be headed from a few different perspectives. We will see that there are very different takes on this and from there, we can come up with our own conclusions.</span></p><p><span style="font-family: arial; font-size: medium;">There is no doubt that EV's are and have been on the rise over the last several years. A recent article published by <i><span style="color: #2b00fe;"><b>cleantechnica.com</b></span></i> shares the following....</span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><i>"With more electric vehicle choices than ever, EV Sales in the U.S. are hitting new heights. In just the first half of 2023, over 670,000 EV's were sold with over 80% of those being fully-electric battery electric vehicles, (BEV's) . It took over 8 years for the first million EV Sales, but now more than a million have been sold over the last 12 months."</i></span></p><p><span style="font-family: arial; font-size: medium;">From this statement alone, one would believe that this EV Revolution is going to keep rising and rising each year. We would also perhaps believe that we will see EV Charging Stations continue to rise as well.</span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><b><i>But could this rise of the EV Revolution perhaps be rising a little too fast?</i></b></span></p><p><span style="font-family: arial; font-size: medium;">As we all know, there are always two sides to every story as the <b><i><span style="color: #2b00fe;">Wall Street Journal</span></i> </b>also reported in the latest edition of <b><i><span style="color: #2b00fe;">NADA Headlines</span></i></b> as follows...</span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><i>"The auto industry's push to boost sales of electric vehicles is running into a cold hard reality that buyer's interest in these models is proving shallower than expected. While EV Sales continue to grow, rising 51% through September of this year, the rate has slowed from a year earlier and unsold inventory is starting to pile up for some brands..."</i></span></p><p><span style="font-family: arial; font-size: medium;"><b><i><span style="color: #2b00fe;">Business Insider.com</span></i></b> even adds their take on the current EV market and where it may be going with these statements...</span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><i>"Car dealers have a warning for their manufacturers: the day of early-adopter electric vehicle sales are all but over. For years, early EV adopters are more fickle. More and more often they are comparison shopping EV's against hybrid and gas-powered vehicles.</i></span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><i>That's leading dealers to use more aggressive sales tactics on "plug-in" models. They warn this could make EV demand appear more robust than reality, and make it harder for car manufacturers to predict demand"...</i></span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><i> "More dealers now are really pushing EV's off their lot, which probably distorts the reporting manufacturers are looking at says Vince Sheehy, a car dealer in the Washington, D.C. area, told Insider. Vince Sheehy also went on to say that he believes EV Sales are even lower than they actually understand them to be"...</i></span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><i>"The warning bell from dealers is the latest sign that after years of exponential growth, the electric car segment is facing a looming plateau. Already, car companies seem to be reacting to changes in demand, after overshooting their EV predictions for this year."</i></span></p><p style="text-align: left;"><span style="font-family: arial; font-size: medium;">Overall, when combining all New Vehicle Sales thus far this year, and according to <b><i><span style="color: #2b00fe;">Kelley Blue Book</span></i></b>, in an article at <b><i><span style="color: #2b00fe;">NPR.com</span></i></b>, the average transaction price for a new vehicle in July was $48,334.00, a slight dip from June and only a 0.4% year-over-year increase.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">The article continues to say that this could present an opportunity for those who have been waiting for prices to cool before purchasing their next ride, even as interest rates remain high.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">All of this said, many are saying that we are headed into a "deflationary market" where patience may be rewarded. If we wait to buy tomorrow, we may actually get a better price than if we purchase today.</span></p><p style="text-align: justify;"><span style="font-size: medium;"><span style="font-family: arial;">It appears that we definitely have two sides of this story</span><span style="font-family: arial;"> and a few different perspectives for sure. The UAW Strike appears to be a non-factor thus far as we look at New Vehicle Sales in general, and how EV Sales have weathered all these up and down swings in the current marketplace.</span></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">That being said, <b><i><span style="color: #2b00fe;">Charlie Chesbrough</span></i></b>, Senior Economist and Senior Director of <b><i><span style="color: #2b00fe;">Industry Insights at Cox Automotive</span></i></b>, which owns <b><i><span style="color: #2b00fe;">Kelley Blue Book</span></i></b> in this same article at <b><i><span style="color: #2b00fe;">NPR.com</span></i></b> warns...</span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><i>"Be aware of what are the offers out there, do your homework, because manufacturers are certainly going to be more willing to negotiate on price today than they were a year ago"...</i></span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><b>So I guess when we asked the question early on if Electric Vehicle, (EV) Sales are Rising or Falling?....I guess that answer would be a resounding Yes!</b></span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><b>And don't forget "Smart Parts" Readers, you can download and read any of our past 163 Monthly Articles, dating back to 2010 at our website at:</b></span></p><p style="text-align: center;"><span style="color: #2b00fe; font-family: arial; font-size: large;"><b><i>www.smartpartstraining.com</i></b></span></p><p style="text-align: center;"><span style="font-size: medium;"><span style="background-color: white; font-family: "times new roman";">If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ </span><span face="arial, helvetica, sans-serif" style="background-color: white; color: blue;"><i><b>www.smartpartstraining.com</b></i></span><span style="background-color: white; font-family: "times new roman";">, or...just pick up the phone and call me at :</span></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"></span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"></span></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: medium;">(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...</span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><b><br /></b></span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><b><br /></b></span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><b><br /></b></span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><br /></span></p>Dave's Smart Parts Bloghttp://www.blogger.com/profile/04660849016453127899noreply@blogger.com0tag:blogger.com,1999:blog-32955433970606665.post-66063000610230220712023-10-05T03:52:00.000-07:002023-10-05T03:52:11.859-07:00October 2023: "Why Does It Take a Strike to Spark the Fire?"<p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Striking a match to light a fire is a pretty common thing, but when referring to the current on-going UAW Strike, this word can be used as a noun and a verb. In last month's issue of ACG "Smart Parts", we released our September issue a little earlier so we could all get prepared for what was to come.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">We discussed how we could use our Dealer Management Systems, (D.M.S.) to actually add extra "Days Supply" to extend our inventory coverage for however long we needed to endure the UAW Strike. Much like preparing for a storm as we all hit the stores for added "Days Supply" of the necessities such as food and water.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Now here we are, in the midst of this current UAW Strike and it's time once again to endure another crisis like we did with Covid-19 and the previous UAW Strike. To me, what's most important is not to just endure the current crisis, but what we learn from it.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">In this month's issue of ACG "Smart Parts", we are going to do a little follow up to last month's issue, but with a little twist. I have actually witnessed a "Culture Change" within our automotive dealerships this time around.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">After talking with and working with literally hundreds of dealerships via online webinars, or in-dealership training, I've actually noticed quite a few things during this Strike Preparation. A shift in how we actually operate and consider the Parts Departments role in the dealership.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">I've never seen actual dealer participation in the overall Parts Operations as much as I've seen these last couple of months in anticipation of the UAW Strike. Don't misunderstand, I'm not saying that the dealer doesn't "drill down" the Parts Department like any other department in the dealership, it has just gone much further than that.</span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><b>What have we learned so far in this UAW Strike and how much more will we learn as we progress through it?</b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Let's look at the "Seven Culture Changes" in the Parts Department since we started preparation and are now experiencing in our latest automotive industry crisis. Seven Culture Changes that most may not even be aware of.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Let's begin once again "Smart Parts" Managers!....</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">The first of these Seven Culture Changes that I have noticed is that we, in the Parts Department are no longer at the bottom of the Totem Pole. For years, the Parts Department just existed as a "Necessary Evil" for the dealer.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">As a matter of fact, back in the day, many dealers wish they didn't even have a Parts Department, or even a Service Department for that matter as all they were interested in was selling New & Used Vehicles. They didn't even want to deal with the customer after the initial sale.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Over the years, dealers have evolved to a degree as "Service Absorption" became a key part of the dealer's profitability. The "back end" now needs to carry much of the dealers' overall expenses with less New Car Dependency.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">So, we have actually climbed the ladder quite a bit since those older days, but we have actually gone up a few more rungs on the ladder since Covid-19 and now this current UAW Strike.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">I am actually seeing dealers, (which I never have before) take part in learning how Parts Set Ups actually work. They are now looking at the math and how Phase-In/Phase-Out works, and Reorder Points, (BRP) and Best Stocking Levels, (BSL).</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">I've never seen dealers go that far in the past as they are even looking at the Parts Managers Stock Orders! I've even seen some dealers actually "run" the Stock Order in their D.M.S. and going another step further by looking at how the Vendor Managed Inventories, (V.M.I.) works, such as RIM, ARO, PartsEye, etc.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">The second "Culture Change" that I have witnessed is that Parts Managers in general are finally "getting it". Again, not saying that Parts Managers are not doing their job, it's just that they are gaining more confidence as dealers get more involved in their dealership roles.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">So many Parts Managers are "gun shy", worrying about overall Parts Inventory Amounts, especially with the burden of carrying too much obsolescence. Unfortunately, many Parts Managers feel that the Parts Inventory is an expense, not an asset that needs to have several "Annual Turns".</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Therefore, they tend to hold back from the parts they actually need in fear that the owner will get on them for spending too much on Parts Inventory. When in actuality, I haven't heard of many dealers preventing, or limiting the Parts Manager from ordering any parts.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Of course, the dealer wants his/her Return on Investment, but they really don't prevent the Parts Manager from ordering any parts. In the Parts Manager's mind though, he or she knows that ultimately, they are responsible for their actions and choices.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">The third "Culture Change" that I have witnessed is that Parts Managers are getting more informed about their overall Stocking Levels. They are getting more aware of what the "math" tells them and adjusting where necessary, especially now with the current UAW Strike.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Kind of a contrast of what we thought before versus now as dealers are actually encouraging Parts Managers to come out of their shell and get the parts we need, no matter what the cost. After all, there is so much at stake in our Service & Collision "Cycle Times" waiting for parts.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Number four Cultural Change is Parts Managers are getting more "proactive" instead of "reactive". One example is parts backorders today versus in the past when a part went on backorder, we, as Parts Managers just said that the part is on backorder, and we would have to wait until it became available.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Now, fast forward to today, especially because of the UAW Strike, when a backorder hits, our job is just beginning, not ending. In other words, we have to take action when that backorder hits, we can't just sit and wait to see when it ever comes in.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Our Number Five Cultural Change is a follow up to our Number Four Cultural Change is that Parts Managers need to address parts backorders before they need them for the customer. In other words, when a part goes on backorder on the initial Stock Order, that's the best time to address it. </span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Why wait until the customer needs that part before we address it. If we chase down that backordered part when it comes up on the Stock Order, we will have it when we need it when the customer has demand for it.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">I can tell you from experience that it's always easier to handle a backordered part on a Stock Order versus when the pressure is on when the customer vehicle is tied up in the shop. The pressure is always on us when Service is held up for a parts issue.</span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><b>Stocking Parts to "Avoid" Backorders...What a Concept!</b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Our sixth Cultural Change that Parts Managers are now getting hungry for Gross Profit! Again, not saying that they never were concerned about being profitable, it's just that they seem to be more "bought in". </span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Overall Parts Profitability as far as Retained Gross Profit Percentage is at its highest peak, in my opinion then it ever has! Just achieving the basic industry guidelines of let's say 40% on Customer Pay Parts Sales is now going to the next level up towards 45%!</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">I guess they key word is that it seems that more and more Parts Managers are taking "ownership" of their departments. Dealers are learning more and more of the importance of how much the Parts Department plays a role in all other dealer departments.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Dealers are also incentivizing more Parts Managers to achieve higher levels and giving them more "clout" in their dealership operations. Parts Managers are no longer hiding in the back are are becoming more a part of the overall dealer operations.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">This is why we are seeing more and more Parts Managers attending 20 Group Meetings as the excuses piled up. Service Departments saying that they couldn't achieve their goals because they simply didn't have the right parts.</span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><b>Finally!...the Parts Department Means Something!...What an Eye Opener!</b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Lastly, our Number Seven Cultural Change is that more and more women are becoming Parts Managers which is a huge, welcome change. Even though it doesn't matter to me who the Parts Manager is as long as the qualifications are there, I have noticed that more and more women are becoming Parts Managers.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Not only does this add diversity, but it also most importantly adds another wealth of the people available for this position! Now, the Parts Manager position, as opposed to years ago, is not just a position that we give to for the next person in line because they have been with the dealer for many years.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">It's not a position that we give to a Counter Person because they are loyal and after all, we are just talking about Parts here. Handing out parts can't be that difficult...anyone can do it...Right?</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Finally, I welcome all this "deserved" attention to today's Parts Manager and what it actually takes and means to get through these times or even normal daily operations. It's about time that Dealers and Dealer Principles actually see what it takes and what's involved with managing their second highest asset.</span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><b>The Parts Manager Position is one the most important manager positions in the dealership...especially today.</b></span></p><p style="text-align: center;"><span style="font-size: medium;"><span style="background-color: white; font-family: "times new roman";">If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ </span><span face="arial, helvetica, sans-serif" style="background-color: white; color: blue;"><i><b>www.smartpartstraining.com</b></i></span><span style="background-color: white; font-family: "times new roman";">, or...just pick up the phone and call me at :</span></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"></span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"></span></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: medium;">(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...</span></p><p style="text-align: left;"><span style="font-family: arial; font-size: medium;"><br /></span></p><p style="text-align: left;"><span style="font-family: arial; font-size: medium;"><br /></span></p><p style="text-align: left;"><span style="font-family: arial; font-size: medium;"><br /></span></p><p style="text-align: left;"><span style="font-family: arial; font-size: medium;"><br /></span></p><p style="text-align: left;"><span style="font-family: arial; font-size: medium;"><br /></span></p><p style="text-align: left;"><span style="font-family: arial; font-size: medium;"><br /></span></p><p style="text-align: left;"><br /></p><p style="text-align: left;"><span style="font-family: arial; font-size: medium;"><br /></span></p><p style="text-align: left;"><span style="font-family: arial; font-size: medium;"><br /></span></p><p style="text-align: left;"><br /></p><p><span style="font-family: arial; font-size: medium;"><br /></span></p><p><span style="font-family: arial; font-size: medium;"><br /></span></p><p><span style="font-family: arial; font-size: medium;"><br /></span></p><p><span style="font-family: arial; font-size: medium;"><br /></span></p>Dave's Smart Parts Bloghttp://www.blogger.com/profile/04660849016453127899noreply@blogger.com0tag:blogger.com,1999:blog-32955433970606665.post-51222574522226644602023-08-23T04:27:00.000-07:002023-08-23T04:27:11.967-07:00September 2023: Pandemics, UAW Strikes, Backorders..."How Do We Deal with All of This?"<p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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. </span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;">So!...How <b>Do </b>We Deal with All This?...Again!</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Let's Begin!...Again!</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Talk about preparing for a storm!...</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">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).</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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).</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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. </span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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?</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;">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.</span></p><p style="text-align: center;"><span style="font-family: arial; font-size: medium;"><b>We got through this before and we can do it again!</b></span></p><p style="text-align: center;"><span style="font-size: medium;"><span style="background-color: white; font-family: "times new roman";">If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ </span><span face="arial, helvetica, sans-serif" style="background-color: white; color: blue;"><i><b>www.smartpartstraining.com</b></i></span><span style="background-color: white; font-family: "times new roman";">, or...just pick up the phone and call me at :</span></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"></span></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: medium;">(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><br /></span></p><p><br /></p><p><span style="font-family: arial; font-size: medium;"><br /></span></p><p><span style="font-family: arial; font-size: medium;"><br /></span></p><p><br /></p><p><br /></p><p><br /></p>Dave's Smart Parts Bloghttp://www.blogger.com/profile/04660849016453127899noreply@blogger.com0tag:blogger.com,1999:blog-32955433970606665.post-82676167834937723872023-08-07T05:23:00.002-07:002023-08-07T05:23:55.349-07:00August 2023: Today's Parts Manager/Service Manager Relationship<p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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!</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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?</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><b>So, let's get down to basics, shall we? </b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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?</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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...</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><b>Let's Get Started!...</b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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 <b>already</b> manage these two departments together. It's just a matter of putting two minds together with perhaps some different, but often valid ideas & opinions.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">Also, please keep in mind that these "Fixed Operations Essential 10 Areas of Joint Leadership" are not listed in any order of priority as <b>all </b>of these areas are a priority at it's right time. Inclusion is the key to the success or outcome of any essential area.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><b><u>Service Absorption/Profitability:</u></b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><b>Parts Manager:</b> 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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><b>Service Manager: </b>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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><b><u>Service Productivity/Parts Productivity:</u></b></span></p><p style="text-align: justify;"><span style="font-family: arial;"><b style="font-size: large;">Parts Manager: </b><span style="font-size: medium;">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.</span></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><b>Service Manager:</b> 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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"> <b><u>Special Order Aging, (30 Days or Less):</u></b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><b>Parts Manager:</b> 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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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 <b>do not order parts </b>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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><b>Service Manager:</b> 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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><b><u>Work In Process:</u></b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><b>Parts Manager:</b> 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".</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><b>Service Manager: </b>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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><b><u>Menu Pricing:</u></b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><b>Parts Manager:</b> 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. </span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><b>Service Manager:</b> 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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><b><u>Pricing Strategies:</u></b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><b>Parts Manager:</b> 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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><b>Service Manager:</b> 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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><b><u>Marketing:</u></b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><b>Parts Manager:</b> Marketing is another really important "Essential Area" that the Parts Manager and Service Manager <b>must</b> 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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><b>Service Manager:</b> 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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><b><u>Housekeeping/Security:</u></b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><b>Parts Manager: </b>Out of all of our "Essential Areas", this one has <b>always</b> 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?</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;"><b>Service Manager:</b> Believe it or not, there is a <b>lot</b> 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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><b><u>Pay Plans:</u></b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: large;"><b><u>Customer Satisfaction:</u></b></span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: justify;"><span style="font-family: arial; font-size: medium;">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.</span></p><p style="text-align: center;"><span style="font-size: medium;"><span style="background-color: white; font-family: "times new roman";">If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ </span><span face="arial, helvetica, sans-serif" style="background-color: white; color: blue;"><i><b>www.smartpartstraining.com</b></i></span><span style="background-color: white; font-family: "times new roman";">, or...just pick up the phone and call me at :</span></span></p><p><span style="font-family: arial; font-size: medium;"></span></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: medium;">(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...</span></p><p><span style="font-family: arial; font-size: medium;"><br /></span></p><p><span style="font-family: arial; font-size: medium;"><br /></span></p><p><br /></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-size: medium;"><br /></span></p><p><br /></p><p><span style="font-size: medium;"><br /></span></p><p><span style="font-family: times; font-size: medium;"><br /></span></p><p><span style="font-family: times; font-size: medium;"><br /></span></p><p><span style="font-family: times; font-size: medium;"><br /></span></p><p><span style="font-family: times; font-size: medium;"><br /></span></p><p><br /></p>Dave's Smart Parts Bloghttp://www.blogger.com/profile/04660849016453127899noreply@blogger.com0tag:blogger.com,1999:blog-32955433970606665.post-29055609990644780832023-07-10T03:55:00.000-07:002023-07-10T03:55:22.191-07:00July 2023: Monthly Parts Inventory Reconciliation: "How Important Is It?"<p style="text-align: justify;">As we move on into July, we will complete our three-part series on "back-to-basics in the Parts Department with Monthly Parts Inventory Reconciliation. We started first in this "back-to-basics" series with Proper Parts Posting & Receipting, and then in our second, we focused on having the right Pricing Strategies & Practices.</p><p style="text-align: justify;">The first two actually lead into our third and final part of the series because both have an impact on how we "balance the books" in the end. We have featured Monthly Parts Reconciliation in the past, but we did not focus on how Parts Reconciliation gets impacted in the first place. The ramifications could be costly and these impacts all start with our first two in this thee-part series.</p><p style="text-align: justify;">Even though reconciling the Parts Inventories to the Financial Ledger Balance is extremely important and, in my opinion, should be done each month, many dealers still do not have a basic, Parts Reconciliation Practice in place. </p><p style="text-align: justify;">Many may have a "once a year" Parts Inventory Adjustment after they have the Parts Physical Inventory performed, but that's not actually the same thing, or even what we are referring to. A once-a-year adjustment is just that as we just make a journal entry to whatever the final parts inventory count revealed whether positive, or negative.</p><p style="text-align: justify;">In my opinion, that's just taking the easy way out and doesn't really explain why we have variances in the first place, especially if that variance is in the wrong direction where the Ledger Balance shows more than the Controlled Balance in the D.M.S.</p><p style="text-align: justify;">In theory, shouldn't these balances be the same?...Shouldn't a part be billed out at the cost we paid for it?...and finally, how can we be so far off in either direction?...</p><p style="text-align: justify;"><b>Let's find out!</b></p><p style="text-align: justify;">Let's start with defining the Parts Inventory Ledger Balance and the Controlled Inventory Balance in the Dealer Management System, (D.M.S.). Each one has a very specific role in the dealer's second highest asset next to the Used Vehicle Inventory in most dealerships today.</p><p style="text-align: justify;">The Ledger Balance Inventory is just basically a dollar amount as it represents what we actually paid for these parts. The Ledger Balance really has no tangible, physical aspect to it as we cannot put our hands on this dollar amount that we paid for our parts inventory, as it's basically just that...a number.</p><p style="text-align: justify;">The Controlled Inventory Balance in the D.M.S. is a different inventory because it is tangible, and we can put our hands on it. We can count it, we can add up the total worth of these based on the current price of that inventory, and we can see it. It represents a commodity with a "perceived" worth, or value as this worth is not realized until the part sells. </p><p style="text-align: justify;">The "perceived" worth of any commodity, or inventory is only perceived until we actually sell that commodity, or inventory at a cost, whether the cost is what we paid for that part, or not...and <b>that </b>is the whole reason for reconciling the Controlled Inventory Balance to the Accounting in the first place.</p><p style="text-align: center;"><b>"But why wouldn't we bill out a part at the cost we paid for it?"</b></p><p style="text-align: justify;">Although, the "number" on the Accounting Ledger Balance is extremely important because it sets the baseline to our profitability on the parts we sell. We paid a certain amount for a part, we bill that part at a higher amount and the difference is the profit we make on the sale of that part....pretty simple, right?</p><p style="text-align: justify;">Not Necessarily!</p><p style="text-align: justify;">The are several legitimate reasons that parts are not always billed out at a cost of what we paid for it. This is the whole reason behind the accountability that reconciliation brings out. The "legitimate" cost variances and other "not so legitimate" cost variances have to be reconciled because it's 100% positive or negative profit.</p><p style="text-align: justify;">An example of a "legitimate" cost variances are obsolete parts being sold at a lower cost than our purchase price. Also, the Manufacturer Price Updates each month can change the cost of what we paid for parts versus the higher cost of what we sell that part eventually. These cost variances need to be "reconciled" as a positive or negative gross profit each month.</p><p style="text-align: justify;">Another "legitimate" cost variance, and perhaps the most common is what I refer to as "Cross Accounting" where parts are received in one inventory account but sold out of another inventory account. The most common of these occurrences happen in the gas, oil & grease and tire inventories.</p><p style="text-align: justify;">Tires, for example may be receipted in the main parts inventory by default, but then sold out of the tire inventory account in the Accounting Department. The cost of sale and sale accounts will relieve the Accounting Tire Inventory as a debit, but the inventory credit amount was receipted in the Main Parts Inventory.</p><p style="text-align: justify;">This also happens often with the Gas, Oil & Grease Inventory as well as Bulk Oil may be receipted into the Gas, Oil & Grease Inventory, but sold out of the Main Parts Inventory. This often happens with "Packaged Oil" being a part, and "Bulk Oil" considered as Gas, Oil & Grease.</p><p style="text-align: justify;">Unfortunately, there are many more "not so legitimate" cost variances that go unnoticed and unaccounted for each day such as parts purchases made at a lower or higher cost, which should be adjusted right up front as "Discounts & Allowances", but often are not adjusted, resulting in reconciliation variances.</p><p style="text-align: justify;">There also tends to be a lot of "wheeling & dealing" in the Parts Department, trying to buy parts at a lower cost than stated in the Manufacturers Pricing Guide. If not adjusted for properly, the Controlled Parts Inventory Value goes up higher than the Ledger Balance Inventory, creating an "uplift" in the Controlled Parts Inventory with the positive difference going 100% to profit.</p><p style="text-align: justify;">Trying to keep up with price cost changes each month is very hard and will often lead to inventory variances in the Controlled Inventory versus the Accounting Ledge Balance Inventory. This is why we should <b>always</b> make our adjustments, whether positive or negative right up front and sell the parts at the cost listed Manufacturers Pricing Guide each month.</p><p style="text-align: justify;">The only exception given on changing the cost of a part is if we are paying more for a part on a Customer Pay Repair Order or Counter Ticket where we pass the additional cost down to the consumer and increase our sale price, again the exception, not the rule.</p><p style="text-align: center;"><b>"So!...what is the proper and correct procedure for Monthly Parts Inventory Reconciliation?"</b></p><div><br /></div><div style="text-align: justify;">Let's start with the Accounting Ledger side, which is the easiest of the two inventories to set up properly and accurately. Due to the fact that we are not dealing with a "tangible" commodity as we are working with dollar amounts, we just have to make sure when we pay for these parts, they are being debited and credited to the "right" parts inventory.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Some of the common Ledger Balance Inventory Accounts are the Main Parts Inventory, Gas, Oil & Grease Inventory, Tire Inventory with some Manufacturers even requiring a separate account for Accessories and "Other Makes". On the other hand, some Dealers and Manufacturers may combine any of the above into the Main Parts Inventory.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The most important thing is that we, in Parts, have to match whatever is on Ledger Balance on Page 1 of the Financial by separating our Sources, or Stocking Groups in Parts. These Sources, or Stocking Groups have to be "mapped" to the Sales and Cost of Sale Accounts on the Financial for each separate Parts Inventory. </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">This is exactly why Proper Posting & Receipting in our first of this three-part series was so important. It's also why in part two of this series on having the Right Pricing Strategies & Practices is equally as important leading up to part three on Monthly Parts Inventory Reconciliation.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">On the Controlled Balance Parts Inventory side in the D.M.S., we have a lot more to do than the folks in the Accounting Department. On our side of the Monthly Parts Inventory Reconciliation Report, we have a <b>lot </b>to break down.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">In Accounting, they don't care about Sources, or Stocking Groups or anything else as they just want a dollar amount to see how close the Accounting Ledger Balance is on what we <b>paid </b>for these parts versus what we actually <b>have</b>.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Now, let's break down our side of things on what we have to report each month on the Monthly Parts Inventory Reconciliation Report. First, we have to have the mindset that we have to account for <b>everything! </b>We want to make sure that we have at least what shows on the Ledger Balance, or more each month. Anything less would be like it went out the back door and we lose money.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Here are the items that we, in the Parts Department have to account for each month, using the inventory dollar values and other reports listed in the D.M.S., and/or by physical counts via Perpetual Inventories, or <b>end of month</b> physical counts in the Gas, Oil & Grease Inventories and Tire Inventories.</div><div><ul style="text-align: left;"><li>Main Parts Inventory Value</li><li>Gas, Oil & Grease Inventory Value</li><li>Tire Inventory Value</li><li>Accessory Inventory, (if separated on the Financial, Page 1)</li><li>Other Parts Inventories, (if any)</li><li>Dirty Core Value on Hand</li><li>Clean Core Inventory Value, (if not part of the Main Parts Inventory Value)</li><li>Parts Work-In-Process on Repair Orders</li><li>Manufacturer's Parts Pricing Update Variance (+/-)</li><li>Outstanding Parts Credits or Returns</li><li>Parts Pre-Billed by the Manufacturer, but Not Received</li></ul><div style="text-align: justify;">As you can see, we have a lot more to be accountable for each month, which is why we need to do practice on a monthly basis, and not just once annually. It's much easier to capture errors over the course of 30 days than it is trying to go back a whole year to find variances and errors.</div></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The Monthly Parts Inventory Reconciliation Report should share both inventories, the top half dedicated to the Accounting Ledger Balance Inventory and the bottom half dedicated to the Controlled Inventory Balance on the D.M.S., with the positive or negative variances listed at the very bottom.</div><div><br /></div><div style="text-align: center;"><b>How important is the Monthly Parts Inventory Reconciliation?</b></div><div><br /></div><div style="text-align: center;">The old saying goes that there is really never a problem until the numbers go in the wrong direction and now it's a problem! Do it correctly each month and it will never be a problem and the end results will be natural profit "uplifts" at the end of the year...</div><div style="text-align: center;"><br /></div><div><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ </span><span face="arial, helvetica, sans-serif" style="background-color: white; color: blue; font-size: 16px;"><i><b>www.smartpartstraining.com</b></i></span><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">, or...just pick up the phone and call me at :</span></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...</span></p></div><p></p><p><br /></p>Dave's Smart Parts Bloghttp://www.blogger.com/profile/04660849016453127899noreply@blogger.com0tag:blogger.com,1999:blog-32955433970606665.post-49882699627586381162023-06-12T04:33:00.000-07:002023-06-12T04:33:25.349-07:00June 2023: Having The Right Pricing Strategy: "How Important Is It?"<p style="text-align: justify;">As we move on into June and the second of our 3-part Series on going "back-to-basics" in the Parts Department, we have yet another topic that's not really anything new as we all have to have some sort of Pricing Strategy in order to be profitable.</p><p style="text-align: justify;">What's really <b>new</b> here is the "<b>news" </b>that many, many dealers are failing to achieve industry guidelines on their Parts Department Retained Gross Profit Percentages. If this is just Parts Department 101, or just <b>basics,</b> how can this happen? How can such a simple task of building a Parts Pricing Strategy that will retain the gross profit that we want be so difficult?...after all, it's just <b>basic </b>math right?</p><p style="text-align: justify;">Of course, if it were really that simple and easy, we wouldn't have all these dealers out there failing to achieve these industry guidelines. These guidelines cover all of our parts sales categories from customer pay, warranty and internal parts sales.</p><p style="text-align: justify;">Of these three though, only one sales category is totally under our control, which is customer pay. We can control our gross profit though on two of these categories and that would be customer pay and internal. Warranty Sales & Gross stand alone pretty much out of our control as sales and gross profits are dictated for us.</p><p style="text-align: justify;">So, if for the most part, we <b>do</b> have control of the majority of our gross profit retention, how do we not only come up with the right Parts Pricing Strategy, how do we follow it through to the end where the results are predictable and to industry guidelines?</p><p style="text-align: justify;">Like most processes, we have to start out by building the plan, while overcoming any of the obstacles and/or objections, and then hold ourselves accountable to that plan going forward. Sounds pretty simple but, like any other Action Plan, how do we prepare ourselves for the unexpected or the unknown that can, in this case, "kill" our parts gross profit?</p><p style="text-align: justify;">Parts Gross Profit "Killers" are out there and if we don't know what they are, or don't have a plan to prevent them, a Parts Matrix is not going to fix it. Believe it or not there are more of these Parts Gross Profit "Killers" out there than you may think.</p><p style="text-align: justify;">We all know that Parts Discounts & Overrides can reduce our parts gross profit, but what about the "not so obvious" Parts Gross "Killers" out there? What leads to these discounts & overrides in the first place? Secondly, if we have a Parts Matrix, what would drive a Parts Manager, or Parts Counter Person to change that price we created?</p><p style="text-align: justify;">All the answers to these and more coming up!</p><p style="text-align: justify;"><b>Let's Get Started!..</b></p><p style="text-align: justify;"><b><u>The Parts Matrix:</u></b></p><p style="text-align: justify;">Let's start out by answering one of the above questions as to why people override the Parts Matrix. Even though there are times for a legitimate Parts Matrix override, most Parts Matrix overrides are due to human instincts. In other words, our "belief system" kicking in and telling us when we think something costs too much so we have to override the matrix.</p><p style="text-align: justify;">Another reason is that the matrix wasn't designed correctly in the first place with the right "cost plus" percentages in the right "cost ranges". There is actually a proper methodology that goes into building the right Parts Matrix and takes some time to do the research and math on where our sales come from and in what price ranges.</p><p style="text-align: justify;">I have seen so many Parts Matrices that have the wrong percentages in the wrong price ranges, thus leading to countless overrides. Many of these overrides are also generated from the Service Department as many Service Advisors "feel" that some of these parts are priced too high. Believe it or not, there are more Service Advisors complaining about parts prices than there are customers complaining about parts prices. <br /></p><p style="text-align: justify;">Bottom Line is the Parts Matrix has to make sense where there is no desire to override it in the first place. The right Parts Matrix doesn't get overridden and produces predictable gross profit retention percentages.</p><p style="text-align: justify;"><b><u>Competitive Priced Parts:</u></b></p><p style="text-align: justify;">Our completive priced parts, often called "Menu Priced Parts", or "Flat Price Parts" are those parts we often see on our Service Menus for Interval Vehicle Maintenance. Engine oil, oil filters, air filters, cabin air filters, wiper blades, brake pads & rotors, etc. are some of the most common competitively priced parts that are often "flat priced" in order to "flat price" the complete job including labor.</p><p style="text-align: justify;">The problem here that I see often times is that the parts are not "flat priced" correctly in the first place. And now, our first "Gross Profit Killer" is revealed before we even have the chance to override the Matrix in the first place. Overriding the parts matrix is one thing, but "flat pricing" a part to a lower gross right out of the gate is another. </p><p style="text-align: justify;">Most "flat prices" that I see in dealerships today were developed from a simple market survey, or "Competitive Market Analysis". In other words, let's just call around and see what others are charging for the same parts, not matter what gross we keep, as long as we stay in the same price range.</p><p style="text-align: justify;">What most may not know is that it only takes an extra dollar or two on the oil filter and maybe $.50 a quart on the oil to not only stay competitive, but also retain the right gross profit. In other words, all we have to do is add another $5.00 to $7.00 on our oil change price to retain the right parts gross.</p><p style="text-align: justify;">In my opinion and in most dealerships, adding another $5.00 to $7.00 on our basic gas oil change shouldn't result in losing customers as we are still remaining competitive, even though we may not be the cheapest. If we lose customers over a few extra dollars, then, in my opinion, we have other issues on retaining our customer base.</p><p style="text-align: justify;">The proper way of determining the right "flat price" that should be used is done by "Weighted Parts Averaging" where we poll our top five to ten oil filters, in this case, then we "weight" the average of all those filters polled by annual piece sales and cost. Essentially coming up with one big oil filter part number to one average cost and then determining the sale price with the right gross retention.</p><p style="text-align: justify;"><b><u>Parts Gross Profit "Killers":</u></b></p><p style="text-align: justify;">Now that we know that we need the "Right Parts Matrix" and the "Right Flat Price" utilizing Weighted Parts Averaging in order to get us to a pre-determined, acceptable retained gross profit outcome, we now have to learn how to keep it.</p><p style="text-align: justify;">We have to know where these Parts Gross Profit "Killers" are and prevent them from happening as best we can. Building the right Pricing Strategy above won't matter if we let these Gross Profit "Killers" get in and steal all the work we did developing the right Parts Pricing Strategy.</p><p><b><u>1.) Overrides/Discounting:</u></b></p><p style="text-align: justify;">As mentioned earlier, overrides and discounts by far are the Number One killer of parts gross profit. We have to have the right Matrix and Competitive Pricing Policies that don't attract human interference leading to discounts, in both the Parts & Service Departments. The Parts & Service Managers should be running a Parts & Service Override, or "Exception" Report off the D.M.S. to monitor these discounts & overrides.</p><p style="text-align: justify;">It doesn't matter what the Matrix is "supposed" to do in order to increase parts gross, if it's set too high, they are just going to override it anyway. A "moderate" Parts Pricing Matrix ultimately nets more gross profit than the "aggressive" Parts Pricing Matrix due to less overrides.</p><p><b><u>2.) Parts Kits/Op Codes:</u></b></p><p style="text-align: justify;">Here is one Parts Gross "Killer" that many are not aware of, especially when utilizing Parts Kits. Parts Kits are designed to make it easier in billing out certain menu parts, or even recall parts. By "joining" up a few part numbers, we can create one overall kit part number at one price that will combine all the individual part numbers and prices.</p><p style="text-align: justify;">What many Parts Managers do not realize is that in many Dealer Management Systems, (D.M.S.), the Op Code can override any kit price and they wouldn't even know it. Even though on our end it looks right when we bill out the parts kit, the Op Code total parts price for that Op Cope wins out.</p><p style="text-align: justify;">In other words, in an Op Code total parts price is set at, let's say at $100.00 for the total parts price allotment, and we bill out $150.00 in parts, the Op Code wins out and drops the total parts on that repair line to the "out the door" price dictated by the Op Code's total parts price allotment.</p><p style="text-align: justify;">Sad thing is that on the Parts Department side, it all looks accurate and great, but when the repair order is invoiced by the Service Advisor, it will automatically adjust to the Op Code Parts Prices. This means that the Service Department ultimately controls the parts sales and gross from their end.</p><p style="text-align: justify;">Technically, if the Service Advisor chooses the wrong Op Code on a 6-quart oil change, instead of an 8-quart oil change with a more expensive oil filter, we will see a "negative" parts gross profit after it's all been said and done. Even though this is an extreme example, we could actually bill out a transmission and the parts price for that Op Code would still control the outcome.</p><p style="text-align: justify;">This is where "head scratching" time comes in when we look at the overall parts gross and it's much lower than expectations. We look at the Matrix, we look at our Flat Prices set at the desired levels and we can't figure out what happened...how can the Pricing Strategy not be working?!</p><p style="text-align: justify;">If we don't know what we are looking for, situations like this are hidden and will not show anywhere other than on our Daily DOC's, or Daily Sales & Gross Reports. We could enter in a part number inquiry into our system and it shows the right sale and cost amounts, so why the negative results?</p><p style="text-align: justify;">It's kind of like the old scenario of scissors cuts paper, paper covers rock and rock breaks scissors. In this case Op Code, (paper) covers rock, (parts) and rock breaks scissors, (parts gross). We need to know how our D.M.S. works and how these Op Codes and Parts Kits can be a Parts Gross "Killer".</p><p><b><u>D.M.S. System Defaults:</u></b></p><p style="text-align: justify;">Our last Gross Profit "Killer" is also one that goes under the radar and much like the Op Codes and Parts Kits mentioned above, we may be losing parts gross and we don't even know it. Once again, pending on the D.M.S., parts "can" be defaulting to a lower price. We could actually bill out a part that we "think" is going to bill out at retail, but ends up billing out a wholesale price, or even lower.</p><p style="text-align: justify;">Set ups in our Customer Information Files don't often get updated as well as pay types, automated discounts, promotions, etc, that may be set up with the "set it and forget it" mentality and before we know it, we are billing parts out as retail, but ending up with wholesale or lower.</p><p style="text-align: justify;">I've been in dealerships where the customer files have not been updated in years and upon discovery, in this one dealership in particular, we found out that the dealer had been giving wholesale prices to the public. The blame was, of course put on the Parts & Service Managers for discounting and overriding parts prices.</p><p style="text-align: justify;">This end result had this dealer pulling his hair out, wondering why his Retail Parts Gross Profit Percentage had always been at least 10 percentage points or lower than industry guidelines for months and years, while the Parts & Service Managers insisted that there were no unusual discounts & overrides. </p><p style="text-align: justify;">Upon our "drill down", we discovered that many, many of their customers were set as Price Code 3, which was wholesale, or "Trade Price", instead of Price Code 1, which is Retail in the System Defaults on Parts Pricing. Unaware of all this, parts kept being billed out accurately, but to a different result.</p><p style="text-align: justify;">Once it was revealed that a combination of these customer pricing set up defaults and some Op Code Prices that hadn't been updated in years, the mystery was finally revealed. After just a couple months, this dealers Retail Parts Retained Gross Profit is now at industry guidelines.</p><p style="text-align: justify;">Bottom line is that this is all math and irrefutable. If we have a Pricing Strategy that includes a Parts Matrix that is set up with an "out of grid" Gross Retained Profit of let's say 45%. Then, we also have our "Flat Price" parts also set to retain 45%...how can the end result be any different?</p><p style="text-align: justify;">The answer is rather simple....we have Parts Gross Profit "Killers" out there that we have get under control and managed properly. Parts Gross Profit should be the easiest thing that we control as Parts Managers, but ultimately, it always seems to come down to the following question...</p><p style="text-align: center;"><b>Like the old saying goes..."How do we know what we don't know?"</b></p><p style="text-align: center;"><b>"I guess...when it comes down to managing our gross profit...we really need to know!"</b></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ </span><span face="arial, helvetica, sans-serif" style="background-color: white; color: blue; font-size: 16px;"><i><b>www.smartpartstraining.com</b></i></span><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">, or...just pick up the phone and call me at :</span></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...</span></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p>Dave's Smart Parts Bloghttp://www.blogger.com/profile/04660849016453127899noreply@blogger.com0tag:blogger.com,1999:blog-32955433970606665.post-53926977677471867092023-05-04T05:04:00.000-07:002023-05-04T05:04:05.475-07:00May 2023: Proper Ordering & Receipting: "How Important Is It?"<p style="text-align: justify;">Over the next few months, ACG "Smart Parts" will be going "back to basics" as we review some topics that we may have taken for granted. After all, there's nothing new here when we drill down this month's topic of the simple procedure of ordering, receiving and posting parts into inventory.</p><p style="text-align: justify;">The topic may not be new, but why then are there so many dealerships out there with Parts Accounting Issues such as high variances between the Parts Ledger Balance Inventory and the Controlled Balance Parts Inventory on the Dealer Management System, (D.M.S.)?</p><p style="text-align: justify;">Why are there so many dealerships out there with inaccurate numbers on their D.M.S. Parts Monthly Management Reports?...and why are there still many Parts Department's out there with substandard numbers on their Industry Composites on Parts Inventory Management?</p><p style="text-align: justify;">You would think that this basic function of ordering, receiving and posting parts into inventory would be a pretty simple process that we all know and perform pretty much every day. Why should it even be a topic of discussion in the first place?</p><p style="text-align: justify;">One of the main reasons and the answer to <b>all</b> the above questions is a lack of knowledge, training and understanding of Accounting and Managing Parts. The unique relationship, or partnership between the Parts Manager and Office Manager/Comptroller has to be one of total understanding on how this process works on both ends.</p><p style="text-align: justify;">Let's start with the relationship, or partnership between the Parts Manager and the Office Manager/Comptroller...</p><p style="text-align: justify;">The Parts Manager has to have Basic Accounting Training and Experience on Managing Asset Accounts, Expense Accounts, Payables & Receivables, Sales & Cost of Sales, etc. and convert that language over to Parts Sourcing, Ordering, Receiving & Pricing, as well as both Sales and Cost of Sales.</p><p style="text-align: justify;">The Office Manager/Comptroller has to have Basic Parts Manager Skills & Abilities in the areas of matching Sales & Cost of Sales to Parts Sources, or Stocking Groups. The Office Manager/Comptroller also has to be able to identify credits and debits to the proper Ledger Inventory Accounts that match the Parts Inventory Controlled Inventory Sources.</p><p style="text-align: justify;">All these have to be set up properly to begin with even before we order our first part number as all these so called "lines of communication" have to be connected accurately and understood by both the Parts Manager and the Office Manager/Comptroller.</p><p style="text-align: justify;">Now that we have our basic partnership, or relationship established, we now have to get all the ingredients together and get them in the right order even before we start ordering, receiving and posting parts. Who would ever have thought that there would be so much going into this process before we even ordered our first part?</p><p style="text-align: justify;">Here are the ingredients that we will need to start our "Proper Ordering & Receiving" Process...</p><p style="text-align: justify;"><b><u>Parts Sources/Stocking Groups:</u></b></p><p style="text-align: justify;">All Parts have to be in their proper Parts Source, or Stocking Group separated and "connected" to the proper Inventory Ledger Balance Inventory Account. The Main Parts Inventory, Tire Inventory, Gas, Oil & Grease Inventory and perhaps Accessories need to be separated by Source, or Stocking Group in order to be accounted for properly on the Accounting Ledger and Financial Statements.</p><p style="text-align: justify;">This is where things can go haywire right off the bat as parts may be ordered from one Source and receipted into a different Source. This may result in a receipt into one inventory account but then sold out of another inventory account. Most Dealer Management Systems are set up to "default" to one overall Main Source, or Stocking Group.</p><p style="text-align: justify;">This "Default Source" is usually where all the problems begin because if we don't receipt the part into its proper source, it will automatically be receipted into this "Default Source". This Source is where all parts initially come into the D.M.S. until manually moved to a different, desired Source. This "Default Source" is also the Source that the Manufacturer recognizes in system integration.</p><p style="text-align: justify;">Parts could be ordered and receipted in the wrong Source, or Stocking Group, causing the Sale & Cost of Sale going to the wrong inventory account in Accounting leading to inventory variances as well. An example would be a quart of oil that was ordered perhaps out of the Gas Oil & Grease Source, or Stocking Group, but then got receipted to the Parts Main Inventory Source, or Stocking Group.</p><p style="text-align: justify;">The results of ordering and receipting in two different Sources means the receipt on the oil "added" to the dollar value to the Gas, Oil & Grease Inventory, but the sale "debited" the Parts Main Inventory. This leads to the variances in the Accounting Ledger Balance in the Sales & Cost of Sales Accounts.</p><p style="text-align: justify;">If the person ordering and receipting the parts does not catch the proper Sourcing right up front, the snowball begins to roll and get bigger. The Parts Source, or Stocking Group and Ledger Balance are not the only problem as price can also be affected as Sales & Cost of Sales will hit wrong accounts.</p><p style="text-align: justify;"><b><u>Parts Order Types:</u></b></p><p style="text-align: justify;">Depending on the D.M.S. brand, there can be several "Order Types" which determines our Overall Fill Rates, First Time Fill Rates, Gross & True Turns, Stock Order Performance, Emergency Purchase Amounts, Sales from Stock versus Non-Stock and Inventory Investment of Stock and Non-Stock Parts.</p><p style="text-align: justify;">Some of the most common Order Types are...</p><p style="text-align: justify;"></p><ul><li>Stock Order</li><li>Supplemental Stock Order, (Forced Order - Dealertrack Dealers) </li><li>Customer Order</li><li>In & Out Purchases, (NG - Dealertrack Dealers)</li><li>Other Orders</li><li>Emergency Purchases</li></ul><div>Here is another area where things can go haywire as often times, the wrong Order Type is applied to the order and is often receipted as ordered. Proper use of these Order Types is crucial to accurate reporting on Parts Monthly Management Reports as well as 20 Group Composite information. Utilization should be as follows...</div><div><br /></div><div><b><u>Stock Order/Supplemental Stock Order:</u></b></div><p></p><p style="text-align: justify;">We only order parts for two reasons, which is either for stock or a customer. That being said, no matter what source or vendor we order the parts from, if it's for the shelf, it should be either a System Generated Stock Order, or Supplemental/Forced Order from other Stocking Vendors.</p><p style="text-align: justify;"><b><u>Customer Order:</u></b></p><p style="text-align: justify;">Even though this one is pretty obvious, as to when we should use it, it still gets confused with Emergency Purchases at times. All Customer Orders should be separated from Stock Orders even though some Customer Orders may be added to the Stock Order when transmitting the order. Adding Customer Orders to the Stock Order also results in false Stock Order Performance Percentages.</p><p style="text-align: justify;"><b><u>In & Out/NG Orders/Other Orders:</u></b></p><p style="text-align: justify;">In & Out, Other Orders, or NG Orders, (terminology pending which D.M.S.) should only be used on Aftermarket, or Other Makes Parts Purchases that we do not intend to stock. </p><p style="text-align: justify;">This Order Type will record the sale and show up in Sales History, but they <b>will not</b> track these sales demands for potential future Phase-In. This Order Type is basically an "in & out" function that will record the Sale & Cost of Sale for Accounting Purposes.</p><p style="text-align: justify;"><b><u>Emergency Purchases:</u></b></p><p style="text-align: justify;">Emergency Purchases should only be used for tracking "Stock Out" situations, meaning that we normally stock the part, but ran out and had to chase for a customer. This information is vital to managing, and /or modifying Stocking Levels. It does not mean that we use it for buying "Emergency Stock" due to Supply Chain Issues as those purchases should be Supplemental Stock Orders.</p><p style="text-align: justify;"><b><u>Receipts:</u></b></p><p style="text-align: justify;">As we receipt these above Order Types, it's just as important to receipt them as ordered and not manually. Back Orders, Cross Ship Orders and Cancelled Orders should also be updated during this receipting process in order to maintain the proper "linking" of these orders by Order Type and Order Number, or Control Number.</p><p style="text-align: justify;">All Stock Order Receipts need to be matched up to the Proper Source, or Stocking Group to ensure proper billing for Sales & Cost of Sales as well as relieving the Proper Parts Inventory on the Ledger Balance Inventory in Accounting and the Controlled Balance Inventory in the D.M.S.</p><p style="text-align: justify;">As you can see, there is a lot more to the "Proper Ordering & Receipting" Process than perhaps meets the eye. In my opinion, this detailed breakdown is necessary for accurate reporting on Parts Monthly Management Reports, 20 Group Composites and most importantly, our Parts Inventories "Checks & Balances" on the books and in the D.M.S.</p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ </span><span face="arial, helvetica, sans-serif" style="background-color: white; color: blue; font-size: 16px;"><i><b>www.smartpartstraining.com</b></i></span><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">, or...just pick up the phone and call me at :</span></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...</span></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p>Dave's Smart Parts Bloghttp://www.blogger.com/profile/04660849016453127899noreply@blogger.com0tag:blogger.com,1999:blog-32955433970606665.post-71654319231811701872023-04-04T05:52:00.000-07:002023-04-04T05:52:43.848-07:00April 2023: Industry Forecast Update: Second Quarter 2023<p style="text-align: justify;">Once again, it's time to bring our ACG "Smart Parts" Readers an industry update. Actually, it's been well over a year since we did the research and shared our "State of the Union" so to speak as it pertains to just what's happening as well as what we, and other experts are forecasting, or "predicting" as far as future industry trends.</p><p style="text-align: justify;">Now that we have one quarter down in this year and a previous year to catch up, we can actually provide, in my opinion, a qualified and fact-based forecast on what we can potentially expect looking forward to this year and perhaps even the next few years.</p><p style="text-align: justify;">As we usually do, we will start this forecast where it all starts with our New & Used Vehicle Sales, then moving on to the "trickle down" affect in our Fixed Operations with Parts & Service. The automotive industry's "after sale" business still remains strong even though we have all weathered many past & current events and conditions.<br /></p><p style="text-align: justify;">After all, we are still feeling the effects from the pandemic and now the flu, inflation with a possible recession in the wake, global conflicts and wars that are all still on the table as we continue forward. Even though I have mentioned in the past that our industry is somewhat "resilient" to all the pre-mentioned, it doesn't mean that we will survive individually in our competitive industry.</p><p style="text-align: justify;">From the front side of things in our Sales Department, we have definitely seen the results from these past few years. You don't have to be an industry expert to see when you drive by any New Car Dealership that the lots are basically empty. Scary feeling for sure, especially for us that have worked in this industry for years.</p><p style="text-align: justify;">If I were the consumer, my first thought would be is this the beginning of the end? Are we headed to a time where we are going to be rationing vehicles again? Will we be sitting in long gas lines again and will food be next?</p><p style="text-align: center;"><b>Even though some of this may sound like "doom and gloom" with history repeating itself, it's not like that at all...</b></p><p style="text-align: justify;">Let's Begin...</p><p style="text-align: justify;">I realize that many "Smart Parts" Readers out there may not realize that this is what really happened back in World War II, even though I wasn't around then, my parents and history recorded these events. Keep in mind, that we are by no means predicting history repeating itself here as these empty dealership car lots were predicted and for specific reason.</p><p style="text-align: justify;">Although, one fact is for sure is it hasn't been since World War II since we experienced more new vehicle production shutdowns. Even though the reasons are different today versus sixty plus years ago, some of the effects are still the same today.</p><p style="text-align: justify;">"Supply In Demand" has always affected our economy, whether it be the overall price of goods, our lifestyle, or just our means of survival, as our Supply Chain feeds the engine of our economy. When supply is cut off, demand drives price up and when price goes up, so do the profits and that's what we have witnessed for the last couple of years.</p><p style="text-align: justify;">Let's start taking a look at some recent history trends and facts that will lead us to what we might expect, or "forecast" into the rest of 2023 and perhaps beyond. Keep in mind that we already know about what we are currently dealing with as we don't want to make any excuses for what we already know. </p><p style="text-align: justify;">It's kind of like dealing with parts back orders as we already know we all have them and, in my opinion, it's time to get over it and deal with them. Our job is not done when a part goes on back order, it's just beginning, much like dealing with everything else in our business.</p><p style="text-align: justify;">Let's start with some recent facts and data...</p><p style="text-align: justify;">According to <b><i><span style="font-family: arial;">Forbes Wheels</span></i></b> at <b><span style="font-family: inherit;"><i>forbes.com</i></span></b>, Used Vehicle mark ups are starting to ease up a bit as Used Vehicle Financing is going up with interest rates rising, thus making it tougher for getting potential Used Vehicle Owners to purchase. Also, New Vehicle Lease Interest Rates are also rising, therefore making Lease Options even more difficult. As a matter of fact, Vehicle Lease Purchases are down almost 50% since Covid-19 first hit.</p><p style="text-align: justify;">On the other hand, even though New Vehicle Prices are rising, and less available, interest rates are lower on New Vehicle Purchases, so it may be more cost effective to buy a New Vehicle versus a 2 to 3-year-old Used Vehicle at a lower overall cost, but eventually much higher after interest rates kick in. This is not unusual and has happened many times over the years.</p><p style="text-align: justify;">Also, we have to factor in what we didn't have to in the past and that is the EV Revolution. Electric Vehicle purchases continue to rise from 326,000 in 2019 to over 724,000 in 2022. This number would have risen even further if it weren't for Supply Chain Issues that continue to affect these EV Purchases today.</p><p style="text-align: justify;">There are still long wait lists for the Ford F150 Lightning, Tesla Model Y, EV SUV's in general, and new models from new Manufacturers such as Rivian, VinFast, and Lucid. Although higher prices for these EV vehicles continue to rise due to higher cost of lithium, cobalt and nickel. </p><p style="text-align: justify;">The only lower cost EV Vehicle is the Chevrolet Bolt & Bolt EUV which has actually lowered their cost by approximately $6,000.00 to become the most affordable Electric Vehicle in the market. Overall, these higher prices for these EV's have tempered the overall excitement of new purchases.</p><p style="text-align: justify;">Here's another little tidbit as Automotive Industry Principal Peter Maithel at Cloud Computing Firm INFOR told <b><i><span style="font-family: arial;">Forbes Wheels</span></i></b> that the on-going chip shortage could affect the production of up to 3 million vehicles this year. Many are designated for SUV's and EV's, but overall EV's require up to 30% more chips than gas, or diesel-powered vehicles.</p><p style="text-align: justify;">Lastly, and in closing on this topic on EV's, as many as 70% of the Electric and Plug-in Hybrid Vehicles that were formally eligible for tax credits will lose that incentive due to strict rules concerning battery and vehicle price caps.</p><p style="text-align: justify;">Even with all the above mentioned, and with prices still soaring at the pump, the American Automobile Association's, (AAA's) recent poll indicates that 25% of Americans are still considering an Electric Vehicle for their next purchase.</p><p style="text-align: center;"><b>So!...What's the Forecast on Parts & Service Aftermarket Sales?</b></p><p style="text-align: justify;">Here's what it boils down to from a Fixed Ops perspective...</p><p style="text-align: justify;">Our first resource contributor on this topic is <i><b><span style="font-family: inherit;">marketwatch.com.</span></b>,</i> where they start off by saying that even though Covid-19 and the current war between Russia and Ukraine are still affecting the Global Supply Chain Relationship and Precious Metals Industry, the Global Parts Automotive Parts Manufacturing Market is still expected to rise.</p><p style="text-align: justify;">With this rise comes a new breakthrough in the development of parts manufacturing which is the manufacturing "split" by segment and type. Even though we have seen this "split" to some degree over the years, we will be seeing much more.</p><p style="text-align: justify;">Some Parts Manufacturing Splits which will include...</p><p style="text-align: justify;"></p><ul><li>Driveline & Powertrain</li><li>Interiors & Exteriors</li><li>Electronics</li><li>Body & Chassis</li><li>Seating</li><li>Lighting</li><li>Wheels & Tires</li></ul><div>This split will allow for more competition and overall production, but it could also cause overall delays in production if one of the wheels are not turning in this split due to production plant, labor and product vendor issues, global economic issues and the like. Even though there could be many benefits to solving Supply Chain issues, there could be other underlying issues going forward.</div><div><br /></div><div>Key market players in this mix include Robert Bosch, Denso, Delphi, Magnetti Marelli, AC Delco, Continental and Hella just to name a few familiar names out of the 30 or so other parts manufacturers on the list in this split.</div><div><br /></div><div style="text-align: center;"><b>Now that we know how and who is involved, let's take a look at where we are going...</b></div><div style="text-align: center;"><br /></div><p></p><p style="text-align: justify;">The future of Parts & Service Sales has never been stronger as the jobs availability for automotive technicians and parts personnel keeps rising. Automotive Tech Schools as other Trade School Facilities are on the rise as the need, or demand has increased beyond the availability.</p><p style="text-align: justify;">Parts sales are continuing to rise according to Hedges Company, <b><i>(www.hedgescompany.com)</i></b> with some of their latest numbers. Here are some of the latest ECommerce numbers as of this year and looking forward.</p><p style="text-align: justify;">Consumer spending updates on Light Duty Parts Sales are expected to reach 374 billion in sales in 2023, with overall sales including Medium and Heavy Duty Parts Sales expected to reach 497 billion this year according to Autocare/AASA Channel Forecast Models.</p><p style="text-align: justify;">ECommerce Parts Sales were at approximately 38 billion in 2022, of which, 19.4 billion was from ECommerce Websites, or "first party, 1P" Sales, and 18.2 billion from "3rd party, 3P" Sales from companies such as eBay and Amazon. These total "1P & 3P" Sales are expected to reach 47 billion by 2025.</p><p style="text-align: justify;">Parts Distribution has also expanded and has increased extensively, not only recently, but over the years. We have always been used to having a "two-step" Parts Distribution System where the Manufacturer sold parts to the Warehouse Distributor, (WD), then the WD to the Retailer, or "Jobber", then ultimately to the Consumer.</p><p style="text-align: justify;">All this has now given way to a "multi-step" Parts Distribution System as the internet has given pretty much open access from the Manufacturer all the way down to the Consumer, but with many added levels. There are now as many as 10 Distribution Channels leading up to 6 Consumer Destinations in our Automotive Parts Industry.</p><p style="text-align: justify;">The immediate forecast looks great for our industry as technology is leading the way for new and more exciting vehicles, with more competition from more, new manufacturers. This will also mean that there will be more vehicle components that will require more skilled technicians and yes....even more of the "right parts at the right time"!</p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ </span><span face="arial, helvetica, sans-serif" style="background-color: white; color: blue; font-size: 16px;"><i><b>www.smartpartstraining.com</b></i></span><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">, or...just pick up the phone and call me at :</span></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...</span></p><p><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p><br /></p>Dave's Smart Parts Bloghttp://www.blogger.com/profile/04660849016453127899noreply@blogger.com0tag:blogger.com,1999:blog-32955433970606665.post-82687371193276801082023-02-28T04:59:00.001-08:002023-02-28T04:59:42.225-08:00March 2023: " Is Anyone Fact Checking Your Stock Order?"<p style="text-align: justify;">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"?</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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?</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">Here's just a few questions that run through the Parts Managers mind...</p><p></p><ul style="text-align: left;"><li style="text-align: left;">What if the part doesn't sell and becomes obsolete?</li><li style="text-align: left;">Is the part too expensive or too big to stock?</li><li style="text-align: left;">Do I need to stock that many of that part when I can get it overnight?</li><li style="text-align: left;">If the part is on Back Order, do I wait until it becomes available?</li><li style="text-align: left;">What if I get stuck with those "package quantity" parts that I can't return?</li><li style="text-align: left;">I know I've sold a few of those, but do I really need that part?</li></ul><div style="text-align: justify;">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.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">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.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Whether all of the above mentioned is either truth or speculation, then <b>why</b> do these two following questions come up over and over again in the Parts Department?...</div><div style="text-align: left;"><br /></div><div style="text-align: center;"><b>"Why don't we stock these parts that we are selling all the time?"</b></div><div style="text-align: center;"><b><br /></b></div><div style="text-align: center;"><b>"Why do we keep running out of this same part we are selling all the time?"</b></div><div style="text-align: left;"><br /></div><div style="text-align: justify;">It's time to do some "Fact Checking"...</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">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...</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">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.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">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.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">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.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">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.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><b>And now...the million-dollar question!</b></div><div style="text-align: justify;"><b><br /></b></div><div style="text-align: justify;"><b><br /></b></div><div style="text-align: center;"><b>"I'm the Parts Manager, why do I need anyone Fact Checking my Stock Orders?"</b></div><div style="text-align: center;"><b><br /></b></div><p></p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: center;"><b>So!...Who should be fact checking the Stock Order with the Parts Manager?</b></p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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. </p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ </span><span face="arial, helvetica, sans-serif" style="background-color: white; color: blue; font-size: 16px;"><i><b>www.smartpartstraining.com</b></i></span><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">, or...just pick up the phone and call me at :</span></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...</span></p><p><br /></p><p><br /></p><p> </p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p>Dave's Smart Parts Bloghttp://www.blogger.com/profile/04660849016453127899noreply@blogger.com0tag:blogger.com,1999:blog-32955433970606665.post-8643452506259482952023-02-06T05:16:00.000-08:002023-02-06T05:16:40.444-08:00February 2023" The "Origin" of Lost Sales<p style="text-align: justify;">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?</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">That being said, let's start it all off by asking the big question...</p><p style="text-align: center;"><b>"What is the true "Origin" of Lost Sales and why aren't we seeing the results that we should be"?</b></p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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... </p><p style="text-align: justify;">1.) We either have the part and the customer chooses to buy, or not buy the part.</p><p style="text-align: justify;">2.) We don't stock the part and the customer chooses to Special Order the part.</p><p style="text-align: justify;">3.) We don't stock the part and the customer wants us to chase the part.</p><p style="text-align: justify;">4.) None of the above three happens and results in a Lost Sale Opportunity</p><p style="text-align: justify;">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.</p><p style="text-align: justify;"><b>1.) <u>Lack of Proper Lost Sales Training & Definition:</u></b></p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;"><b>2.) <u>Fear of "Double Posting" Parts:</u></b></p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;"><b>3.) <u>Added D.M.S Steps in Lost Sales Reporting:</u></b></p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;"><b><u>Lost Sales Opportunity Sources:</u></b></p><p style="text-align: justify;"><b>1.) <u>Incoming Phone Calls:</u></b></p><p style="text-align: justify;">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.</p><p style="text-align: justify;"><b>2.) <u>Service Department Quotes:</u></b></p><p style="text-align: justify;">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. </p><p style="text-align: justify;">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.</p><p style="text-align: justify;"><b>3.) <u>Sales Department Opportunities:</u></b></p><p style="text-align: justify;">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.</p><p style="text-align: justify;"><b>4.) <u>Technicians & Service Advisors:</u></b></p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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. </p><p style="text-align: justify;">Lastly, it is a fact that <b>posting Lost Sales is the Number One</b> <b>ingredient</b> 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.</p><p style="text-align: justify;">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!</p><p style="text-align: center;"><b>Find & Report Them!...Don't Ignore Them!</b></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ </span><span face="arial, helvetica, sans-serif" style="background-color: white; color: blue; font-size: 16px;"><i><b>www.smartpartstraining.com</b></i></span><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">, or...just pick up the phone and call me at :</span></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...</span></p>Dave's Smart Parts Bloghttp://www.blogger.com/profile/04660849016453127899noreply@blogger.com0tag:blogger.com,1999:blog-32955433970606665.post-54023993622339757772023-01-04T06:39:00.000-08:002023-01-04T06:39:05.980-08:00January 2023: 2023 - A New Era of Parts Managers<p style="text-align: center;">Happy New Year "Smart Parts" Managers and I want to welcome in the New Year with my first question to all past, present and future "Smart Parts" Managers out there...</p><p style="text-align: center;"><b>"So!...what made you want to become a Parts Manager, or perhaps become a Parts Manager?"</b></p><p style="text-align: justify;">You don't have to answer right away because I've often asked myself that same question. For most of us "back in the day", we most likely fell into the role by happenstance. Maybe we didn't go onto college, or military service and we were just looking for a job. Then perhaps, we stumbled onto a parts counter position and then down the road...Voila!...we became the Parts Manager.</p><p style="text-align: justify;">Believe it or not, many of us "old timers" <b>did </b>wind up as Parts Managers just as mentioned above and we learned from the previous Parts Manager. We also learned just the way they taught us and may have or may not have been a good thing. We never asked why, and we just did it the way they did and when asked why we do it that way, we simply said..."That's the way we've always done it!"</p><p style="text-align: justify;">Problem with that statement is, we never knew if what we were doing was right or wrong, as long as we got the parts. Some of us were fortunate enough to get the proper training and knowledge as I was able to receive and attain. </p><p style="text-align: justify;">For many Parts Managers though, they just did it the same way every year. To the point that many Parts Managers would have perhaps 30 years of Parts Manager experience, which was actually one year, thirty times, never actually knowing what it took to be a successful Parts Manager.</p><p style="text-align: left;">This leads me to my second bold question of the New Year...</p><p style="text-align: center;"><b>"What's so different today and perhaps coming in the future versus many years ago and what does it take to be a successful Parts Manager today and going forward?"</b></p><p style="text-align: left;">Let's begin our journey to the past, present and future...</p><p style="text-align: left;"><b><u>Parts Managers in the Past:</u></b></p><p style="text-align: justify;">I guess I fall into this category all the way to the present, but as I mentioned earlier, the qualifications on being a Parts Manager in the past was completely different than today, and perhaps in the future. Primary qualifications included being a trustworthy employee, maybe some tenure in the Parts Department before becoming the Parts Manager with a basic education background.</p><p style="text-align: justify;">We weren't required to have a Financial or Accounting background as we were basically paid an hourly wage, or salary and we would never see a Dealer's Financial. As years went on, we may have received a "paste and cut" version of the Parts Sales & Gross Page as we may have achieved a bonus on total sales and gross. </p><p style="text-align: justify;">We never saw an Expense or Net Profit number to actually see how we ended up from a profit or loss standpoint. This was considered privileged information that we were not allowed to see or focus on as Parts Managers. </p><p style="text-align: justify;">We learned basic duties on how to look up parts in a catalogue and micro fiche well before computers came of age. We learned how to keep track of those parts we sold by writing them down as they sold and walking the aisles to see what we needed.</p><p style="text-align: justify;">We checked our inventory to see what we stocked on a "counter pad", or we just walked to the bin to see if it was there. We usually had it as many parts fit many applications for many years and we just remembered the part numbers and where they were on the shelf, (pretty weird huh?)</p><p style="text-align: justify;">We then learned how to order parts for restocking the shelves and customers by "mailing in" our parts orders, or perhaps via phone, or teletype machine, until eventually, on very primitive computers. We often picked those parts up ourselves at our local Parts Distribution Center, (PDC), or waited for them to come via mail, or UPS.</p><p style="text-align: justify;">As we transitioned into the role of Parts Manager over the years, we were fortunate enough to witness change along with new innovations and new computers. We watched vehicle parts transitioning to vehicle components and computer chips becoming the brain of the automobile. Today, most vehicles have anywhere from 30 to 50 or more microchips controlling nearly every vehicle function.</p><p style="text-align: justify;">Overhauling transmissions, engines, alternators, starters, rear ends, wheel cylinders, etc. have become a thing of the past as component replacements has become the new normal. Overhauling and actually "repairing" a component was how it was done "back in the day".</p><p style="text-align: left;">Lastly, and before we move on, electronics, computer software and fiber optics started controlling many moving parts that used to be driven via hydraulic pressure, vacuum assist, pumps, manual levers, air and even gravity. </p><p style="text-align: left;"><b><u>Parts Managers in the Present:</u></b></p><p style="text-align: justify;">First and foremost, and as a Parts Manager from the above category, the most dynamic and "welcome" change from past to present is more and more women are becoming Parts Managers. Not only are they becoming Parts Managers, but they are also <b>great</b> Parts Managers!</p><p style="text-align: justify;">I've had and still have the privilege to train and work with many women Parts Managers and their personality types and behavior patterns are well suited for the position. Not only that, but it also seems that all the women Parts Managers that I have worked with have or have had a more extensive educational background as opposed most of my Parts Manager gents out there.</p><p style="text-align: justify;">Overall, today's Parts Manager, whether a guy or a gal, has to have a more extensive educational background than we did in the past. Today's Parts Manager should have an educational background that incudes Basic Standard Accounting, especially Automotive Standard Accounting.</p><p style="text-align: justify;">Parts Managers today also have to be verse in both parts inventories, the Controlled Balance Inventory that we manage on the DMS side, and the Accounting Ledger Balance Inventory listed on page one of the Financial. These inventory variances were never a concern years ago that could be devastating to a dealer if not managed properly today. </p><p style="text-align: justify;">Other educational skills include computer software training to include Excel, Word, and other Microsoft Office Applications. Even more important is Financial and Personnel Management Training as managing the Parts Department has become "managing a business". Each dealership department has to stand on its own and be profitable, especially in these times.</p><p style="text-align: justify;">We are now required to not only "manage the business", but also be a "profitable" business where we have to manage sales, gross and expenses to a desired net profit amount. We have to know, achieve and maintain industry guidelines on all sales, gross, expense and net profit categories.</p><p style="text-align: justify;">Lastly, and not to be left out of today's Parts Manager's educational background is Inventory Management Skills Training as the parts inventory is one of, if not the most important dealer asset. It's much more difficult today to manage the parts inventory compared to years ago.</p><p style="text-align: justify;">Managing proper inventory Stocking Levels today requires that certain skill of "balancing" between what the manufacturer <b>wants</b> us to stock versus what we <b>should</b> stock based on our own customer demand in order to maintain proper First Time Off Shelf Fill Rates.</p><p style="text-align: justify;">Parts "life cycles" are much shorter as manufacturers increase their inventory breadth with more parts and more applications than years ago. A parts life cycle years ago would often see one part number fitting many applications for many years. </p><p style="text-align: justify;">Today, it's quite the opposite as many parts will only fit one application depending on vehicle options and for a shorter time span of year and model usage. Stocking the right part at the right time, along with eliminating obsolescence <b>before</b> it happens has become a high priority in protecting the dealer's investment.</p><p style="text-align: justify;">In addition, today's Parts Manager has to "multi-task" and "juggle" through this ever-changing supply chain and back-order issues just to provide the service our customers' demands in this high pace world we live in. I can honestly say that we never had to deal with these issues in the past that we are experiencing today.</p><p style="text-align: justify;">Today, we also have to be "network savvy" as E-Commerce purchases and sales continue to rise. Our parts purchases and sales are coming from a much more diverse network of online sales and purchases websites and warehouses. We continually have to use all our available resources to find parts and get rid of parts at a marketable price.</p><p style="text-align: justify;">I have spoken to many Parts Managers that have been out there as long as I have, or even longer and they are spending many more hours a day managing these issues than ever before. We also joke about how so much has changed over the years and how much fun it <b>used</b> to be years ago.</p><p style="text-align: justify;"><b><u>Parts Managers in the Future:</u></b></p><p style="text-align: justify;">Even though the future Parts Manager will experience all the above mentioned in the present, I believe it's going to get even more intense for the Parts Manager of the future. More and more electric vehicles will be hitting the market which means even more technology and "knowledge" that the future Parts Manager must have.</p><p style="text-align: justify;">Mandatory training and education will be, in my opinion, a big player into managing the parts inventory in the future with algorithms taking over stocking levels, seasonal parts sales along and with even more "manufacturer control" on parts inventories in general.</p><p style="text-align: justify;">I also believe that supply chain issues will be somewhat of a new normal as component replacements such as auxiliary batteries, control units, DC converters, motor drives, on board chargers, etc. become more in demand. These types of parts don't sound cheap to me and will most likely have limited supplies, manufacturers, vendors and warehouses all over the world.</p><p style="text-align: justify;">Managing the parts inventory, in my opinion, is going to change drastically in the future as we spend less time "managing" parts inventory and more time "processing" parts inventory. Even though we will always need those maintenance and "wear and tear" parts, most other component parts will not be stocked and have to come from outside sources.</p><p style="text-align: justify;">That being said, this is why I believe that these supply chain issues will only increase in the future as most dealers will not want to invest in a more expensive parts inventory with less movement at higher acquisition and holding costs. Who knows...we may be more of a Parts "Acquisition" Department in the future.</p><p style="text-align: justify;">Online parts purchases and sales will also continue to grow as we will do what we have to in order to provide the service our customers demand. As mentioned in previous issues, E-Commerce sales and purchases are expected to continue rising and supply chain issues grow.</p><p style="text-align: justify;">Even though we will always have to stock the right parts at the right time by any means, we will have to see what those parts are. In my opinion, only parts demand will dictate what we have on the shelf, which means, we should never go back on our basic Parts Manager instincts and processes which starts with the continued process of posting Lost Sales.</p><p style="text-align: justify;">What lies in the future is definitely a mystery, but what we do know now is that we are seeing signs of what's to come. We have to constantly train ourselves and our staff in order to keep up with change and evolution. It all starts with our willingness to learn as we go, accepting and growing with the environment in order to achieve our goals.</p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ </span><span face="arial, helvetica, sans-serif" style="background-color: white; color: blue; font-size: 16px;"><i><b>www.smartpartstraining.com</b></i></span><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">, or...just pick up the phone and call me at :</span></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...</span></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: center;"><br /></p><p style="text-align: center;"><br /></p><p style="text-align: center;"><br /></p><p style="text-align: center;"><br /></p>Dave's Smart Parts Bloghttp://www.blogger.com/profile/04660849016453127899noreply@blogger.com0tag:blogger.com,1999:blog-32955433970606665.post-21195534409596336962022-12-08T06:31:00.000-08:002022-12-08T06:31:51.335-08:00December 2022: Moving On To 2023: "Could This Be Our Year?"<p style="text-align: justify;">As we wind down yet another year here at ACG "Smart Parts", it's time once again to look back to see what we have learned in 2022 and take a look ahead to perhaps what we can expect moving forward. One thing for sure is that this past year has been another challenge much like it has been for the past two plus years.</p><p style="text-align: justify;">Predicting and forecasting for future events is not a certainty but what <b>is</b> for certain right now is that the automotive parts industry is hotter than ever! Who would think that after all we have been through these past couple of years or so, we would we even make that kind of statement.</p><p style="text-align: justify;">Continued Pandemic awareness, rising inflation, employee shortages, on-going supply chain issues, parts backorder situations, new and used vehicle shortages and so on. Most importantly though and in my opinion, is the Lack of Consumer Confidence.</p><p style="text-align: center;">Based on the Conference Board <b>Consumer Confidence Index</b>, and as listed on their web page @ <span style="font-family: georgia;"><i><b>www.conference-board.org</b>.</i></span>, this following statement was just released this past month of November...</p><p style="text-align: center;">"The Confidence Board <b>Consumer Confidence Index</b> decreased in November after also losing ground in October. The Index now stands at 100.2, down from 102.2 in October. The <b>Present Situation Index</b>, based on consumers' assessment of current business and labor market conditions decreased to 137.4 from 138.7 in October. The <b>Expectations Index</b>, based on consumers' short-term outcome for income, business, and labor market conditions, declined to 75.4 from 77.9"...</p><p style="text-align: center;">According to <b>Lynn Franco, Senior Director of Economic Indicators at the Conference Board</b>, she goes on to say...</p><p style="text-align: center;">"The <b>Present Situation Index</b> moderated further and continues to suggest the economy has lost momentum as the year winds down. Consumers' expectations regarding the short-term outlook remains gloomy. Indeed, <b>The Expectations Index</b> is below a reading of 80, which suggests the likelihood of a recession remains elevated"...</p><p style="text-align: justify;">So, with all the above said, and once again, how can we even think that 2023 is going to be "Our Year?" Furthermore, and the most important question is...</p><p style="text-align: center;"><b>How Long Is This Going To Last?...</b></p><p style="text-align: left;">Here's the Good News!...</p><p style="text-align: justify;">First and foremost, we are in an "Essential Service Industry", as we operate in the Transportation Industry, much like the Airline Industry, Rail Transit, or perhaps the Food & Clothing Industry and the Healthcare Industry just to name a few.</p><p style="text-align: justify;">Even though we are not "Recession Proof", our Automotive Industry is essential to our way of life and must move forward, no matter what the economic situations are. What we <b>do</b> have to do is adapt to these conditions and remain in business and be profitable.</p><p style="text-align: justify;">According to <span style="font-family: times;"><i><b>hedgescompany.com</b></i></span>, we learn even more about how even through these times, our Automotive Parts Industry continues to grow. We learn that even though the economy is not good, our Automotive Parts Industry is "Recession Resistant". </p><p style="text-align: justify;">Let's start off with some basic facts as we get into the most recent data that proves our continued growth in these times. You would think with all the "doom and gloom" that we just revealed earlier in this issue, and at some point, something has to give to send us in a downward spiral.</p><p style="text-align: left;"><b>Fact # 1:</b></p><p style="text-align: justify;">The number of Licensed Drivers in the United States are actually climbing as industry analysts predict that we will reach 240 million Licensed Drivers by the year 2025. Miles driven is also up average 1.3% over the last few years, even though some analysts predict that this percentage will drop over the next few years as inflation and prices rise.</p><p style="text-align: left;"><b>Fact # 2:</b></p><p style="text-align: justify;">People are not returning to Public Transportation, or "Ride Sharing" as we witnessed prior to the Pandemic as online Parts Purchases continue to rise at a 9% growth rate as listed in the most recent Compound Annual Growth Rate, (CAGR) numbers. This number also equals forecasts made by <i style="font-weight: bold;">The Auto Care Association </i>as their forecasts reveal robust, continued growth through 2023.</p><p style="text-align: left;"><b>Fact # 3:</b></p><p style="text-align: justify;">E-Commerce Parts Sales continue to skyrocket as 2022 hit 38 billion in sales and is expected to rise over 40 billion in the coming year. In fact, it is predicted that E-Commerce Parts Sales, both in first party and third part sales will reach 67 billion by 2030! The Digital Influence on parts sales, both online and offline are up over 2% this year, even with inflation.</p><p style="text-align: left;"><b>Fact # 4: </b></p><p style="text-align: justify;">Personal consumption on parts sales as a percentage of total income has also risen and continues to rise, even with rising fuel prices. Light Duty Truck and SUV sales continue to outsell regular passenger vehicles at a clip of 2-1. Truck enthusiasts especially are spending more and more on optional, non-essential truck parts such as accessories.</p><p style="text-align: left;"><b>Fact # 5:</b></p><p style="text-align: justify;">Used Vehicle Sales are up drastically as New Vehicle Sales drop to the lowest levels in years due to Supply Chain Issues, especially with the digital microchip shortages. This has resulted in record Parts & Service Sales over the last couple of years as these Used Vehicles have required higher maintenance and repair costs.</p><p style="text-align: left;"><b>Fact # 6:</b></p><p style="text-align: justify;">Consumers are keeping their vehicles for longer periods of time as New & Used Vehicle Ownership hits near the double-digit range in years. New & Used Vehicle financing is even pushing payments terms to 6 years or even more. Vehicle Loan Interest Rates are also on the rise, thus forcing the consumer to keep their vehicle through the loan payment cycle, closer to the end of the loan payment period.</p><p style="text-align: left;"><b>Fact # 7:</b></p><p style="text-align: justify;">The Automotive Parts Industry continues to pour in over a trillion dollars each year into our economy at a clip of 3.0% to 3.5% of our overall Gross Domestic Product, (GDP) and continues to grow even higher. These statistics don't even include the revenue generated from the manufacturing of automotive parts that are shipped overseas and around the globe.</p><p style="text-align: justify;"><b>In Conclusion:</b></p><p style="text-align: justify;">Our automotive industry, in my opinion, is just going to keep growing and growing with even newer innovation, technology and the rise of totally Electric Vehicles. As we keep growing, and with each step upward, we will <b>always</b> need our vehicles serviced and repaired, no matter how our vehicles are powered.</p><p style="text-align: justify;">Our "need for speed", and our personal choice on how we travel along with our overall passion for the automobile will be with us far beyond my lifetime. Consumer Confidence may drive our personal choices as to what we buy and when we buy, but if you are in an "Essential Service Industry" like we are, they will <b>always</b> buy.</p><p style="text-align: left;">Question is...</p><p style="text-align: center;"><b>"Will They Buy from You & Could This Be YOUR Year in 2023?"</b></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ </span><span face="arial, helvetica, sans-serif" style="background-color: white; color: blue; font-size: 16px;"><i><b>www.smartpartstraining.com</b></i></span><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">, or...just pick up the phone and call me at :</span></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...</span></p><p style="text-align: left;"><br /></p><p style="text-align: left;"><br /></p><p style="text-align: left;"><br /></p><p style="text-align: left;"><br /></p><p style="text-align: left;"><br /></p><p style="text-align: left;"><br /></p><p style="text-align: left;"><br /></p><p style="text-align: left;"><br /></p><p style="text-align: left;"><br /></p><p style="text-align: left;"><br /></p>Dave's Smart Parts Bloghttp://www.blogger.com/profile/04660849016453127899noreply@blogger.com0tag:blogger.com,1999:blog-32955433970606665.post-53729590341576842612022-11-02T05:54:00.000-07:002022-11-02T05:54:01.514-07:00November 2022: Winding Down In 2022 - "What Have We Learned?"<p style="text-align: justify;">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?<br /></p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">Each month's topic has also included a solution to what we are currently dealing with, surviving through and most importantly, <b>prospering</b> through these times. Unfortunately, we don't often read between the lines, and we tend to complain, or have excuses for undesired results. </p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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...</p><p style="text-align: center;"><b>"Where Would I Be Right Now?"</b> </p><p style="text-align: left;">Let's begin with January 2022...</p><p style="text-align: left;"><b><u>January 2022: The Top 10 "Do's & Don'ts" for 2022</u></b></p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: left;"><b><u>February 2022: D.M.S. Utilization:</u></b></p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p><b><u>March 2022: The Parts Department In The EV Revolution:</u></b></p><p style="text-align: justify;">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.</p><p style="text-align: justify;">The topic in March was driven by many Parts Managers asking me...</p><p style="text-align: center;"><b>"What kind of Parts are we Going to Sell on these Electric Vehicles?..."</b></p><p style="text-align: justify;">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 <b>do</b> require maintenance and <b>will</b> have "wear and tear" parts issues as well.</p><p style="text-align: justify;">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.</p><p style="text-align: left;"><b><u>April 2022: Dealing With Supply Chain Issues:</u></b></p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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? </p><p style="text-align: justify;">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.</p><p style="text-align: left;"><b><u>May 2022: Mapping Out The Parts Department Floor Plan:</u></b></p><p style="text-align: justify;">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</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: left;"><b><u>June 2022: Expanding The Parts Inventory "Breadth"</u></b></p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: left;"><b><u>July 2022: Managing The Tire, Gas , Oil & Grease Inventories</u></b></p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: left;"><b><u>August: "Don't Take Your Foot Off The Gas!"</u></b></p><p style="text-align: justify;">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.</p><p style="text-align: justify;">"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"?</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: center;"><b>"Are you Seeing a Pattern Here Yet?"</b></p><p style="text-align: left;"><b><u>September 2022: "It's Time To Raise The Bar!"</u></b></p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">It seems that the mindset got to the point where dealers thought that they had to get what they could get, no matter what, <b>in order</b> 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!</p><p style="text-align: justify;">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 <b>have to</b> raise the bar just to keep up with everyone else! If not, we will just be left in the dust.</p><p style="text-align: left;"><b><u>October: Managing Through Inflation In The Parts Department</u></b></p><p style="text-align: justify;">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?</p><p style="text-align: justify;">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 <b>succeed and prosper</b> through these times.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">Our focus all year has been on this challenge that we all face and to <b>not</b> 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.</p><p style="text-align: justify;">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. </p><p style="text-align: justify;">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.</p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ </span><span face="arial, helvetica, sans-serif" style="background-color: white; color: blue; font-size: 16px;"><i><b>www.smartpartstraining.com</b></i></span><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">, or...just pick up the phone and call me at :</span></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...</span></p><p style="text-align: left;"><br /></p><p><br /></p>Dave's Smart Parts Bloghttp://www.blogger.com/profile/04660849016453127899noreply@blogger.com0tag:blogger.com,1999:blog-32955433970606665.post-8199930745326273042022-10-03T06:24:00.001-07:002022-10-03T06:24:44.473-07:00October 2022: Managing Through Inflation In The Parts Department<p style="text-align: justify;">Inflation in itself is an interesting topic that we are all familiar with as the economy is one of the biggest concerns for all of us in this country. It affects each and every one of us every day and "coping" with it is a struggle in itself. It's also one of the biggest topics, discussions and conversations that everyone can relate to.</p><p style="text-align: justify;">On the receiving end of Inflation, we really don't have much we can do in the way of preparation as it's more of how we deal with it and make the necessary adjustments purchasing goods and managing our own expenses. Being "frugal" and watching our pennies is our primary means of preparation.</p><p style="text-align: justify;">On the other hand, and from a retail perspective, we are on the other side of Inflation as a free market provider of goods and services, especially in the Parts Department. Preparation for Inflation takes on a whole different meaning as we have to consider many other different factors.</p><p style="text-align: justify;">One might think that just adjusting our prices to Inflation is all we have to do as the "trickle down" effect takes center stage. After all, we just have to adjust our prices as our costs increase and then just pass the added cost down to the consumer to remain profitable.</p><p style="text-align: justify;">In all actuality, it goes much further than that as just merely adjusting our prices to meet the added costs we incur is one of the last factors in preparing the Parts Department for these inflationary times. We have to have a different mindset with a "preparation to meet expectation" attitude and focus.</p><p style="text-align: justify;">In this issue of ACG "Smart Parts", we are going to list out our "Top 10 Factors" in preparing the Parts Department for these inflationary times. Some might think that there can't be that many factors in inflation preparation in the Parts Department, but I believe that all these "Top 10 Factors" play a huge role.</p><p style="text-align: justify;">We are not alone in the Parts Department as most other businesses that offer retail goods and services are going through the same thing, having to consider many factors in inflation preparation. As a matter of fact, and as we review our "Top 10 Factors", you may see that these factors may apply in any business.</p><p style="text-align: justify;">We will review all these factors in order of importance from an ACG "Smart Parts" Perspective, starting with our Number One all the way up to our Number 10 factor in "Managing Through Inflation In The Parts Department". Preparation is also the key to success and if we aren't prepared, we won't meet the expectations.</p><p style="text-align: justify;">We all know Inflation is already here and we have been dealing with it for a couple years now, but are we really prepared? Are we really considering all the right factors that we should be in order to not only survive Inflation, but succeed and prosper through it? </p><p style="text-align: justify;">Question is....</p><p style="text-align: center;"><b>"What's Your Answers to These Questions?"</b></p><p>Let's Begin with our "Top 10 Factors" in Succeeding through Inflation!...</p><p><b><u>Number One: Goal Setting/Guidelines</u></b></p><p style="text-align: justify;">First and foremost, and if we haven't done it already, we have to have a plan. We all know that we have to meet or exceed industry guidelines, but the bar has been raised as we mentioned last month. Dealers have been "raising the bar" over the last couple of years and to some degree, the demands have increased from the status quo.</p><p style="text-align: justify;">Not only do we have to "raise the bar", most importantly, we have to communicate these new goals and guidelines all the way down to our parts employees as no one should be left out of the overall objectives. Everyone has to be on the same page and understand what each staff members duties & responsibilities are.</p><p><b><u>Number Two: Training</u></b></p><p style="text-align: justify;">Parts Training has become more important than ever as I can attest to over these last couple of years from the Parts Manager down to counter staff, shipper/receivers and parts delivery staff. Every position is crucial from proper receipting of parts, posting Lost Sales and Pricing Policies.</p><p style="text-align: justify;">Parts Manager Training on the Proper Set Ups & Controls on the D.M.S. in conjunction with the Manufacturers Vendor Managed Inventory, (V.M.I.), if offered, is crucial to understanding and maintaining proper Stocking Levels and the process of Phasing In the right parts at the right time.</p><p style="text-align: justify;">If you don't know it already, Parts Counterpersons are "salespeople", and they have to be trained in selling skills. They have to also have a personality that accommodates the sales environment and be dressed appropriately to represent the dealer's profile.</p><p style="text-align: justify;">The Front Parts Counter area needs to display accessories, apparel, etc. and have a "store front" feel to it to invite customers. It cannot have a "service counter" look to it and should be updated frequently with new products and displays as opposed to old, outdated accessories that just collect dust over time.</p><p style="text-align: justify;"><b><u>Number Three: Proper Staffing/Employee Incentives</u></b></p><p style="text-align: justify;">Proper staffing in the right position in the Parts Department is key to providing efficient service to technicians and front counter customers. Technicians standing in line waiting for parts is a "Productivity Killer" as time is a perishable inventory. </p><p style="text-align: justify;">If a technician is waiting for parts for even 15 minutes can cost $50.00 to $100.00 in parts and service sales that we can never get back. Unfortunately, many dealers under staff the counter staff based on sales resulting in Lost Service Productivity.</p><p style="text-align: justify;">Parts employees should also have sales incentives as they are salespeople after all. Incentives based on Overall Sales, and/or Service Productivity promotes higher sales and team effort in increasing Service "Cycle Times". It also incentivizes the Parts Department to have the right part at the right time and much faster.</p><p><b><u>Number Four: Controlling Expenses</u></b></p><p style="text-align: justify;">Controlling expenses is not a new thing, or is it any less important at any time, especially during these inflationary times. But what is more important now more than ever is reviewing our vendor invoices on a monthly basis. Most often times, we just pay the bill each month from the same vendors without batting an eye.</p><p style="text-align: justify;">In addition, payables and receivable staff don't often communicate with managers on the bills we are paying each month. All Managers, and not just Parts Managers should authorize all semi-fixed expenses each month and "sign off" legibly so that there is no confusion as to what is being paid and who's paying for it.</p><p style="text-align: justify;">Paying for employee overtime has also been an issue the last couple years between the pandemic and rising inflation. More and more dealers are cutting back on hourly and/or salary-based compensation as a means of controlling overall dealer expense as our employees are our biggest expense.</p><p style="text-align: justify;">This can be a "Catch-22" though as we can't expense our way into profit in most situations and we don't want to cut our staff and hours too low where it effects overall sales and gross. We need to staff properly based on industry guidelines and in sales, our sales staff needs to perform as well to industry guidelines.</p><p><b><u>Number Five: Purchasing </u></b></p><p style="text-align: justify;">This category of purchasing goes beyond just buying part in the Parts Department as we are referring to <b>all</b> purchasing controlled by the Parts Department. Sublet Purchases, Shop Supplies, Cleaning Supplies, Waste Oil & Hazardous Waste Removal, etc. are just a few of examples of the "purchasing power" of the Parts Department above and beyond just parts purchases.</p><p style="text-align: justify;">That being said, there should only be authorized parts personnel that have the "power" to create and authorize a purchase order, whether buying parts or any other of the above examples. In addition, all purchases, invoices and purchase order numbers need to be "married up" for Accounting Reconciliation. </p><p>Parts purchases also have to be reconciled to ensure that the price we pay is the price we cost out on the repair order or parts invoice unless there are adjustments to be made in Discounts & Allowances to balance with the Parts Ledger Inventory in Accounting.</p><p><b><u>Number Six: Shopping Vendors</u></b></p><p style="text-align: justify;">This category kind of "dove tails" into our Number Four on Controlling Expenses, but with a little twist. Not only should we be authorizing only what we purchase, we should also be "shopping" our vendors at least twice a year to keep them honest.</p><p style="text-align: justify;">One example is that I just changed my Auto Insurance Company after being with them for over thirty years. The increases in rates over the last year have been astronomical and they just thought I would go along with it. </p><p style="text-align: justify;">They took for granted that I had been with them so long and that I would just accept these crazy rates. The end result was a huge savings with a top insurance company with even better coverage. All I got for excuses from my previous auto insurer was..."prices are going up everywhere". </p><p style="text-align: justify;">We have to do the same thing in our Parts Department as our dealer's "purchase agent". As mentioned, we need to keep them honest and shop, compare and barter with other vendors who are trying to make it through these inflationary times as well. You may be surprised at what some of these vendors may offer in order to get our business!</p><p style="text-align: justify;">We just don't have to settle for the status quo when it comes down to spending the dealer's money. We just have to be diligent and do our homework and take the time to do the research. After all, and as in my auto insurance example, if it was your money...what would you do?</p><p style="text-align: justify;"><b><u>Number Seven: Stocking Levels</u></b></p><p style="text-align: justify;">Some may feel that our Number Seven should have higher priority, but when you think about it, and other than our Number Four on Controlling Expenses, all the other factors have to come into play in order to properly manage our Stocking Levels.</p><p style="text-align: justify;">One thing for sure that we all have experienced Supply Chain Issues over the past couple of years and to some degree, we still are going through it. That being said, it becomes even more imperative to have the right Stocking Levels while battling Inflation.</p><p style="text-align: justify;">Not only the right Stocking Levels, but the right Stocking Levels on the "right parts" and that can only come from our D.M.S. with the Proper Set Ups & Controls based on the math and our own individual demand history from Sales and Lost Sales.</p><p style="text-align: justify;">The last thing we need is to increase our Stocking Levels while adding to the obsolescence problem. We have to have the right parts at the right time while "Phasing-Out" the part that have no demand in over seven or eight months while we still have a 35% - 40% chance of selling those parts and not restocking them, unless they meet Phase-In Criteria all over again.</p><p style="text-align: justify;"><b><u>Number Eight: Controlling Obsolescence</u></b></p><p style="text-align: justify;">This category just makes sense as a follow up to our Number Seven on Proper Stocking Levels. Obsolescence is also a category that is no stranger whether managing through Inflation or not, but what is different now is we cannot afford to hold on to it.</p><p style="text-align: justify;">The IRS Standard Depreciation of any commodity or inventory is half of the cost of what is displayed on the D.M.S., which is approximately $.50 cents on the dollar. Acquisition & Holding Costs alone add up over the years and for the most part, the dealer has already made money on those obsolete parts over the years just on price increases alone.</p><p style="text-align: justify;">The cash back from selling the obsolescence for whatever we can get can be reinvested on parts that sell, or "turn" several times a year on faster moving parts. Unfortunately, the old theory that many dealers still have today that "it has to be worth what it costs" is old school. These dealers still don't realize the ROI that can come from selling it for $.40 - $.50 cents on the dollar.</p><p style="text-align: justify;">Lastly, we have to "stop the bleeding" and control obsolescence from happening in the first place which can come from having the right D.M.S. Set Ups & Controls along with an "In-House" Scrapping Program, (an ACG "Smart Parts Exclusive"). </p><p style="text-align: justify;">An "In-House" Scrapping Program also frees the dealer from the clutches, controls and dependency on the manufacturer for trying to build return allowance from purchasing more parts for that little bit of protection that never matches the obsolescence build up each year.</p><p style="text-align: justify;"><b><u>Number Nine: Pricing Policies</u></b></p><p style="text-align: justify;">Wow!...we finally got to the meat!...our Pricing Policies to combat Inflation!...</p><p style="text-align: justify;">Even though pricing is the final "end game" in battling inflation, we absolutely cannot have the "right" Pricing Strategies unless we do all of the above first. Developing the right Pricing Strategies while maintaining, or even growing our customer base is absolutely crucial.</p><p style="text-align: justify;">The amazing thing is that developing the right Pricing Strategies is the easiest thing we can do because it's all about the math. The key ingredient to developing these strategies is our cost factors, as cost is constant. What we pay for parts is what we pay, and we have to structure our gross profit from "cost up".</p><p style="text-align: justify;">We also have to keep up with our cost factors as most manufacturers have already had two major parts price increases this year alone. They are passing the ball down to us and we have to pass it on down as well to ensure our gross margins. Gross pays the bills, and we have to be able to afford our Number One Asset, which is our employees.</p><p style="text-align: justify;">Developing and maintaining our Pricing Strategies is not a "set it and forget it" category as we need to review, modify and update, if necessary, each month to ensure our gross margins. We have to compare our results each month to industry guidelines and make the necessary modifications.</p><p style="text-align: justify;"><b><u>Number Ten: Accountability</u></b></p><p style="text-align: justify;">Our Number Ten is the "glue" to all of our "Top 10 Factors" in our battle against inflation. Everyone, and I mean <b>everyone</b> needs to be held accountable to their Duties & Responsibilities. We cannot achieve our goals if we deviate from the process and dealer guidelines listed above.</p><p style="text-align: justify;">Parts gross killers include discounting, price overrides, costing errors, pilferage, parts security, lack of training, housekeeping, accrued obsolescence, accounting errors, improper reconciliation, etc. and I could go on and on. We have to maintain control and accountability at all times.</p><p style="text-align: justify;">As mentioned, parts is all about the math and if we don't achieve our gross numbers, then somebody is overriding the math, it's that simple. If we don't receive the results we expect, there has to be a logical reason.</p><p style="text-align: center;"><b>Inflation is just another period in time that we have to adjust to. Getting through it and prospering through it are two different things....</b></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ </span><span face="arial, helvetica, sans-serif" style="background-color: white; color: blue; font-size: 16px;"><i><b>www.smartpartstraining.com</b></i></span><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">, or...just pick up the phone and call me at :</span></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...</span></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"> </p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p>Dave's Smart Parts Bloghttp://www.blogger.com/profile/04660849016453127899noreply@blogger.com0tag:blogger.com,1999:blog-32955433970606665.post-67572674949294283742022-09-07T04:44:00.001-07:002022-09-07T04:44:54.317-07:00September 2022 - An ACG "Smart Parts" Perspective: "It's Time To Raise The Bar!"<p style="text-align: justify;">It's hard to believe that we have reached yet another milestone here at ACG "Smart Parts" with our 150th Edition. In this edition, and as a follow up to our last edition titled "Don't Take Your Foot Off The Gas!", we are going to challenge "Smart Parts" Managers yet again in this month's issue.<br /></p><p style="text-align: justify;">For years, we have measured our individual dealership success by meeting or exceeding the standards set by industry analysts, companies and of course, the manufacturers. These guidelines have changed to some degree over the years, but overall, they have been the standards that we have all been compared to.</p><p style="text-align: justify;">These comparisons, or "composites" have given us industry information in many areas in all dealership departments and help us determine if we are above average, just average, or below average. This collective information has also helped many dealers meet or exceed these guidelines by sharing different processes and ideas with other dealers.</p><p style="text-align: justify;">Since the Covid-19 Pandemic began a couple years ago and, in my opinion, much has changed in how dealers operate their businesses. Along with supply chain issues, employee shortages and rising inflation, dealers had to adapt to a different way of doing business in order to survive.</p><p style="text-align: justify;">That being said and fast forwarding to today, I have noticed that many of our industry guidelines are being replaced by new goals and guidelines set by individual dealers. One good example of this is what dealers are achieving today in their average "front and back" New & Used Vehicle Gross Profit Margins.</p><p style="text-align: justify;">Many have over doubled their "front and back" New & Used Vehicle Gross Margins to offset supply chain issues and overall lower New & Used Vehicle Sales. Many are actually making more with less with Floor Plan Expense dropping by thousands of dollars.</p><p style="text-align: justify;">This phenomenon is also true in the Fixed Operations as dealers became even more dependent on their Service Absorption, or "Fixed Coverage" in the dealership's "back end". This trickle-down effect, in many dealerships today between the front and back end has made them more profitable than ever!</p><p style="text-align: center;"><b>"So, what has all this done to our industry guidelines, especially in the Parts Department?"</b></p><p style="text-align: justify;">In my opinion, the results of these past few years have definitely impacted our industry guidelines, especially in the area of parts for sure. As a matter of fact, the impacts are so great that we need to start thinking about "raising the bar" on some of our parts guidelines.</p><p style="text-align: justify;">In this issue, we will break down five of these guidelines and perhaps, get a new perspective on where we should set that bar. Even though, we are not challenging or disagreeing with these industry guidelines, we are just challenging ourselves to achieve what is possible.</p><p style="text-align: justify;">Question is...</p><p style="text-align: center;"><b>"If other dealers are doing it...</b><b>What should MY new guidelines be and how far do I raise the bar?"</b></p><p><b>Let's Begin...</b></p><p><span style="text-align: justify;">First and foremost, we can't just throw crazy numbers and percentages out there to achieve some crazy goal as these goals and guidelines have to be S.M.A.R.T.* Each guideline has to be carefully thought through, make sense and most important, the math has to work as well because Parts is not about opinions, it's "black & white".</span></p><p style="text-align: center;"><b>* S</b>pecific, <b>M</b>easurable, <b>A</b>ttainable, <b>R</b>ealistic and <b>T</b>ime Focused</p><p style="text-align: justify;">In each guideline category, we will list the current industry guideline and then we will list our ACG "Smart Parts" Perspective Guideline and as you will see, the math will have to work to match other parts industry guidelines. Also, we will back these ACG "Smart Parts" Perspective Guidelines with formulas, and/or definitions to confirm the perspective guideline result.</p><p style="text-align: justify;">The following five guidelines are not listed in any particular order, and we will list industry guideline first, then followed by our ACG "Smart Parts" Perspective Guideline. We will follow with our reasons and explanations for "raising the bar" if need be, or if we maintain our current parts industry guidelines.</p><p style="text-align: justify;"><b><u>Customer Pay Parts Retained Gross Percentage:</u></b></p><p style="text-align: justify;">Industry Guideline: 40% - 42% (Matrix When Possible)</p><p style="text-align: justify;">ACG "Smart Parts" Perspective Guideline: 45% - 48% (Matrix Captive Parts, Flat Price Competitive)</p><p style="text-align: justify;">This guideline is the one that I've seen climb the most over the past few years in many dealerships that I have visited as well as the most under achieved guideline. It seems that many dealers are either "over-achieving" the industry guideline, or they are not even coming close which has resulted in the biggest gap of all the guidelines.</p><p style="text-align: justify;">In my opinion, there should only be two Pricing Strategies on Customer Pay Parts. One being the proper utilization of a Parts Pricing Matrix in the right "cost plus" ranges on "captive parts" and the second Pricing Strategy being "flat priced" parts for "competitive parts".</p><p style="text-align: justify;">The reason the industry guideline is at 40% - 42% is because most Manufacturers Suggested Retail Prices are set to retain an average of 40% - 42%, even though some are higher and some lower, the overall average will retain a 40% - 42% retained gross, which matches the industry guideline.</p><p style="text-align: justify;">The ACG "Smart Parts" Perspective Guideline for Customer Pay Retained Gross Profit goes a little further. The reasoning for "raising the bar" on Customer Pay Gross follows two basic, commonsense principles. Plus, this 3% - 5% increase in Customer Pay Gross Retention doesn't really change customer perception when it comes down to what people buy.</p><p style="text-align: justify;">The first basic principle is the cost of doing business has gone up expensively, especially in Parts from Acquisition & Holding Costs, Cost of Employees, Insurance, etc., just to name a few impacts of what we are experiencing today versus just a few years ago.</p><p style="text-align: justify;">The second basic principle is customer perception when buying parts and services in our dealership. As I mentioned, the average MSRP of parts today is pretty much set to average the current industry guideline of 40% - 42%, which from a "cost plus" standpoint, we are marking up from cost by 67%.</p><p style="text-align: justify;">In addition, and another fact is that approximately 80% of our parts sales are coming from the $10.00 to $40.00 cost range. That being said, if I have a $20.00 cost part, the manufacturer will most likely have an MSRP of approximately $33.40. This is where it all starts as this price at MSRP drives the customer perception, if any.</p><p style="text-align: justify;">If I were to "matrix" that same part that costs $20.00 cost + 82%, instead of 67%, I would be selling that same $20.00 cost part at $36.40, which is only $3.00 more. The difference though is that I achieved a 45% gross profit margin instead of 40%. In my opinion, if the customer says "yes" to $33.40, they will also most likely say "yes" to $36.40.<br /></p><p style="text-align: justify;">This, of course only applies to those "captive parts" when customer perception doesn't usually play a role as much as "competitive parts" would. In my opinion, those "competitive parts" should be "flat priced" and weighted for average pricing at cost + 67%, which would retain a 40% gross margin.</p><p style="text-align: left;"><b><u>Parts Sales Per Employee/Gross Profit Per Employee:</u></b></p><p style="text-align: left;">Industry Guideline: Sales: $45,000+/Gross Profit: $15,000+</p><p style="text-align: left;">ACG "Smart Parts" Perspective Guideline: Sales: 50,000+/Gross Profit: $20,000+</p><p style="text-align: justify;">The reasoning behind this one is quite simple as the math doesn't lie. Our industry guideline math results in a 33% overall gross profit margin and we should be trying to achieve at least a 40% retained gross margin overall. The ACG "Smart Parts" Perspective Guideline does result in a 40% overall gross margin.</p><p style="text-align: justify;">The other reason for the higher gross margin is now with most manufacturers having to pay full list on warranty parts, or a substantial "uplift" to dealers for those warranty parts, our target should be at least 40%. With exception given only to those few states that have not yet litigated for this warranty parts uplift, a 40%+ parts gross profit overall is achievable.</p><p style="text-align: justify;">Lastly, and if anyone hasn't noticed yet...the cost of everything is going up. We are actually selling the same parts for more as all manufacturers have raised their prices this year at least once, if not more already. That means our Parts Staff is selling at higher price and higher gross with the same effort and number of transactions, and not necessarily selling more parts.</p><p style="text-align: left;"><b><u>Lost Sales Reporting:</u></b></p><p style="text-align: left;">Industry Guideline: 5% - 10% of Total Parts Sales at Cost</p><p style="text-align: left;">ACG "Smart Parts" Perspective Guideline: 10% - 15%+ of Total Parts Sales at Cost</p><p style="text-align: justify;">Actually, the industry guideline for Lost Sales Reporting has gone down over the past few years as the guideline for reporting Lost Sales used to be at 10%, but now has been reduced to 5% - 10% which does not make sense to me. In my opinion, Lost Sales should actually be called "Potential Missed Opportunities".</p><p style="text-align: justify;">Lost Sales is a key component in recording "parts demand" along with parts sales. The more we record parts demand, the more we will see and be able to manage on potential parts that may phase into the Dealer Management System, (D.M.S.) The less demand we record, fewer parts will phase in, resulting in a lower inventory "breadth", or coverage.</p><p style="text-align: justify;">Posting Lost Sales at a higher rate will result in better inventory coverage and defining what is a true Lost Sale is very simple. At the time of part inquiry is our best opportunity to post Lost Sales as one of the four following things will happen...</p><p style="text-align: left;">Number One: We have the part and we sell it, or...</p><p style="text-align: left;">Number Two: We don't have the part and we Special Order the part, or...</p><p style="text-align: left;">Number Three: We don't have the part and we have to chase the part, or...</p><p style="text-align: left;">Number Four: None of the above three happens and we post a Lost Sale.</p><p style="text-align: left;"><b><u>Overall Fill Rate/Level of Service:</u></b></p><p style="text-align: left;">Industry Guideline: 90% - 95%</p><p style="text-align: left;">ACG "Smart Parts" Perspective Guideline: 85% - 90%</p><p style="text-align: justify;">It may look like we are actually lowering the bar on this one, but that's not exactly true. First of all, Overall Fill Rate, (Level of Service in some D.M.S.'s) has a different definition than most may think. The Overall Fill Rate, (Level of Service) is defined as "Total Sales at Cost Minus Lost Sales at Cost".</p><p style="text-align: justify;">All this category means is that we sold the part, whether today, tomorrow, next week or next year, minus any Lost Sales posted at cost. This is why the industry guideline is 90% - 95% because that's the opposite of the industry guideline for Lost Sales Reporting at 5% - 10%.</p><p style="text-align: justify;">That being said, we could actually report no Lost Sales and the Overall Fill Rate, or Level of Service will show up the Parts Monthly Management Report as 99.9% or 100% Overall Fill Rate, or Level of Service. So, I guess in that case, we would look like a hero at 100% Fill Rate!</p><p style="text-align: justify;">This also explains the ACG "Smart Parts" Perspective Guideline for Overall Fill Rate is at 85% - 90% as it too is the opposite of the 10% - 15% Lost Sales ACG Guideline. So even though the ACG "Smart Parts" Perspective is lower the industry guideline, the results are better.</p><p style="text-align: justify;">On a side note, the most important fill rate to measure is the "First Time Off Shelf Fill Rate", which is the actual percentage of time the part is sold on first visit. That calculation cannot also be measured on the D.M.S. as it has to be calculated the old fashion way....</p><p style="text-align: center;"><b>Total Sales of Normal Stocking Parts at Cost Minus Emergency Purchases at Cost</b></p><p style="text-align: left;"><b><u>Stock Order Performance:</u></b></p><p style="text-align: left;">Industry Guideline: 75% - 85% of Total Parts Purchases at Cost</p><p style="text-align: left;">ACG "Smart Parts" Perspective Guideline: 75% - 85% of Total Parts Purchases at Cost</p><p style="text-align: justify;">I agree with this industry guideline, but I wanted to put this one in because most Parts Departments will never achieve this guideline if they are only utilizing the manufacturer's Vendor Managed Inventory Programs, (V.M.I.) to replenish their stocking inventory. </p><p style="text-align: justify;">If we don't utilize our own D.M.S., (with the proper set ups of course by the math) in addition to the Manufacturer's V.M.I., the best we could ever achieve is a 50% - 55% Stock Order Performance as the Manufacturer's V.M.I. only covers approximately 50% - 55% of their total inventory breadth.</p><p style="text-align: justify;">This guideline 75% - 85% should also be our guideline for our First Time Off Shelf Fill Rate as it only makes sense that if 75% - 85% of our parts should be ordered for stock replenishment and it's our guideline for Stock Order Performance, then we should be selling those Normal Stocking Parts at a rate of 75% - 85% as well.</p><p style="text-align: justify;">There are many industry guidelines that I agree with and abide by, but I believe that these five industry guidelines not only can be attained, but they could also reach our ACG "Smart Parts" Perspective Guidelines as well. Sometimes it doesn't take much to make a difference and achieve higher levels of expectation.</p><p style="text-align: center;"><b>To me, it's the "expectations" that we have on ourselves that allows us to achieve even higher levels and the first step to getting there is to realize that it's "Time To Raise The Bar!"</b></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ </span><span face="arial, helvetica, sans-serif" style="background-color: white; color: blue; font-size: 16px;"><i><b>www.smartpartstraining.com</b></i></span><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">, or...just pick up the phone and call me at :</span></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...</span></p><p style="text-align: left;"><br /></p><p style="text-align: left;"><br /></p><p style="text-align: left;"><br /></p><p><br /></p><p><br /></p><p><br /></p><p> </p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p> </p>Dave's Smart Parts Bloghttp://www.blogger.com/profile/04660849016453127899noreply@blogger.com0tag:blogger.com,1999:blog-32955433970606665.post-74414175832574175332022-08-10T04:58:00.001-07:002022-08-10T04:58:48.755-07:00August 2022: "Don't Take Your Foot Off The Gas!"<p style="text-align: justify;">It has definitely been a whirl wind in our industry these past couple of years between the pandemic, shifts in the economy, supply chain issues and lower New Vehicle Production just to name a few. All the forementioned along with a lower work force participation rate, who would have thought that many dealers are experiencing their best years ever these last couple of years. </p><p style="text-align: justify;">The challenges have been great for sure, but as always, we adapt and move on in our industry. Profits have risen for sure along with our stress levels as we continue the battle of having so much work that we can't keep up with due to hiring issues and labor shortages.</p><p style="text-align: justify;">With that said, the effects of these last couple of years taken into consideration, the job of the Parts Manager has never been tougher. The time spent alone chasing down many parts that are not easily accessible has taken up much of the time in the day for Parts Managers and their staff.</p><p style="text-align: justify;">The pressure has never been greater as the needs of the customer to get their vehicle back on the road relies heavily on having the right part, or just trying to get the right parts to complete the job. Back that up with the pressure on the Service Department to have enough technicians to meet the increased demand adds up to a stress level we have never experienced before.</p><p style="text-align: justify;">All the above mentioned is not news that we don't already know, but in my opinion, we have to separate what is out of our control and what is <b>in</b> our control. It seems that we tend to let what is out of our control actually control our thought process and our actions.</p><p style="text-align: justify;">No matter what gets thrown at us, we have to maintain control and not let the outside environment stop us from doing the basic duties and tasks that the Parts Manager is responsible for. This is why the title of this month's issue is what it is..."Don't Take Your Foot Off The Gas!"</p><p style="text-align: justify;">Every Parts Manager is facing the same issues, no matter who their manufacturer is, so rather then talking about the tales and woes of what we are facing, we will focus on what is in our control and get back to some of the basics of what we can do and not what we can't do.</p><p style="text-align: justify;">That being said, let's get started and ask ourselves one simple question...</p><p style="text-align: center;"><b>"What am I not doing that I should be doing no matter what the current environment is?"...</b></p><p style="text-align: justify;">To set the stage, I did a little research on over 30 Dealership Parts Departments that are on our current Smart Parts On-Going Parts Training Program. Over 90% of these dealership Parts Departments are succeeding to be at or above parts industry guidelines in almost all categories.</p><p style="text-align: justify;">Considering all that's going on in our current environment with backorder issues, supply chain issues, employee shortages, added time to chase parts that are not available whether parts restriction or cancellations, they are still getting it done.</p><p style="text-align: justify;">So that brings me to this question...</p><p style="text-align: center;"><b>"How are they getting it done when everyone else out there is complaining that they can't get parts?"</b></p><p style="text-align: justify;">This is where the research began as I started to break down the Parts Manager's "good practices" that have never changed over the years <b>and</b> are in our control versus what's <b>not</b> in our control due to the results of our current industry environment which include parts shortages, supply chain issues, parts restrictions, employee shortages, etc.</p><p style="text-align: justify;">The results were really not shocking to me, but they may be for others as we go down the list of what some Parts Managers are doing to get things done versus the ones that aren't. Even though we are truly working harder, we have to go further and work smarter. We also have to understand how Normal Stocking Parts get on the shelf in the first place.</p><p style="text-align: center;"><b>"Is your foot on the gas, or off the gas?....here are four ways to find that answer for yourself...</b></p><p><b><u>Number One: Lost Sales Reporting/D.M.S. Utilization</u></b></p><p style="text-align: justify;">Every single one of these successful Parts Managers continues to post Lost Sales at the industry guideline, or better of 5%-10% of total cost of sales. Posting Lost Sales is essential to picking up those added parts demands over and above the natural parts demand realized from parts sales.</p><p style="text-align: justify;">Each one of these Parts Managers are also utilizing their own Dealer Management System, (D.M.S.) in addition to their Manufacturer's Vendor Managed Inventory, (V.M.I.). Therefore, posting Lost Sales can be an advantage as the extra demand posting from these Lost Sales allows for more parts to "phase-in" to the D.M.S., leading to more parts inventory "breadth".</p><p style="text-align: justify;">Keep in mind though, if you are not utilizing your own D.M.S. and relying solely on the Manufacturer's V.M.I. such as RIM, ARO, PartsEye, etc. for Stocking Replenishment, it doesn't matter if you post Lost Sales or not as that information really doesn't get utilized if we are not running our own D.M.S. Stock Order for those parts not covered by the Manufacturer's V.M.I.</p><p style="text-align: justify;">Posting Lost Sales only helps if you are running your own D.M.S. Stock Order in addition to the Manufacturer's V.M.I Stock Order as the Manufacturer's V.M.I. Stock Order only covers approximately 50%-55% of the Manufacturer's total inventory "breadth" with mostly A and B parts movement.</p><p style="text-align: justify;">All the rest of what I call the "hard parts", or the "meaty parts" can only be picked up by the Dealer's D.M.S. with the proper Set Ups & Controls based on the math. In fact, during my research I found that dealers with Manufacturer's that did not provide a V.M.I., had a much better inventory "breadth" and experienced fewer back orders and parts restrictions because they already had the part on their shelf.</p><p><b><u>Number Two: Managing Back Orders/Restricted Parts/Supply Chain Issues</u></b></p><p style="text-align: justify;">Our number two does have a long title, but all three of the above falls into the same category as to how the Smart Parts Manager actually "manages" those situations. Even though we are spending more time on the phones chasing parts more than ever, it doesn't change the fact that we still need to get the parts.</p><p style="text-align: justify;">First of all, our job as Smart Parts Managers doesn't stop when we discover that the part is on backorder, restriction, unavailable until whenever, perhaps requires a VIN number to process the order, our job is actually just beginning. Having a mindset that we just can't get the part just makes matters worse.</p><p style="text-align: justify;">Common sense tells me that somewhere out there, some other dealer or vendor has the part that is not available through normal supply chains. Also, we have to utilize all of our options, such as offering the customer with the aftermarket options in order to complete the repair and get the customer's vehicle back on the road.</p><p style="text-align: center;"><b>But!...What About The Exceptions!...</b></p><p style="text-align: justify;">Of course, in every situation there are going to be exceptions and that's what I hear about the most from our Smart Parts Managers. Exceptions such as warranty situations that require a factory only part to complete the job with no parts availability and no expected delivery date until whenever.</p><p style="text-align: justify;">Keep in mind that we have always had these exceptions and that's why we call them exceptions in the first place. Yes, perhaps we are experiencing more of these exceptions than we ever have, but for the most part, we <b>can</b> go much further to reduce these situations.</p><p style="text-align: justify;">That's where the right mindset comes into play as we need to focus more on what we can do versus what we can't and stop complaining about the exceptions to the rule because there will always be exceptions, it's just a matter of how many we have to deal with each day.</p><p style="text-align: justify;">For example, often times I've seen where a part is on back order and all I had to do was upgrade or change the order type to get that part. Or perhaps I may have to find the part on OEConnect, or some other Locator and pay more for it, but in the long run, I will make more gross "dollars" once the job is completed.</p><p style="text-align: justify;">I was actually shocked to find that many Parts Managers would not go the extra mile because it was going to hurt their parts gross margin. These Parts Managers, to me, are not getting it and are not looking at the big picture as I can't spend a gross margin, but I can spend gross dollars.</p><p><b><u>Number Three: Parts Staffing Needs</u></b></p><p style="text-align: justify;">Since the beginning of the pandemic and due to other economic reasons, we have experienced a much lower work force participation rate and we all know that. Although, we may or may not know that over the last couple years, we have seen more and more workers that <b>are</b> in the work force changing jobs and/or careers for higher wages and income.</p><p style="text-align: justify;">Most people in the work force know that employers from every aspect and field are looking for employees who want to work. That being said, more and more people are looking for work, but they may want higher wages and salaries due to economic reasons.</p><p style="text-align: justify;">So, I guess my question is that if we know this already, then why are we letting our people and staff walk away to other dealerships? Just like everything else nowadays, everything is going up and that includes employee wages and we have to pay them if we want to keep them.</p><p style="text-align: justify;">As a matter of fact, parts people in the aftermarket generally make less wages and salaries than the average parts counter person does in the automotive parts dealership which gives us an advantage to try and recruit, hire and train these parts people from the aftermarket parts stores.</p><p style="text-align: justify;">It's our job as managers to make up the gross due to the higher cost of business, which includes our employees. Problem is, many, many managers and owners have a fixed cost in their mind of what a person is worth and that's the problem. For example, I think a gallon of gas is <b>worth </b>about $2.00 - $2.50 a gallon, but that's not what I'm actually paying today.</p><p style="text-align: justify;">Who would have thought we would be getting the price for Used Vehicles today with more front and back gross than ever before. That goes for the people in the work force today as they know this and they will shop other opportunities if they have to just to survive our current economy.</p><p style="text-align: justify;">Down the road, things may change, but one thing for sure is that we have to keep up with the times as they are and stop having a mindset that is outdated. People will work for a decent wage and they won't shop other opportunities if we just pay them what the going rates and trends dictate. As managers and owners, we are the ones that are responsible for sales and gross to expected industry guidelines.</p><p><b>One last comment and example on our Number Three...</b></p><p style="text-align: justify;">I recently visited a dealer that was complaining that they couldn't find any help, (no surprise!) and they said they couldn't afford what people were asking for as far as wages, from Parts Staffing Wages to Technician Flat Rate Wages, etc.....sound familiar?</p><p style="text-align: justify;">Not surprisingly though as this same dealer had not raised a simple oil change price or any other maintenance menu item in over five years, no adjustments to parts pricing and matrix as far back as he could remember, and his Service Customer Effective Rate was the same as it has been for over five years. Last I knew...a lot of things have gone up over the years...</p><p style="text-align: center;"><b>"If you can't afford to pay, then I guess you can't afford to play"...</b></p><p style="text-align: left;"><b><u>Number Four: Managing Proper Stocking Levels</u></b></p><p style="text-align: justify;">Managing the right Stocking Level on all Normal Stocking Parts also goes beyond just utilizing the Manufacturer's V.M.I. as the information they receive to have the right Stocking Level comes from our own Dealer Management System.</p><p style="text-align: justify;">So, as the old saying goes..."Garbage In, Garbage Out" and if the dealer's D.M.S. Set Ups & Controls aren't accurate based on the math, we will end up having too much of what we don't need and not enough of what we do need. This will amplify the problems we are already having with backorders, supply chain issues, restricted parts, etc.</p><p style="text-align: justify;">So now, it goes well beyond the "exceptions" I mention above because we are now running out of the most common, fast-moving parts and that has never happened before! We have always had the fast-moving parts such as filters, wiper blades, brake pads, etc.</p><p style="text-align: justify;">We are now running out of the simplest parts that should never be an issue, but due to all the above mentioned, we are having to scramble to buy even oil filters from other dealers, or aftermarket vendors. Back in the day, we actually stocked "too many" fast-moving parts with more overstock than we really needed as "lead times" and "fill rates" were never a problem.</p><p style="text-align: justify;">We need to rely on our own D.M.S. and also have to know how to use it when it comes down to Managing Stocking Levels and doing the math. When Supply Chains and Shortages happen, we can "turn the switch up" on our Best Stocking Levels, or High Days Supply to carry our Stocking Levels further out to accommodate longer lead times.</p><p style="text-align: justify;">If we are relying solely on the Manufacturer to supply us based on their recommendations, and/or we don't utilize our own D.M.S. with the right Set Ups & Controls, then we will run out, it's that simple. If we utilize our own D.M.S. with the right math, the Manufacturer will emulate our D.M.S. and provide the right Stocking Levels on their qualified parts as well as.</p><p style="text-align: justify;">The biggest problem with Supply Chain Issues, Part Shortages, Restricted Parts, etc. is that many Parts Managers don't know how to make the appropriate modifications to their D.M.S. in their Best Reorder Points, or High Days Supply. These increased lead time changes alone caused by Supply Chain Issues will cause "stock out" situations.</p><p style="text-align: justify;">Quite simply, if my system is designed to carry the right parts for a specific amount of days, and then those normal stocking days get interrupted by increased lead times from supply chain issues, or perhaps from a different supply warehouse that takes longer to get... then wouldn't it seem obvious that I need to make the appropriate adjustments in my D.M.S.?...seems pretty simple to me...</p><p style="text-align: justify;">The above four areas are what supplies the fuel that keeps the parts engine running and if we don't have the fuel, we can't keep our foot on the gas in providing the best service for our customers. If we don't utilize all the tools in our tool box, then the results will not change during these times. We will always be running on half a tank of fuel and at half the speed limit...</p><p style="text-align: center;"><b>We can either watch what happens, wonder what happened, or we can make things happen. One thing for sure though, if you want to get through it..."Don't Take You Foot Off The Gas!"</b></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ </span><span face="arial, helvetica, sans-serif" style="background-color: white; color: blue; font-size: 16px;"><i><b>www.smartpartstraining.com</b></i></span><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">, or...just pick up the phone and call me at :</span></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...</span></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p>Dave's Smart Parts Bloghttp://www.blogger.com/profile/04660849016453127899noreply@blogger.com0tag:blogger.com,1999:blog-32955433970606665.post-51063111211565300972022-07-05T12:34:00.001-07:002022-07-05T12:34:39.123-07:00July 2022: Managing The Tire & Gas, Oil, Grease Inventories<p style="text-align: justify;">Managing any inventory is a task in itself, but when it comes down to managing the Parts Inventory in the automotive dealership, it can be even more diverse. In the automotive industry, and for years, the Parts Inventory has been broken down into three separate inventories.</p><p style="text-align: justify;">These three parts inventories, especially from an accounting standpoint, has always been the main parts inventory, the tire inventory and the gas, oil & grease inventory, (G.O.G.). Although, some dealers today have actually combined all three of these parts inventories into one main parts inventory.</p><p style="text-align: justify;">Most Dealer Financial Statements have this separation of parts inventories on the first page of the Financial which is called the "Balance Sheet". Some manufacturers even have Accessories separated on the first page. Much like the separation of the New & Used Vehicle Inventories, they are all listed as "assets".</p><p style="text-align: justify;">Before we get down to the reason of this separation of Parts Inventories, let's break down some of the facts, or "differences" in the parts Main Inventory, Tire Inventory and the Gas, Oil & Grease Inventory. As a matter of fact, "back in the day", dealers actually had gas on sight, which was part of the Gas, Oil & Grease Inventory to fuel their New & Used Vehicle Inventory.</p><p style="text-align: justify;">Here are some of the facts on the differences of these parts inventories, then we will get into the reasons for the separation....</p><p style="text-align: justify;"><b><u>Main Parts Inventory:</u></b></p><p style="text-align: justify;">The Main Parts Inventory carries the bulk of the overall parts inventory value and most of the part numbers in the overall inventory. Also, the Main Parts Inventory also carries the largest life span of parts with more consistent overall demand over time.</p><p style="text-align: justify;">The Main Parts Inventory requires different criteria on Parts Phase-In, Phase-Out, Stocking Levels and Pricing Strategies. Lost Sales play a huge part in the Main Parts Inventory initial demand set ups on parts Phase-In to record overall demand compared to the lower Lost Sales demand on tires and oil.</p><p style="text-align: justify;">Lost Sales are hardly ever recorded on Tires and Oil, although Lost Sales should be recorded on tires as they tend to have more part numbers than oil and far many more vehicle applications. Tires should be considered as regular part numbers, even though they should be separated from the Main Parts Inventory.</p><p style="text-align: justify;"><b><u>Tire Inventory:</u></b></p><p style="text-align: justify;">The Tire Inventory has far many more obstacles and concerns to overcome. First and foremost, tires take up a lot of space and weight which requires not only space requirements, but they also require safety considerations when storing them. Along with the expected lower gross margins and shorter life span, tires can be literally "a pain in the butt" for Parts Managers.</p><p style="text-align: justify;">Although, from the Service side of things and from a retention standpoint, tires are essential to keep our customers coming back to the dealership. Selling tires, much like selling a basic Lube, Oil & Filter are the two primary services that lead to keeping our customers coming back.</p><p style="text-align: justify;">Tires are also always changing designs and superseding to an upgraded tire which requires updating tire inventory constantly. As a matter of fact, it is most likely that the tire that came with your new vehicle will be replaced by an upgraded tire by the time of replacement. </p><p style="text-align: justify;"><b><u>Gas, Oil & Grease:</u></b></p><p style="text-align: justify;">Oil is the <b>highest</b> volume part number sale in the whole parts inventory, even though oil has the <b>lowest</b> inventory of part numbers in the parts inventory. Oil also is never considered as a part that will ever go obsolete. On the contrary, oil can be the highest asset purchase risk in our entire parts inventory.</p><p style="text-align: justify;">Oil can't be returned and is an environmental risk while occupying valuable inventory space forever once it becomes obsolete. Are there any vehicles utilizing 10W-40 oil any more, or an even better question: Does anyone still have 10W-40 in their inventory? Oil is ours once we purchase it and will most likely stay where it's at right now.</p><p style="text-align: center;"><b>"So!...What Are The Reasons For Separating These Inventories?"</b></p><p style="text-align: left;">Let's look at the reasons...</p><p style="text-align: left;"><b><u>Reason Number One: Reconciliation</u></b></p><p style="text-align: justify;">First and foremost, the Gas, Oil & Grease Inventory is the toughest one of the three to keep reconciled to correct amounts between the Accounting Ledger and Controlled Inventory Amounts each month and year. Bulk oil is the biggest culprit as varied amounts are pumped out each day.</p><p style="text-align: justify;">Receipting oil is also a problem as often times oil is receipted into one inventory and then sold from another inventory. The sales and cost of sales accounts must be linked correctly with the proper parts source or stocking group to insure proper reconciliation.</p><p style="text-align: justify;">Tires also fall into this category as parts may be purchased as a part and receipted into the main parts inventory and then sold from the tire inventory. Most invoices from the manufacturer on both oil and tires allow for the dealer to receipt to either the main inventory, or the other two.</p><p style="text-align: left;"><b><u>Reason Number Two: Inventory Aging</u></b></p><p style="text-align: justify;">Oil and Tires age much differently than the parts in the main parts inventory, especially tires as the life span is much shorter. That being said, tires require different set ups as far as Phase-In, Phase-Out and overall Stocking Levels. Tires need to especially have a shorter Phase-Out timeline as tires tend to supersede to updated part numbers.</p><p style="text-align: justify;">Also, tires only come around for replacement approximately 24 - 36 months so they are especially hard to track for consistent sales demand. That being said, it's very unlikely that we get return tire business from the same customer. It's much better to capture initial tire sales and then let them Phase-Out after six to nine months.</p><p style="text-align: justify;">Believe it or not, oil can also go obsolete as most parts managers keep refilling the tanks until one day, the manufacturers come out with a new grade of oil to meet new emission and fuel conservation requirements, or regulations. At that point, we are stuck with what we have left in the tank with no options to get rid of it.</p><p style="text-align: left;"><b><u>Number Three: Inventory Discrepancies</u></b></p><p style="text-align: justify;">Even though it's our number three reason for separating these inventories, it's probably the most important reason. Oil is the number one reconciled inventory of all the inventories because it has the highest individual unit of sales by quantity.</p><p style="text-align: justify;">It also has the most "crossover" inventory accounting between the main parts inventory and the gas, oil & grease inventory. Packaged oil may be considered a part while bulk oil may be considered gas, oil & grease and they may even have the same part number. We could have 0W-20 oil in bulk and packaged in two separate inventories.</p><p style="text-align: justify;">Tires may also fall into this same category as we may purchase tires from the manufacturer and is receipted and sold as a part. We can also purchase tires from the local tire vendor and those tires get receipted and sold out of the tire inventory.</p><p style="text-align: justify;">Crossover accounting from the main parts inventory, the tire inventory and gas, oil & grease inventory happens all the time and creates an accounting nightmare in many dealerships. If only one main inventory is used for three of these inventories, it is much harder to "trap" overall parts inventory discrepancies.</p><p style="text-align: justify;"><b><u>The Bottom Line:</u></b></p><p style="text-align: justify;">With all of the above facts and reasons mentioned above, the separation of these three inventories seems pretty obvious. It may be easier for accounting to have them all looped into one inventory, but when a problem, or a huge discrepancy occurs after the physical inventory is performed, no one is happy.</p><p style="text-align: justify;">Also, a physical inventory can be performed on the tire inventory and the gas, oil & grease inventory to reconcile the Accounting Ledger Inventory and the Controlled Parts Inventory on the D.M.S. each month to control any discrepancies.</p><p style="text-align: justify;">Unless we are performing Perpetual Inventories on the main parts inventory, we can't count our main parts inventory each month, but we can "trap" most of these most common discrepancies that happen mostly in the tire inventory and the gas, oil & grease inventory.</p><p style="text-align: justify;">If we are just waiting until the end of each year when most perform their annual physical parts inventory to deal with these discrepancies, we are just leaving ourselves open to surprises that may not be in our favor...</p><div style="text-align: justify;"><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ </span><span face="arial, helvetica, sans-serif" style="background-color: white; color: blue; font-size: 16px;"><i><b>www.smartpartstraining.com</b></i></span><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">, or...just pick up the phone and call me at :</span></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...</span></p></div><div><br /></div><p style="text-align: left;"><br /></p><p style="text-align: left;"><br /></p><p style="text-align: left;"><br /></p><p style="text-align: left;"><br /></p><p><br /></p><p><br /></p><p> </p><p><br /></p><p><br /></p><p><br /></p>Dave's Smart Parts Bloghttp://www.blogger.com/profile/04660849016453127899noreply@blogger.com0tag:blogger.com,1999:blog-32955433970606665.post-21191788033637407262022-06-06T05:08:00.001-07:002022-06-06T05:08:39.526-07:00June 2022: Expanding The Parts Inventory "Breadth"<p style="text-align: justify;">One of the main goals as "Smart Parts" Managers is to always have "the right part at the right time". Believe it or not, having the "right part at the right time" in today's world is a much tougher task than it was just a few decades ago.</p><p style="text-align: justify;">More and more vehicle manufacturers have jumped into the market while existing manufacturers continue to expand their vehicle model base. Along with the on-going new vehicle technology added to all these new vehicles and models, replacement part number expansion has skyrocketed.</p><p style="text-align: justify;">In addition, part number coverage is not what it used to be a few decades ago. For example, "back in the day", we would have had just one part number for a set of front brake pads that fit many models for several years. Today, we could have several different brake pad numbers that fit the same model vehicle for just one model year.</p><p style="text-align: justify;">All this has led to a nightmare for parts managers trying to hit that elite goal of having "the right part at the right time" at least 75% - 85% of the time on that first visit to the parts counter. Also, and to add insult to injury, many manufacturers are not making it any easier.</p><p style="text-align: justify;">Since the evolution of vehicle manufacturers' wanting to control the dealer's parts replenishment inventory, otherwise known as Vendor Managed Inventory, (V.M.I.), many parts managers have abandoned creating their own stock order in the Dealer Management System, (D.M.S.)</p><p style="text-align: justify;">The days of running stock orders on our own D.M.S., getting much higher return allowances and discounts, easier parts return policies from the manufacturers have been replaced by manufacturer-controlled inventories, lower discounts and return allowances, and program compliance, or "obedience" as I prefer to call it.</p><p style="text-align: justify;">What many may not know is that most of the manufacturers' V.M.I. programs only cover approximately 50% of the manufacturers total inventory coverage with mostly A and B parts covered. That being said, and if we do the math, the best we can do on inventory "breadth" is about 50%. If we aren't utilizing our own D.M.S. to run our stock orders for the "rest" of the parts, increasing our own inventory "breadth" is nearly impossible.</p><p style="text-align: justify;">Here in lies the big question...</p><p style="text-align: center;"><b>"How are we going to increase our parts inventory breadth AND reduce our overall inventory amounts?"</b></p><p>Here We Go!...</p><p style="text-align: justify;">The first thing that we have to do when considering increasing our parts inventory breadth goes back to my intro. We have to know what <b>our</b> customers are <b>asking for</b> and what they are <b>buying</b> as those two combined add up to <b>parts demand</b>. What they are asking for equals Lost Sales and what they are buying equals Sales Demand.</p><p style="text-align: justify;">The second thing we have to do is manage and control our parts obsolescence in order to maintain a broader inventory breadth. There are always new parts coming in, or phasing in that meet total demand for normal stocking status so we cannot afford to hold obsolete inventory beyond the parts life span.</p><p style="text-align: justify;">The life span of a part today is far shorter than it was decades ago. Here are a few facts on today's life span of a part courtesy of Mike Nicoles, Inc.</p><p></p><ul style="text-align: left;"><li>Parts with no sales in 6 months = 49% chance of no future sales</li><li>Parts with no sales in 9 months = 67% chance of no future sales</li><li>Parts with no sales in 12 months = 98% chance of no future sales</li></ul><div>Let's back that up with the NADA Guideline for Sales Activity...</div><div><ul style="text-align: left;"><li>Parts Sales Activity 0 - 6 Months Should Equal 85% of Total Sales</li><li>Parts Sales Activity 7 - 12 Months Should Equal 10% - 15% of Total Sales</li><li>Parts Sales Activity Over 12 Months Should Equal 0% - 5% of Total Sales</li></ul><div style="text-align: justify;">As you can see, we cannot afford holding parts beyond their expected lifespan and the way we control this obsolescence from happening in the first place is to have our own D.M.S. set to the proper phase-out settings to where we can sell and phase these parts out well before 12 months. </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">If we set our phase out setting between 7 and 9 months, we still have a 35% - 40% chance of selling these parts and they will not be restocked unless these parts meet parts phase in criteria all over again. Unfortunately, we may have to hold the manufacturer's V.M.I. parts much longer before we can return them.</div></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">So, now that we have looked at controlling our obsolescence to current parts life cycle times, we can now focus on expanding the parts inventory "breadth". Increasing parts inventory "breadth" can only come from one direction and that is from <b>total parts demand</b> recorded into the dealers D.M.S.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">When we talk about total parts demand, that includes total Parts Sales and Lost Sales Reporting to industry guidelines or higher into our own D.M.S. which gives us what our customers are asking for and what they are buying.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Reporting Lost Sales into our manufacturer's V.M.I. Program can provide demand for a group of dealers, but it will not have as much of an impact as it would if reported into our own D.M.S. as we control the total number of parts demands before phase in and not the manufacturer.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The number one ingredient to increasing overall inventory "breadth" is reporting Lost Sales to industry guideline or higher, which is a minimum of 5% - 10% of total sales at cost, although I prefer 10% or higher. Unfortunately, Lost Sales Reporting is considered a chore in many parts departments and not taken seriously.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Actually, we should be <b>looking</b> for Lost Sales and areas we can post even more as the more "input" we give to our D.M.S., the more "output" we will get towards our goal of increasing our inventory coverage, or "breadth". But, before all that, we have to look at the definition of a Lost Sale in order to increase these demands.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">We all know that if you asked 10 different people what the definition of a Lost Sale is, you would probably get 10 different answers. The end result would be a lack of, or no Lost Sales Reporting, which is really sad because when you think about it, the definition is really simple.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The best opportunity to report Lost Sales is at the time of inquiry as one of four things are going to happen when you are asked to research a part....</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Number One: We have the part and we sell it...</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Number Two: We don't have the part and we create a Special Order...</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Number Three: We don't have the part and we chase it as an Emergency Purchase..</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Number Four: None of the above happens and we post a Lost Sale...</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">We also have to look for these Lost Sales as "Potential Missed Opportunities" and record these demand opportunities to increase parts inventory "breadth". Lost Sales Reporting should not be considered a chore and we should hold our staff accountable in consistent, accurate reporting.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Keep in mind, even if we report an excessive amount of Lost Sales, it doesn't matter as these parts that phase in from Lost Sales don't just jump on the shelf. They will only phase in to a Suggested Stock Order where the parts manager makes the final decision whether to stock the part or not. One thing for sure is that we can't manage what we don't see.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Let's look at some areas for Lost Sales Reporting Opportunities...</div><div><ul style="text-align: left;"><li>Special Order Parts before they are sent back to the manufacturer</li><li>Aged Back Orders not received</li><li>Aftermarket parts sold in place of manufacturer parts with a Lost Sale posted under the manufacturer's part number</li><li>Service Quotes on unsold, non-stock parts </li></ul></div><div style="text-align: justify;">Each one of these above examples do not have any demand posted as the sale did not happen under the manufacturer's part number. Even though there was an initial "need" for the part, the D.M.S. has no idea that there was a need, or a demand for the part.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Reporting Lost Sales isn't anything new that we didn't already know about, but I guess what many don't get is just how important they are when it comes down to increasing our parts inventory "breadth". The other thing is that we need to encourage Lost Sales Reporting as it is just as important as recording customer "Ups" in the Sales Department.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Increasing our parts inventory "breadth" also increases our parts profitability as we all know, and just like in Front End Sales, we make our most profit on the vehicles and parts we have on the lot and on our shelves. If we manage and control our obsolescence and increase our parts inventory "breadth" we will actually have more coverage and less inventory.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">We will also capture the "peak sales" of parts during their shorter life span compared to years ago. Keeping our obsolescence at twelve months or less, and selling that obsolescence at even half the market value or less, the Return On Investment, (R.O.I.) by re-investing any revenue we receive from the obsolescence into parts that are moving can bring an R.O.I. of 300% or more.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Last and most important, if we do not utilize our D.M.S. with the proper set ups & controls in conjunction with manufacturer's V.M.I. as opposed to relying solely on the manufacturer to replenish our inventory, we will never achieve a broader inventory. </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">All we would accomplish is increased Obsolescence, more Special Orders and Emergency Purchases, lower Parts & Service Gross Profit, lower Parts "First Time Off Shelf Fill Rates" and increased Parts Acquisition & Holding Costs. The tools are right in front of us...it's time to get back to basics and use the D.M.S. as intended.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Let's increase the "muscle" of our parts inventory and get rid of the "fat" as the end results will be that we can have a leaner and meaner parts inventory that will give our dealers' the best Return On Investment and higher profits.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ </span><span face="arial, helvetica, sans-serif" style="background-color: white; color: blue; font-size: 16px;"><i><b>www.smartpartstraining.com</b></i></span><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">, or...just pick up the phone and call me at :</span></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...</span></p></div><div><br /></div><div><br /></div><div><br /></div><div><br /></div><div><br /></div><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p>Dave's Smart Parts Bloghttp://www.blogger.com/profile/04660849016453127899noreply@blogger.com0tag:blogger.com,1999:blog-32955433970606665.post-71701571601330097252022-05-11T06:25:00.001-07:002022-05-11T06:25:42.869-07:00May 2022: "Mapping Out The Parts Department Floor Plan"<p style="text-align: justify;">Unless you are building a new dealership, or renovating your Parts Department, most Parts Managers have what they have as far as the space allotted for parts storage and the positioning of the parts currently in their inventory. That being said, these parts are where they are now and perhaps always will be.</p><p style="text-align: justify;">But, have you ever thought for a moment that we don't have to continue with the "status quo" as far as where our parts are located? Have you ever thought that there may be a better and more efficient way to position, or "bin" our parts? Have you ever even considered that there is a "science" on how we should store and stock parts?</p><p style="text-align: justify;">The Parts Department is unique in the fact that we get accustomed to what we see every day, or perhaps what we have been used to as where parts are located. This complacency has led us to brake pads go here, filters go here, spark plugs go here, bumpers go upstairs, cases of oil go here and on and on it goes because that's the way it's always been.</p><p style="text-align: justify;">Positioning parts efficiently isn't something that's new as most "Smart Parts" Managers will position fast moving parts close to the back counter for technicians along with perhaps packaged oil, sealants, clips, connectors and such, but are we really utilizing our parts space efficiently? Even more important, are we utilizing our "air space" efficiently?</p><p style="text-align: justify;">We will explore more on this topic and end the excuse mongering such as....</p><p style="text-align: center;"><b>"I Can't Stock All The Parts We Need Because We Don't Have Enough Space!" </b></p><p style="text-align: justify;">I would have to say that my first response to that comment would be in the form of a question...</p><p style="text-align: center;"><b>"How Much Parts Inventory Space Is Currently Occupied By Obsolete Parts?"</b></p><p style="text-align: justify;">Let's Begin...</p><p style="text-align: justify;">The proper positioning of parts begins with stocking parts "back to front" in the way of individual parts space requirements and sales movement. In other words, bigger parts in the back and smaller parts to the front. Keep in mind that fast moving, overstock parts also fall into this category.</p><p style="text-align: justify;">"Back to front" also includes any upper level parts space capacity on mezzanines or second floor parts space capacities. These larger, bulkier parts items also tend to be slower moving parts and are less likely to interrupt technician efficiency.</p><p style="text-align: justify;">As I mentioned most "Smart Parts" Managers already do have their faster moving parts closer to the front and back counters, but after that...parts could be anywhere depending on space restrictions or Parts Department demographics and logistics.</p><p style="text-align: justify;">This is where the topic of this issue all begins...</p><p style="text-align: justify;">Here's what many Parts Managers don't consider and should start to consider when maximizing their Parts Department's efficiency and space capacities. Keep in mind, the following considerations, or recommendations will work no matter how much parts space you have , or perhaps don't have.</p><p style="text-align: justify;"><b><u>Obsolescence:</u></b></p><p style="text-align: justify;">First and foremost, <b>all</b> parts that are considered obsolete, (no sales over 12 months) should be in a separate parts source, shelved in the furthest most bin location from the front and back counter, regardless of the size of the part. Being that the chances of selling these obsolete parts is 98% or worse, they should be shelved in outside storage units, or at the furthest point from the front and back counters.</p><p style="text-align: justify;">You would be surprised at how much parts storage space can be freed up when obsolete parts are out of the current active parts inventory storage space. Once completed, active parts can be re-binned in a closer area to the front and back parts counters. Even bulk items can be repositioned closer and more efficiently.</p><p style="text-align: justify;"><b><u>Fast Moving Parts:</u></b></p><p style="text-align: justify;">As we move on from the slowest, or obsolete parts that don't sell, we have to position our fasted moving parts closer to the front and back counters. These parts will not only be more available for efficient sales, they will also be in a position where Perpetual Inventories can be performed on a monthly basis.</p><p style="text-align: justify;">Fast moving parts that are positioned closer to the front and back counters can also provide the "Smart Parts" Manager a much better view on Stocking Levels. After all, stock out situations are more apt to happen on faster moving parts.</p><p style="text-align: justify;"><b><u>"Back To Front" Mentality:</u></b></p><p style="text-align: justify;">Now that we reviewed that slowest and fastest moving parts, it's the "in-between" parts that cause the most confusion. After taking care of the slowest and fasted moving parts, the "back to front" mentality must take over, meaning that the biggest go to the back and the smallest to the front.</p><p style="text-align: justify;">This also includes any overstock items such as packaged oil, filters and bulk fluids. Each of these items should carry two bin locations, both primary and secondary. The primary location would precede with only sufficient shelf space given. There is no need to have one part number, let's say an oil filter occupying several bin locations.</p><p style="text-align: justify;">Fast moving parts need only occupy a four days sales supply and can be replenished from secondary locations as needed from either back locations or outside parts storage facilities rather easily. Many Parts Departments may not have ample interior bin space, but if researched, outside parts storage via Pods or Storage Trailers are simple solutions.</p><p style="text-align: justify;"><b><u>Adjustable Bins/Parts Drawers:</u></b></p><p style="text-align: justify;">These "in-between" parts should also occupy 80% of the active part number inventory as adjustable shelves and parts drawers offer the highest of ease in adjustability. These parts are constantly moving, changing in size and quantity as well as utilizing as much "air space" as possible.</p><p style="text-align: justify;">These adjustable shelf bins and drawers are also much easier to manage around the front and back parts counters and can be moved much more easily as needed. These "in-between" parts are also much easier to access and perform Perpetual Inventories, or regular bin counts.</p><p style="text-align: justify;"><b><u>Mezzanines & Second Level Parts Storage:</u></b></p><p style="text-align: justify;">Mezzanines and Second Level Storage space seems to always be primarily a dealership dumping ground from Accounting Documents, older computer equipment, take off wheels and tires from New & Used Vehicles, older office furniture, etc....we've all been there.</p><p style="text-align: justify;">Upper level storage should be for parts only and other dealership items mentioned above should be maintained in outside storage facilities, plain and simple. If these other items mention do not carry any asset risk, they don't need to be taking up the space of a liability asset.</p><p style="text-align: justify;">Upper level parts storage is also where warranty parts on hold should be maintained. Even though these exchange warranty parts are not necessarily parts sales items, they still need to be maintained for warranty payment purposes and secured properly.</p><p style="text-align: justify;">These upper level parts should be bulk items, overstock, accessories, (other than accessory display items) and slower moving parts. Also, these parts in upper level areas should not present any safety or health risks such as tires, engines, transmissions, etc. unless proper equipment is used such as forklifts, elevators, etc. and must meet weight restriction requirements.</p><p style="text-align: justify;"><b><u>Accessories:</u></b></p><p style="text-align: justify;">Stocking Accessories can be a nightmare, not only do they have a short lifespan, they retain lower profits and become obsolete much quicker than normal stocking parts. Accessory displays are very popular, but unfortunately, many Parts Departments do not update their Accessory Displays often enough.</p><p style="text-align: justify;">In fact, in many, many dealerships that I have visited, there is a ton of dust on these accessories that are outdated usually by a few years. Stocking Accessories has always been a challenge, whether the manufacturer has prepaid them on sold units, or if we actually purchased them for stock.</p><p style="text-align: justify;">All that being said, all Accessories should be stocked in a "visual" area where the Parts Manager can keep an eye on them. Much like Special Order Parts, these Accessories can become obsolete rather quickly and often times, they are not returnable.</p><p style="text-align: justify;">Accessories also come in all shapes and sizes and should not take up the space of active parts. The should only be on display and at a visual point from the Parts Manager, perhaps also near the Shipping & Receiving Area. In view, but not taking up valuable shelf space of our "in-between" parts stocking areas.</p><p style="text-align: justify;"> <b><u>Special Ordered Parts:</u></b></p><p style="text-align: justify;">Prior to contrary belief and in my opinion, Received Special Ordered Parts should be closer to the Parts Front & Back Counters and not out of sight from the Parts Manager. Special Order Parts are the number one contributors to obsolescence and should be under the watchful eye of the "Smart Parts" Manager at all times. </p><p style="text-align: justify;">Especially when you consider that Special Order Parts represent sold work and should be watched daily by the Parts & Service Managers. Special Order Parts must be managed and kept to an aging of 30 Day or Less. This active visual each day by the Parts & Service Managers is crucial to on going awareness.</p><p style="text-align: justify;"><b><u>Shipping & Receiving Area:</u></b></p><p style="text-align: justify;">Even though most shipping & receiving areas are at the back of the Parts Department, it's represents the first and foremost important areas of the Parts Department. The shipping & receiving area is where it all starts. Verifying parts orders, packing slips and invoices is where parts reconciliation starts.</p><p style="text-align: justify;">Reconciling the Parts Controlled Inventory on the D.M.S. and the Accounting Ledger Balance is where the parts inventory can make or break a dealer on this very important asset. Training is crucial on proper receipting and posting parts inventory into the proper inventory accounts starts here.</p><p style="text-align: justify;">The shipping & receiving area is also where most heavier bulk items such as engines, transmissions, tires, or perhaps drums of oil, transmission fluid, overstock on batteries or coolant should be stored if space allows. If space is not available, these heavier bulk items should be stored in waterproof outside storage units.</p><p style="text-align: justify;">As an added note on tires, and if you have a Service Drive, this would be a great place to stock tires. They can be secured by locks and chains, easily inventoried and your Service Customers can now see that you are in the tire business. The more tires they see, the more tires that the customer perceives you sell.</p><p style="text-align: justify;">If we use common sense and work "back to front", it will be much easier to perform on going Perpetual Inventories. Perpetual Inventories work great, but only if implemented after a physical inventory is performed.</p><p style="text-align: justify;">Lastly, and if your Parts Department simply does not have the space, there are many Parts Shelving Companies out there that can consolidate your current Parts Storage Space down to as much as 60% with your current parts inventory. </p><p style="text-align: justify;">With all the technology and space consolidation options out there, they can "map" your current Parts Department with an onsite evaluation and provide sensible alternatives. You would be surprised on how much "air space" is available!</p><p style="text-align: justify;">Mapping out the Part Inventory Floor Plan should be just that...a plan. Working with existing Parts Floor Plans that have been there for years may just continue the frustration of not having enough space for the right parts and who knows?...you just may have more space than you think!</p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ </span><span face="arial, helvetica, sans-serif" style="background-color: white; color: blue; font-size: 16px;"><i><b>www.smartpartstraining.com</b></i></span><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">, or...just pick up the phone and call me at :</span></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...</span></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: left;"><br /></p><p style="text-align: left;"><br /></p><p> </p>Dave's Smart Parts Bloghttp://www.blogger.com/profile/04660849016453127899noreply@blogger.com0tag:blogger.com,1999:blog-32955433970606665.post-5970161619724057282022-04-07T05:58:00.002-07:002022-04-07T05:58:50.266-07:00Supply Chain Issues: "Managing Our Way Through"<p style="text-align: justify;">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. </p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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".</p><p style="text-align: justify;">All the above being said, I would just like to pose this question...</p><p style="text-align: center;"><b>"Can anyone tell me what I don't already know about this Parts Supply Chain Issue?"</b></p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: center;"><b>So, let's get started...enough about talking about the problem, let's get down to the solutions to the problem"!</b></p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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".</p><p><b><u>DMS Utilization:</u></b></p><p style="text-align: justify;">Our DMS is the <b>only</b> 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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p><b><u>Supply Chain Options:</u></b></p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;"><b><u>Dealing With Backorders:</u></b></p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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 <b>all</b> the gross, both parts and labor.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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. </p><p><b><u>Batteries, Oil & Filters:</u></b></p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p><b><u>Paying The Price:</u></b></p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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.</p><p><b><u>Parts Hoarding:</u></b></p><p style="text-align: justify;">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".</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">After all, we are not in the business of "hoarding", protecting, or holding parts, we are in the business of <b>selling </b>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.</p><p style="text-align: justify;">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.</p><p style="text-align: justify;">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".</p><p style="text-align: justify;"><b><u>The Bottom Line:</u></b></p><p style="text-align: justify;">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?</p><p style="text-align: justify;">Last question and most important...</p><p style="text-align: center;"><b>"Are we going to lie down, waiting and watching what happens, or are we going to be the one who makes things happen?"</b></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ </span><span face="arial, helvetica, sans-serif" style="background-color: white; color: blue; font-size: 16px;"><i><b>www.smartpartstraining.com</b></i></span><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">, or...just pick up the phone and call me at :</span></p><p style="text-align: center;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px;">(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...</span></p><div style="text-align: justify;"><br /></div><p style="text-align: center;"><b><u><br /></u></b></p><p style="text-align: center;"><b><u><br /></u></b></p><p><b><u><br /></u></b></p><p><b><u><br /></u></b></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p>Dave's Smart Parts Bloghttp://www.blogger.com/profile/04660849016453127899noreply@blogger.com0tag:blogger.com,1999:blog-32955433970606665.post-11989046217453049132022-03-01T16:15:00.001-08:002022-03-01T16:15:44.760-08:00March 2022: An ACG Smart Parts Exclusive - "The Parts Department in the EV Revolution"<p style="text-align: justify;">It's not surprising to any of us in the automotive industry today that the "revolution" of Electric and Hybrid Vehicles continues to grow and "evolve" each year. In addition, many automotive manufacturers are already setting future dates to "retool" their plants and going fully electric on all their vehicles.</p><p style="text-align: justify;">Each year going forward, we will be seeing new models, platforms and even more manufacturers getting into the Electric Vehicle Industry worldwide. There are currently over 5.6 million EV's on the road today worldwide as 2018 experienced the biggest EV surge of 2.2 million units alone, up from 3.4 million up until then.</p><p style="text-align: justify;">Electric Vehicle Charging Stations are also on the rise with a Compound Annual Growth Rate, (CAGR) of 38% in 2021 alone. In addition, Bloomberg Energy Finance is predicting that by 2040, 58% of the vehicles on the road predicted to be Electric Vehicles, leaving just 42% of the vehicles predicted on the road as combustion engine vehicles.</p><p style="text-align: center;"><b>So, how does this new EV Revolution translate down to our role in the Parts Department? </b></p><p style="text-align: justify;">There are still many questions out there for many of us as to what parts we will be selling with all these new component driven vehicles hitting the road. Many Parts Managers believe that we will be reduced to selling just batteries, tires, brakes and a few filters as there will be fewer moving parts on these Electric Vehicles.</p><p style="text-align: justify;">In all actuality, that thought couldn't be further from the truth as EV's will still require maintenance and replacement parts. In addition, for at least the near future, there will still be combustion engine vehicles on the road requiring the same maintenance and repair parts.</p><p style="text-align: justify;">This new technology will also require skilled technicians to provide the maintenance and repairs, just at a higher level. That being said, the diversity and "breadth" of the parts inventory will, in my opinion, be even more important than it ever has. </p><p style="text-align: justify;">No matter what parts we stock, we will still have to "do the math" and stock the right parts at the right time even though they just may cost more. Every vehicle requires a power source and way to transmit that power down to a driveline to make it move and that requires parts and components.</p><p style="text-align: center;"><b>So!...What kind of parts are we talking about in this EV Revolution?</b></p><p style="text-align: left;">Let's start with the Anatomy of the Electric and Hybrid Vehicles...</p><p style="text-align: justify;">All Electric Vehicles are manufactured with the same components required to enable the power source to be transferred to a powertrain and/or differential with some additional components required for Hybrid Electrical Vehicles. </p><p style="text-align: justify;">Whether a combustion engine with gas or diesel fuel, electric motor, or power inverter, power still has to be generated from a source and transferred to a driveline or differential to make the vehicle move. The idea has always been the same and it's just the source of where the energy, or fuel comes from.</p><p style="text-align: left;">Here's the basic list of components required for all Electric Vehicles...</p><p style="text-align: left;"></p><ul style="text-align: left;"><li>Power Electronics Controller</li><li>DC/DC Converter</li><li>Electric Traction Motor</li><li>Transmission, or Power Converter</li><li>Traction Battery Pack</li><li>HV Batteries/Wiring/Cables</li><li>Auxiliary Battery</li><li>Thermal/Cooling System</li><li>On Board Charger</li><li>Charging Port</li></ul><div>In addition to the above, Hybrid Vehicles require...</div><div><ul style="text-align: left;"><li>Electric Generator</li><li>Internal Combustion Engine - Spark Ignited</li><li>Exhaust/Emission System</li><li>Fuel Tank/Fuel Filler</li></ul><div style="text-align: justify;">The basics of the anatomy are the same even though other features, or parts may be involved such as regenerative brake systems, electric emergency brakes, electric drive motors, battery refrigeration system, inverters, chargers, clutch actuators, vacuum pumps, radiators, and electric steering pumps to name a few.</div></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The transmission in the Electric Vehicle is also unique due to the electric motor, or "power inverter", which can generate up to 15,000 RPM's and up to 100Kw of power, resulting in a sport like acceleration with only one transmission gear ratio.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Higher end EV's may also have their own Battery Management System, (BMS) such as Tesla to monitor all the battery storage, capacity and condition of all power sources that operate all onboard systems such as self-drive computers, command center functions, etc.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Both Electric and Combustion Engine Vehicles have the "rubber on the road" which requires drive axles, wheel bearings, various brake systems, tires and fluids. All of which require maintenance at certain intervals, or repairs on a needed basis.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Steering and suspension is also an area that will require interval maintenance and needed repairs as these components take up a lot of wear and tear on any vehicle, whether EV, or combustion engine. Whether electronically assisted rack & pinion steering, constant velocity joints, air springs, dampers or steering mounts, they will all take a beating. </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">They will all be subject to normal, or abnormal wear and tear, requiring replacement parts. It won't be a question of parts needing to be replaced inasmuch as the cost of stocking these parts when needed. There will be a lesser need for smaller parts in the EV as larger components will carry the higher price tags.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">In a way, it's almost like <b>deja vu</b> when "back in the day", we used to rebuild wheel cylinders, starters, alternators, generators and brake master cylinders just to name a few, with smaller parts. Now all those parts are sold as one component, whether new, rebuilt or remanufactured.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Computers, modules, actuators and control units have already impacted our combustion engine vehicles over the past fifty plus years. Once again, parts are always required to keep the "iron on the road" with cost, quantity and parts lifespan as the only variables.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Over the years, vehicle manufacturing has required fewer and fewer moving parts, which is kind of ironic as we are talking about manufacturing a vehicle that "moves", with fewer "moving parts", whether a combustion engine or electric vehicle.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The biggest issue, in my opinion, is not the fact that we will need our parts department to supply our need for replacement parts, no matter what power source we prefer, it's the issue of "risk versus reward" and our own personal preference.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">All fuel, or "power sources" such as gasoline, diesel, lithium-ion batteries, hydrogen cells may all carry safety and environmental risks. All it takes is a fuel source and oxygen to cause ignition, no matter what the fuel source is.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Whether it's how fossil fuel vehicles affect the environment, or how we dispose of lithium-ion batteries, there will always be environmental impacts from our transportation industry. In my opinion, it's not a question of if there will be an impact, it's more of a question of how we control these impacts.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Safety is always a concern in all vehicle manufacturing as it has been for many years and will still play a huge role in how all vehicles are made going forward. From the day when the first seat belt was introduced, advancements in vehicle safety has been impressive over the last 50+ years.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Whether it's new technology on airbags, impact sensors, vehicle rollover sensitivity, weight distribution, passenger air quality, or vehicle crumple zones, advancements in these safety technology areas will always continue on the path of new innovation.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Bottom line is that innovation, technology and evolution has never come without risk and that to me is progress and moving forward. Change is inevitable and will always be at the forefront of advancement, especially in our automotive and transportation industry.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><span style="background-color: white; font-family: "times new roman"; font-size: 16px; text-align: center;">If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ </span><span face="arial, helvetica, sans-serif" style="background-color: white; color: blue; font-size: 16px; text-align: center;"><i><b>www.smartpartstraining.com</b></i></span><span style="background-color: white; font-family: "times new roman"; font-size: 16px; text-align: center;">, or...just pick up the phone and call me at (786) 521 - 1720...After all, not knowing is not worth not "fixing" it...</span></div><div style="text-align: justify;"><br /></div><p></p><p style="text-align: left;"><br /></p><p style="text-align: left;"><br /></p><p style="text-align: left;"><br /></p><p style="text-align: left;"><br /></p><p style="text-align: left;"><br /></p><p style="text-align: left;"><br /></p><p style="text-align: left;"><br /></p><p style="text-align: left;"><br /></p>Dave's Smart Parts Bloghttp://www.blogger.com/profile/04660849016453127899noreply@blogger.com0