January 2025: First Quarter 2025: "Top 5 Parts Focus Point"

As we start off yet another year here at ACG "Smart Parts", and before we get into the first issue of our "Top 5 Parts Focus Points" in the First Quarter of 2025, I would like to start off with a little editorial to kick things off. Then we will dive into our first issue of 2025.

ACG "Smart Parts" has now been publishing monthly blogs and articles for nearly 15 years as we are now publishing our 178th issue in January of 2025. I've often been asked how we can keep going on focusing on Parts each and every month for almost 15 years.

After all, how much more can we write about Parts after all these years? What can be new and exciting over what we already know about Parts? What can we learn that will help us to continue on in our industry that may give us that "edge" over anyone else?

Surprisingly, writing these articles and blogs for almost 15 years goes much further than the basic questions mentioned. Even though our industry is constantly changing in many areas, it all comes down to "Coaching".

Much like in many professional sports, even though many professionals are experts in their field, we believe that everyone still needs a Coach. Someone that will keep us on our toes on the basics as well as picking out areas that need improvement or "tweaking".

It's easy to lose sight by taking our eyes off the ball with our everyday Duties & Responsibilities, we need that "coach" to put us back on track or perhaps keep us on track. This is why we move on each month, concentrating on what needs to be focused on while all the while, forging forward on to new goals and new heights.

That being said, our first issue of ACG "Smart Parts" in 2025 will be devoted to what we need to focus on entering this New Year. Even though the content may not necessarily be new, the real question is...

"Are We Ready for the New Year and What Do We Need to Focus on Right Out of the Gate?"

Here we go "Smart Parts" Readers as we venture into 2025 with our first issue!...

January 2025: 

First Quarter 2025: "Top 5 Parts Focus Points"

Moving on to a New Year has many benefits for the Parts Department as the clock has been rewound back to zero in many areas. Calculating Parts Gross & True Turn starts over, Year to Date Sales & Gross Percentages, Sales Activity rewinds and End of Year Parts Reconciliations have given us a new start.

In this issue of ACG "Smart Parts", we will key in on our "Top 5 Parts Focus Points" in the First Quarter of 2025 starting in January through March of the New Year. Getting a jump in Parts, in my opinion is most important every New Year as these first few months can highly impact the Parts Asset and Profitability for the whole year ahead.

Let's Get Started!...

Number One: Reducing and Eliminating Parts Obsolescence

Even though we wound down last year with perhaps some "parts write-offs" to close out the year, many dealers out there enter the New Year with an excessive amount of parts obsolescence. Even though they may have made adjustments at the end of the year, they still tend to carry over a good portion of their obsolescence.

We first must accept the fact that parts will go obsolete at a rate of at least 3% - 5% each year no matter what we do. So, the question really isn't if we will accrue more parts obsolescence as it is more of a question of what we will do about each month going forward.

January of each year is the best time to get a game plan of first getting rid of our obsolescence and then having a follow up plan to control it going forward. Letting it build every year without a plan will just lead to a never-ending cycle that won't go away.

With a New Year to work with, we can start our 12-month plan to get rid of it and prevent it from growing in the future. Many Obsolescence Vendors and Dealers that are interested in purchasing obsolescence are usually very hungry to buy obsolescence at the beginning of each New Year as opposed to the end of their fiscal year.

This allows dealers that have an excessive amount of obsolescence to get their best Return On Investment, (ROI) early in the New Year. Unfortunately, many dealers don't even pay attention to their parts obsolescence until the end of each New Year when they are reconciling their Parts Inventory, including "write offs". Their attention to their parts obsolescence should actually be spent in the first part of each New Year.

Number Two: Parts Monthly Reconciliation

Our Number Two follows "hand-in-hand" with our Number One focus early on in the first quarter of the New Year. What better time to set up a Monthly Parts Reconciliation Process? Why wait until right after we finished up the previous year when we had to "balance the books" and end of year Parts Physical Inventories for most dealers?

Unfortunately, and once again, the majority of dealers do not make it a practice of reconciling their Parts Inventories each and every month. Even if they would perform this "practice" each month and monitor their Parts Inventory amounts between the Ledger Balance Inventory compared to the Controlled Inventory in the DMS, it would be a plus.

Even if they just monitored the monthly variances and make one final Journal Entry at the end of the year, it would at least allow them to see if there are any major discrepancies each month. It's much easier to go back over 30 days to find errors versus trying to find these discrepancies over a whole year.

Most importantly, it's a great practice for Parts Managers to get into this practice as, in my opinion, they need to take more "ownership" in their dealers Number Two Asset as if it were their own.

Number Three: Perpetual Inventories - Daily/Monthly Bin Checks

Our Number Three can't go without mention as there are more transactions in the Parts Department in a single day than there are in the whole dealership in a month. Thousands and thousands of part numbers that are in our Parts Inventory are managed daily and cannot go without some sort of on-going accountability.

The best time to start a "Perpetual Inventory" Process is right after a Physical Inventory is performed to verify a fresh, new starting point. Although, Many Parts Managers confuse "Perpetual Inventories" with Daily, or Monthly "Bin Checks".

The difference between the two is quite simple as performing "Perpetual Inventories" means that the whole inventory is counted each month and reconciled with Accounting each month. Performing "Bin Checks" just means that we may count a certain number of bins each day or month as a sampling of the whole inventory to get an idea of what variances there may be.

The first of the year is a great time to start a process of either or both of the two to avoid any major discrepancies in the inventory counts throughout the year. The worst thing in my mind is to find out that we may have issues and too late by the end of the year.

Number Four: Parts Pricing Strategies - Menu Pricing

Last month we talked about one of our "End of Year" duties should be to review our Pricing Strategies, Service Menu Pricing and our Overall Parts Gross Percentages. In the first quarter of 2025, we need to act and implement these Pricing Strategies based on the results, in this case, in 2024.

Retail customers tend to adapt to price adjustments at the beginning of a New Year versus during the current year. Keep in mind, I'm not implying that just because we are entering into a New Year that we should increase our prices just because it's a New Year.

It's just a "better" time to make adjustments based on previous years' results. Managing our Parts Gross Profit, other than perhaps Warranty Parts Pricing and Collision Parts Pricing is our responsibility and for the most part, we control it.

Our Industry Guidelines are specific, and, in my opinion, we deserve to achieve the Industry Guidelines for our dealers. What better time than the first of the year to set these new goals and holding ourselves accountable to them in the New Year?

Our Menu Pricing should also be updated at the beginning of the New Year as we have to balance these prices to Industry Guidelines and our cost while remaining competitive in the Marketplace. 

Lastly, we need to review our Parts Matrices to balance Captive Parts versus Competitive Parts. A successful matrix is one that works in achieving our overall Parts Gross Goals while remaining competitive. Even though the same matrix can bring different results between dealers, it's all about developing that balance on parts that we can matrix versus those parts that we cannot apply a matrix.

Number Five: A New Mindset for 2025

Perhaps one of the most important in our First Quarter Focus in 2025 is our overall "Parts Mindset". Even though it is our Number Five, if we don't have the right mindset in today's world, we may just be missing the boat in the overall scheme of things.

We all know that backorders, supply chain issues and overall parts availability is a way of life as it rains everywhere, and we all have to deal with it. The difference, in my opinion, between those who succeed and those that don't is the way we approach each day.

Even if we have the best DMS Set Ups & Controls, parts availability is what it comes down to. Our DMS, (if set up properly) is only providing information and the DMS does not know if parts are on backorder, or unavailable, it simply saying that we need these parts based on the proper math.

It all comes down to the Parts Manager making the proper decisions and to have the determination to do whatever it takes to get these parts and get these vehicles off the lift and on the road.

We have to have the "mindset" in my opinion to believe that someone out there has to have these parts that we need. Even though that may still not produce these "harder to get parts", we cannot sit back and wait until they may become available down the road.

We also need to include our Service Managers in our "Stock Order Meetings" to help us make those critical decisions on what parts we need to stock. Parts Managers look at a Stock Order much differently than a Service Manger does.

We, as Parts Managers tend to make Stock Order decisions based on the price of the part, Model Usage, History, Overall Amount of the Stock Order and Low & High Model Year Usage. After all, what if these parts we buy end up obsolete? The fear of buying parts that may not sell weighs heavily on the Parts Manager's mind.

The Service Manager on the other hand is looking at the part itself and what parts are tying up vehicles in the shop along with relative parts to complete the overall repair. In other words, what good would it do to stock the turbo without the associated bolts, gaskets and hoses?

We have to go above and beyond to do our jobs, much more than ever before, but if that's what it takes, then that's what we have to do. We can't let our guard down and just wait for things to happen instead of making things happen in 2025 and beyond.

Lastly, in my opinion, we have three basic responsibilities in our role as Parts Manager...

• Achieve and Maintain "First Time Off Shelf Fill Rates" of 75% - 85%
• Achieve and Maintain Parts Profitability to Industry & Dealer Guidelines
• Protect the Dealers Investment in Gross & True Turns as well as Controlling Parts Obsolescence to Industry Guidelines of 0% - 5%

Happy New Year "Smart Parts" Readers!

If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ www.smartpartstraining.com, or...just pick up the phone and call me at :

(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...

 

 

December 2024: "Preparing for Year End & Predictions for 2025

As we wind down yet another year here at ACG "Smart Parts", we will once again devote our last issue of the year "finishing up" our current year of 2024, then take a "look ahead into the new year of 2025.

Although this year, we will add a little twist as in prior years, we took a look back over the current year to see what we all experienced. This year, we will prepare for "finishing the deal" in 2024 and then prepare for the new year ahead in 2025.

I think we all know what we have experienced this past year, so rather than looking back, we will "prepare" for not only the new year ahead, but we will also "prepare" for closing out the current year.

That being said, we will split up our issue into two sections starting with end of year preparation and then move on to predictions & preparation in the new year ahead. As always, we will also utilize our trusted industry resources on bringing our readers an in-depth look on what lies ahead.

We may not truly know what lies ahead, but one thing for sure is that we do have to prepare for what "may" lie ahead. Our industry as well as our overall economy will be moving into another era and now that the elections are over, it will be interesting to see what our industry and other economic "prognosticators" are predicting.

Let's start "Smart Parts" Readers with our End of Year Preparation!...

Here We Go!...

Part One: Preparing for Year End

Number One: Year End Physical Inventories

As mentioned earlier, many dealers actually perform their Parts Physical Inventory many different times in the year, depending on when their Fiscal Year actually ends. For the most part though, most actually perform their Parts Physical Inventory in either November or December.

This way, final posting of their Parts Reconciliation entries between the Parts Controlled Inventory and their Parts Ledger Balance Inventory by the end of the current year can be made. Keep in mind though, just because it's a time for end of year Parts Reconciliation, it doesn't necessarily mean the dealer actually makes these end of year adjustments.

Many dealers "opt out" of actually making these adjustments in lieu of using their LIFO, (last in, first out) inventory options. This option is usually used when there are way too many discrepancies between the Controlled Inventory and the Ledger Balance Inventory.

Using this option will eventually catch up to these dealers when the LIFO Funds run out and they will have to, at some point make the proper adjustments to balance out the discrepancies in the long run.

This is why we recommend doing Annual Physical Inventories every year. Whether in-house and utilizing an outside company at least every other year or three years at the most. 

Secondly, we recommend that these end of year inventories are reconciled, no matter which way. Industry averages say that there should be a Parts Inventory "Uplift" of at least 3% - 5% in the Controlled Inventory versus the Ledger Balance Inventory.

Number Two: Applying for Parts & Labor Warranty Uplifts

Typically, the Manufacturers allow dealers a once a year, one time opportunity to apply for parts & labor increases going forward. This application process includes a 90-day survey of current Customer Pay Repair Orders to determine the average Parts & Labor Sales to determine the average Parts Gross & Service Labor Effective Rates.

Then, "unqualified" Customer Pay Parts & Labor Sales are backed out, which normally include competitive Parts & Labor Sales to determine the average over the 90-day Survey Period.

It's important to note though that if the current Customer Pay Effective Labor Rate is not at least 90% of the Posted Door Rate and the Customer Pay Parts Retained Gross Percentages aren't at least at Industry Guide of 40% - 42%, it is not recommended to apply for these uplifts.

Number Three: Review Current Pricing Strategies

Our Number Three actually falls right in line with our Number Two and even though we should be reviewing our Pricing Strategies as a monthly routine, it's especially important to review them before entering into a new year.

Keeping up with our Pricing Strategies to remain at or above Industry Guidelines on a monthly basis actually allows the dealer to feel confident in applying for the once-a-year application for Warranty Parts & Labor Uplifts with the Manufacturers.

In Parts, we need to be looking at our Competitive Prices more frequently as markets change, (as we have all experienced) and costs keep climbing, especially on fast moving parts and oil. 

Menu Pricing should be reviewed on a quarterly basis just to keep up with rising costs and maintaining proper gross profit margins while remaining competitive.

Our Customer Parts Matrix should also be reviewed on a quarterly basis at minimum to ensure that we are getting a little more uplift on "captive" parts to offset our competitive parts that may carry less gross while remaining competitive in the market.

Number Four: Obsolescence Prevention

Even though we should have an on-going monthly plan to control obsolescence to eventually keep us within industry guidelines of 0% - 5%, we also need to review our goals and plans to keep us within these guidelines in the upcoming year.

Parts will go obsolete each year at a rate of at least 3% - 5% no matter what we do to prevent it. The real question should not be how many parts will go obsolete each year. The real question is what are we going to do about it?

The fact is dealers with an unacceptable amount of obsolescence is due to the fact that they have just let it build up and don't have a plan in place to get rid of it and control it going forward.

This is why I recommend if you don't have an Obsolescence Prevention Plan in place...get one! The beginning of a new year is the best time to put a plan in place as we will have 12 months to begin hitting that goal of 0% - 5%, even if your dealer is enrolled in the Manufacturers Vendor Managed Inventory, (VMI) Programs.

The best part is...if you don't have one, we can help!

Number Five: Dealership Infrastructure & DMS Review

Lastly, one of the most important year end preparations that needs attention is our own current dealership infrastructure and DMS Set Ups Reviews. In the area of "Infrastructure", this would include Sales & Gross Projections for the new year, employee reviews and logistics.

Most dealers require their managers to give them their sales, gross and expense projections for the upcoming year prior to entering the new year. Also, it's the best time to encourage our employees to be part of this new quest into the new year with new incentives and individual career path goals.

Reviewing the current year's results in Parts & Service are huge components into making our projections into the new year as well as economic and natural growth predictions. We always have to look at what history has shown us along with a goal and a realistic plan to push the bar even further.

In the area of logistics, we have to look at what we will need in order to achieve our future goals and dealer expectations. The end of the year is where most dealers are looking to invest in their own dealership and end of year "write offs".

Space & equipment modifications, upgrades as well as staffing requirements are just a few of the areas that we need to communicate to our dealers that may be needed in moving forward and achieving newer and higher goals.

It's also a great time to review our DMS Set Ups & Controls as these basic DMS Set Ups tend to be overlooked. In my opinion, our DMS Set Ups & Controls should not be viewed as "set it and forget it".

Modifications on Parts Phase-In and Phase-Out, Stocking Levels utilizing ABC Source Ranking & Stocking Groups, or Source Management are key set ups that can even affect Accounting Integration and Monthly Reconciliation in the future.

Part Two: Preparing & Predictions for the Year Ahead

This topic is one of my favorites each year as we get a chance to look at what may lie ahead in the new year. Doing this research each year always makes me optimistic in setting new personal goals in our ever-changing automotive industry.

We will start out with some insight from our trusted industry analysts on what history has led us to in making their forecasts for 2025, starting with New & Used Vehicle Sales. After all, it all starts with the initial vehicle sale that will determine what we see on the back end.

Let's start off with the J.P. Morgan Research Team as they predict the following...

"The car industry is undergoing a radical transformation, with most carmakers agreeing the next 10 years will bring more changes than the previous two decades. The next target date cited by automakers as a tipping point is 2025, when everything from fuel to cost and the companies that build cars are set to look dramatically different..."

Wow!...what a start as this refers to the upcoming new year! This article continues with their expectation of a continued rise in Electric Vehicles, (EV's), Hybrid Electric Vehicles, (HEV's) and Plug-In Electric Vehicles, (PEV's to an overall market share of 7.7% at 8.4 vehicles in 2025 worldwide.

I agree on a global standpoint that we are headed that way, but on our domestic front, we may want to consider some other analyst's views on what we may see on the home front.

In a recent article in MotorTrader.com by Justin Fischer, gives us some insight on what will be happening domestically...

"Following a year of stagnant sales, automakers will have to work harder for each sale in 2025. New Car Incentives are already on the rise, a trend that will continue in the new year. Falling Interest Rates will bring 0% financing to more models and pull shoppers away from the used car market."

I tend to agree with him as many automakers are experiencing an excessive amount, or "Days Supply" of new vehicles of over 170 Days with some manufacturers, which is three times their desired levels, or Days Supply.

Justin Fischer goes on to say...

"After four years of tumult, the car market is finally starting to resemble normalcy, at least in terms of seasonal price fluctuations and dealership lot inventory. Yet, as many car shoppers know, new car prices remain high. Over the past five years, new car prices have surged by 27% and remain just shy of the record highs we saw in late 2022. So, will car prices drop in 2025?..."

A recent survey by Edmunds.com found that nearly half of all new car buyers aim to spend $35,000.00 or less on their next vehicle. Considering that the average transaction price for new car was $47,870.00 in mid-2024, there is a mismatch between what consumers want, and the automakers are trying to sell"

So, what about Parts?...

It's interesting to see these insights and predictions from a new vehicle standpoint, but when it comes to Parts & Service, this can only lead to more vehicles hitting our Service Drives ending up with more Parts & Labor Sales.

In my opinion, it just won't lead to more Parts Sales, it will also lead into a new wave of what parts we will be selling. We all know that maintenance parts will be on the increase, but we will also see more parts that drive the technology in today's new vehicles.

In a recent article in TechInsights.com, they had this to say as to what we in Parts should be looking for more of in the near and distant future...

"The automotive semiconductor market is on the verge of significant growth, driven by evolving technologies and increasing demand for electric vehicles and automation. With innovations like 5G chipsets, advanced E/E architectures, and the rise of software-defined vehicles, the industry is transforming at a rapid pace".

In addition to the aftermarket parts sales growth both on the domestic and worldwide market as we reported in my earlier article this year, we also have a new wave of what type of parts we may be adding to our shelves in the future.

A few of "take aways" for me in these predictions from our industry analysts are...

• No matter what your vehicle of preference, there is an abundance of New Vehicle Inventory out there that the automakers have to unload.
• I believe the consumer will benefit from this "unbalance" of the desired New Vehicle purchase price versus the current average new vehicle purchase price.
• Rebates, Cash Back, Zero Down, Zero or Low Financing will drive consumers back to our showroom floors in 2025.
• I believe Used Vehicle Prices & Values will drop with this eventual "sell off" of New Vehicle Inventory.

Lastly, on Parts...in my opinion, 2025 will not only be a great year, but also innovative with new parts hitting our shelves as in my opinion, we will see more computer chips, batteries, semi-conductors and other electronics hitting our shelves.

On the other hand, and unfortunately, I don't see shortages, back ordered parts, and supply chain issues going away any time soon. That being said, it will be another year of spending much of our days chasing those parts that are not easily accessible.

Just keep in mind "Smart Parts" Managers...when a part goes on back order, or is presumably unavailable, our job is not finished...it's really just begun. We have to have the mindset that the part is out there somewhere. We just have to go and get it and get these vehicles off our lifts in the Service Department.

See You All in 2025!...Wishing All "Smart Parts" Readers a Safe Holiday Season & a Happy, Prosperous New Year!

If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ www.smartpartstraining.com, or...just pick up the phone and call me at :

(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...

 

November 2024: "When you Snooze, You Lose!"

It's hard to believe that we are winding down to the last couple of months here in 2024. In my opinion, the results we experienced this year thus far in the Parts Department, whether positive or negative are impacted by several areas which I call "Parts Indicators".

As in many other dealership departments, if we don't keep our focus on the things that got us to where we are, we will obviously start going in the wrong direction. Being "asleep at the wheel" in the Parts Department is especially impactful as we directly impact the results in other dealership departments, especially in the Service Department and Collision Centers.

Even though these Parts Department topics that we discuss are not new, what may be new is how we pick up on these "Parts Indicators" and "Right the Ship" before it's too late. It's one thing to notice these reverse trends after we see the Financial, but it's another to act on it and fix it.

Even the best Parts Departments that are run by some of the best Parts Managers out there may tend to fall asleep at the wheel until they find out that in the end, they realize "When You Snooze, You Lose!"

So, the first question that I have as perhaps many Parts Managers have is how did this happen? The next human instinct is to blame other people, or maybe even use another excuse, whether the economy, the weather, staff shortages or perhaps even the manufacturer. In the end, it all falls on us as it rains everywhere.

It also reveals that if we initially respond with some of the above reasons or excuses for failure, we have to own up to the results. 

Keep in mind though that there are always some other Parts Managers at some other dealerships out there that is still getting the job done. No matter what the excuse or reason may be, they know that "When You Snooze, You Lose".

So, let's break this all down and to me, the most successful Parts Managers out there pick up on these "Parts Indicators" that may lead to undesired results and most importantly, they either don't let it happen in the first place, or they pick up on these negative trends and act on it.

First, let's talk about these "Parts Indicators" that lead us to the biggest question of all...

What Happened and How Did It Happen?!...

As simple as it may sound, the above question is probably the easiest one to answer as we have to just trace it back to the root cause, just like a technician diagnosing and "trouble shooting" a problem with a vehicle.

We already know what happened, so we just can't sit there and wonder what happened, we have to trace it back to why it happened and how it happened. Fortunately, we work in the Parts Department and it's all about the math which means that there is a logical solution.

As opposed to let's say the Service Department, there are many more factors over and above the math that can impact negative results. Even if we have the best practices in place in the Service Department, they can all go "by the wayside" because of the "people aspect".

Let's start it all off with the "Parts Indicators" and the "Root Causes" that impact these negative trends or results...even if we thought we had it right to begin with. The one unique thing about the Parts Department is that if we have the Set Ups and the right math, it's just a matter of consistent execution.

Let's Do This!

Number One Indicator: First Time Fill Rates Dropping

Other than seeing our Parts Sales & Gross Numbers dropping, this is probably the most important Parts Indicator that we have to stay on top of. As we will see going forward, when Parts First Time Fill Rates start to drop, a whole lot of other areas are affected in both the Parts Department and the Service and Collision Departments.

So, as we drill this down as to why the Parts First Time Fill Rate may be dropping, the first thing we have to look at is our Parts Set Ups & Controls. If the Parts Set Ups & Controls are still the same as when we had higher First Time Fill Rates, then we have to look at our daily process and routines.

Once again, if the math is irrefutable, then we have to look at the obvious, which is ourselves and what we are doing, or not doing differently. Here are some of the questions that we need to ask ourselves...

"How often do we run our DMS Stock Order, over and above my Manufacturer's Vendor Managed Inventory, (VMI) Stock Order?", (if in fact we do participate in in the Manufacturer's VMI)

"Are we actually overriding what the Suggested Stock Order reveals in order to save money, even though the history and math reveals otherwise?"

"Is the Service Manager participating in reviewing the Suggested Stock?"

On that particular question, I have always suggested that the Service Manager participate in reviewing Suggested Stock Orders as it adds another opinion. It is a fact that the Parts Manager looks at a Suggested Stock Order much differently than a Service Manager does.

Parts Managers look at and affirm Stock Orders much more critically than a Service Manager would. As Parts Managers, we tend to "disqualify" many parts by price, make & model, low & high year applications, etc. On the other hand, Service Managers look at a Stock Order by need and what's tying up the Shop.

Number Two Indicator: Lost Sales Reporting Dropping

One could argue that this Parts Indicator should be our Number One, but it's usually not seen as the original cause of lower First Time Fill Rates and tends to ride below the radar. It's not until the Service and Collision Departments start to complain that we don't have the parts, or maybe not as we did before we started to "Snooze and Lose". As mentioned, lower Lost Sales Reporting always seems to fall under the radar, when in reality, it should be one of the first things we look at.

But I will say this for sure...when Lost Sales Reporting starts to drop, it's just a matter of time, (and not that long I might add) that the Parts First Time Fill Rate will follow in that same downward spiral. 

The trends always follow a pattern...when Lost Sales Reporting drops, First Time Fill Rates drop. Stock Order Performance drops, 0-6 Months Sales Activity drops and lastly, the percentage of Normal Stocking Parts drops.

The first and foremost thing that can stop these spiral trends is to get back on Lost Sales Reporting. We need to let these Lost Sales Demands "Phase-In" and let the DMS do its job, (if the math on the Set Ups is correct by the math), then run the Stock Order and don't "over think" the math and trust it!

Parts Demands are only created in our DMS by Sales and Lost Sales. If we fail to report Lost Sales on Non-Stocking parts with demand, we are losing a major contributor in tracking parts history for parts we should eventually stock.

Number Three Indicator: Parts Gross Profit Dropping

This is another key "Parts Indicator" as managing the Parts Gross Retained Percentage should be a daily routine and not one that we look at after the month is over. Lower Parts Gross Percentage may be attributed to many things such as increased parts cost, price overrides, coupons, service contracts, chasing parts, etc. just to name a few.

The most important thing to ensure that we are not asleep at the wheel is to monitor the Parts Gross Retained Percentage is to look at it daily and to review exceptions and overrides. We also have to monitor our Parts Matrix each month to ensure we are getting the desired gross to offset competitive and flat priced parts.

Powertrain parts sales also impact our parts gross as engines, transmissions, rear ends, accessories, etc. usually carry a much lower parts gross percentage and the only way to offset these parts sales is to make the appropriate modifications to the parts matrix more consistently, at least on a quarterly basis when we see trends going in the wrong direction.

One other Parts Indicator in our Number Three that may lead to lower Parts Gross Percentage is our "Parts to Labor Ratio". Industry Guidelines have current Parts to Labor Ratio Guidelines at 1:1. In other words, for every $100.00 in Customer Pay Labor that is sold, we should also be selling $100.00 in Customer Pay Parts on Repair Orders.

Although, it isn't always a Parts Sales or Gross Issue if we fall short on this 1:1 Ratio, as it could also indicate that we aren't getting enough Customer Pay Labor per Repair Order which would drive that Parts to Labor Ratio higher on the parts side. For example, if just may be that we fall short on our desired Customer Pay Effective Rate, resulting in a higher Parts to Labor Ratio.

Number Four Indicator: Increased Emergency and Special Order Purchases

When you see the Parts First Time Fill Rate dropping, you will also see Emergency Purchases and Special-Order Purchases climbing. Just as in our Number One Indicator, when First Time Fill Rates drop, we end up chasing more parts as Emergency Purchases, and/or we end up having more Special-Order Purchases.

This could a "net result" of being over critical on our Stock Orders and not really relying on the math and the facts. The trickle down now begins into many other Parts Indicators as it will spill down into our Stock Order Performance percentage, which should represent 75% - 85% of our total purchases based on industry guidelines.

Increased Special Order Purchases are also a major contributor to our Overall Parts Obsolescence. It's hard enough already to gain enough Return Allowance to protect ourselves from building obsolescence, Special Order Purchases do not qualify for Return Allowance and only add to the potential of increased obsolescence and lower Return Reserve.

Number Five Indicator: Increased Parts Obsolescence

Speaking of Obsolescence, it is our Number Five Parts Indicator. Many "Smart Parts" Managers may not know this, but Parts Obsolescence will accrue at a rate of at least 3% - 5% each year no matter what we do. The real question is..."What are we doing about it?"

As Obsolescence increases each year and due to all the above Parts Indicators, that reveal that "If You Snooze, You Lose", Obsolescence will just increase at an even higher rate to the point of being totally out of control.

When we see Obsolescence increase at an even higher rate, it's always due to the "trickle down" of the above and previous Parts Indicators. When we lose control, or start "Snoozing and Losing", it's usually followed by increased Obsolescence. Another area that we tend to say..."What Happened?!"

Keeping Parts Obsolescence under control is a monthly Duty & Responsibility of the Parts Manager and not something we look at after it gets out of control. Parts that drop down in that "Over 12 Months - No Sale" category have to be dealt with at that point on the 13th month and not later, otherwise, it just keeps climbing out of control.

Utilizing Obsolescence Vendors, implementing an In-House Scrapping Program along with utilizing our Return Reserves is crucial to controlling Obsolescence. Even more important is not to buy Obsolescence right up front! 

Managing our Manufacturers recommended Stocking Levels and managing our own Special Orders in order to prevent "Obsolescence Purchases" at the get go is crucial. Being "Obedient" to the Manufacturer as opposed to being "Compliant" is a major contributor to Obsolescence and Over Stock Parts amounts.

In Conclusion...

It's one thing to fall asleep at the wheel and finally realize "When You Snooze, You Lose", it's another when it does happen, we don't act on it. What really matters is how we respond to what happened and how it happened, and then drill it down to the root cause and fix it. 

Finally, and then and perhaps even most important is to make sure it doesn't happen again and to stay awake at all times because we all know that...

"When You Snooze, You Lose!"

If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ www.smartpartstraining.com, or...just pick up the phone and call me at :

(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...

October 2024: News Flash! "Service Drive Training Actually Begins with Parts!"

As we wind down these last few months of 2024, I wanted to bring in a topic that is a little bit out of our normal sequence of ACG "Smart Parts" Newsletters. The idea of this month's topic came to me because many dealers have been coming to me and "wanting" Fixed Ops Training, but what they really want is the "Right" Fixed Ops Training.

That being said, there are lots and lots of opportunities out there for dealers to find the right Fixed Operations Training Companies that will suit their individual needs. To each their own as they say, but one common theme that I noticed when they approach me is that they wanted something different.

I thought about this for a bit, and I then realized what, in my opinion has been missing is that dealers are reaching out for what they believe they need is more Service Drive Training to increase their overall Service Absorption.

It's not unusual that this Fixed Ops Training would start out in the Service Drive as that is primarily the "point of purchase" Sales Opportunity, so why not start there? The customer pulls in the Service Drive and who is greeting them first but the Service Advisor.

This is where, in my opinion the opportunities begin, but it's also where the "break in the chain" also begins in the area of over promising and under delivering. No matter what kind of training is out there, or how well it's delivered, if we can't deliver the "Customer Promise", all training goes by the wayside.

Which brings us to the next challenge of having the right processes and the right resources to deliver the "Customer Promise". This is where having properly trained Service Advisors and Skilled Technicians come to the forefront.

But!....What's the Missing Link!

If you were to look up the definition of "Productivity", which is the engine to how our Service Department operates, the revelation becomes even more realistic when you factor in the importance of the Parts Department, especially when we are talking about Service Drive Training.

The definition of "Productivity" is simply this...

"Productivity Equals Output Divided by its Resources"

That being said, (again), what are the resources in this equation as far as the Fixed Operations referring to?...

You guessed it!....Parts!

We can't perform over 85% of our Service Department Repairs or Services without having parts to complete the repairs. So now, we are starting to get the picture of success of Service Drive Training and the initial overall requirements in the training process.

I don't care how good or how successful any Service Drive Training Process or Company is, without the Parts Department operating on peak levels with "First Time Fill Rates" at or above 75%, the investment spent on this training will not achieve expected results in both departments.

So!...How Does the Parts Department Impact the Service Drive Training Process?

Let's break it down and prove the obvious...

Parts "First Time Fill Rates":

Not to be confused with "Overall Parts Fill Rate", which is basically the sale of a part, no matter if we had the part or not, or where and when we get the part to fill the order. Overall Fill Rate does not mean we filled that demand on first attempt. It just means we filled the order and not necessarily on the first attempt.

The average Parts Department's "First Time Fill Rate", which means the parts demand was met on the first attempt is less than 50%, where the industry guideline is 75% - 85%. So, when we start talking about an effective Service Drive Training Process, all could be good except at the "point of purchase", all goes downhill because we don't have the part.

Think of it this way, you are looking to buy a brand-new lawnmower, refrigerator or stove and the salesperson shows you a picture, or perhaps a floor model and his or her training convinces you to buy, but then...he or she says we don't have it, resulting in great training, but no eventual sale.

Posting Lost Sales:

If you think that not posting Lost Sales may have an impact on Service Drive Training, you are missing a huge component to a Successful Service Drive Process. Posting Lost Sales is really defined as "posting customer demands", which are Sales and Lost Sales.

In other words, if we don't track what our customers are asking for, no Sales Training will end up in a sale without the availability of eventual desired product or service. In other words, if we don't have it, they will go somewhere else to get it.

On the other hand, even if we do post those Lost Sales, it won't really matter if we don't have the proper Set Ups & Controls in our DMS, which translates down to our Manufacturers Vendor Managed Inventory Stock Replenishment Programs, (VMI) if offered by the Manufacturer.

Proper Set Ups & Controls:

Speaking of which, if our "math" is not set up properly on our DMS, we are most likely not going to have that part 75% - 85% of the time and no Service Advisor or Service Drive Training Process, no matter who or what company it is will be able to wave a magic wand and make that part appear to close that sale.

Let's look at the other side of things if we do have a Parts Department that meets all the requirements and achieves all these industry guidelines. Just imagine for a moment if you have a Parts Department that has a "First Time Off Shelf Fill Rate" of 75% - 85%.

First:

Service Advisor confidence goes up because the part is in stock, and the Advisor can then go to closing techniques with fewer customer objections.

Second:

It is a fact that having the parts in stock, much like having the right vehicle on the lot increases closing ratios immensely.

Third:

Having the right part at the right time also promotes a higher "point of purchase" environment for both the salesperson and the customer.

Service Scheduling & Appointment System:

Believe it or not, having a high Parts "First Time Fill Rate" does impact Service Drive Training and the Service Drive Process by impacting and increasing Service "Cycle Times" and the overall availability of appointment slots.

Having a more efficient Parts Department enables the Service Department to process more customers through the Service Department. It can also impact the number of overall available Service Appointments including "Drop Off" and "Waiter" customers.

In Conclusion:

Getting back to the Service Drive Training aspect of things and what really works is proven quite obvious. Parts has to come first as far as Training along with the Proper DMS Set Ups & Controls. In my opinion, Parts Training, Proper Set Ups & Controls have to be in place at least two or three months prior to any Service Drive Training Process.

The reason I believe two or three months is needed is because sales history with the Proper Set Ups & Controls have to go through at least one "Part Cycle" of three months.  This cycle allows the system to Phase-In more demands and to set proper Stocking Levels and the data acquired from Lost Sales Posting leads to more inventory breadth as more and more parts phase into the DMS.

Putting the "cart before the horse" in this case just makes sense, but the problem is that Parts Training is scarce, especially if you don't know how to get these Set Ups & Controls implemented properly into the DMS. This is why at ACG "Smart Parts", we speak 14 different languages of Dealer Management Systems.

There are many out there that can tell you what needs to be done but can't actually get the job done because their knowledge of various systems is lacking. In addition, and unfortunately, many of the people employed by these various systems don't even know themselves what their system is capable of and don't know the basic math as I have personally witnessed. 

Having the Proper Set Ups & Controls is just simply that as it's all about the math. It's irrefutable as there are no opinions when it comes down to the math and how these systems and algorithms work.

In my opinion, no matter what Fixed Ops Training Program the dealer chooses, success will only follow if the Parts Department is ready and running efficiently and having the right part at the right time. If the Parts Department is not ready, then it's pretty obvious that the investment spent on Service Drive Training is likely to lead to less than desirable results.

If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ www.smartpartstraining.com, or...just pick up the phone and call me at :

(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...

September 2024: Parts E-Commerce: "Should We, or Shouldn't We?"

One of the most popular topics that I am receiving more and more questions about concerns Parts E-Commerce. Parts E-Commerce is technically not new as it has been for quite few years now, but with more and more Manufacturers getting into the game, more and more dealers are asking questions.

When Parts E-Commerce hit the stage quite a few years ago, it was pretty much only for the big players in the Parts OEM Dealer game and larger chain Aftermarket Parts Suppliers. Now, they have brought it all down to the "local level" for all dealers of any size in order to increase market share where anyone could get into the game of Parts E-Commerce.

When it all started, E-Commerce Websites were popping up everywhere and they are still out there today. Many Automotive Manufacturers are now jumping in with their own E-Commerce Sites and pulling in individual dealers into the mix who perhaps would not sign up with other E-Commerce Sites so all dealers can now participate.

With all the above being said, it now comes down to whether we, at the dealer level should jump into the game, no matter how big or small the individual dealer is. The end result with more and more dealers participating, the overall scope of Parts E-Commerce Sales will expand and grow.

This is where it all starts in this month's issue of ACG "Smart Parts" as we will break it all down and answer the overall question...

E-Commerce Parts: "Should We, or Shouldn't We?"

Like in many other potential sales ventures, we have break it all down with our "due diligence" to see if it's worth getting into in the first place. Some of the areas that we need to start with, especially if we are going with the Manufacturers Programs is "risk versus reward".

In this issue of ACG "Smart Parts", we will break it all down by category in order to come down to the decision of whether or not it's all worth it and how much we should expect as far as our Return On Investment, (ROI).

Here are the categories in our quest of finding out this month's answer concerning Parts E-Commerce Sales...

• Program Costs versus Potential Sales & Gross Opportunities
• Choosing the Right E-Commerce Platform, (if we do go E-Commerce)
• Shopping for the Right E-Commerce Website vs. the Manufacturer
• Reviewing the Most Recent E-Commerce Parts Sales Data
• Shopper Demographics
• Dealership Internal Accounting

Here We Go!

Program Costs versus Potential Sales & Gross Opportunities:

We will first start out with measuring our Potential Sales & Gross Opportunities, especially if we are starting out as a small player in the E-Commerce game. One of the ways we can accomplish this, especially if we are going with the Manufacturers Programs, (as they are all different) is to measure cost and commitment right up front.

In other words, are there limitations on what gross we can attain? What are the initial upfront costs and monthly fees? What are the other requirements in additional parts inventory that we may have to stock, especially with no prior demand history?

We also have to acquire market surveys that will give us an idea of what is out there for Potential E-Commerce Sales and what dealers around me are also participating in this E-Commerce game. If other dealers are in the game, then what will my market share actually be and how much will my manufacturer send our way?

Choosing the Right E-Commerce Platform:

If we have made the decision to dive into the E-Commerce game, we now have to choose the Right Platform. When we talk about an E-Commerce Platform and as recommended by the Hedges Company, (www.hedgescompany.com), we have to break it all down as follows.

• Functionality
• Navigation
• Shopping Cart Options
• Tech Support
• Pricing (both upfront and monthly fees)
• Manufacturer Costs
• OEM & Aftermarket Options

In other words, we have to find out which of the available E-Commerce Websites are ranked and approved in all these categories. These E-Commerce Platforms also hold true for New & Used Vehicle Sites such as Carvana, CarMax, Vroom, Cars.com, TrueCar, as well as other numerous Online Vehicle Auction Sites.

You can also visit the Hedges Company Website where they list the Top 54 E-Commerce Websites if you want to be a big player in the Parts E-Commerce game.

Shopping for the Right E-Commerce Website vs. the Manufacturer:

In addition to the above with our E-Commerce Platform, we then have to weigh the differences from those listed at the Hedges Company Website versus just going with the Manufacturers Program.

This involves having the same expectations that we listed above in choosing the right platform and now weighing the costs of each program. Not only that, but we also have to consider what I refer to as the Manufacturers "back end" money into the mix as well.

On top of that, and on the other side of the "back end" money, what are the limitations in the Manufacturers Program versus how much more control we could possibly have with going with an outside E-Commerce Website.

Reviewing the Most Recent E-Commerce Parts Sales Data:

This topic in our breakdown categories in my opinion would play a huge role in my overall decision of getting into this E-Commerce game. Thanks again goes out to our friends at Digital Commerce 360, (www.digitalcommerce360.com) for their excellent research through 2023 as 2024 stats are not yet available.

According to Digital Commerce 360 with their Top 1000 list of retailers, 2023 U.S. Parts E-Commerce Sales rose to 9.12B over 2022, which was 8.82B resulting in a 3.5% increase in E-Commerce Parts Sales.

Also, a U.S. Commerce Department study revealed that Automotive Parts & Accessory Sales purchased in 2023 reached 133.24B, up from 123.83B in 2022, resulting in a whopping 7% increase year over year.

Although these are positive increases, Digital Commerce 360 had this to add as well...

"Category growth for Automotive Parts & Accessory Retailers in the Top 1000 was quite different for Online Sales and Total Sales, (online & offline) Category Sales declined 3.6% in 2023, while Total Sales also fell to 7.6% in 2023"

This information seems to contradict from the previous statements, but it does indicate a kind of shift in where and how customers choose to purchase Automotive Parts & Accessories. Perhaps that's why they are more educated in comparing and shopping for price now than ever before.

Another survey provided to us from Statista, (www.statista.com) breaks down our Customer Base Demographics as to the age of our Automotive Parts & Accessory Buyers. This provides us key information as we do our own market surveys based on age demographics and how much they buy.

• 65 +: 7.3%
• 55-64: 13.5%
• 45-54: 18.8%
• 35-44: 23.0%
• 25-34: 23.2%
• 18-24: 14.3%

Lastly, Statista provides us with yet another little "tidbit" as to where Automotive Parts & Accessories falls in the overall "Total Retail" Market. Automotive Parts & Accessories ranks # 7 overall behind Toys & Hobby, Food & Beverage, Health & Personal Care, Computers & Consumer Electronics, Furniture & Home Furnishings with the # 1 being Apparel & Accessories, which is really no surprise.

Shopper Demographics:

In addition to doing our research on who are our buyers from an age standpoint, we have to also research where we live from perhaps a rural area or up to metropolitan areas. This research will go beyond age breakdowns and take us into potential sales overall along with where Automotive Parts & Accessories fit in, (#7) in the Overall Retail Sales Market.

After that, we also have to look at our Automotive Retail Share by brand as compared to the of the Overall Automotive Retail share by Manufacturer. Breaking all of this down is a key component to finding out our potential in additional E-Commerce Parts Sales.

The goal is to define who our customers are including those who purchased from our dealership and those who chose not to return for whatever reason. This is also where many dealers miss opportunities in general as customer retention needs to be at the highest level.

Dealership Internal Accounting:

This is perhaps the most difficult area in many dealerships today that are participating in E-Commerce Parts Sales at whatever level. It is also sometimes determined by how the Manufacturer conducts the initial E-Commerce Parts Sale.

One most common example is that the customer purchases the part from the Manufacturer, then the dealer actually provides the part and bills the part Internally. This is not the proper procedure.

If the Manufacturer initiates the sale, the customer pays the Manufacturer, then the dealer provides the part to the customer. Then, the Manufacturer reimburses the dealer, and we now have a conundrum right from the start.

If the above is how the Manufacturers' Program works, then it should be considered as a "Charge Customer". Many dealers make the mistake by considering these transactions as an "Internal Sale", which is definitely not.

An "Internal Sale" is between dealer departments only and these E-Commerce Sales are just like a customer that has a Charge Account. In other words, and if you are selling E-Commerce Parts as listed with the above example, a Charge Account should be set up for the Manufacturer.

Works the same way as the Manufacturer initially accepts payment from the customer, who will then reimburse the dealer. When the customer picks up that E-Commerce part at the dealer, it is then "charged" the Manufacturer.

Once the dealer is reimbursed from the Manufacturer, the credit from the Manufacturer is then applied to the Manufacturers' "Charge Account", resulting in a "wash". Billing the E-Commerce part as an Internal is not what happened here.

As far as determining if this E-Commerce sale is a Retail, Wholesale, or an Accessory Sale to me is determined by my profitability. If the Manufacturer only allows me to bill these parts at a wholesale price and I am locked in, then it needs to be accounted for as either a wholesale or accessory sale.

If I am allowed to "recoup" full retail price, then these E-Commerce Sales will be moved to Counter Retail. The reason is very simple that if these E-Commerce Sales are out of my control as to how much gross can be achieved, then the sale should reflect the proper Sales & Cost of Sales Accounts on the Financial.

So!...Now that we have covered all the aspects, details, research and data that will lead to our own decision as to whether or not we should "dabble" into E-Commerce Parts Sales, the only remaining question is...

"Should YOU Get into E-Commerce Parts Sales?"

Your answer to that question is staring at you in the mirror if you do all the proper preparation and research...

We would also like to "Thank" our research team listed and we welcome all to visit their websites for more detailed information on this topic.

If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ www.smartpartstraining.com, or...just pick up the phone and call me at :

(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...

August 2024: Why Do We Have So Many Open RO's?: "We Are Waiting For Parts!"

No matter what the real reason Repair Orders are open for a longer than a desired period of time, the first words uttered are usually..."We Are Waiting For Parts!". Even if a different reason is true, it's usually the easiest one that everyone expects and accepts.

Sometimes, when we as human beings hear the same thing over and over again, it becomes an accepted response, or answer in this case. Even without a real explanation, no one really challenges the answer and this the guilt, and blame falls where it usually does.

There is a logical reason for this overwhelming first response, or answer and that is because more often than not, we are "waiting for parts". But we have to go way back to the beginning to find what really leads us to this point of eventually "waiting for parts" at the outset.

Think about it...a vehicle is brought in with concerns that require a diagnosis from a "certified" technician. The diagnosis is made, and it is determined that a repair is required that involves parts. It's at this point that "Work-In-Process" is born, and the clock starts ticking as to when the repair will be completed.

Once the diagnosis has been completed and if parts are required, it's off to the Parts Department to start the process of completing the repair(s). This is why the most common answer to why we have so many open repair orders as everything stops right here if we don't have the part(s).

That being said, we all know that it is crucial to have the right parts at the right time with a Parts Inventory that can provide the technician that part on a first-time basis of 75% - 85% of the time. 

Even if we don't stock the part due to back-order situations, or limited demand, we have to have a Parts Department that is diligent in chasing down the needed part. No matter how hard it may be to get due to limited availability, back order or supply chain issue, our job is to limit Service Cycle Times and RO's being open waiting for parts.

In the Parts Department, we have to have a "sense of urgency" and a "state of mind" that time, in this case a perishable inventory in Service that we can never get back. In other words, if the part is back ordered, not in stock for whatever reason, our job is just now beginning.

With all that said, "Smart Parts" Managers already know this and especially in today's world. More and more Parts Managers and their staff are spending more time than they ever have getting the parts our customers need than they ever have before.

I know from personal experience that more and more dealers are spending more than they ever have on Parts Manager Training. More and more dealers are seeing the need for training their Parts Manager and staff on having more of the right parts on the shelf.

The overall goal now is to reduce Overall Service & Collision Center Cycle Times, reduce the amount of open repair orders and most importantly, increase their Fixed Operations Parts & Service Sales & Gross as well as their Overall Service Absorption and the Parts Department plays a huge role.

So!...with all the above being said!...

"Why Do We Really Have So Many Open RO's?"

It's time to reveal our Top 10 Reasons why we have so many Open RO's...and surprisingly enough...it's not just the Parts Department's fault!

As I mentioned earlier, it is no surprise that the Number One reason and answer to the above question is "hands down" that we are waiting for parts. It's also obvious that parts are required in most repairs, so it's also the most logical answer if we don't have the parts to complete the repair(s).

In this issue of ACG "Smart Parts", we will explore all the reasons why we have so many open repair orders, also known as "Work-In-Process", or as I refer to as "Work-In-Waiting", for whatever the reason or excuse.

We will list our Top 10 Reasons why we have so many open repair orders beyond the accepted limits. Accepted limits meaning, "longer than initially expected" after the repair order was first written. We all know that once a repair order is initially written up, it's already considered as "Work-In-Process" until it's been closed.

Our Top 10 is also not in any particular order, even though we will start with parts, as after all, it's the main headliner in this month's issue. But many may be surprised as we bring out many other reasons why we have so many open repair orders, even if we aren't willing to admit it.

Here We Go!

1.) Needed Parts Not in Stock

As mentioned earlier, one of the most common reasons for RO's to be open for a longer period of time is that the part is not a Normal Stocking Part. Today's average Parts Department's "First Time Fill Rate" is less than 40%, meaning that they fail to provide that needed part on the first visit.

This starts the "Work-In-Waiting" Process depending on how long it takes to find, order and receive the parts needed to complete the repair. At this point the "finger pointing" is obvious as to why these RO's remain open.

Solution:

In order to increase the Parts Department's "First Time Fill Rate" it requires the utilization of the Dealer Management System, or "DMS", which to me means Demand More from your System. More and more Parts Managers are relying less on their own DMS and more on the Manufacturer for Stock Replenishments.

Most Manufacturers' Vendor Managed Inventories, (VMI) only provide approximately 50%-55% of the manufacturers total inventory "breadth". The only way to get to that Magic Number of 75%-85% First Time Fill Rate is to use the dealers' DMS with ABC Source Ranking by Piece Sales with the proper math.

2.) Parts on Back Order/Not Readily Available

Another reason we have so many Open RO's is no surprise as Back Ordered Parts and Parts that are not readily available for other reasons can definitely add to the "Work-In-Waiting" problem.

Parts Supply Chain Issues, VIN-Specific Parts and some Recall Parts are also on that list of parts that can hold things up in the Shop. All that said, and even though we have more of these parts delays today than we did years ago, we still have to find ways to overcome these parts issues.

When a part is not available, our job has not ended as it's really just beginning. Unfortunately, in many dealerships today, when a part is back ordered, or not readily available, Parts Managers do not go to the extent of pursuing these parts strong enough.

Solution:

We have to have a "sense of urgency" and stop the back order before it happens!...

If you think about it and based on what we know, most Parts Departments' "First Time Fill Rates" are less than 40% where that industry guideline is 75%-85%. If our "First Time Fill Rate" is within industry guidelines, it is more likely that we would have that part on the shelf.

If a part goes on back order on our Stock Order, it's much easier to chase those parts down before it is actually needed for the customer. Once the customers' vehicle is down in the shop and we just now find out the part is on back order, it's already too late.

Just looking at the math, if we achieve a "First Time Fill Rate" of 75%-85% and based on dealer averages in this category, our chances of having to deal with back ordered parts, or other parts that may not be readily available, are cut in half at minimum.

3.) Wrong Parts Ordered

This one has "finger pointing" written all over it with the blame going mostly to the Parts Department, but we all know that the technician is also involved as well. That being said, we have to look at the root causes as to why this happens, especially more often to than "back in the day".

The answer is really quite simple as even though Electronic Catalogues and looking up parts by the VIN number has helped immensely, vehicles today are much more complicated and have many more parts and components than they did years ago.

Also, parts "life spans" of parts has decreased, while overall model usage has increased, requiring more part numbers to look up with more chance of mistakes being made. More parts, less usage is definitely a recipe for more Open RO's.

Solution:

With all the above being said, today's vehicles require the right Technician diagnosing the vehicle in the first place and a Parts Counter Person that has the right experience, which all starts with proper training in both areas.

4.) Improper Diagnosis

It's kind of obvious that our Number Four would follow our Number Three, but I did want to separate them. "Improper Diagnosis" has many more ramifications than just ordering the wrong part and the "finger pointing".

Technician misdiagnosis not only slows the process down and adds to "Work-In-Waiting", but it can also lead to more obsolescence. (see last two ACG "Smart Parts" issues) Ordering the wrong parts up front, and/or additional parts, (just in case we need them!) due to lack of Technician Skill Level happens far too often. But!...who gets the blame as technically, we are "still waiting for parts"!

Solution:

In order to lessen the "Work-In-Waiting" in this category, training is the word that comes to the forefront. We cannot have Technicians "guessing" what they may need in order to repair a vehicle as it's not only adding to the problem, but it could also lead to safety issues.

Parts Counter Staff also need to be properly trained and "motivated" to getting it right the first time and also not "guessing" which part is actually required to repair the vehicle.

5.) Poor Scheduling

In my opinion, Scheduling Service or Collision Repairs is an artform as it requires lots of forward thinking into the unknown in many cases. After all, how do we know how long it will take to repair a vehicle when we haven't even diagnosed the problem yet?

What we do know though is after the vehicle has been diagnosed, we now have an idea of how much time will be needed to complete the repair(s). The trick is how we "fit in" these repairs with other vehicles are still coming in for their initial diagnosis as well as all the vehicles scheduled in for maintenance.

This is where the ball is usually dropped as some Advisors and Technicians "prioritize" their workload based on their own preference, or paychecks and not necessarily based on Overall Shop "Cycle Times" and Overall Shop Productivity. 

Overbooking is not uncommon due to not having enough time initially available in the Shop in order to achieve desired productivity levels. In other words, if we have 10 Technicians that work an 8-hour day, we only have 80 clock hours available, no matter what the workload is. 

This is where the "juggling" begins, and more repairs are added into the "Work-In-Waiting" equation. Plus, if you add in that we have to wait because we are chasing parts, then the "trickle down" affect is now also in play, pushing vehicles in and out, losing precious time that we can bever get back.

Solution:

Whatever Scheduling System is being utilized, and most are using an Electronic Scheduling System, initial Set Ups in these systems are crucial. If we use the above example of a 10 Technician Shop, we have to first determine how many hours those 10 Technicians can produce in a day.

We may have 10 Technicians, but due to most of the Technicians perhaps having lower Skill Levels, thus, we may only be able to produce 60 hours in a day at 75% Productivity as opposed to 80 hours in a day at 100%.

All Scheduling Systems should be set up and based on our "hours to sell" capabilities with a combination of hours available for diagnosis and hours available for repairs. The dealers that are doing it better always have the proper amount of Technicians with the right mix of Skill Levels.

Also, and perhaps most important is that all Scheduling Systems have to allow for Carry Overs and Customer "Walk-Ins" to their Overall Fill Rates and Shop Capacities.

6.) Poor Communication

This one is a big contributor to "Work-In-Waiting", or too many Open RO's which also usually includes a lot of "finger pointing". Advisors claiming they ordered the part, Parts Department saying the Advisor or Technician never ordered the part, part came in and the Advisor wasn't notified, Parts claiming they gave the Parts Received Slip to the Advisor, but the Advisor says they never got it...the list of excuses goes on and on.

This is exactly why, a Parts Special Order Process needs to be implemented, (see last two month's issues) where the Special Order Process eliminates all these excuses. It's all about "Accountability" with all key players. 

Technicians are also included in this area of "Poor Communication" as all three parties, which include the Advisors, Parts Staff and Technicians don't communicate and parts either don't get ordered, wrong part ordered, or someone drops the ball in this three-way miscommunication resulting in extended Open RO times.

There is nothing more embarrassing than scheduling a customer in for Service and the part is not there for whatever reason...Sound Familiar?

Solution:

Whether the wrong part is ordered, the vehicle was misdiagnosed, the part is on back order or not available, the part was received but no one was notified, or whatever the reason for the delay for the extended repair time...we have to have a process that eliminates or minimizes these situations.

First, a Special-Order Parts Process must be implemented with consequences on parts that go past the 30-Day limit of not being installed. Return Fees must be applied to the responsible party that doesn't get these Special Ordered Parts installed.

Most importantly, there has to be a "sense of urgency" and a line of communication that includes a "state of mind" of acquiring parts to complete repairs, proper diagnosis and ultimately lowering the amount of Open RO's within a 30-Day Period or less.  

7.) Technician Skill Levels/Stall Utilization

In my opinion, next to parts availability, this category is second in the reason we have so many Open RO's and a high "Work-In-Waiting" problem. Let's consider the number of times that we use the excuse that "we are waiting for parts". Let's look at the number of reasons that we are actually "waiting for parts".

If the vehicle is misdiagnosed because the Technician Skill Level causes the improper diagnosis in the first place and requires parts to be ordered multiple times, then of course we will "always be waiting for parts".

Then, if you add in all the normal time it takes to acquire, chase and find these parts along with the numerous back-order situations we have today, then of course the fault will lie on the Parts Department, regardless of who's fault it is.

In addition, and when we add in how many stalls get tied up waiting for these parts, or if a technician does not have the proper Skill Levels to complete the repairs, the "Work-In-Waiting" climbs even further.

Solution:

Even though Skilled Technicians have always been hard to find, they are out there. But unfortunately, and in my opinion, dealers today are still unwilling to pay what these Skilled A & B Technicians are asking for.

Here's your "News Flash"....A & B Technicians are getting the money and making 6-Figure Incomes! It's our job as Dealers and Service Managers to get our Customer Pay Effective Labor Rates up to where we can afford these valuable Technicians.

Dealers also need to invest in "portable lifts" that will allow us to free up more stalls with lifts as they can be moved out of stalls with lifts if vehicles are waiting for parts, or whatever other reason. There is no need tie up valuable lift space when we have other options.

8.) Service Department & Collision Center Supplements

Here's another area that seems to go "under the radar" with the eventual blame being passed down to the Parts Department as again and after all, we are still technically "waiting for parts!".

Whether repairs that were initially unseen, or if parts were missed, or if misdiagnosis is involved, the "Work-In-Waiting" grows even more. Even though this is an area that happens for obvious reasons, it can still be minimized.

When Supplements do happen, all the other previous areas come into play to multiply the extent of times these RO's remain open. Back Orders, Improper Diagnosis, Ordering the Wrong Parts, Improper Communication and all the other categories come into play.

Solution:

Even though we all know, especially in the Collision Center, we will always and most likely incur Supplements. That being said, and if we know this already, there needs to be a higher "sense of urgency" in these cases.

In other words, we need a "Code Red" Flag and Process on these situations where cost should not be the main concern. Dispatching priority should also be moved up as "Cycle Time" should be the number one issue and goal.

Moving that vehicle out just to bring another one in, and then to bring that same vehicle back in just lowers our overall productivity and profitability. These situations also require management involvement and accountability.

9.) Waiting For Authorization

This category usually involves the Manufacturer, or perhaps an Insurance Company to authorize the repair(s) or Supplemental Repairs. This may seem like this process really shouldn't add to our "Work-In-Waiting", but in today's world, it really does.

It seems like no one wants to take responsibility in making decisions that can come back and bite them, or they just "pass the buck" on to someone else in order to avoid the situation and blame altogether.

This is also another excuse that we hear as to why we have so many Open RO's as the answer to this one seems to always be..."We are waiting for the Rep, or Insurance Adjuster to authorize the repairs!"...

And then if that one doesn't work for the dealer, we can then say..."We just got approval, but now we are"...(you guessed it!) "Waiting For Parts!" No wonder it's the Number One answer, or excuse to our main question!

Solution:

The "Solution" to this one is simple and direct....

"Get Your Dealer Involved!"

The dealer is the one paying the bills and if there is one person out there that no one on the other side wants to deal with is definitely the dealer. As managers, we can't feel like we aren't doing our job because we have to get the dealer involved. 

If you are the dealer, you can't feel your manager isn't getting it done as this is just the way it is. That is of course that the manager has gone through all the hoops and done all they can to that point where the dealer should get involved.

10.) Sublet Repairs

This last area that can be a reason for why we have too many Open RO's can involves other "entities" or companies that we "sublet" work to. Now have to deal with not only our schedules, but theirs as well. 

This often happens if the dealer does not have a Collision Center, or any repairs for that matter where we have to ship the vehicle out to someone else that may be part of the overall repair, or the whole repair.

Either way, the customer is still holding us accountable and responsible. The RO was still open in our dealership, and our responsibility, and added to our own "Work-In-Waiting". I also put this in the category of putting a customer into a Rental or Loaner Vehicle.

It seems that often times, an Advisor puts a customer into a Rental or Loaner Vehicle. They may feel like the job is done as the customer is now out of their face, but much like in the Parts Department when a part goes on Back Order, our job is not over as it's now just beginning.

Solution:

In my opinion, and this goes for all these in our Top 10 Reasons for why we have so many Open RO's for that matter, there needs to be more accountability and consequences for how many Open RO's we have over a certain period of time.

In many cases involving Sublet Repairs, many Advisors and Managers just look the other way as in their minds, it's out of their hands as we are just waiting for someone else to do what is ultimately our responsibility.

Here's the best way to take care of those Sublet Accounts that do not hold up their end of the bargain...

"Don't Pay the Bill!"...if we are doing business with other companies that affect our reputation and are a mirror image to our customers expectation, then hold them accountable!

The bottom line is this...the Parts Department may just be the Number One "Excuse" as to why we may have too many Open RO's...BUT!...it may not be the Number One "Reason" why we have too many Open RO's!

The question we all have to ask ourselves is this....

"Why Are Some Dealers Out There Controlling Open RO's Better Than We Are?...After All...It Rains Everywhere!"

If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ www.smartpartstraining.com, or...just pick up the phone and call me at :

(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...