Wednesday, August 10, 2022

August 2022: "Don't Take Your Foot Off The Gas!"

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. 

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.

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.

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.

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 in our control. It seems that we tend to let what is out of our control actually control our thought process and our actions.

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!"

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.

That being said, let's get started and ask ourselves one simple question...

"What am I not doing that I should be doing no matter what the current environment is?"...

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.

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.

So that brings me to this question...

"How are they getting it done when everyone else out there is complaining that they can't get parts?"

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 and are in our control versus what's not in our control due to the results of our current industry environment which include parts shortages, supply chain issues, parts restrictions, employee shortages, etc.

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.

"Is your foot on the gas, or off the gas?....here are four ways to find that answer for yourself...

Number One: Lost Sales Reporting/D.M.S. Utilization

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.

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".

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.

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.

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.

Number Two: Managing Back Orders/Restricted Parts/Supply Chain Issues

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.

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.

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.

But!...What About The Exceptions!...

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.

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 can go much further to reduce these situations.

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.

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.

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.

Number Three: Parts Staffing Needs

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 are in the work force changing jobs and/or careers for higher wages and income.

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.

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.

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.

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 worth about $2.00 - $2.50 a gallon, but that's not what I'm actually paying today.

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.

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.

One last comment and example on our Number Three...

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?

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...

"If you can't afford to pay, then I guess you can't afford to play"...

Number Four: Managing Proper Stocking Levels

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.

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.

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.

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.

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.

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.

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.

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...

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...

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!"

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...





Tuesday, July 5, 2022

July 2022: Managing The Tire & Gas, Oil, Grease Inventories

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.

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.

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".

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.

Here are some of the facts on the differences of these parts inventories, then we will get into the reasons for the separation....

Main Parts Inventory:

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.

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.

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.

Tire Inventory:

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.

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.

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. 

Gas, Oil & Grease:

Oil is the highest volume part number sale in the whole parts inventory, even though oil has the lowest 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.

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.

"So!...What Are The Reasons For Separating These Inventories?"

Let's look at the reasons...

Reason Number One: Reconciliation

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.

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.

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.

Reason Number Two: Inventory Aging

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.

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.

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.

Number Three: Inventory Discrepancies

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.

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.

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.

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.

The Bottom Line:

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.

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.

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.

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...

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...








 




Monday, June 6, 2022

June 2022: Expanding The Parts Inventory "Breadth"

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.

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.

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.

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.

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.)

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.

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.

Here in lies the big question...

"How are we going to increase our parts inventory breadth AND reduce our overall inventory amounts?"

Here We Go!...

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 our customers are asking for and what they are buying as those two combined add up to parts demand. What they are asking for equals Lost Sales and what they are buying equals Sales Demand.

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.

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.

  • Parts with no sales in 6 months = 49% chance of no future sales
  • Parts with no sales in 9 months = 67% chance of no future sales
  • Parts with no sales in 12 months = 98% chance of no future sales
Let's back that up with the NADA Guideline for Sales Activity...
  • Parts Sales Activity 0 - 6 Months Should Equal 85% of Total Sales
  • Parts Sales Activity 7 - 12 Months Should Equal 10% - 15% of Total Sales
  • Parts Sales Activity Over 12 Months Should Equal 0% - 5% of Total Sales
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. 

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.

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 total parts demand recorded into the dealers D.M.S.

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.

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.

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.

Actually, we should be looking 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.

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.

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....

Number One: We have the part and we sell it...

Number Two: We don't have the part and we create a Special Order...

Number Three: We don't have the part and we chase it as an Emergency Purchase..

Number Four: None of the above happens and we post a Lost Sale...

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.

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.

Let's look at some areas for Lost Sales Reporting Opportunities...
  • Special Order Parts before they are sent back to the manufacturer
  • Aged Back Orders not received
  • Aftermarket parts sold in place of manufacturer parts with a Lost Sale posted under the manufacturer's part number
  • Service Quotes on unsold, non-stock parts 
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.

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.

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.

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.

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. 

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.

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.

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...













Wednesday, May 11, 2022

May 2022: "Mapping Out The Parts Department Floor Plan"

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.

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?

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.

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?

We will explore more on this topic and end the excuse mongering such as....

"I Can't Stock All The Parts We Need Because We Don't Have Enough Space!" 

I would have to say that my first response to that comment would be in the form of a question...

"How Much Parts Inventory Space Is Currently Occupied By Obsolete Parts?"

Let's Begin...

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.

"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.

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.

This is where the topic of this issue all begins...

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.

Obsolescence:

First and foremost, all 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.

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.

Fast Moving Parts:

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.

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.

"Back To Front" Mentality:

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.

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.

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.

Adjustable Bins/Parts Drawers:

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.

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.

Mezzanines & Second Level Parts Storage:

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.

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.

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.

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.

Accessories:

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.

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.

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.

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.

 Special Ordered Parts:

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. 

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.

Shipping & Receiving Area:

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.

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.

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.

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.

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.

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. 

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!

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!

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...





 

Thursday, April 7, 2022

Supply Chain Issues: "Managing Our Way Through"

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. 

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.

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.

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".

All the above being said, I would just like to pose this question...

"Can anyone tell me what I don't already know about this Parts Supply Chain Issue?"

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.

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.

So, let's get started...enough about talking about the problem, let's get down to the solutions to the problem"!

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.

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".

DMS Utilization:

Our DMS is the only 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.

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.

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.

Supply Chain Options:

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.

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.

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.

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.

Dealing With Backorders:

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.

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 all the gross, both parts and labor.

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.

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.

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. 

Batteries, Oil & Filters:

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.

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.

Paying The Price:

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.

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.

Parts Hoarding:

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".

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.

After all, we are not in the business of "hoarding", protecting, or holding parts, we are in the business of selling 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.

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.

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".

The Bottom Line:

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?

Last question and most important...

"Are we going to lie down, waiting and watching what happens, or are we going to be the one who makes things happen?"

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...
















Tuesday, March 1, 2022

March 2022: An ACG Smart Parts Exclusive - "The Parts Department in the EV Revolution"

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.

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.

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.

So, how does this new EV Revolution translate down to our role in the Parts Department? 

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.

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.

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. 

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.

So!...What kind of parts are we talking about in this EV Revolution?

Let's start with the Anatomy of the Electric and Hybrid Vehicles...

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. 

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.

Here's the basic list of components required for all Electric Vehicles...

  • Power Electronics Controller
  • DC/DC Converter
  • Electric Traction Motor
  • Transmission, or Power Converter
  • Traction Battery Pack
  • HV Batteries/Wiring/Cables
  • Auxiliary Battery
  • Thermal/Cooling System
  • On Board Charger
  • Charging Port
In addition to the above, Hybrid Vehicles require...
  • Electric Generator
  • Internal Combustion Engine - Spark Ignited
  • Exhaust/Emission System
  • Fuel Tank/Fuel Filler
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.

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.

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.

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.

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. 

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.

In a way, it's almost like deja vu 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.

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.

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.

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.

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.

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.

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.

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.

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.

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...









Thursday, February 3, 2022

February 2022: D.M.S. Utilization: "Are You Getting You Money's Worth?"

Since the evolution of Computerized Dealer Management Systems, (D.M.S.) way back in the 70's, many Parts Managers weren't even born yet. Even though new systems continue to evolve, D.M.S. Utilization Factors still fail to reach expected levels.

In my opinion, the main reason for these low percentages is a lack of training, understanding and overall Parts Manager Training. Even though new systems offer more and more depth to what the D.M.S. can offer, the basic D.M.S. capacities are under utilized.

Up to this point, I am fluent in over 10 different D.M.S. "languages" and the one common denominator with all of them is that they all provide the basic necessities in Parts Set Ups & Controls, even though some are better than others.

Unfortunately, many Parts Departments have the wrong Set Ups & Controls because the D.M.S. Vendor doesn't even know what the proper Set Ups & Controls should be. Installers and Trainers most often haven't even worked in the dealership environment and basically just get the system up and running without doing the math, especially in the Parts Department.

It seems like the only dealership department that gets set up even close to accurate is the Accounting Department as "integration" is key in making all the dots connect in the dealership. However, in the Parts Department, basic, standard Set Ups & Controls are "cookie cutter" at best, including D.M.S. Parts Manager Training.

All of the above has led us where we are today, which is no further than we were back in the 70's when the first system was introduced. Well over 40 years and dozens of Dealer Management Systems out there to choose from and we are still under utilizing the D.M.S.

In the Parts Department, under utilization can't be more evident as Parts Managers have so much information at their fingertips to manage their Parts Department more efficiently, but they still scratch their heads when I show them what they have available. Over and over, the response I receive after revealing the D.M.S. capabilities is..."I didn't know my D.M.S. could do that!"

The key to understanding and learning any D.M.S. is actually "knowing" what you are looking for in a D.M.S. to begin with. They all have the basics from Phase-In/Phase-Out Set Ups, Stocking Levels, Min-Max Set Ups, Source Ranking by Piece Sales, Lost Sales & Emergency Purchases Reports, Stocking Status such as Normal or Active vs. Non-Stock and In-Active, etc.

All that being said!...."What Are We Missing?!"

Let's Begin!....

Based on our experience in hundreds of automotive dealerships, we have compiled quite a list of "under utilized" D.M.S. Functions and Reports. Each of the following "under utilized" D.M.S. Functions and Reports provide vital information in managing the Parts Department to it's fullest potential even though they are not listed in any particular order.

Each of the following "under utilized" Functions and Reports are available in all D.M.S Systems, even though they may just have a different name to the function, or report. The most important thing to remember is that we need to know what we are looking for and if we can't find it?...ask someone who does.

 Here We Go!

Ordering/Receipting Practices:

It all starts here as the way we order and receipt parts determines the outcome on our Monthly Parts Inventory Management Reports. For example, if we order a Special Order Part on a Stock Order, it will give us inaccurate reporting as to what parts we have on the shelf that are considered Normal Stocking Parts or Non-Stock Parts, or otherwise referred to as Active, or In-Active Parts.

Every D.M.S. has different order types and receipting options that will determine the actual status of each part. Order and Receiving type codes are easily accessible and should be utilized properly. Emergency Purchases, Outside Purchases, In & Out Purchases, Special Order Purchases and Stock Order Purchases need to be utilized accurately.

Lost Sales & Emergency Purchases Reports:

Believe it or not, and even though we are all familiar with these reports, many Parts Managers still do not run these reports often enough in order to see if we are within industry guidelines, or even reporting them accurately. Both reports are crucial in the Parts Phase-In Process as well as managing "stock out" situations.

Zero Stock Reports:

This report is another report that should be run often, especially those parts at zero quantity and considered as Normal Stocking Parts, or Active Parts. Especially in these times with all the supply chain issues. The last thing we want to see or hear is that we ran out of a part that we normally stock at "point of purchase".

Override/Exception Reports:

This is one report that I hardly ever see a Parts Manager run. Does it not make sense to look at this report daily to see if anyone is overriding parts prices, changing bin locations, and most importantly, removing parts from a Repair Order or Invoice?

Demand Fill Analysis/Piece Sale & Cost Analysis:

Once again, another extremely important report as each D.M.S. will "rank" our sales from a cost of sales perspective, or a piece sales perspective. This information provides the Parts Manager vital information on the parts we sell the most and at what cost range in order to adjust Stocking Levels, and/or adjust our Parts Matrix.

Source Ranking By Annual Piece Sales:

I know these items are not listed in any priority, but if we did, Source Ranking By Annual Piece Sales would be right at the top. Setting the proper Stocking Level of each part we have on the shelf by Annual Piece Sale Ranges determines having the right amount of parts on the shelf at the right time.

Every...and I mean every Parts Department I have visited has the wrong Stocking Level Set Ups. This is not an opinion, this is a fact as the math does not lie. Even if we are enrolled in a Vendor Managed Inventory, (V.M.I.) offered by the manufacturer, they are pulling our own individual D.M.S. data to determine our Stocking Levels.

Inventory Plus/Minus Adjustments:

This report category really goes without an explanation or reason as these plus/minus adjustments can play a huge role in Parts Reconciliation with the Accounting Inventory Ledger Amount. Simply allowing parts to be added in or taken out of the parts inventory is a scary subject. These adjustments, which can and do happen from time to time need to be done by the Parts Manager only.

Multiple/Duplicate Bin Reports:

Unfortunately, in most dealerships, this report only gets run once a year in most Parts Departments when the annual physical inventory is performed. This report should be run monthly and proper adjustments made in order to get accurate inventory counts when the physical inventory is actually performed.

Multiple, or Duplicate Bin Locations may also cause an overstocking issue if the Parts Manager is not aware of these secondary bin locations when ordering. It may also cause inaccurate plus/minus adjustments if not corrected.

Parts On Repair Orders/Work-In-Process Parts:

Whoa!...I shouldn't even have to mention this one, but believe it or not, there are many, many Parts Managers out there that don't even know how many parts they have billed out, but haven't been paid for yet as they are still considered "Work-In-Process". This report should be run daily and reviewed with the Service Manager.

Parts On Order/Back Order:

This is yet another report that Parts Managers don't run enough, especially in these times. What many Parts Managers may not know is that the D.M.S., or even the Manufacturer's Vendor Managed Inventory will not reorder parts that have an "Outstanding Order"status in the D.M.S.

In other words, if I have a part number out there with a quantity of four that still shows "on order", or  on "back order", and we run out of that part, the system will not suggest, or reorder because we still have four coming...eventually. 

This report should also be run at a minimum of once a month and "purged" of Outstanding Orders sitting out there that may have actually been receipted manually. If a part is not receipted to the correct order and control  number, the Outstanding Order on that part is not really "relieved", even though we received it.

Perpetual Bin Count Reports:

Here is another report that doesn't get used enough because many Parts Managers don't run Perpetual Inventories. Even though we may have a annual, physical inventory performed, we should still have constant bin checks performed each day. Constant bin counts each day, week and month can make the annual physical inventory go much smoother.

Most importantly, when it comes down to "balancing the books" between the Accounting Ledger Balance Inventory and the Controlled Inventory Balance on the D.M.S., it's much easier to keep the variances between the two at a minimum.

Dirty Core Reports:

Most D.M.S. Vendors now have Dirty Core Reports to help us "reconcile" the cores we receive back from technicians and customers. In other words, when we bill a part that has a new core amount attached to it and then taken off the repair order when the technician returns the old core, that core amount will be added to the Dirty Core Inventory.

Problem is...many Parts Managers just return their Dirty Cores once they build up and don't actually "relieve" the Dirty Core Amounts from that Dirty Core Inventory,  thus the Dirty Core Inventory just keeps climbing. This also gives false "positive" Dirty Core Inventory Amounts for Monthly Reconciliation with Accounting.

 Daily Operating Control, (D.O.C.) or, Sales and Gross Analysis:

If we are not looking at our sales and gross numbers each day, the end result at the end of each month will be what it is as we can't go back. We should be tracking our sales and gross numbers each day, along with our expenses in order to achieve the dealers expected results at the end of the month.

Believe it or not, there are still dealers out there that will not provide this information to their managers while still expecting these same managers to achieve their expectations. We can't manage what we can't see or measure and these daily reports are the only way we can meet expectations.

In conclusion, we may not know what we don't know, but we do need to know what we are looking for in our D.M.S. and what it has to offer. The challenge is to dig deep and if we don't get the right answer from our D.M.S. Vendor, keep digging as there is an answer out there and lastly...

"Yes...Your D.M.S. CAN Do That!"

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...