Wednesday, April 15, 2015

April 2015: "Do I Really Need To Post Lost Sales?"

If there is one parts topic that has been beat to death in my opinion, it has to be Lost Sales Reporting. Even though this is my belief, I still feel it deserves another look, but in a different light.

For years, reporting lost sales has been a key part of tracking total parts demands in the parts department. Other than actual parts sales, lost sales are the only other way we can report total demands in the Dealer Management System, (D.M.S.) which is crucial in setting phase-in and phase out parameters.

Not very long ago, I was talking to a Parts Manager about this very subject and I had noticed that he literally had no lost sales reported on his most recent Monthly Analysis Report. When I commented on the lack of reporting, he began to back his reasoning as to why there were no lost sales reported.

His first words were..."Do I really need to post lost sales?" At first, I couldn't believe he asked me that question because of the importance of tracking every possible demand. What surprised me even more was he followed his question with a comment saying...."I really don't have any lost sales, we fill every order"!

My belief is that there always has and always will be lost sales in the Parts Department, it's just a matter of how many of these lost sales go unreported. This may be one of the reasons why this particular Parts Manager also had a very low "First Time Off Shelf Fill Rate", low gross profit margins and low shop productivity.

So!...why are we beating this topic down again?

I recently met with another Parts Manager and after a review of his Monthly Analysis Report, he also had a "less than desired" percentage of lost sales reported. The major difference was all other guidelines on the Monthly Analysis either met or exceeded expectations, especially his "First Time Off Shelf Fill Rate" and gross profit margins.

This definitely got my attention and I started to wonder if there may be a hidden silver lining to what the first Parts Manager was saying, even though my belief system hasn't changed on lost sales reporting.

What I did find out was there were a couple of similarities in both these scenarios with these two different Parts Managers with two different results. Even though they both were lacking in the lost sales reporting category, they both had the same manufacturers' stock replenishment program and both also utilized it 100%, in lieu of using the Set Ups & Controls on their D.M.S.

So, what am I missing here?.....

As we continued our conversation with the second Parts Manager, I had to ask him how he managed to meet or surpass all these areas of industry guidelines and he basically told me that his manufacturers stock replenishment program takes care of most stocking concerns.

Items such as phase-in, phase-out, stocking levels, days supply, best stocking levels and best reorder points are all controlled by the manufacturer.

Even if a Parts Manager does utilize the manufacturer's stock replenishment program to it's full extent, he or she can still run a Lost Sales Report on their own D.M.S.. These individual dealer demands could then be added to the manufacturer's stock order, while still maintaining the manufacturer's compliance guidelines.

In addition, many manufacturers also include lost sales reporting in their stock replenishment programs to allow Parts Managers to report these demands. The question I have though is how many of these Parts Managers do report these lost sales through their manufacturer and how many are still being missed?

He further added that he also has "vendor specific" aftermarket warehouses very close to his dealership so if a "stock-out" situation does occurs, a potential lost sale can be avoided as this actually becomes an extension of his own inventory without the investment as well as acquisition and holding costs.

One could argue that there still must be "lost sales" out there that are just going unrecorded, but the facts make it pretty hard to debate. I even went as far as checking the dealers current shop productivity, which was over 90%, which could be better, but still not that bad

Are we possibly seeing a revelation in this case, or are we still missing something? Even though this isn't the first time that I have had a Parts Manager tell me that they don't really have lost sales, this particular one is different from all the previous. This is the first to prove to me with numbers and facts to back it up.

Could it be possible that this may be the formula to finally take away all those answers to the age old question..."What's the true definition of a Lost Sale?"

One thing it does tell me is that it IS possible to actually have a "limited" amount of lost sales and still have a respectable "First Time Off Shelf Fill Rate". Although, this can only be backed up by facts when reviewing the Parts Monthly Management Report. 

Even though I am actively involved in both parts and service training, analyzing the parts department has always been "black & white". No opinions, just the facts as revealed in Monthly Management Report when it comes to analyzing the inventory management side.

In my opinion, this all boils down to the fact that the second Parts Manager has achieved great results, even though his lost sales reporting may be a little less than desired. Although, he still believes in reporting lost sales and that there will always be lost sales.

As far as the first Parts Manager who doesn't even "believe" that he needs to report lost sales? Well, I guess that may be one of the reasons for his low "First Time Off Shelf Fill Rates", lower shop productivity and lower parts gross retention. is "black & white" and no opinions, it either is or isn't what it is.

One thing I believe is a misconception by most, reporting lost sales is actually a good thing, not a bad thing. It can only assist the Parts Manager, or manufacturer track more demands and provide a better level of service to the customer, higher service shop productivity and higher profits.

I have always maintained that my definition of "Lost Sales" actually translates to me as "Potential Missed Opportunities". If we fail to take advantage of this inventory management tool, we lose the opportunity to better serve our customers and achieve higher profits.

Many Parts Managers may still have many different definitions as to what they believe qualifies a lost sale in the first place, but one thing remains true....there will always be lost sales. So, whatever your opinion may be when it comes to reporting lost sales, you may want to look at your Monthly Management Report before you "re-ask" yourself...

"Do I Really Need To Post Lost Sales?"

Dave Piecuch is the Vice President of Automotive Consultants Group Inc. and is the Head Coach for Smart PartsTMThe only "Results Based" High Return Training, Coaching, and Consulting company in the world!  Dave can be reached at Cell 786-521-1720 or E-mail at Vist our Website at