Tuesday, June 9, 2015

Parts Ordering Process: "A Lost Art"

One of the reasons for the title of this month's issue of "Smart Parts" may take a few of us back quite a few years when ordering, receipting and stocking parts wasn't as easy as it is today.

Creating a stock order was definitely a challenge as Inventory Management Systems, (I.M.S.) were just evolving in the late 70's to early 80's.

Prior to the computer age, creating a stock order was more like "writing" a stock order, then combining these normal stock parts with customer orders.

Many of us may still remember walking the parts aisles and writing down "tagged" parts that may be or close to a stock out situation.

I don't think the younger Parts Managers today could even fathom running a parts department prior to the computer age. About the only electronic device we had back then was a "teletype" machine to transmit the orders, which replaced mailing in the stock and customer orders.

Parts order "answer backs" rolled out almost like a ticker tape on special rolled paper instead of over a computer screen a couple times a day. The parts manager would then make appropriate order changes pending availability in the parts distribution chain.

Parts orders were then picked up at the local Parts Distribution Center, (P.D.C.) via a "will call" pick up order which our own drivers picked up each order. Cross shipped parts would take days to arrive by mail or perhaps even U.P.S.

The first computers used in the parts department were actually used for transmitting data to the manufacturer such as financial data, new vehicle orders, new vehicle invoices and warranty claims submission.

It was also used to transmit parts orders with data saved to a cassette tape and downloaded to the manufacturer each night.

The hardest part of managing an inventory back then was the time lapse between stock orders which could be only once or twice a month. As you could imagine, these long lead times made it difficult in calculating a decent days supply.

One of the only advantages we had back then was that a majority of part numbers had multi-year model coverages. This allowed for better stock order performance with less part numbers and a higher days supply to get through those long lead times.

The biggest difference that I see comparing the parts ordering and receipting process back in the day versus today is that it seemed more "hands on" back then.

Don't misunderstand me, I was extremely happy when the computer age hit the modern day parts department. I just think we learned a lot of "common sense" parts department practices that his remained with us to this day.

Remembering bin locations, part numbers, superseded part numbers and part group numbers were just a few things that were grilled into us. Replaced down the road by much more efficient  Electronic Parts Cataloging, much of those older practices have also become extinct.

Even part numbers have changed over the years. Back in the day, part numbers actually meant something as often times, you wouldn't even have to look up the part number. The part number would include the type of part, year, make and model of each particular part. 

Leading up to where we are today, what have we really learned and how have these changes over the years effected how we order, receipt and stock the right parts at the right time? I, for one believe these changes have really impacted our current parts department practices.

In many cases, we have lost control of the parts ordering process with many manufacturers offering stock replenishment programs. Many Parts Managers today totally "trust" the manufacturer with their stocking parameters and the dealers' money.

Even though these manufacturers totally control the amount of earned discounts and allowances that a parts manager can earn, should they really control the parts manager's purchasing power? Should they really tell a parts manager what to stock and what not to stock?

I agree that there are a lot of advantages to these programs, but I don't believe that they should totally replace the Parts Manager's common sense decisions within each dealership.

Inventory protection in controlling  obsolescence is definitely important, but should it be the number one reason for trusting the manufacturer with your money?

After all, isn't the real number one reason for stocking the right parts at the right time is to avoid obsolescence in the first place? Shouldn't our number one goal be "First Time Off Shelf Fill Rate" and profitability? What could this loss of control and parts ordering "Lost Art" lead to?

I believe that this loss of control can lead to many potential concerns in how a Parts Manager controls the inventory. One of the most prevalent area that I see in reviewing many dealers' Monthly Management Reports is Outstanding Orders.

Often times, I see Monthly Management Reports show these Outstanding Orders in excess of 25% of the total inventory value! What does this mean and what effect does it have on the whole scope of things?

Keep in mind that each dealers' Inventory Management System, (I.M.S.) can only control and manage information or data going in and going out. "Garbage In & Garbage Out"....

If the Parts Manager doesn't properly manage these Outstanding Orders, the I.M.S. will not reorder parts at the Best Reorder Point, (B.R.P.) up to the Best Stocking Level, (B.S.L.). If parts are manually receipted without using the proper order or control number, that order still remains outstanding.

This means, in many cases that the I.M.S. will not suggest new orders until outstanding orders have been receipted or relieved. Once again, my fears realized as many Parts Managers are turning over their inventory control and money to the manufacturer. 

Overall, I am definitely "IN" on all these new innovations and advancements to our industry overall, but I really think they should all be taken in the proper perspective. Managing the parts inventory will always require common sense solutions and common sense inventory management.

No matter what lies ahead, I believe that our ultimate goals well never change. Achieving a "First Time Off Shelf Fill Rate" of at least 85% or more will increase overall shop productivity, great true and gross turn numbers, high customer retention and gross profits at or above expected levels. 

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 dave@smartservicetraining.com Vist our Website at www.smartpartstraining.com