Monday, January 7, 2019

January 2019: "What's Your New Year's Resolution?"

In my opinion, for the "Smart Parts" Manager, January is one of the most important months of the year. More important in fact for many reasons far different from other dealer department managers. January gives us an opportunity to not only start all over again, it also gives us a "seeing eye" into the future.

Unfortunately, I have witnessed Parts Managers and other department managers begin each New Year with  holiday season "postpartum" depression with a "here we go again" attitude. To me, I couldn't wait to start all over again each year.

New challenges and forecasts, inventory looking fresh as we just performed the annual physical inventory last month, and most important to me was...getting a chance to jump out of the gate fast and furious.

As we move forward with our first issue of ACG "Smart Parts", we will be challenging "Smart Parts" Managers out there to a New Year's Resolution by implementing what I have always called the 5 "Fast Start" Initiatives for each New Year.

These 5 "Fast Start" Initiatives will definitely give the "Smart Parts" Manager a more proactive and positive approach to the New Year and...if holiday "postpartum" depression still lingers, this will definitely get everyone in the department up and running again.

So, if you are ready to make a "Smart Parts" New Year's Resolution...Let's get it going with our 5 "Fast Start" Initiatives for 2019!

Number One: Modify Phase-In Parameters

That's right!....we are going to "forcefully" modify our phase-in settings to be more aggressive for just the month of January. One might ask why we would do this and change what's worked in the past and the answer is quite simple.

The month of January is the only month of the year where all our basic parameters, business ratios and inventory measurements are "annualized" with just one month of information and that would be January of each new year.

The clock turned on January 1st, 2019 at midnight where all our business ratios that we monitor will give us immediate results in the areas of Level of Service, (Overall Off Shelf Fill Rate), "First Time" Off Shelf Fill Rate, Stock Order Performance as well as Gross and True Turn Rates.

Most Dealer Management Systems, (D.M.S.) measure parts demand, (sales or lost sales) on a monthly and annual basis with exceptions given to newer Dealer Management Systems like Dealertrack and Quorum for example where demands are measured "daily" and even "weighted" over a specific period of time.

So, other than the exceptions I have listed, and for most other systems out there, January is the only month of the year that we can "trap" this vital information on our business ratios as it's happening right now and without averaging and annualizing a whole year.

On February 1st of this year, we will be looking at our first Parts Monthly Management Report of the New Year reflecting January alone. This first report of the year will also give us an "annualized" report based on just one month into the year.

We will never get this "snapshot" again for the rest of the year and it will be our best indication of the parts inventory performance. This is also the best time to make modifications to any of the set ups and parameters going forward.

Now, getting back to the answer as to why we should change our phase-in settings for one month. Basically, we want to see what's out there and to give the "Smart Parts" Manager a "seeing eye" into the future.

If you are primarily using a Vendor Managed Inventory, (V.M.I.) such as RIM, ARO, PartsEye, etc., you will not get this information there.

Trapping this vital information can only come from your own D.M.S. after aggressively modifying the phase-in parameters and running an in-house D.M.S. stock order.

It is not necessary to modify Best Reorder Points, (BRP, or Low Days Supply) and Best Stocking Levels, (BSL, or High Days Supply) as basic math will determine those levels.

As an example, if your basic phase-in parameters are set for demand in 3 separate months in the last 7 months, with a total demand of 3 or more, we would change those parameters 2 demands in 3 separate months with a total demand of 3. This will give us a lot more information over a shorter period of time.

Once the modifications are set and we have run the system update to store and keep the changes, we can now create a system generated stock order on our D.M.S.

This stock order may be huge and with a lot of pages, especially if we haven't created one in a while. Especially if we are only relying on our Vendor Managed Inventory, (V.M.I.) stock orders instead of including our D.M.S. stock orders.

The results may be astonishing as now I will see the most recent activity and an accurate "Dynamic Days Supply", (D.D.S.) as this is what's happening right now.

Keep in mind though that these parts will not just jump on the shelf as the "Smart Parts" Manager makes all the plus and minus adjustments before approving any stock order.

Lastly, after aggressively modifying these phase-in parameters, we can maintain them, or revert back to the initial phase-in parameters if too aggressive.

Most importantly, we will see what's happening now and we may just find some new part numbers out there that we should be stocking, whether they are protected by a V.M.I. or not.

Number Two: Pricing Strategies

Our number two "Fast Start" Initiative is very simple and right to the point. Our pricing policies need to be updated at least once a year and what better time than the first of the New Year.

Prices that need to be updated include; Weighted Parts Prices, (air & cabin filters, wiper blades, etc.), Service Menu Prices and most important to me, the Parts Escalation Matrix on "captive" parts.

Prices are constantly changing, whether up or down, but we still need to manage these areas to insure the proper gross profit retention. In most dealerships, our parts sales are controlled by other departments, but we control our gross profit and gross profit retention.

Number Three: New Model Year Accessories

Yes Accessories!....

When I talk to many Parts Managers, accessories is not a popular subject for many reasons. Low profitability, shorter parts life cycles, little or no parts return protection, higher stocking requirements, etc. just to name a few.

So, why is "New Model Year Accessories" our number three "Fast Start" Initiative? Quite simply, it's probably the most under utilized opportunity sitting out there for "Smart Parts" Managers and for most of the aforementioned reasons listed above.

On the contrary, selling accessories is no different than selling all other parts except for the "point of purchase", (P.O.P.) factor....the customer has to see them and be led to them.

Image advertising is not new and especially when the customer is excited over their new purchase, seeing is buying. Displays are as crucial as the T.O.'s, (turnovers) received from the Sales and Service Departments.

In my opinion, each new vehicle purchase customer should be offered to view and/or purchase all available accessories offered on their new purchase. To me, accessories should be treated just visiting the F & I Office to complete the sales transaction. 

Lastly, all accessories should be inventoried in their own separate source with separate phase-in/phase-out criteria and days supply to limit overstocking and potential obsolescence.

These parameters should include shorter phase-in/phase out criteria and "controlled" Reorder Points and Stocking Levels due to shorter parts life cycles.

Number Four: Controlling Obsolescence

For the most part, controlling obsolescence is not just a "January" thing as we all know that controlling obsolescence is a never ending task for "Smart Parts" Managers that goes on day in, day out, month after month and year after year.

But, here's the difference....when do we ever make a decision on what to do with the obsolescence? Usually that's a year end decision that our dealer makes whether to write off the parts obsolescence or not, or maybe the dealer puts it off again for another year.

But again...when do we make a decision and what's our plan moving forward to "stop the bleeding" and stop the obsolescence from returning year after year. If the dealer chooses to keep his parts obsolescence, it should at least be moved to a separate source and out of the active inventory.

There are many options for keeping obsolescence from returning, with my favorite being an in-house "scrapping" program with funds set aside each month to make up the difference that we never seem to get from selling obsolescence on eBay, OEConnect, etc, or from our manufacturer's accrued return reserves.

Lastly, we have to look at how we got all the obsolescence in the first place and the two most common contributors to how we accrued so much obsolescence in the first place is Vendor Managed Inventories, (V.M.I.'s) and improper set ups and controls in the Dealer Management System, (D.M.S.) due to lack of Parts Manager training.

Bottom line in our Number Four "Fast Start" Initiative is to start each year making a decision on how we will manage and keep obsolescence from coming back this year. Don't carry it year to year....Make A Decision!

Number Five: Encourage New Ideas

Some of the best ideas that I have learned and shared were right in front of me as they came from my own staff of employees. In my opinion, EVERYONE we are in contact with is a resource, as there  are countless "information centers" are all around us that haven't even been tapped into yet. 

They seem to see things that we don't and if asked, they are happy to share their ideas and they will especially be appreciative that we did ask. This is where employee confidence and loyalty is taken to a higher level.

They may have ideas on how we can sell more accessories, or maybe even a new bin layout that would save space and be more efficient, or maybe even ideas on how we can gain more wholesale accounts. Ideas are everywhere and we just need to ask and encourage our staff to be more involved in our business.

The reason that I chose "Encourage New Ideas" as our Number 5 "Fast Start" Initiative is simply because "new ideas" work best in the "new year" and encouraging our employees on a positive level always gets them out of the holiday "postpartum" depression. 

Rewarding our employees for their "best ideas" and involvement is also highly recommended as well. Letting them even "champion" some of these new ideas as they were the ones to come up with...let them run with it!...

So don't let the holiday season "postpartum" get you and your staff merely walking into the New Year...start the race running with your New Year's Resolution and the 5 "Fast Start" Initiatives for 2019 and make it your best year ever!....Happy New Year All!

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