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...
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