Here we go again with yet another crisis, especially for Parts Managers as we face this impending UAW Strike. In my opinion, this is actually much worse than what we dealt with during the Pandemic.
During the Pandemic, we all had to deal with the effects of what Covid-19 dished out with employee shortages, supply shortages, and prices sky-rocketed effecting our whole economy and daily lives, whether at home or at work.
In retrospect, comparing this impending UAW Strike to the Covid-19 Pandemic has a much different feel to it as it will put the Parts Manager on center stage. The Covid-19 Pandemic had everyone on center stage as we all had to bear the brunt of effects, whether in Sales, Service or Parts.
On the other hand, from a Parts perspective, we will most likely have to handle this UAW Strike much like we did during the Covid-19 Pandemic. We are actually still feeling that Parts impact as we are still dealing with Supply Chain Issues and never-ending Back Order Situations.
Hard to believe that things may actually get worse as the projected 45 - 60 Day UAW Strike predicts that Back Orders will multiply. Chasing parts once again will be the normal each and every day during this UAW Strike.
How we manage our way through this may have us looking back a few years ago to see how we did it the last time, but in my opinion, we have to be much smarter than the last time. History should have told us that we need to prepare better when these times hit us.
So!...How Do We Deal with All This?...Again!
One thing for sure is that the lessons of the past should always help us in preparing better in the future, even though this particular crisis puts Parts Managers on Center Stage with the fingers only pointing in our direction.
That being said, we have to keep logic on the forefront in managing our way through this and fortunately we have math on our side. Unlike other dealership departments, the Parts Department's Inventory Performance is highly dependent on history, math and algorithms.
Much like preparing our families for impending storms, whether hurricanes, winter storms, or any other impending weather issue, preparation is key. Once we get wind of what's coming, we all head to the grocery store for extra supplies and food.
Preparing for this UAW Strike is no different in nature, except for the fact that we are looking at a Parts Inventory of anywhere between 3,000 to 8,000 different parts numbers that sell at various Annual Piece Sale Rates.
That's much different than making out a grocery list and increasing our normal supply of milk, eggs, bread, water and other supplies in preparation of upcoming weather events. Having that many part numbers to prepare for in this event requires the right math on Lead Times and Days Supply.
It also requires proper modifications in the DMS to accommodate the added Days Supply needed to survive, in this case, an additional 45 - 60 days of the UAW Parts Strike Shutdown. In comparison, we have to plan on an extra 45 - 60 days of food and supplies to get through this storm.
Talk about preparing for a storm!...
The only way to prepare for this accurately is to use our DMS to do the math for us. Problem is, most dealership DMS Set Ups do not have ABC Source Ranking Set Ups installed into their DMS.
Even if they do, often times the math is not set up correctly based on Annual Piece Sales. Most DMS's are set up to one overall default settings on Low Days Supply, or Best Reorder Point, (BRP), and High Days Supply, or Best Stocking Level, (BSL).
ABC Source Ranking allows us to set the proper Best Reorder Points and Best Stocking Levels of all parts that sell at different rates throughout the year with the proper math. Parts sell at different rates and numbers, thus requiring different Reorder Point and Best Stocking Levels.
Having just one Default Setting for Best Reorder Points and Best Stocking Levels does not allow for parts that move at a different rate. For example, a part that sells 100 times a year is due to sell on average every 3.65 days or rounded up to every 4 days.
In other words, if an oil filter sells an average of 10 a day, that would mean that when this oil filter gets down to a 4 Days Supply of 40, the DMS would kick in at the Best Reorder Point and order that oil filter back up to it's Best Stocking Level of at least 100% at 80 for the Best Stocking Level.
Compare that to a part that sells only 12 times a year, with an average sale every 30 days, which requires a different BRP and BSL, (see above). In other words, that particular part can sell down to zero before ordering back to a Stocking Level of one based on current Lead Times.
The whole key is Lead Time Days as we have to allow at least 4 Days of Lead Time. One day to order, one day to receive, one day to stock the shelf and one day of Safety Stock. Even though in most cases, we receive them overnight, or in a couple of days.
If the dealer only has one "Default Source", then only one set of Stocking Levels can be applied, which is usually set to a Low Days Supply, (BRP) of 15 Days and a High Days Supply, (BSL) of 30 Days.
Having just one set of these Stocking Level Parameters leads to stocking too much of what we don't need and not enough of what we do need. This makes this whole UAW Strike battle even worse to overcome.
Having ABC Source Ranking allows the Parts Manager to simply add the number of Days Supply predicted in the UAW Strike. In other words, and using the above example of the oil filters, we would just need to add 45 - 60 days to our High Days Supply, (BSL).
Even though the Reorder Point never changes based on how many Annual Piece Sales, we can adjust the High Days Supply, (BSL) to include the added days of the UAW Strike Shutdown.
So, instead of when those oil filters get down to a 4 Days Supply of 40 and reorder up to 80, (100%), we would just add another 45 - 60 Days, bringing the High Days Supply, (BSL) to 85 - 100 to allow for the Extra Days needed during the UAW Strike.
This math would apply to all ABC Source Ranked Piece Sale Ranges, especially the Fast-Moving Piece Sale Ranges above 50 Piece Sales Annually. These ranges include 50 - 74 Annual Piece Sales, 75 - 99 Annual Piece Sales, and 100+ Annual Piece Sales.
We can now see how important ABC Source Ranking is, especially when preparing for this impending UAW Strike, but what do we do if we don't have ABC Source Ranking installed into our DMS? How do we adjust all the Annual Piece Sale Ranges with only one Default BRP and BSL?
Well?...if you haven't figured that one out yet, then you might as well just plan on doing the added Days Supply needed during this UAW Strike manually. Although, I'm not just saying to use the SWAG method that I mentioned earlier.
There is a "right" way of doing it, even though we may not have ABC Source Ranking installed into our DMS. That method would be what we did "back in the day" and that's setting Minimums & Maximums, otherwise referred to as MIN/MAX Set Ups.
By reviewing history for each of the Faster-Moving Parts, which I would recommend running a Parts Piece Sales Ranking Report which is available in most systems to determine which parts are selling the most annually.
After determining these faster moving parts in Parts History, we can then pull up each individual part number and set the MIN/MAX numbers, (especially the minimum) to accommodate the added predicted Days Supply needed during the UAW Strike.
Keep in mind though, whether we add the Days Supply via the MIN/MAX method or adding Days Supply via ABC Source Ranking, we need to "reset" these parameters back to their original settings after creating the Stock Orders to accommodate the UAW Strike.
This is definitely a procedure that we don't want to "set & forget" because the ramifications after this crisis could get even worse in an adverse effect as adding more inventory when it is not needed may lead to over stocking and additional obsolescence.
As mentioned, preparation is the key to success and surviving yet another crisis depends on the math in this case and should never rely on guessing our way through which may just lead to over stocking and future obsolescence as mentioned.
We got through this before and we can do it again!
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...