July 2024: Managing & "Preventing" Purchased Obsolescence

As we continue down this road and topic of Parts Obsolescence for the second straight month, we will focus on purchasing Parts Obsolescence from day one. Last month, we highlighted stopping obsolescence before it happens and this month, we will focus on stopping the actual purchase of obsolescence from the start.

Each year, on average, parts aging statistics tell us that no matter what we do, parts will go obsolete each year at a rate of at least 2% - 3%. That being said, we have to look at a few other things.

One, the fact that parts will go obsolete no matter what we do to try and keep up with it by sending parts back to the manufacturer, other vendors, or perhaps even scrapping them on in-house programs is a given. 

Second, we always seem to end up with a surplus of obsolescence after all options have been exercised as the obsolescence just keeps growing. No matter what we do, unless we are heavy into wholesale, we can never build up enough return allowance and we never seem to get a handle on it.

The third problem seems to go under the radar, which are those parts we actually buy that are obsolete to begin with. In other words, parts that we purchase that may not have sufficient sales history, such as Special Ordered Parts and/or parts that the manufacturer recommends us to stock based on "their" recommendations.

To kick this month's issue off, I am reminded of an acronym that goes way back, which is PMA = OPM. Definition: "Positive Mental Attitude = Other People's Money. The Positive Mental Attitude is great, but the "Other People's Money" issue is whose money are we playing with here?

If we are talking about a "money well" here where anyone can just spend someone else's money, in this case, the dealers' money, then it's easy to assume that there is no accountability on how the dealers' money is being spent.

If we put this into perspective and from a consumer standpoint, would any of us spend money on anything without an expectation of some sort of return for that purchase? Even if we invest our money, we still have an expectation, even if there are risks involved.

I'm quite sure if Parts Managers out there took "ownership" on their parts purchases if it was actually "their" money they were spending on parts. They might even have a different approach when purchasing some of these parts that I would consider to be obsolete at the time of purchase.

This leads us to our main topic of discussion and question...

"What Exactly is Purchased Obsolescence & How Do We Manage and/or Prevent It?"

When you think about it, in most Parts Departments today, we are buying "obsolete" parts every single day. But, before we even go down that road, we have to determine just what is an "obsolete" part.

One definition of an obsolete part is a part that has not sold in 12 months and by the IRS Standard Accounting Methods, is technically worth only half of its value at cost, with a 98% chance of no future sales after 12 months.

So, how can we say or even talk about buying obsolete parts that we haven't even stocked yet, or perhaps had in inventory for 12 months? Technically, we can't even consider the purchase of obsolete parts without the test of time over 12 months.

On the contrary, we are talking about parts that we purchase that have an overwhelming chance of no future sales from the beginning based on other factors. These other factors are based on total sales demands from a much larger market other than our own.

One good example may be an interior trim panel that may be of a certain, uncommon color. If this "Special Order" part is not replaced and sold on this vehicle, we can pretty much be assured that this interior trim panel will ever sell again in our own parts inventory.

On the individual dealership level, there are two major contributors to pre-purchased parts obsolescence. The first is Special Order Parts, which by definition, pretty much explains why they could be determined as purchased obsolescence.

There is a reason that we call them "Special Order Parts" to begin with as they are technically parts that have not met our own Parts Phase-In Criteria with less than at least three parts demands over a set period of time.

Even though Special Ordered Parts are a part of our daily lives in our role as Parts Manager, we need to at least try and lower our risks by managing and preventing future obsolescence from the start with some guidelines with some accountability built into the process.

Thus, if we Special Order these parts, we are already at risk if we don't have a Special Ordered Parts Ordering Process which includes deposits, Service Pre-Appointments, Return Fees and perhaps some consequences on those that have the authority to Special Order Parts.

As mentioned, we have to have consequences, or fees for Special Order Parts that end up being returned to the manufacturer. Return Fees need to be charged to the dealership department that authorized and originated the Special Order to begin with if repairs are not completed.

Just to keep this in perspective, I'm quite sure that if the Parts Manager was paying for these Special Ordered Parts personally, they would either one...make sure the part is paid for up front, or two...make sure someone will be paying for the part or paying for the return fees.

Even if it were a warranty part, the Parts Manager would find a way to recoup the cost of the part. They would also make sure they wouldn't be paying for a part out of their own pocket without getting reimbursed in some way.

This is one of the biggest problems as unfortunately, most Parts Managers don't take ownership as they are spending the dealer's money and not their own. This may come as a shock to some "Smart Parts" Managers, but it's the truth. Take a look at your P & A Parts Summary at the end of the month from your manufacturer and you will know what I'm referring to.

Bottom line is that every dealership needs a Special Order Parts Process to include the following...

• Special Order Parts Deposit, or Pre-Payment on Customer Pay Parts, (where applicable)
• Special Order Parts "Pre-Appointment" for Service Customers. (Back Order Parts to be Re-Scheduled Upon Notification)
• Special Order Parts Notification System to Service Manager & Service Advisors, (DMS Reports)
• Return Fees Applied to Department Responsible for Special Order Part(s)
• Special Order Parts are Returned to Manufacturer after 45 Days and Not Put on the Shelf in "hopes" of Future Sales, (First Loss is the Best Loss)

The second most common area of "Purchased Obsolescence", especially over the last 20 or so years is caused by the manufacturer. As more and more manufacturers enter into the world of Vendor Managed Inventories, (V.M.I.), more and more dealers are stocking parts that do not have sufficient individual dealer demand.

"So How Can These Vendor Managed Inventories Provided by the Manufacturer be a Contributing Cause for "Purchased Obsolescence"?

Many of these V.M.I.'s only require just one single sale in two years in order to "pull the trigger" with the manufacturer recommending the dealer to stock the part on a new proposal. Unfortunately, many Parts Managers think they are being "compliant" by accepting these new proposals, when all the while, they are just being "obedient" to the manufacturer in order to stay in compliance.

I've often asked Parts Managers if they would stock a part that had only one sale in two years and the answer I always receive is a resounding "NO"!. My response to them after asking this question is..."Then Why Are You Doing It?"

Manufacturers that offer these programs are basing these proposal recommendations based on "group" sales demands and not necessarily "individual" dealer demand. Once a part has met "group" demand, or "criteria", and when the "trigger is pulled" just one time by the individual dealer, "Purchased Obsolescence" is born. Just to hold that part for a year or just to send back and start the process all over again. 

Here's the worst part...even if we do hold that part for a year or so and send it back, often times the manufacturer comes right back and puts that same part on a new proposal the next day to stock it even again after we just sent that part back!

Sounds like a great deal if you are the manufacturer! All the risks of "Purchased Obsolescence" falls on the dealer and if the Parts Manager is not taking ownership of their own Parts Department, then they are just adding to their already on-going obsolescence nightmare.

In my opinion, it is not even worth being "compliant", or "obedient" to most of these Manufacturer V.M.I. Programs when you consider all the acquisition and holding costs of "buying" all this eventual obsolescence. Purchase discounts and so-called inventory "protection" will never outweigh the overall costs of holding inventory that does not sell.

I will say though that there are better V.M.I. Programs out there than others, but overall, if the dealers D.M.S. is not set up correctly by the math, then the manufacturers V.M.I. will just magnify the problem on "Purchased Obsolescence". 

The guidelines in preventing "Purchased Obsolescence" with the Manufacturers V.M.I. Program is as follows:

• First and foremost. the Dealers' D.M.S. must be set up properly with all the right math in the areas of Parts Phase-In/Phase/Out, Best Re-Order Points, (BRP) and Best Stocking Levels, (BSL) utilizing ABC Source Ranking.
• Better "drill downs" on the V.M.I. New Proposals and not just accepting every part proposed. Checking history and application usage, low & high model year, etc.
• Do not re-accept New Proposals after parts have been Phase-Out by the DMS.
• Do not re-accept New Proposals on parts that have finally met the return phase to the manufacturer. Many times, a part is "Re-Proposed" after we return the part.
• Do not accept New Proposals just to remain compliant. The Temporary Excluded Parts List is a great resource for filling in for those compliant percentage gaps.

If the math is not correct in the dealers' D.M.S., then the Stocking Levels recommended by the manufacturer on V.M.I. parts will also be incorrect. This results in too many of the parts we don't need and not enough of the parts we do need.

But don't worry!...the manufacturer absolutely loves the dealer being their second warehouse! Guaranteed sales and no risk as the dealer will hold many of these "pre-purchased" obsolete parts throughout the active parts life cycle. Even though many parts may be fast moving A & B Parts...many of these parts are just held for future return.

The sales of these faster moving A & B parts just "masks over" all these other parts in the C & D movement range that don't sell but have to keep as well. It's almost like New Vehicle Sales where dealers may be forced to carry New Vehicle Inventory that does not sell in order to get the New Vehicles that they do sell and want on their lots.

Keep in mind that there is no such thing as "Inventory Protection" as I can walk into any Parts Department today and find these so-called "protected" parts on the shelf that are several years old. It's just another fancy name for a basic "Return Policy", no matter what the manufacturer. All parts have to qualify for all parts returns, no matter who the manufacturer may be.

It's hard enough to manage our obsolescence that filters down each day and month that seems to grow higher and higher every year. We never seem to gain enough Return Allowance to make up for the natural progression of accrued obsolescence. We have to not only stop obsolescence before it happens as we mentioned last month....

"We Also Have to Stop Buying Obsolescence from the Start!

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...

June 2024: Got Obsolescence? "Stop It Before It Happens!"

Dealing with, or even discussing Obsolescence is not a new topic for sure, but it seems to still be a plague out there for many dealers and parts managers. If obsolescence is so common of a topic, then why haven't we stopped this plague yet?

In my opinion, obsolescence has just become a household name that we all know very well, and we are just going to accept things as they are. We know we have it; we know we are going to have more, and we know we are always going to have it, so we just have to live with it!

This may sound a little out there, but it's very true as many dealers and parts managers have just accepted the fact that they are carrying and have been carrying excessive amounts of obsolescence. 

It's kind of like seeing the same piece of trash in the same spot each day and no one picks it up because we have grown accustomed to seeing it every day and it's now just a part of what we see each day during our daily routines.

To me, there are just three dealer, and/or parts manager "mindsets" when it comes down to handling or dealing with parts obsolescence. All three have a huge impact on how we look on paper in several Parts Key Performance Indicators, (KPI's), or Industry Guidelines.

The first mindset and also the worst is that it's just there and it will always be there. Most of these dealers and parts managers know it, but it's really not at the top of the list. I also find that these dealers tend "not" to take much interest in their Parts Department in general as they are more "front end" focused.

The second "obsolescence" mindset are those dealers and parts managers that do want to control their obsolescence and are battling this plague. They just can't get ahead of it, and they need a plan to control it.

The third and last obsolescence mindset are those dealers that have no obsolescence and prevention is a priority just as much as sales and gross profits. These dealers and parts managers know the actual, overall "true" impact of carrying excessive obsolescence.

Here's the question....

"What are the TRUE Impacts of Carrying Excessive Obsolescence and How Do We Control, or Eliminate It?"

First, we all have to understand one key element when we discuss obsolescence. Parts will and are going to go obsolete at a rate of at least 2% - 3% each year. So, it really isn't a question of having obsolescence, it's more of a question of what we are going to do about it.

We mentioned earlier that in my opinion, there are three mindsets when it comes down to dealing with obsolescence, whether a priority or not. That being said, we are going to start out by revealing the "true" impacts of carrying excessive obsolescence.

As many of us already know, there are several industry guidelines in Parts, just as in every dealership department. Although, I can't think of any one thing, that of course being parts obsolescence, that impacts so many of the parts industry guidelines.

We will kick this issue of ACG "Smart Parts" off by revealing the impacts of carrying excessive obsolescence and what it can and does bring. These impacts on several parts industry guidelines are not just opinions, they are facts as the math does not lie.

The only question after seeing what the impacts of excessive obsolescence will bring is... will it actually change one of the three mindsets? In my opinion, many dealers with the wrong mindset do not even know the ramifications. Hopefully, we can change that thought process during this reveal.

Once we go through the impacts of carrying this "monkey on our back", we will then move on into revealing the true secrets on how every dealer can be "Obsolescence Free Forever", no matter what manufacturer, or franchise.

Let's Get Started!...

Number One: Inventory Investment Analysis (Industry Guideline: 75%-85%)

This Parts Industry Guideline measures the percentage of parts inventory that is considered Normal Stocking Parts vs. Non-Stock Parts, or Active vs. In-Active Parts in inventory, depending on the DMS used. 

Obsolete Parts fall into the Non-Stock, or In-Active category so right off the bat we can see that a higher than acceptable amounts of obsolescence can impact this guideline. For example, let's say that we are not in guide, but 25% of my parts inventory is obsolete. But after "Backing Out" the obsolescence, we find that we would be in guide if we did not have that high amount of obsolescence.

We also have to be careful not to include "so called" Normal Stocking Parts that have not sold over 12 months as these parts need to be added to the obsolescence amounts. So, when we do the calculation on this guideline, we have to include all Normal Stocking Parts minus the Over 12 Months - No Sales Normal Stocking Parts.

Just because a part is still considered a Normal Stocking Part, but has not sold in over 12 months, it's still an obsolete part and is actually no longer a Normal Stocking Part and needs to be added in the obsolescence equation.

Number Two: Sales Activity: (See Guidelines Below)

0 - 6 Months Sales Activity: 85%

7 - 12 Months Sales Activity: 10% - 15%

Over 12 Months Sales Activity: 0% - 5%

Obsolescence can surely impact this Key Performance Indicator, or Industry Guideline. All these categories have to add up to approximately 100%, so if the Sales Activity in the 12 Months or over category climbs, the percentage drops in the other two.

Excessive amounts of obsolescence can actually "shadow" and hide potential good percentages in the 0 - 6 Month and 7 - 12 Month Sales Activity categories. Often times, I've seen where a dealer's 0 - 6 Month Category was at only 50%, but when we backed out the obsolescence in the 0% - 5% category, the 0 - 6 Month Sales Activity jumped to over 85%.

Very deceiving for sure, but when we look at all these categories, obsolescence values are included with all inventory values. This is where many dealers get confused as it is possible to have a low 0 - 6 Months Sales Activity on paper, but in reality, with Over 12 Months Sales Activity backed out, they may actually be in good shape.

Number Three: Annual Gross & True Turns: (See Guidelines Below)

Annual Gross Turns = 8

Annual True Turns = 5

The true measurement of how well the dealer's parts investment is working for them is Annual Gross & True Turns. These two "turn rates" are slightly different from each other as one, (Gross Turns) measures the "dollars" of inventory that is "turned" through the Ledger Balance Inventory of the Parts Department, whether the part is stocked or not.

True Turns measures the actual sale and "Annual Turns" of the Normal Stocking Parts Inventory based on Stock Purchases. All this being said, we can already see what's coming as far as obsolescence. Gross & True Turns includes all the Parts Inventory, including the obsolescence.

Gross & True Turns also includes "overstock" amounts of Parts Inventory as well, even if they are fast moving parts. Combined with the obsolescence, overstock amounts and obsolescence all add up to the Parts Inventory "Over Valued Amount".

If this "Over Valued Amount" is excessive, it will lower the Parts Gross & True Turn numbers for sure. If Obsolescence & Overstock numbers are held at Industry Guide, the Gross Turn will be at 8, and the True Turn would be at 5 Annual Turns. This will also add up to 45 Days Supply of Inventory, which is also the Industry Guideline for Days Supply.

Number Three: Acquisition & Holding Costs: 25%-30% of Inventory Value

Probably one of the most under looked category of them all as you will never see this expense, or cost on any financial statement. Not only an Industry Guideline in our industry, as Acquisition & Holding Costs are measured in any industry that includes an inventory asset or commodity for resale.

Acquisition & Holding Costs includes all the expenses to manage the Parts Inventory such as Personnel, Rent, Insurance, Advertising, Depreciation, etc. Not, only that, the "IRS Accounting Straight Line Method" says that any inventory or commodity for resale that has not sold in 12 Months is only worth half it's value, or $.50 cents on the dollar.

Now we are really seeing how much it costs to hold obsolescence once we back in all the costs, whether seen, or unseen. Acquisition & Holding Costs are real, even though dealers that carry excessive obsolescence may not think so.

Now that we have drilled down why the cost of carrying any obsolescence is not worth it, it's time to start building a regular plan to not only control obsolescence, it's also time to have a plan to get rid of it as we...

"Stop It Before It Happens!"

There is an old saying out there that reads..."An Ounce of Prevention is Worth a Pound of Cure". That cannot be any truer than when we talk about Controlling & Eliminating Obsolescence.

We have to have a plan of course, but what's different about this plan is that we are going implement a "monthly" Obsolescence Plan. We aren't going to wait until it's too late and has grown beyond our means of keeping up with it.

We are going to implement a "3-Stage Obsolescence Plan" that will be an on-going process each month to keep obsolescence out of our lives. We will go beyond just our Return Reserves and Accruals, which we all know and use, but never enough.

Let's Get to Fixing It!...

Stage One: In-House Return Policy/Obsolescence Prevention

The first thing we need to set up is In-house policy on Special Ordered Parts, Returns, Handling Fees and Authorized Personnel ordering parts to begin with. In most dealerships I visit, there are really no parts order policies as anyone can order a part.

This is where obsolescence begins as there is no accountability in what I call the "purchasing of obsolescence". There has to be consequences to go along with the accountability.

That being said, there needs to be handling fees charged to the department on the returns of Special-Order Parts after 30 Days. Parts will not be held over 30 days unless by manager approval and will be sent back to the factory. Return Fees & Unreturnable parts will be charged to the authorized ordering department as well, no exclusions.

Of course, Special Orders should be pre-paid, when possible, pre-appointment on Special Orders in Service, signing off on Special Orders, Proper Notification upon part arrival are all included in Stage One.

This first part of our "3-Stage Plan" is most crucial as this stage puts the wheel in motion to preventing obsolescence as most Special Ordered Parts not sold end up being obsolete. After all, there is a reason we had to Special Order the part in the first place, it's not a stock part.

We have enough to deal with in the area of obsolescence with parts going obsolete by an average rate of 2% - 3% a year all by themselves without having to add to the situation by having unsold Special Order Parts added to the mix.

Stage Two: Monthly Returns: Manufacturer & Outside Vendors

There is nothing new in our second stage as far as sending parts back to the manufacturer as this has been our routines for years. Even though manufacturers have different return policies, we are all pretty familiar with this monthly routine.

But if I was to ask the question to parts managers out there as to how often they are shopping out their obsolescence to outside vendors, I would guess that they are not doing it monthly. Vendors such as Parts Broker Direct, (OEC), Dealermine, Parts Voice, Find Rare Parts, etc. just to name a few are out there and should be utilized monthly.

Why is it that we wait until we have accrued way too much obsolescence before we shop it out to these vendors when we should be sending lists monthly. Parts go obsolete every month and more parts get added to the list and can be shipped out to these vendors.

Many parts managers just go with one big list after it's built up and pick one vendor for their obsolescence purchases. After the vendor picks through the list as to what they may what to purchase with pennies on the dollar, the process seems to stop right there.

When in all actuality, the process has just begun here in Stage Two. In my opinion, we should be sending the obsolescence list to all the vendors out there and doing it monthly. The auto parts world market is always changing and what they may not want today becomes next month's hot item.

Just because the vendor passes on a part or offers a lower than desired offer today doesn't mean that it will stay that way down the road. Either way, our first loss is our best loss, and we need to get rid of it. If it hasn't sold in 12 months, there's a 98% chance that it will never sell.

Stage Three: Create an In-House Scrapping Account

In my opinion, our Stage Three is the "glue" to the whole process of being "Obsolescence Free Forever", (just like O.F.F. Mosquito Repellant). Even though many dealers may already have a Parts Scrapping Account where they set aside a certain amount each month, there is a better way than just setting aside the same amount each month.

The difference, in my opinion, in having the "right type" of scrapping account is what will make the difference. The first thing to remember is that the scrapping account has to be based on the rate of "net obsolescence", after Stage One and Stage Two.

The second thing is that the Scrap Amount that is set aside each month should not be one set amount. You heard correctly...even though I like the fact that the dealer is willing to set aside a certain amount each month for parts scrapping, there is a better way.

In my opinion, the Monthly Scrap Amount should be charged back to Customer Pay Repair Order Parts Gross at a monthly rate of 2%. This way, the scrap amount each month will flow with the CPRO Parts Sales & Gross and won't impact any more than the 2%.

Here's the big question...

"Where Are We Going to Make Up for That 2% Loss in Gross"?

If we are utilizing a "Cost Plus Matrix", it's rather easy to regain that 2% loss of gross that went into our Monthly Scrapping Account. The one thing about math is that it's irrefutable and it is what it is. Roughly, every 10% that we raise from cost up with net us 2% retained gross.

For example, if I have a part that costs $10.00 and the MSRP is $16.70, my "cost plus" markup may be 100%, which would be a sales price of $20.00 and a 50% gross margin.

By bumping it to "Cost Plus 210%", versus "Cost Plus 200%", (depending on the DMS, cost plus 100% to 110%), we end up selling that part for $22.00 instead of $20.00. The extra $2.00, or 2% retained gross allows me to set aside that $2.00 for scrapping and maintain my average gross retention before the 10% matrix modification.

Stage Three is the last resort as Stage One an Two are primary in Obsolescence Prevention and Control, but when Stage Three kicks in, we are talking about the elimination of Obsolescence altogether.

The mindset that we started this all out with is the most important element to the overall results as we, in my opinion have to have that mindset that we are not going to tolerate obsolescence, no matter what the manufacturer.

"Let's Get This Monkey Off Our Back Once & For All!"

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...

May 2024: "Parts Life Cycles"

In this issue of ACG "Smart Parts". we will continue with a theme, although similar to last month's theme of "The Lifespan of a Part Number", we will actually break down that "Lifespan of a Part Number into different stages, which is referred to as "Parts Life Cycles".

Much like our own lifespan where we tend to go through different cycles, or "stages" of life that consists of "peaks and valleys", "good times and maybe not so good times", and times in our lives where we are more active than others.

The "Parts Life Cycle" is very similar over the course of the "Lifespan of a Part Number", which we featured last month. In continuing with last month's theme, we will actually break it all down and transform these different "Parts Life Cycles" as how they tie into our current Industry Guidelines on Parts Inventory Management.

Managing the Parts Inventory much like any other department in today's Automotive Dealership requires a certain skill for sure.  Although, when it comes down to managing the dealers' assets, only the Sales Department and the Parts Department are involved.

That being said, and as in the Sales Department, certain Industry Guidelines are applied that do not affect other dealership departments. But when you break it down even further, managing the Parts Department Inventory gets even more complicated and involved as compared to managing the New & Used Vehicle Inventories.

Managing the New & Used Vehicle Inventories involves a much shorter "lifespan" and fewer "life cycles". It would be kind of like comparing the lifespan of a fly compared to our own lifespan as the fly has a much shorter lifespan.

Therefore, the fly is less likely to have as many "life cycles" as we have in our own "life cycle". Thus, the "Parts Life Cycle" stands alone in comparison and requires their own specific measurements and guidelines as to how we manage the dealers second highest business asset.

The "Lifespan of a Part Number", as we discussed last month is broken down into "Parts Life Cycles". As "Smart Parts" Managers, we have to maximize these "Parts Life Cycles" in order to "turn" the Parts Inventory to Industry Guidelines.

"So What Industry Guidelines are Directly Impacted by Parts Life Cycles?"

As we go through our own lives and our own life cycles, one thing is for sure is that there will be change in each life cycle. Much is the same for parts as there will be "peaks and valleys", but in the case of the parts life cycle, we have more control of how we shape that "Parts Life Cycle".

As opposed to our own "Life Cycles" where we may not have as many choices, in Parts, we can choose our Stocking Levels, our Pricing Levels, and we can choose when and how much of a part we want to stock during these "Parts Life Cycles".

As we mentioned earlier, the "Lifespan of a Part Number" is broken down into "Parts Life Cycles" that are "governed" by a certain number of Industry Guidelines" that will help us maximize our parts sales and gross profits over the course of this parts lifespan.

All this being said, we now have to ask....

"What is a Parts Life Cycle Anyway?...and How Are These Life Cycles Measured?"

The first answer to the above two questions is a "Parts Life Cycle" is measured in 90-day periods, or three months. That doesn't mean that the part is only alive for three months, it just means that a "part" cycles through or cycles out every three months.

We will provide evidence of this as we go through the following Industry Guidelines and how they revert back to these three-month periods. Whether the part is "phased-in", or "phased-out", these cycle times play a huge role in the overall "Lifespan of a Part Number".

Number One: Parts Phase-In

The first "Parts Life Cycle" measurement, or Industry Guideline starts with the Parts Phase-In Criteria. Normally, parts are "phased-in" by a number of parts demands, usually 3 hits over a course of 3 different months over a certain number of months, usually 3, 6, or 9 months.

Here is our first bit of evidence of the 3-month Parts Cycle of every 3 months. In other words, parts "cycle through" every three months, or "trimester". Once total parts demand meets the initial phase-in criteria, it now has to survive the next "Parts Life Cycle".

Number Two: Parts Sales Activity

Parts Sales Activity Guidelines are another piece of evidence of the "Parts Life Cycle" periods of 90 days, or three months. Industry Guidelines for Parts Sales Activity starts with 0-3 Months, 4-6 Months and then 2 cycle periods in the 7-12 Months Sales Activity.

Although, Industry Guidelines have been recently updated in the first two Sales Activity, combining the 0-3 Month Sales Activity and the 4-6 Month Sales Activity into one Sales Activity range of 0-6 Months. Once again, measurement guidelines in 3-month, or 90-day increments.

Each Sales Activity segment with Industry Guidelines of 85% in the first 0-6 Month Sales Activity, then 10%-15% in the 7-12 Month Sales Activity, then finally 0%-5% Over 12 Months Sales Activity. Over 12 Months Sales Activity is also measured in 3-Month Increments in many Dealer Management Systems...12-15 Months and so on.

Number Three: Seasonal Parts Sales

Another bit of supporting evidence to these 3-Month "Parts Life Cycles" are Seasonal Parts Sales, even though seasonal parts sales may not be the same everywhere. Even though that may be true, parts demands do tend to follow a seasonal trend, regardless of yearly temperature swings.

In other words, no matter where you are, summer is summer, and winter is winter, and we tend to see more seasonal sales in the peaks of these seasons. It may just be that some experience more demand than others depending on the location.

Number Four: Parts Phase-Out

Once the "Lifespan of a Part Number" reaches its final "Parts Life Cycle", it is extremely important to "let it go". Parts Phase-Out is also triggered in stages of 3-month cycles as previously mentioned in our Sales Activity segment.

Once a part reaches that "In-Active" point of either 6 months, or even 9 months, the chances of selling those parts drops drastically. To the point that if a part does not sell after 6 months, it's a 50-50 chance that it will never sell again.

At 9 months, pretty much a 67% chance it will never sell again, and then finally at 12 months, pretty much a 100% chance of no future sales. Once again, statistics carried in 3-month intervals.

Number Five: Gross & True Turns

Even though Gross & True Turns are measured annually, we always tend to break down each year into "quarters"...first quarter, second quarter, third and so on. Even Gross Domestic Product, (GDP) is measured on a quarterly basis, or every 90 days. Most businesses are measured and forecasted in 4 periods of 90 days, or every 3 months.

Annualized Gross & True Turns are key factors in determining how well the dealers Parts Asset is performing from an investment standpoint. It's also an indicator of how "fluid" the asset is, and how much the asset is truly worth and profitability potential.

All in all, managing the Parts Department and the dealers' number two asset requires the knowledge and skill in managing every part. From the time it's born, through the "cycles of life" and throughout the parts "lifespan" in order to maximize the investment.

If we do this, we will be more able to provide the "right part at the right time" through the "peaks and valleys" in the life span of a part number. Much like our own lives, we have to enjoy life while we can and make the best of all our opportunities.

"Everything Goes in Cycles...So Does the Life of Today's Automotive Part..."

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...

April 2024: The Lifespan of a Part Number: "Back Then & Today"

Over the past 40 years or so, the number of part numbers in some automobile manufacturers' parts catalogues has grown as much as 25 times the number of part "numbers" today versus back then. This is simply evident by the increased number of manufacturers and increased number of vehicle models.

That being said, the "Lifespan of a Part Number" has drastically changed over this span of 40 years and beyond. But when we talk about the lifespan of a part number, there are actually two different meanings, or definitions of this lifespan.

When we talk about the "lifespan" of a part number from the manufacturer's standpoint, we are referring to "how long" the manufacturer will carry this part in their Master File before it becomes discontinued and it's "shelf life" has expired.

When we talk about the "lifespan" of an automotive part from a consumer standpoint, the "lifespan" of an automotive part means "life expectancy". How long will the part last before it breaks or wears out.

Back in the day, the "lifespan" of an automotive part from the manufacturer's standpoint was actually much longer than it is today. Years ago, many part numbers fit several vehicle applications for several years and often times we could memorize part numbers because of the frequency of use in multiple applications.

For example, one set of brake pads could fit seven different applications for several years where as today, this is quite the opposite. We could have seven different brake pad numbers for just one model vehicle application over a much shorter time.

The result of this swing increases the number of total part numbers that a particular manufacturer carries in the breadth of their inventory. More increases are even realized by the increased number of vehicle models with the addition of hybrid and electric vehicles.

With this increased number of part numbers also comes the "decrease" in the lifespan of the "individual" part number. The result of increased inventory breadth and fewer individual part demands as opposed to multiple model and year utilization as mentioned above 40 years ago results to the "shrinking" of the lifespan of the "individual" part number.

"So, Just How Does One Definition, or Meaning of the Lifespan of a Part Number Affect the Other Definition or Meaning?"

The answer to that question is that the "Lifespan of a Part Number" is highly impacted by both definitions, or meanings. One affects the other in the opposite direction as one increases, the other decreases.

This may sound confusing, but after we break this down, we will see that it all makes sense, especially from a mathematical standpoint. As mentioned, the "Lifespan of a Part Number" can also be referred to as the "Life Expectancy" from either side, meaning how long will a part last on the vehicle, or on the shelf.

So, we actually have two scenarios involving this term of "The Lifespan of a Part Number". One being how long will that part last on the vehicle before wear and tear takes its toll. The second being how long will the part number last on the shelf before becoming obsolete and/or discontinued due to lack of demand.

Now, let's get into it and find out how each meaning affects the other in a huge way. We will see when one definition goes on the upswing, the other one tumbles.

Let's start with the "Lifespan of a Part Number" from a "life expectancy" standpoint, meaning how long a part will or would last after it is installed in a vehicle today versus 40 years or so ago. 

The technology in automotive manufacturing has certainly risen drastically over the past 40 years which is one main reason why the "life expectancy" of an automotive part, or automotive parts has increased. 

Many automotive parts have also been replaced with components versus "moving parts" that are more efficient and dependable. Some parts today actually have a "life expectancy" of the actual life of the vehicle with no expected replacement interval.

For example, 40 years ago, parts such as fan belts, radiator hoses, steel exhaust systems, biased tires, non-platinum spark plugs, and wheel bearings had shorter "lifespans". They either wore out or had to be replaced on a mileage or time interval basis.

Even vehicle fluids last longer today as opposed to years ago with longer life engine coolant, transmission fluid and synthetic engine oil. All going way beyond the old "life expectancy" of years ago.

Other parts that now have extended lifespan are belts and hoses as years ago, there were as many as 4 drive belts per vehicle. Fan Belts, A/C Belts, Power Steering Belts and some vehicles with Air Pump Belts have been replaced with just one Multi-Ribbed Serpentine Belt with a much longer life.

Radiator Hose replacement has almost become a thing of the past as these hoses, as in the previous mentioned "V-Belts" of the past would only last approximately two years or 30,000 miles much like steel exhaust systems, versus "stainless steel" exhaust systems today.

On the other hand, the "shelf life" of many parts years ago would have a much longer "shelf life" than parts today. This may sound weird, but it is true from a standpoint that many parts years ago fit for many years and fit multiple vehicle models and applications. The end result is the "need" for these parts lasted for a longer period of time.

As mentioned earlier, and for example, a set of brake pads for one manufacturer fit many models and for many years as opposed to today when we could have several different sets of brake pads that would fit just one year vehicle model due to various vehicle options and requirements.  

With more vehicle manufacturers, more vehicle models and more technology, the end result is that we have many more part numbers and a wider "breadth" of parts inventory within each manufacturer than we had several years ago.

That being said, more applications mean less overall "individual" part number usage even though the "overall" part usage may be the same. In other words, we could sell 10 sets of 10 different brake pad part numbers versus 10 of one part number, both equaling 10 total sets of brake pads.

In a similar comparison, in the airline industry, Southwest flies Boeing 737's exclusively. There for, the chance of having the right part for repairs and maintenance is more likely to be available than Delta who flies Boeing 717's, 737's, 747's, 767's and 777's for a longer period of time. Not only that, Delta also flies jets manufactured by Air Bus, McDonald Douglas, (bought out by Boeing) and Canada Regional just to name a few.

This means the likelihood of Delta not having the right part for repairs or maintenance is more likely to occur than with Southwest. It is also more likely that Delta has to have more "breadth" of parts inventory to maintain its fleet of various jets.

Back in our industry and way back in the beginning of the automobile assembly line, Henry Ford kept it very simple. One part fit all, and the Model T was only available in one color which was black. Mass producing of original equipment and replacement parts was definitely not an issue, especially in later years in the automotive parts aftermarket.

The number of vehicle applications that required the same part number years ago was much higher than it is today, even though there are far many more vehicles on the road today versus "back in the day".

When you have as many part numbers as we have today, it's really no wonder why there are more back ordered parts and supply chain issues. Even though some manufacturers do it better than others, it's quite clear that the manufacturers with more total models have more shortages and less parts availability than manufacturers with less models.

The "Lifespan of a Part Number" is affected by both definitions, and they actually play off one another. When one lifespan definition is extended, the other lifespan definition is diminished. The difference between the two again is how long will the part last on the vehicle versus how long the part will last on the shelf from an availability standpoint.

A part can be discontinued or go obsolete no matter what the part fits no matter what the year, make or model. I personally know of parts that are still available from a manufacturer that fit vehicles back in the 70's. On the other hand, I know of parts that have gone obsolete, with the part being discontinued, and the vehicle is less than 10 years old.

It all comes down to part demand and longevity from either one of our definitions of the "Lifespan of a Part Number". The definition of each terminology simply indicates demand is going to determine the fate of a part number or dictate the overall outcome of the individual part number.

One thing for sure is if we were to compare the "Lifespan of a Part Number" to our own lifespan, there are definite similarities. Each part number is really just a name, just like any one of us. A part is born, a part grows in demand, just like we do over a course of time, goes to work for a while, then demand slows down until we eventually retire.

In the end, just like us, parts are discontinued, and we move on past this life. And much like our own lives, some live longer than others as the part numbers do depending on the overall part demand.

So, next time you walk down that aisle and pass by some of these part numbers that you know and may we have in your parts inventory, just remember...it may be the last time you see each other, only just to remember that part number down the road when it becomes your time to look "back in the day"!

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...

...

March 2024: Vendor Managed Inventories, (V.M.I.): "How to Play the Game"

Since the early to mid 90's, many of us have gotten used to working with the Manufacturers' Vendor Managed Inventory, (V.M.I.). Prior to the V.M.I. Introduction, Parts Managers like myself relied totally on our own Dealer Management System, (D.M.S.) to run our Daily and/or Weekly Stock Orders.

Fast forward to today, and if your manufacturer offers their own V.M.I., we are now subjected to these Manufacturers recommendations on just what parts we should stock. Even though these V.M.I. Programs do utilize individual dealers' sales information as well as the dealers recommended Stocking Levels as set up on the D.M.S.

In this issue of ACG "Smart Parts", we are going to drill down and break down just how these V.M.I. Programs work and more importantly, "How to Play the Game" in getting more of the rewards from these programs with less risk.

Even if your manufacturer does not offer a V.M.I. just yet, don't be surprised if they do in the near future as many manufacturers are joining in such as VW, BMW, Ford just to name a few. Software Programs such as RIM, ARO, Partseye, SRD, and others are now the tools manufacturers are using to create their Stock Replenishment Programs.

Even though the individual manufacturers set ups and qualifications may be different, they may use the same "vehicle". For example, RIM is not just a GM Sponsored V.M.I. as Ford, VW, Mitsubishi and Nissan and others have their own versions of the same software used in RIM, (Retail Inventory Management).

There are also some V.M.I. Programs that are better than others such as PartsEye and FCA's ARO Programs. It all comes down to how they are set up initially as well as program qualifications, benefits, penalty's, guidelines and one of my favorites which is "compliance", which I actually call "obedience".

Another great selling point for these programs is the word "protection" or "inventory guaranty", as both of these terms are deceiving. If these programs offer this protection, or guaranty, then why are there still many of these "qualified" program parts still on the shelves at dealers several years later? Where is the protection, or where is the inventory guaranty?

The truth is all these V.M.I. programs include a "Return Policy", and not "Protection" or "Guaranty" Return Policy. All return parts include restrictions, guidelines, criteria and return qualifications just like any other Manufacturers Return Policies, whether regular monthly returns, or V.M.I. returns.

Let's get started on how these V.M.I. Programs work....

Creating the software V.M.I. "vehicle" such as RIM for example all starts with the collection of sales data from the dealers Dealer Management Systems, (D.M.S.). Some V.M.I.'s will also collect "total demand" data which includes Lost Sales Reporting.

This demand data is collected from dealers nationally, regionally, demographically and weighed utilizing algorithms to measure and initiate parts "phase-in" as a group. The next step, which varies from manufacturers and V.M.I., is what will "trigger" the initial parts "proposal", or recommended Best Stocking Level, (BSL).

In most V.M.I.'s, it only takes one sale in either 12 or 24 months on a "qualified" V.M.I. part that has met overall "group" phase-in criteria. For example, normal individual dealer parts phase-in criteria may be "at least 1 demand in 3 separate months over a period of 7 months to phase-in".

Group phase-in follows these same guidelines in the above example except "multiplied" by several dealers' total demand. So, instead of "at least 1 demand in 3 separate months over a period of 7 months", the demand may have to be "143 demands in 3 separate months over a period of 7 months".

Then, after "qualifying", parts are then weighted for average daily demand through algorithms and is called "Weighted Daily Demand", (WDD), or even "Cycle Demand" and "Lead Time Demand" algorithms.

This all sounds pretty complicated, but it really isn't and the problem with all this is that technically, a part may qualify with those 143 demands in the group as listed above, without any demand in my dealership. 

In other words, when we do finally sell just 1 of these "qualified" parts, the V.M.I. will recommend stocking that part after just 1 sale in either 12 or 24 months. So, then the next question would be..."Should we stock a part that we've only sold once in 12 or 24 months, and will it really be protected?"

The above example can also go in the other direction on a part that has met my criteria for phase-in with several "hits" but is still not a "qualified" V.M.I. part because it hasn't met the total group demand criteria. This is why we still need our own D.M.S. to track our own demand.

Let's now look at "The Good, The Bad, & The Ugly" on these V.M.I. Programs

First, The Good:

It's always been a good thing to see what parts are selling out there to get a good sense of what we may be selling in the future. Collective demand information will give us a "road map" for sure, but demand varies from dealership to dealership and may lead to understocking or overstocking and obsolescence.

Discounts and Allowances is also a good thing as these V.M.I. Purchase help us earn discounts and build return reserve. Depending on the manufacturer, additional "back end" money may be available as these programs may also be tied into overall dealer "cash back" programs.

Second, The Bad:

One of the first "bad things" that I see quite often due to these programs is that many Parts Managers rely on these programs 100% for all their Stock Replenishment. What they may not realize is that most of these V.M.I. Programs offered by the manufacturer only provide approximately 50%-55% of their total manufacturer parts inventory "breadth".

In other words, they cover mainly the A and B type parts and miss a lot of what I call the "meaty parts" like some sensors, gaskets, bolts, tensioners, adjusters and so on. Many of the parts that are tying up the Service Department and slowing down Service "Cycle Times".

These "meaty parts" can only be picked up by our own D.M.S. with the Proper Set Ups & Controls and running our In-House Stock Orders like we did before these V.M.I.'s were even out there. Unfortunately, many Parts Managers have transformed away from their own D.M.S. and are missing the benefits of their own D.M.S. with the right set ups & math.

Lastly, The Ugly:

The Ugly side of many of these Manufacturer V.M.I. Programs is unfortunately the lack of understanding of how these programs work and "How to Play the Game". The results of not knowing how to play the game leads to a lot of overstocking of these V.M.I. parts and more obsolescence.

Overstocking in the ways of maybe having too many Days Supply of even faster moving parts, i.e. having 10 Brake Rotors of a part number when we only need 4. Overstocking doesn't just mean having too many of a fast-moving part as having just 1 of a part number that I don't sell could be too many.

In many of the stores that I have visited, the overstock of V.M.I. parts are as much as 10%-15% of the total parts inventory. All the while, that additional investment on overstocking investment could be directed more towards parts that will strengthen the "breadth" of our parts inventory to increase overall "First Time Off Shelf Fill Rates".

Another "Ugly" is that many of these dealers that utilize a Manufacturers V.M.I. Program is increased obsolescence. Even though these programs promise "Inventory Protection", that is just not the case as I've witnessed over and over again.

Although, there are a couple of these V.M.I. Programs, such as PartsEye that actually "discourage" the stocking of Aged V.M.I. Parts, which is great. Maintaining the proper level of Days Supply and Aged V.M.I. Inventory is encouraged and rewarded with more Program Benefits.

Unfortunately, in some other Manufacturer V.M.I. Programs, dealers are being led to being the Manufacturers Second Warehouse and admittedly so from some of my conversations with some manufacturers.

Knowing "How to Play the Game" also requires knowledge of "Riding the Curve". Compliance Levels require the Parts Manager to know what to stock and what not to stock in these programs that lead to overstocking and accruing more obsolescence while staying "Compliant", or "Obedient" to these Programs.

Knowing "How to Play the Game" is a "juggling act", and we need to take advantage of the benefits while protecting our dealers second highest asset, which is the Parts Inventory.

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...

 

February 2024: Dealer Management Systems, (DMS) Rankings for 2024

In my opinion, one of the most challenging decisions that today's dealer owner has to make is which Dealer Management System, (DMS) is right for their dealership.

It was much easier years ago as their where just a handful of DMS Vendors out there such as Reynolds & Reynolds, ADP, (Now CDK), UCS, Coin Convergent Systems, and perhaps Arcona, which evolved into today's Dealertrack DMS.

The pricing of these Dealer Management Systems was just what it was as dealers didn't really have many options as DMS competition was held pretty tight with just a few systems out there.

Dealers had to have a Dealer Management System, so the choice of which system to purchase became just a matter of preference. Price wasn't a major factor on which system was eventually selected as being familiar with system operation was the priority.

Fast forward to today, Dealers have lots of options, in a way, maybe too many options. It has led to choices being made based on price, or perhaps, Office Manager, or Comptroller preference, no matter what the price.

Office Managers and Comptrollers often dictate which DMS the Dealer will choose, regardless of the price due to Conformity and Accountability to their standards they are familiar with in basic Dealer Accounting.

That being said, if Accounting is a main priority, with price coming in second, what about usability in all other Dealer Departments? What affect does this choice of which DMS have on the Fixed Operations Departments, primarily the Parts Department?

It's Time to Find Out....Let's Do This!

I will say that the choice made definitely impacts both the Parts & Service Departments. Some are better than others and many lack basic needs of each individual department.

In this issue of ACG "Smart Parts", we will break down each individual DMS out there with their "pros and cons". There may be more systems out there that are not mentioned, but for the most part, we will cover all but a few, if any.

We will not list these Dealer Management Systems in any order of personal preference as many dealers are perfectly fine with their choice. We will simply list the positives and negatives with each system out there from a Parts Perspective.

So, let's get started with our own ACG "Smart Parts" Perspective on what these Dealer Management Systems have to offer and what they lack. 

If we had the opportunity to put the best of each system wrapped all into one DMS, we would then have the perfect Dealer Management System out there, which someday, I would personally love to be a part of.

Each DMS that we review will be in alphabetic order and will not be listed in any order of preference. We will list our "Thumbs Up" and "Thumbs Down" on each DMS most utilized by Dealers today in 2024.

Although, ACG "Smart Parts" will "rate" each DMS with our "5-Star" Rating, One Star being the lowest rating, all the way up to our highest rating with Five Stars.

Let's Begin...

Adams: ★

👍: Thumbs Up

Adams Dealer Management System is not widely utilized but is an efficient DMS overall. It does provide ABC Source Ranking by Piece Sales and the basics as far as integration with Accounting are there and provisions for Matrix Pricing Options. 

Somewhat User Friendly but does require a lot of extra keystrokes to go from program to program, but not a major issue. Parts and RO billing is fairly easy, and Source Management is manageable and basically effective on Best Reorder Points and Best Stocking Levels.

Lost Sales Reporting is available but requires too many extra steps to get them recorded. Also, there are no prompts to report Lost Sales if parts aren't stocked initially.

👎: Thumbs Down

One of the main "Thumbs Down" in Adams is a lack of Reporting Options. Most of the "canned reports" lack enough significant information for daily operations. 

"Drill Downs" are just not there on Parts Gross Profit Issues, Parts Detail Information, Parts History, Supersession Links, Special Orders, Source & Batch Moves, etc.

Constant manual updating is also required for most information such as Best Reorder Points and Best Stocking Levels as real time updating is lacking.

Not a bad choice if you are a smaller dealer and just want the basics as we will see in many other DMS Options as we continue forward. 

A detailed Special Order Program is also lacking in Adams, almost like an afterthought with little detail and links to Customers and Open Repair Orders and Appointments.

AutoMate: ★★★

👍: Thumbs Up

I will say that AutoMate has come a long way in the last several years. They have "upped" their game to become a significant player in today's DMS battle.

Definitely very "User Friendly" with a very simple dashboard to direct anyone to where they need to go. All the key elements are there that a Parts Manager needs. 

Source Management with ABC Source Ranking, Batch Moves, Parts Matrix with Cost Plus, List Plus and List Pricing Options within the same Matrix, which is not common, but beneficial. Very good DMS overall with a few drawbacks they need to work on.

Lost Sales Reporting does take a couple extra keystrokes which will tend to lower the actual true Lost Sales numbers due to that extra step, but Lost Sales are easy to post in AutoMate.

👎: Thumbs Down

As mentioned, AutoMate has made many improvements, especially in Parts over the last several years. One of the items they need to work on is Parts Receipting.

In AutoMate, Parts receipts are either for Stock, or whatever else. In another words, there is no breakdown in Supplemental Stock Orders, "In & Out" Orders, Other Orders, etc.

AutoMate also lacks their own "Report Generator" that can be utilized by dealer personnel. They do have "Report Mate" where AutoMate can generate specific reports for the dealer at an additional cost.

AutoSoft: ★

👍: Thumbs Up

AutoSoft is very "User Friendly" with Parts Counter Tickets and Repair Orders very easy to navigate. Moving parts from RO to RO, or line to line very easy.

AutoSoft is probably one of the easiest to learn, primarily due to the fact that it's extremely simple to navigate through. The Action Buttons and Menu Driven Software is easy to read through and figure out.

AutoSoft does offer Source Movement by Piece Sales that is updated automatically in Sub-Source Management, but with limited levels of Source Movement by Piece Sale Ranges.

👎: Thumbs Down

Unfortunately, there are many negatives with AutoSoft, especially in Parts starting with the reporting. Monthly Management Reports are not updated automatically. If the Parts Manager does not archive the Month End Report?...they are lost forever.

AutoSoft has limited ABC Source Ranking Levels with only six levels offered. The minimum amount of ABC Sourcing Levels required based on the math requires at least eight levels.

Same goes for the Parts Matrix as only twelve levels are offered with no ability to add more based on different sales ranges. Monthly Management Reports lack lots of information needed for properly managing the Parts Department.

Unfortunately, there are many disadvantages with this DMS are far as Parts & Service goes beyond what we could list in this issue. They have a long way to go, but it's much more affordable for the Dealer with adequate Accounting Integration options.

CDK - Drive: ★★★★

👍: Thumps Up

Formally ADP, CDK Drive is still one of the most prominent, popular and longest lasting Dealer Management Systems out there today for many reasons.

CDK offers everything for all Dealer Departments, especially in Parts. ABC Source Ranking, Parts Matrix Pricing, Parts Ordering from Stock Orders, Supplemental Stock Orders, In & Out Purchases, E-Purchases, Lost Sales Reporting, etc.

No matter what the size of the dealership, CDK will provide all the needs. Daily & Monthly Reporting is outstanding in both Parts as in Service. Installing Parts Set Ups, though not easy and recommended for the average user, they are there.

CDK is still evolving over to their "Drive" format, but the old "Green Screen" is still required in certain Parts Set Ups. Most Parts Set Ups are fairly easy in their MSSO and IRO Set Up Functions.

CDK also provides "Weighted Price Averaging" which allows parts sales history to be "weighted" over the last twelve months. This provides the most recent sales information, especially on parts seasonal sales, not offered by many Dealer Management Systems.

👎: Thumbs Down

One of the more "pricier" systems out there, and as mentioned above, CDK is still evolving from their "DOS-Based" System from years ago over to their newer Windows Based Drive System. This process is still on-going and hopefully will be completed in the near future.

CDK does not allow the "mixing" of a Cost-Plus Parts Matrix with an "out of grid" default to List as AutoMate does, which is a great option. CDK also does not have a "Flat Price" override to Matrix Pricing as Dealertrack offers.

Flat Pricing can only be utilized by moving Flat Priced Parts into a different Source but doing that will sacrifice ABC Source Ranking & Movement. Source Ranking Movement also requires running the SCS Function Daily to allow Source Movement as it is not done automatically.

Dealerbuilt: ★★★

👍Thumbs Up

This DMS, in my opinion is one of my "Sleepers" on our list of Dealer Management Systems. I was actually surprised when I first started working with this system as it does what a basic, affordable DMS should do.

All departments will benefit from this system in a general way, but without the detailed information available in other systems like Reynolds & Reynolds, CDK and perhaps Dealertrack.

On the Parts side of things, it is pretty much complete in all aspects although some Applications require several extra keystrokes, but overall...a "good bang for the buck" in all dealership applications.

👎: Thumbs Down

Dealerbuilt does lack detailed report information if you are a manager that likes to "drill down" information as the "canned reports" have limited information, other than the basics.

Having the ability to create "specific" reports with "specific" information provided in other systems, whether Report Generator, Advanced Reporting, Dynamic Reporting, or an "English Statement" back in the old ADP days.

Today's Dealer Managers require more than just the "canned reports" that are provided by most Dealer Management Systems. Dealers in general are requiring their managers to "drill down" more and perform at an even higher level than years ago.

Dealertrack: ★★★★

Dealertrack, in my opinion, and from the Parts side of things has become one of the top, more affordable Dealer Management Systems available. Even though they are still lacking some key components as we will list, they are climbing that DMS ladder rather quickly.

As far as DMS Conversions, and in the hundreds of dealerships that I have visited over these last five years, Dealertrack has taken over more systems out there, with few converting from Dealertrack to other systems.

This alone makes a statement about this system in general. User friendly, great "drill down" features, Parts Set Ups & Controls without adding additional Sources, (Stocking Groups) for Source Ranking by Piece Sales.

Dealertrack also has one of the best Special Order Parts Programs available with great detail, more than any other system out there in my opinion.

Weighted Parts Averaging, Simplified Parts Matrix, Pricing Strategies, Lost Sales Reporting, Stocking Group Management, Parts Ordering, etc. are all top notch and easy to navigate. Definitely one of the best systems out there for Parts.

👎: Thumbs Down

As with any new Product, or Service out there, there are still some "growing pains" to work through. One of which is that Dealertrack still does not have a "Batch Move" function in a "canned report" feature.

They can do Dynamic, or Advanced Reports specific reports such as Batch Moves. In other words, we can't move all parts from one Stocking Group, (Source) into another Stocking Group. Dealertrack has to build and perform these specific reports individually. 

It requires downloading parts into an excel document and reloading into another Stocking Group, (Source). This may not sound like much, but it is a HUGE inconvenience for Parts Managers.

They also don't have a lot of Order and Receipting options with only NG, (Negative) SO, (Special Order), EP, (Emergency Purchase), or Stock Orders. The NG, or Negative Purchase Sales also have to be managed as they will remain at a negative quantity without constant maintenance.

In their Sales Analysis Section, Dealertrack does not separate Customer Pay Service Repair Orders from Collision Center Customer Repair Orders as they are looped into the same report, even though they can be separated in Accounting on the Financial. 

Lastly, Dealertrack does have great reports, but they do not have one "catch all" Parts Monthly Management Report as most all Dealer Management Reports have. Even though all the information is available in separate Monthly Reports, they are not inclusive on one Parts Monthly Management, or Monthly Inventory Management Report.

Dominion/VUE: ★

👍: Thumbs Up

To be quite honest, and in my opinion, this DMS is definitely lacking in so many areas, but on the positive side of things, it is a Menu Driven, Windows Based System that is easy to navigate.

It does offer ABC Source Ranking by Piece Sales, but parts that meet Phase-In Criteria have to be "manually" posted as Normal Stocking Parts as "Automatic Phase-In" is not available.

Dominion/VUE does offer all the basics such as Matrix Pricing, Lost Sales Posting, Special Order Program, Daily Sales & Gross Information and pretty much all that a DMS needs to offer, but not to any great depth.

👎: Thumbs Down

Dominion/VUE Parts Manager Reports are extremely vague and they lack the simplest information. For example, they do not have a Parts Ordering and Receipting Report at all. 

In other words, we do not know what parts were receipted as Stock Orders, Special Orders, Emergency Purchases, In & Out Orders, Other Orders, etc. 

Stock Order Performance is a Key Performance Indicator for Industry Guidelines and is not available on this system. Many of their Parts Monthly Management Reports contradict each other and lack trustworthiness.

For Parts, we could go on and on with the "Thumbs Down" categories for this system. Although, these comments do not reflect potential benefits for other Dealer Departments and Accounting, but from a Parts perspective, this system lacks quite a bit, even the simple things.

PBS: ★★★

👍: PBS is my other DMS "Sleeper" out there as this system, much like Dealerbuilt has everything a Dealer would need in a Dealer Management System for the most part at an affordable price.

It does have a few flaws in the area of Parts, which we will discuss, but overall, and for the price, there is value in this system versus the big guns like Reynolds & Reynolds and CDK.

Parts Monthly Reporting is also very complete and the reports provide all necessary reporting information, or Parts Key Performance Indicators required for Industry Guidelines.

Accessibility, User Friendly and ease of all aspects of Parts Billing, Ordering, Receipting, Lost Sales Reporting have ease of functionality. For the money, one system I would consider.

👎: Thumbs Down

Parts Set Ups & Controls as we all know are crucial to getting the right information out of any system. PBS does lack the "ease" of implementing the right Phase-In/Phase Out Parameters, Low & High Days Supply, also referred to as Best Reorder Points, (BRP0 and Best Stocking Levels, (BSL)

If not done properly, as the "language" of this system is quite different from most other systems will lead to improper Suggested Order Quantities, especially in Source Ranking by Piece Sales.

Reynolds & Reynolds - Ignite: ⋆⋆⋆⋆⋆

👍: Thumbs Up

Even though this DMS is our last one listed alphabetically, it is our ACG "Smart Parts" choice as our 5-Star recipient of Dealer Management Systems available, even though, most likely to be the most expensive one out there.

Much like CDK, Reynolds & Reynolds is still transitioning over from their old "Blue Screen", DOS-Based System over to their new Windows Based Ignite Program. Even though there really isn't a perfect DMS out there, this one is the closest in my opinion.

From all the existing features still in the old "Blue Screen" to the newer on-screen features and dashboards in Ignite, they have it pretty much covered.

Order Types, Receipt Types, In & Out Receipts & Sales, Lost Sales Reporting, Batch Move Capabilities, Source Ranking by Piece Sales, Advanced Reporting all are available and more in Reynolds & Reynolds.

Their Special Order Program and Reporting is only second to Dealertrack in my opinion. The ability to bill Parts to Appointments and track by the customer is also a plus.

Reporting in Reynolds is far superior to most systems as well with their sheer number of custom, canned reports are at a very high level. This allows Parts Managers to drill down more than most other systems. 

The addition of Ignite has allowed Reynolds to become more User Friendly without all the excessive keystrokes required in the old "Blue Screen" version.

👎: Thumbs Down

The biggest downfall to this Dealer Management System is price. With new ownership in Reynolds a few years back, they have gotten even more expensive with contract requirements to system updates and even higher prices which has driven many loyal customers to other systems.

The other drawback is that Reynolds still requires the addition of Parts Sources to implement ABC Source Ranking by Piece Sales. Updating is still required manually by running Program 2105 to update Source Movement in the old "Blue Screen".

Other than the continued conversion of the remaining, old DOS Screen Programs, they still have most of what the Parts Department needs, no matter what the dealership size.

Other Systems Available: ★★★

Other Dealer Management Systems that I am familiar with include Quorom, Lightspeed, UCS and Dealer Socket. All of which, even though I am familiar with have had limited usage overall with Dealers, but with the same "Thumbs Up" features and "Thumbs Down" lack of features.

Tekion is the newest to enter into this mix of systems available.  From what I have seen thus far, they are pretty much have everything with some nice features with more they are still working on. That being said, the jury is still out on what this system will reveal going forward.

Lastly, no matter what DMS you currently have, the overall "Utilization Factors" on all of them is a staggering 20% - 25% of what they are capable of. This all reverts back to proper Installation and Training.

Challenge is, and from my experience, these DMS Vendors need to start with their own people, training them on what they are actually installing. In my opinion, many don't even know their own product well enough to the point where they are more concerned with "functionality" instead of what the system is "capable" of doing.

 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...