Dave's Top 10 Indicators: "Number Three: Sales & Gross Per Employee"

Welcome to May "Smart Parts" Readers as we continue on up the ladder of our Top Ten Indicators that will lead us to higher success and profitability!

This month, we will will "drill down" our Number Three Indicator which is "Sales & Gross Per Employee". This category is one of the most important as it lays down the foundation to our Parts Department operations.

Having the right amount of employees to carry out the daily operations and to achieve proper sales and gross numbers goes beyond just this one guideline.

Depending on which franchise or manufacturer, the guideline for "Sales & Gross Per Employee" is approximately $38,000.00 in sales per employee and $14,000.00 in gross per employee.

Gross per employee should be approximately one third of the sales number as overall parts gross profit to sales should be in the vicinity of 33% to 35%.

Overall, this is is a good measurement to the total amount of parts staff that we should employ, but it really doesn't break it down enough. The "Sales & Gross Per Employee" guideline includes ALL parts employees, but in order to maintain a proper "bottom line", we have to have the right amount of employees in the right position as well.

Technically, we could achieve the proper "Sales & Gross Per Employee" guidelines, but still NOT achieve the overall personnel expense to gross guideline on the balance sheet.

The amount of overall parts employee compensation for specific positions within the department has to be addressed as well.

This is where the Parts Department "staffing metrics" comes into play. In order to attain the "Sales & Gross Per Employee" guideline AND achieve the proper personnel expense to gross guideline, we have a few questions to consider:

• How many "total" parts employees should I have on staff based on current sales and gross numbers?
• How many of these staff members should be front and back sales counters?
• How many drivers should we have on staff?
• How many shipper/ receivers do we need?....or do I need any?
• Do I need to have an inventory clerk and/or stock person?
• Do I need an assistant manager? 

All these questions should come into play when we are trying to achieve and maintain the proper staffing.  It will allow us to not only hit our target on the "Sales & Gross Per Employee" guideline as well as maintain the proper expense to gross numbers on personnel expense management.

Keep in mind that in most dealerships, personnel expense represents over 40% of the total expense each month in the Parts Department.

So!...How do we do this?

Proper "staffing metrics" begins with one simple item and that is our "sales to support" ratio. Just as we measure "sales to support" ratio in service and sales, the same applies in the parts department. The "sales to support" ratio in parts is 2:1, just as it is in the service department. 

That being said and using a little basic math, each counter "salesperson" should achieve one and a half  times the sales and gross numbers to account for one half the expense of support staff. Also, "support staff" employees usually earn about half as much as "sales staff" employees with the exception of management.

Here's an example Parts Department "Staffing Metrics" based on an average parts department sales & gross numbers:

Average Month's Sales: $200,000.00

Average Month's Gross: $70,000.00

Total Parts Employees Based on "Sales & Gross Per Employee" Guideline: 5

Staffing Metrics:  Parts Manager: (1)  Sales Staff: (3)  Support Staff: (1)

This example could also have a little "shift" within itself as some "support" staff members may play duel roles in working the front and/or back counters during peak times.

Parts Managers may also play in this scenario as well playing multiple roles. The most important part of this example is the proper "sales" staffing is crucial to meeting ALL the guidelines and net profit expectations.

Achieving the proper "Sales & Gross Per Employee" guideline is just a piece of the puzzle. Building the proper "people" foundation in the Parts Department is critical and proper "staffing metrics" have to implemented in order to achieve "predictable results" on the bottom line. 

Dave Piecuch is the Vice President of Automotive Consultants Group Inc. and is the Head Coach for Smart PartsTM. The only "Results Based" High Return Training, Coaching, and Consulting company in the world!  Dave can be reached at Cell 786-521-1720 or E-mail at dave@smartservicetraining.com Vist our Website at www.smartpartstraining.com

Dave's Top Ten Indicators: "Number Two: Level of Service (Overall Fill Rate)

Our series on the "Top Ten Indicators" to a more successful and profitable Parts Department continues this month with our second indicator, which is "Level of Service" or as some refer to as "Overall Fill Rate". Keep in mind, each month we are climbing the ladder to our overall number one goal which is higher net profits.

Last month, we featured our number one indicator which was "First Time Off Shelf Fill Rates", not to be confused with this months "Top Ten Indicator", though quite often it does.

Having the part on the first visit to the counter is extremely important, but we also have to meet the overall demand 85% - 90% of the time and that's where "Level of Service" comes in.

The "Level of Service" (Overall Fill Rate) is an important indicator because it measures how well we are meeting the demands of the customer and not losing sales opportunities. The problem is, often times Parts Managers don't post all their demands properly which leads to an unrealistic measurement percentage on the Monthly Management Report.

In my opinion, filling the overall demand is not the main issue. Any Parts Manager can order a part and fill the customer demand...I can do that without even stocking a single part.

To me, the real issue here is to make sure the Parts Manager is "seeing" all the demand opportunities in the first place. Many opportunities go "unseen" and the Parts Manager doesn't even get a chance to fill the demand, such as "Lost Sales Posting" or as I refer to them as "Potential Missed Opportunities".

If there is one issue that I get challenged on the most, it's definitely the "Lost Sales" category. More and more Parts Managers are telling me that they don't post "Lost Sales" because they either don't have any, or they are concerned about posting too many demands to their Dealer Management System, (D.M.S.).

I can understand why many parts managers feel that way, but I would challenge those who do to the following little  task.

Devote about an hour each day, preferably in the morning, just to listen to your parts staff when they answer the phone. Not only listen to how they answer the phone, but also "listen, watch and see" if they are just giving out information, or if they actually make the sale.

I can guaranty you that you will be amazed on how many "Potential Missed Opportunities" go unrealized.

• Did the customer on the other end of the phone just call for prices? 
• Did we have the part they were asking about in stock? 
• Are they really going to call back to order or buy the part? 
• How many phone calls do we take on a given day? 

Here's the worst part, we never even know how many opportunities are missed because they don't get posted.

So, what does the proper posting of all demands have to do with our "Level of Service" or "Overall Fill Rate"? First of all, a "demand" is defined as a "Sale" or a "Lost Sale" and the posting or reporting of these two lead to the "Level of Service" or "Overall Fill Rate" calculation.

With that said, I would have to ask this question:

"Are we really posting ALL of our Potential Missed Opportunities"?

With this thought in mind, I'm wondering if our number of demands could be increased and filled instead of being more concerned about the Level of Service or Overall Fill Rate percentage.

The NADA guideline for this category is 85% - 90% and most often times, I see Parts Monthly Management Reports in the mid to upper 90% bracket. When I see these high percentages, I often wonder if the Parts Manager is reporting ALL "Potential Missed Opportunities".

Personally, I would much rather be at the lower end of that percentage with more demands than I would at the higher end with less demands entered. In other words, I would much rather fill 85% of 100 opportunities instead of maybe filling 95% of 50 opportunities.

If I don't enter ALL of my potential demand opportunities, I would really never know what my market potential is.

By posting as many demands possible, I would not only have a better "vision" of my marketability on my Monthly Management Report, I would also increase my potential Gross Turn numbers.

Gross Turns are also a big indicator of market potential as it determines the inventory "dollar value" needed to meet demands and maintain a (45) days supply available. We will explore more about Gross and True Turns when we reach our Number Seven Top Ten Indicator in a few months down the road.

As you can see, being true and honest in our posting and reporting procedures can make a huge impact in planning our marketing strategies. Whenever I see a Monthly Management Report that shows a "Level of Service" or "Overall Fill Rate" higher than 95%?...I know that there are "Potential Missed Opportunities" not being posted.

One of the biggest indicators that can measure our market opportunities and impact the size of our customer base is our "Level of Service" or "Overall Fill Rate".

Increasing the number of demands posted along with the right Phase-In/Phase-Out and Days Supply Criteria can and will increase market potential. Don't let these "Potential Missed Opportunities" slip away from sight as they will ultimately lead to higher sales and profits!

Dave Piecuch is the Vice President of Automotive Consultants Group Inc. and is the Head Coach for Smart PartsTM. The only "Results Based" High Return Training, Coaching, and Consulting company in the world!  Dave can be reached at Cell 786-521-1720 or E-mail at dave@smartservicetraining.com Vist our Website at www.smartpartstraining.com

Dave's Top Ten Indicators: "Number One: First Time Off Shelf Fill Rate"

Last month we published, what I referred to as the "Top Ten Indicators" to a successful and profitable Parts Department. As we counted down to Number One, it was kind of ironic how each how each "previous" indicator was impacted by the next one down the list. 

For example; the number ten indicator which is "Net Profit As A % Of Sale" became impacted by number nine and so on down the list.

Actually, our "goal" is to impact number ten the most, with all the others playing a specific role in the overall success and profitability of the Parts Department. So, here we go with the number one indicator...."First Time Off Shelf Fill Rate"!

In any business that generates its' profit from buying, stocking, warehousing and selling an inventory; the ultimate success relies primarily on how well and how often the inventory "moves" or sells.

In my opinion, managing the automotive dealership parts inventory versus other types of inventories has many disadvantages right from the start. 

After all...how many different parts are there on a vehicle today versus even..."yesteryear"? Even though it is not "new news" that we need to stock the right parts at the right time...nowadays, it's the "right time" that's the challenge!

Parts sales activity cycles have diminished quite extensively over the years. For example; I remember when one part number's application cycle would fit multiple years. Now, you could have many different part numbers for the same application within the same year!

The first thing that we have to establish is the "true" definition of the First Time Off Shelf Fill Rate as opposed to just plain "Fill Rate". 

The actual overall fill rate simply means that the parts order was "filled" and not necessarily from my own inventory. Technically, I could have a 100% overall "fill rate" without even stocking a single part number! That is of course, if I'm not recording or have any "Lost Sales".

The "First Time Off Shelf Fill Rate" refers to parts orders filled from "stocking parts" that have met stocking criteria such as Phase-In/Phase-Out, Days Supply and Source Ranking by Piece Sales. 

The guideline for this criteria should be a minimum of 75% - 80% and NOT confused with the overall "Fill Rate" or "Level Of Service".

One other important practice that is crucial to achieving a goal of 75% - 80% "First Time Off Shelf Fill Rate" is separating "Customer Orders" from actual "Stock Orders". 

This is one BIG area that hinders Parts Managers' from achieving their goals, especially with many manufacturers offering overnight dedicated delivery service.

This added benefit can actually be a double edged sword as "Daily Customer Orders" get placed along with "Daily Stock Orders" and receipted as stock, instead of being receipted as a "Non-Stock" part, ordered for a specific customer. 

The first step is to be honest with our "Belief System" on how we use out Dealer Management System, (D.M.S.)

If we do not enter the information correctly to begin with, I can guaranty that a TRUE "First Time Off Shelf Fill Rate" of 75% - 80% will never be achieved. 

By this, I mean that every time a tech pulls up to that back counter, he or she receives that part on the first visit, 75% - 80% of the time. This also leads to higher productivity in the shop and higher parts gross as more stock order discounts and accruals are realized.

Once we have our "Belief System" in check, we can now proceed to one of the key ingredients to achieving a high First Time Off Shelf Fill Rate which is "Source Ranking By Piece Sales".

Today, to my amazement, there are many Parts Managers still utilizing just one parts source within a given automotive franchise.

Defining "Source Ranking By Piece Sales" simply means that we would create separate parts sources, or separate "little inventories" by how fast, or how slow they move, or "sell". 

Each source would have different criteria on how a part phases into the system as well as when it will phase out over a period of time without any activity. 

Each source would also have a different number of days supply in order to avoid "over stocking" and "run out" situations.

Fast moving parts need less days supply because they get replenished more often and slower moving parts need more days supply because they don'y sell as often. Believe it or not, many get confused about my last statement, so let me explain;

If I have a part that sells only twelve times a year, or once every thirty days on average, then I would need only a "thirty days supply" of that specific part because it's only due to sell, on average, every thirty days.

 Fast moving parts need less days supply, maybe two to seven days supply, depending on stock order acquisition and lead times. Low and High Days Supply can be adjusted as needed depending on seasonal or promotional items.

The last ingredient to achieving a "First Time Off Shelf Fill Rate" is the proper posting of Lost Sales and Emergency Purchases. 

I like to define Lost Sales as "Potential Missed Opportunities" as many Parts Managers tell me that they don't have any Lost Sales. They just chase or order the part(s) over and over again if they don't have it.

Posting more "Lost Sales" or "Potential Missed Opportunities" will create more parts demands and give the Parts Manager more insight to potentially stocking more of the right parts. 

More demands will lead to more of the right parts on the shelf, controlled in their own source by their own movement cycles with specific criteria such as phase-in/phase-out and days supply.

Lastly, we can't stop the bleeding of obsolescence or parts inactivity until we set a proper foundation on how we stock parts in the first place. 

We also have to be honest about how we use our Dealer Management System, (D.M.S.) in order to get the best results in our "First time Off Shelf Fill Rate" category. 

You can't manage what you can't see and having the correct information on our Management System Reports is our first line of offense and defense.

Final Question: 

"Are your technicians getting the right parts on the FIRST visit to the parts back counter at least 75% of the time"?

If not, don't kid yourself...you can do better and our "Number One Indicator" is a good place to start climbing the ladder up to our "Number Ten Indicator" which is higher "Net Profits As A % Of Gross" and ACG "Smart Parts" can help you get there!    

Dave Piecuch is the Vice President of Automotive Consultants Group Inc. and is the Head Coach for Smart PartsTM. The only "Results Based" High Return Training, Coaching, and Consulting company in the world!  Dave can be reached at Cell 786-521-1720 or E-mail at dave@smartservicetraining.com Vist our Website at www.smartpartstraining.com

"What Do We Do Now?"...Dave's Top 10 Indicators

As we all know, the success and profitability of the Parts Department relies primarily on a knowledgeable Parts Manager with the support of upper management and the dealer principal. Beyond that, the Parts Manager also has to have a plan that will lead to "desired results".

We also have to begin with focusing on key areas, or "indicators" that will impact these "desired results" and that will be the focus of our study as we "drill down" these top 10 indicators.

I also realize that some may agree or disagree on the order of these indicators, but I do believe we will all agree that as we move down to "Number One", each and every indicator effects the previous.

You may also see as we count down to number one, that many Dealers and Parts Managers seem to focus on these "Top 10 Indicators" in reverse as opposed to focusing on the "root causes" that effect our overall profitability.

So!...Are you ready?....Here We Go!

NUMBER 10: Net Profit as a % of Gross Profit (Guide: at least 25%)

Often times, we tend to look at the results on the financial statement from the "bottom up" and that is quite common. After we see the "bottom line", we start to dissect the numbers even further and if we do not see the desired results, we start looking at the expense side first, followed by the sales and gross numbers.

Next, we start "finger pointing" to certain areas, trying to justify the means, knowing all the time that we can't change what has already happened.

Our "Number 10" Indicator is a direct result of failed processes, poor expense management, improper I.M.S. Set Ups & Controls, improper guidelines, etc. "Number 10" is the "catch all" of all the indicators to follow.

NUMBER 9: Customer Pay Gross Profit as a % of Sales (Guide: 42%)

Obtaining the proper Customer Pay Gross Profit percentages is probably one of the easiest guidelines to achieve. I realize that demographics and market areas play a big role, but when you think about it, if the proper escalation matrix is in place, you can have the best of both worlds.

Remaining competitive is always important, but having the "right pricing mix" on both captive and competitive parts is easily maintained in most Dealer Management Systems (D.M.S.).

NUMBER 8: Expense Management 

Expense to Gross Percentage Guidelines vary from each manufacturer, ranging from 50% - 75% and can also be broken down by Personnel, Semi-Fixed and Fixed expenses. 

The most important guideline, or "thought process"  that I've always had was..."you can't spend what you don't have".

The Parts Manager has to also be very familiar with reading, understanding and dissecting the parts financial pages in order to properly manage the department. Understanding the numbers and how they got there is imperative for all managers, not just the parts manager.

 If we take on the mindset of what expenses we can control versus what can't control and stay within the guidelines set by the dealer and the manufacturer, we will achieve expected net profits. 

If you run your department like it was your own business...you WILL be profitable!

 NUMBER 7: Inventory Gross and True Turns (Guide: 8 Gross, 5 True)

This category is a key indicator in "Part Management 101" as the experience and knowledge of the Parts Manager comes first and foremost in managing one of the dealers' highest assets. 

The ability to "roll over" the parts inventory the proper amount of times annually is not an easy task, but contributes greatly to the overall parts profitability. 

This indicator also illustrates the "liquidity" and overall resale value of the parts inventory. It will also expose obsolete inventory as lower gross and true turns factors in all parts in inventory at cost, whether it moves or not.

NUMBER 6: Sales Activity 0 - 3 Months (Guide: 75%)

Our "Number 6" indicator ties in directly with our previous indicator on inventory gross and true turns. The parts movement activity cycle is a HUGE indicator on how well balanced the parts inventory is, especially in the 0 - 3 month category. 

In other words, three quarters of the total parts inventory value should be active in the last three months.

Once again, the experience and knowledge of the Parts Manager along with proper system management comes into play. This guideline CAN NOT be taken for granted and should be at guide or better without question.

NUMBER 5: Special Order Parts Aging (Guide: 30 Days or Less)

At "Number 5", Special Order Parts Aging probably goes down as the most "unnoticed" indicator in the countdown. It a very important indicator because it's a "return reserve killer"! 

As we all know, most manufacturers' provide a "return  reserve account" for the parts department based on stock order purchases. The intent of this this accrual account is to allow the dealer to return obsolete parts and to maintain proper inventory levels.

Most often times, this accrual account is "sucked up" by special order parts returns over 30 days and never gets utilized for the actual intent.

 It's also a huge indicator of "lack of process" on how parts get ordered in the first place without proper guidelines on special order deposits, customer follow up, etc. 

Just like in the Used Car Department, if we have a bunch of "aged units"....or in this case, "aged special ordered parts"...we've got other problems as well.

NUMBER 4: Lost Sales Reporting (Guide: 10% of Total Sales at Cost)

Defining "Lost Sales" has always been a big controversy and can be defined many different ways. First of all, I wish they would change the terminology from "Lost Sales" to "Potential Missed Opportunity". 

Posting "Lost Sales" is a "good thing" and is one of the biggest assets for a parts manager. Posting "Lost Sales" also creates a "demand" in the Inventory Management System, (I.M.S.) and allows the Parts Manager to see potential new parts to add to the regular stocking inventory. 

Posting these "Potential Missed Opportunities" are the "eyes" of future sales and should be posted whenever possible. 

When in doubt?...Post It! It can only help the Parts Manager see what's out there. Bottom line is...you can't manage what you can't see! "Number 4" in our countdown is "Number 4" for a big reason.  

NUMBER 3: Sales/Gross Per Employee (Guide: $38,000/$14,000)

One of the foundations in the Parts Department is having the right number of employees to meet the demands in all sales areas. 

From counter staff, shipper/receivers, delivery drivers and wholesale sales people...we not only have to "measure up" to these guidelines, we have to have the right person in the right seat on the Parts Bus. 

We can't accomplish any of our goals or guidelines without the right staff of people in the right positions.

NUMBER 2: Level of Service or Overall Fill Rate (Guide: 90 - 95%)

Overall, we have to provide a "service" to our customers. Our "Number 2" indicator could be debatable, but I chose this category as "Number 2" for one simple reason...if we do not provide an extremely high "Level of Service", which simply means that we provide the part(s) 90 - 95% of the time, we will lose customers. 

All would be lost if we didn't pay direct attention to customer retention and loyalty. 

The only variation in this percentage guideline would be "Lost Sales"...that is, of course, IF we report "Lost Sales" in the first place. 

If we don't post "Lost Sales", our "Level of Service" or "Fill Rate" would show on our Monthly Analysis Report close to 100%....which, of course, would not be a true.


And Here We Are!!....our "Number One" Indicator!...(Drum Roll Please!)


NUMBER 1: "First Time Off Shelf Fill Rate" (Guide: 75 - 80%)

When you stop and think about it, it all starts here. The ability to provide your technicians and ultimately, your customer the right part(s) on the  "first visit" to the counter 75% of the time. 

If we accomplish this one goal of 75 - 80% "First Time Off Shelf Fill Rate", most of the other "Top 10 Indicators" fall right into line automatically.

Not only will the most of the other indicators fall into line, we will highly impact and increase our overall service shop productivity. 

Excessive time at the parts counter; moving vehicles in and out waiting for parts; bringing vehicles back in the shop tomorrow when they could have been done today are all examples that contribute to lower shop productivity. 

With the exception of proper staffing, pricing structures and expense management, all of the other indicators would take care of themselves. 

Level of Service, Inventory Turns, Less Special Orders, Fewer Lost Sales, Higher 0 - 3 Month Sales Activity and Higher Gross Numbers are all achieved by this ONE indicator.

It's pretty amazing how one "key indicator" can impact so much overall  I am also quite sure there may be other indicators that we could add to the list of "Top 10" items. 

The most important items tend to go unnoticed but highly contribute to our "Number 10" indicator on this list which is Net Profit.

Stay tuned to "Smart Parts" each month this year as we "drill down" each and every one of our "Top 10" indicators starting with Number One: "First Time Off Shelf Fill Rates" in March. We will continue up the ladder all the way to higher Net Profits in December.  

Dave Piecuch is the Vice President of Automotive Consultants Group Inc. and is the Head Coach for Smart PartsTM. The only "Results Based" High Return Training, Coaching, and Consulting company in the world!  Dave can be reached at Cell 786-521-1720 or E-mail at dave@smartservicetraining.com Vist our Website at www.smartpartstraining.com

"Balancing The Books"

In most Parts Departments, the Annual Parts Inventory Count is performed at the end of each year for legal and accounting purposes. As in any business that manages an inventory, it is mandatory to account for inventory assets and it's overall value.

In most automotive dealerships, the Parts Inventory is one of largest assets that the dealer has to account for, especially when it comes down to "tax time" at the end of the year.

Even though Office Managers, or Controllers perform this similar function at the end of each month throughout the year, the "end of year" parts inventory balance must be reconciled between the Accounting Ledger and the Controlled Inventory Balance.

The "Controlled Inventory Balance" is defined as the inventory balance after the physical inventory is counted, completed and authorized. This inventory balance is also represented in the D.M.S. (Dealer Management System) after the inventory count and variances are posted.

So, what happens if the "Controlled Inventory Balance" amount doesn't match the Accounting Ledger, or Financial Statement Inventory amount?

First of all, the "final" Controlled Inventory Value MUST match the Accounting Ledger Value, or the Financial Statement Inventory Value.

In a sense, we have to "balance" the Controlled Inventory amounts to the Accounting Ledger by way of adjustments. This will also be reflected on the Financial Statement as "Adjustments to Inventory" and considered 100% as profit, either as a credit or a debit.

The second thing we have to realize is that "variances" after the physical inventory are common, but should also be within an acceptable range. Many inventory analysts suggest that this acceptable range be within two to four percent of the total inventory value on the Accounting Ledger.

Keep in mind that acceptable amounts should be to the positive side of the overall balance which means that the Controlled Inventory Value should be larger than the Accounting Ledger, or the Financial Statement Value.

Many dealers are primarily concerned about pilferage or theft and rightly so, but in most cases, there are usually many other causes for these discrepancies.

Here are some common variances that may lead to discrepancies between the Controlled Inventory Value and the Accounting Ledger Value:

• Manufacturers' pricing updates not posted
• Cost posting errors or overrides throughout the year by parts personnel
• Pilferage or Theft
• Parts "work-in-process" issues
• Gas, Oil & Grease bulk adjustments
• Tire Inventory adjustments
• Damaged or Scrapped Parts not accounted for
• Outstanding credits and/or debits from all parts vendors
• New and used core inventories

These are just a few areas that can lead to discrepancies between the Controlled Inventory Values and the Accounting Ledger.

Most Parts Managers and Inventory Management Companies are well aware of these items mentioned, but inevitably, these are the most common areas that lead to discrepancies.

So, how can we limit these discrepancies to a manageable level each year? Here are few tips that may lead to some helpful solutions:

• Make sure your "house" is in order by using good housekeeping practices
• Conduct daily, weekly or monthly bin checks and post adjustments to D.M.S.
• Insure proper security throughout the Parts Department.
• Post manufacturers pricing updates monthly and provide D.M.S.documentation to Office Manager
• Provide End of Month Parts Inventory Analysis Report to Office Manager for potential discrepancies between the Controlled Inventory and the Accounting Ledger on a monthly basis.
• Conduct a monthly physical on "other" inventories such as Tires, Gas, Oil & Grease, etc. 
• Review "Cost Override" and "Minus On Hand" D.M.S. Reports Daily
• Manage Parts "Work-In-Process" and Special Orders to less than (30) days

Lastly, we have to keep a mental mind set that closing out our "End Of Year" should be no different than closing out our "End Of Month".

It's much easier to manage what happens over the course of a month as opposed to trying to manage what happens over the course of a year in the parts department.

 Dave Piecuch is the Vice President of Automotive Consultants Group Inc. and is the Head Coach for Smart PartsTM. The only "Results Based" High Return Training, Coaching, and Consulting company in the world!  Dave can be reached at Cell 786-521-1720 or E-mail at dave@smartservicetraining.com Vist our Website at www.smartpartstraining.com

Smart Parts 2012: The Year In Review

Here we are, winding down yet another year in our ever-changing world of the automotive industry. We have seen changes ranging from many new model introductions with advanced fuel economy without sacrificing horsepower to the on-going advancement of the hybrid and electric vehicles leading the way into a new age of technology.

With all this said, how much does all this really impact the way we have always conducted our business as Parts Managers? Do we really have to change with the times or should we stick with proven methods that have gotten us to where we are today?

In our final issue of "Smart Parts" 2012, we are going to take a look back at this years past issues and blogs to see if we have really maximized on what we know as "good practices" in conjunction with setting the bar for the future.

We will highlight each issue's topic with some key points that have impacted the way we do business in the Parts Department. We will close each following month with a "challenge question" that relates to the topic and hopefully lead to our own self-evaluation.

Here we go "Smart Parts" readers!...it's a long blog, but it may prove worthwhile! If you have missed any of our past issues, visit our website for more information...

January 2012: 2012: "A New Beginning"

In January, 2012, we focused on our Parts Set Ups & Controls. Each year, our inventory resets to what I refer to as "Ground Zero". All of our inventory analysis information ranging from True & Gross Turns, Stock Order Performance, Level of Service, "First Time" Off Shelf Fill Rates, etc. resets to ZERO.

This means that this would be the best time of the year to review and modify these Set Ups & Controls as they will yield immediate results at the end of the first month of the year. Most Parts Managers rarely review and/or modify these Set Ups & Controls on a periodic basis which often leads to unwanted obsolescence and reduced "First Time" Off Shelf Fill Rates.

January's Challenge Question: Did you review and/or modify any of these Set Ups & Controls?  

February 2012: Hope Or Change: "We have To Make A Decision!"

In February, 2012, we continued to focus on our Set Ups & Controls by reviewing the results of the changes or modifications we made in January of 2012. If no changes were made?...then how can we expect a different result?

If changes or modifications were made, then what did the results reveal and how can we use this information moving forward? Do we just "hope" that the same Set Ups & Controls will lead us forward, or do we "change" for the future? Remember, the "life cycle" of parts isn't anywhere near what it was years ago.

February's Challenge Question: Have you been doing the same thing for several years, or have you really been just doing the same thing every year, several times and expecting a different result?

March 2012: What Is My Parts Department's "Rate Of Change?"

The March issue of "Smart Parts" was one of our "most read" blogs of the year as this term is not often heard of, or referred to in the Parts Department.

I've found that the majority of Parts Managers haven't even heard of the term "Rate Of Change" Quite simply, it's the number of "add and delete" adjustments that have been made in our Inventory Management System versus the total number of part numbers in the Inventory Management System (I.M.S.).

Too many adjustments may lead to inventory discrepancies and dollar values between the controlled inventory values versus what's on the dealers financial statement. It could also indicate pilferage or accounting issues in the Parts Department if the "Rate Of Change" exceeds 10%.

March's Challenge Question: What's your Parts Department's "Rate Of Change"?

April 2012: Dealing With "The Cycle Of Change"

In April, it was the end of the first quarter of 2012, so we focused on the first "Activity Cycle" of our parts inventory as every three months completes one parts inventory "Activity Cycle".

 What did the first three months indicate? What did the business ratios such as True & Gross Turn, Stock Order Performance, Level Of Service and "First Time" Off Shelf Fill Rate reveal? Do I need to go back and review or modify any of my Set Ups & Controls moving forward? Are my profit structures in line to my first quarter goals and expectations?

April's Challenge Question: Do you perform an inventory evaluation after each "Activity Cycle" in 2012?

May 2012: Maximizing Parts "In-Coming Phone Calls"

May's "Smart Parts" article also drew a lot of attention as many dealers and parts managers DO NOT track in-coming parts phone calls. How many in-coming parts phone calls are received where there is just information given with no follow up?

How many of these calls could be transferred to the service department for potential service appointments? An insurmountable number of calls are received each day by parts departments everywhere that go without an accountable follow up system.

May's Challenge Question: Do you have a follow up system in place to track in-coming parts calls?

June 2012: Is Your Dealer Management System, (D.M.S) "Telling The Truth?"

June's "Smart Parts" blog may have "touched a nerve" with some, but it was one of my personal favorites in 2012. As an industry consultant and trainer, I perform many parts department evaluations and it is quite interesting to see some of these dealers Parts Monthly Management reports.

Many dealers don't even know how to read their D.M.S. Parts Monthly Analysis reports. They tend to believe what they are reading, even though the parts manager isn't reporting the information correctly. As the old saying goes..."garbage in, garbage out"!

I could go on and on with this subject, but for more information, read the June 2012 "Smart Parts" article! For you dealers out there...it's a MUST READ!

June's Challenge Question: Is YOUR Dealer Management System, (D.M.S.) Telling The Truth?

July 2012: "Shrinking Parts Gross: Who's To Blame?"

In July, we explored parts gross in general, but with the main focus on our increasing "Express Service" business. With more and more manufacturers "mandating" an independent express service department within our existing fixed operation, it has led to many challenges.

 Many vehicles manufactured today are requiring less and less maintenance with fewer dealer visits.We have to remain competitive, but we also have to have the right pricing in parts that can balance these "competitive items" along with the "captive items" in order to retain proper gross margins.

The parts escalation matrix should be utilized "wisely" and like other Set Ups & Controls....reviewed and modified often.

July's Challenge Question: How often do you review your parts pricing guidelines and escalation matrix?

August 2012: Guidelines To Sidelines: "Where DO We Draw The Line?"

In August, we kind of went back to basics with a review of industry guidelines versus the goals and guidelines we set for ourselves in each dealership.

It's important that we are measuring ourselves with a combination of individual standards along with our individual manufacturers' as well as national guidelines set by the National Automotive Dealers Association, (NADA) for example.

The most important lesson in this particular issue is, if in fact we ARE measuring our performance constantly and do we set goals above normal or reasonable expectations"?

August's Challenge Question: Do you set performance goals and guidelines and most important, do you hold yourself and your staff accountable to these expectations?

September 2012: Express Service: "The Parts Impact"

September's issue was kind of a follow up to the July issue of "Smart Parts" We focused on how we can overcome some of the issues of shrinking parts gross due to the "Express Service" impact by embracing it instead of fighting it.

As we know, gross pays the bills and we have to look at this new found opportunity with some different perspectives on what our expectations should be concerning retained parts gross. Quite simply, would you rather have 30% of $20,000.00 or 40% of $5,000.00?

By selling more in volume at a more competitive rate, maybe, just maybe, we can attract and retain more business opportunities.

September's Challenge Question: Are you really maximizing the "Express Service" parts opportunity?

October 2012: Parts Inventory: "Active, Idle or Obsolete?"

Our October issue of "Smart Parts" also caught the eyes of many as we explored the three most common parts classifications. The most interesting part of these classifications is how "Idle" and "Obsolete" are often confused, or even how long an "Active" part is actually considered "Active".

By drilling down these classifications in this issue, we were able to properly identify each of these categories and how to properly manage them to maximize True Turns and most importantly, get the highest parts Return On Investment.

October's Challenge Question: Do you know the difference between "Active, Idle and Obsolete" inventory? 

November 2012: O.E.M. VS. Aftermarket Parts: "The Choice Is Simple"

Last month we explored another "hot" topic that's really been around for years and that is the choice of offering aftermarket parts versus O.E.M. parts as a viable competitive option.

For the most part, we all "stick to our guns" by maintaining the image and belief that there really is no replacement for the manufacturers' replacement part and I would have to agree. With that said, I also agree that our customers deserve a choice on certain competitive repairs or maintenance where, quite honestly, the aftermarket option has similar quality, but at a more affordable price to the consumer.

I believe that if we offer more options to our customers, we have a better chance of keeping them. After all, if a vehicle needs brakes...someone is going to get the repair job...why not you?

November's Challenge Question: Do you provide other parts options to your customers on qualified, competitive repairs and maintenance?

In conclusion, for this December issue, I have one last question:

"Did you answer NO to any of the above Monthly Challenge Questions"?

If you did answer "NO" to any of this years challenge questions, maybe it's time to make a commitment moving forward into 2013. Contact ACG's "Smart Parts" and make 2013 your "Best Year Ever!"

Happy Holidays from "Smart Parts" and We Wish All a Very Prosperous New Year!

Dave Piecuch is the Vice President of Automotive Consultants Group Inc. and is the Head Coach for Smart PartsTM. The only "Results Based" High Return Training, Coaching, and Consulting company in the world!  Dave can be reached at Cell 786-521-1720 or E-mail at dave@smartservicetraining.com Vist our Website at www.smartpartstraining.com

O.E.M. vs. Aftermarket: The Choice Is Simple

For many years, dealer parts managers have had to play a "juggling" act when comes to choices between stocking only Original Equipment Manufacturers parts, (O.E.M.) to mixing in some aftermarket parts into their inventories. There are many reasons for both sides of the argument, pending on market areas, demographics, competition or just plain common sense decisions.

First of all, I am a true believer that O.E.M. parts are best for the overall performance of the vehicles manufactured today. They also provide the best "fit" and in most cases, are backed by the best warranties in the industry. Most would also agree that O.E.M. parts are the top choice of most technicians when it comes to the overall quality of repairs.

With the infiltration of many "counterfeit" parts vendors today, parts managers have to consider the quality of the parts manufactured as well, which makes the choice rather easy for those "O.E.M. Only" parts managers. It is also much easier from an accounting standpoint with manufacturer invoicing, discounts and return allowances as well inventory protection programs.

This all sounds good except that we have left "choice" out of the above equation, thus leading to the title of this article..."The Choice Is Simple". I believe that in some cases, we need to give our customers more of a choice, when it comes to their vehicle repair options. Many of the manufacturers' pricing policies on some highly competitive parts are much higher than aftermarket competitors parts of equal quality.

One case in point that comes to mind is the pricing of brake parts with some manufacturers. I'm not going to single out any particular manufacturer, but I do believe a better job can be done in order to be more competitive. Standard brake repairs can vary by hundreds of dollars, thus resulting in "lost repair opportunities" and more customer "price shopping" at aftermarket facilities.

Even though some manufacturers offer some "good, better, best" parts options, in some cases, a high quality aftermarket part can out perform the lesser of these manufacturer options. Even though many of us believe that price shouldn't be an issue, we still have to be competitive and be somewhere "in the ballpark".

Another little tidbit that we all have to be aware of is that many parts are made by only a few different vendors and labelled by the individual manufacturer for re-distribution. Each year, vehicle manufacturers constantly bid with outside vendors on many replacement parts as well as original equipment parts.

We have to look back at how we lost so much of our repair and maintenance business to aftermarket vendors in the first place. We all know how much convenience, quality service and value has played in getting some of that business back, now we have look closer at providing those same three principles with even more competitive pricing.

Giving our customers more of a "choice" in some of these basic repair and maintenance items will lead to more sales because we are giving them options "within" our stores. In many cases, we have only given them the option of choosing "where" they will have their vehicle serviced.

So, the choice IS simple when it comes to some of these basic repair and maintenance items...give your customers more of a choice. We need to think "OF" our customers, not "FOR" our customers!

Dave Piecuch is the Vice President of Automotive Consultants Group Inc. and is the Head Coach for Smart PartsTM. The only "Results Based" High Return Training, Coaching, and Consulting company in the world!  Dave can be reached at Cell 786-521-1720 or E-mail at dave@smartservicetraining.com Vist our Website at www.smartpartstraining.com