February 2017: "How Truthful Is Your D.M.S. Monthly Management Report?"

The first couple of months of each year, as "Smart Parts" Managers, we have a tremendous opportunity to purge and "refresh" our parts inventories. In addition to the physical inventories that are usually performed in December of the previous year, we also have the opportunity to "reset the clock" on key inventory management areas.

Once we enter into a new year, "annualized" calculations such as Gross and True Turns, "First Time" and Overall Off Shelf Fill Rates, Stock Order Performance, Level Of Service, Demand Filled From Stock Ratios, Rates Of Change and Sales Activity Cycles are all highly impacted from the first couple of months of each year.

As the year progresses, annualized calculations kind of settle in, especially around June and July where it becomes much more difficult to positively impact some of these Key Performance Indicators, (K.P.I.) from an inventory management perspective.

This "refreshing" of the parts inventory can be a great thing, but if we don't act, or "stop the bleeding" in some of these key areas, we will just see this new year repeat the results of the previous year. More importantly, if we don't understand how these numbers are calculated in the first place, we can pretty well assure ourselves that the results will repeat themselves, year after year.

First of all, we have to know industry guidelines in all these above mentioned areas of Key Performance Indicators. We also have to know and understand how to do these calculations ourselves and not relying solely on our Dealer Management Systems, (D.M.S.). 

Before we get into how these Key Performance Indicators, (K.P.I.) can be misconstrued, incorrect and misleading, let's first look at some of these industry guidelines set by various industry groups such as NADA, Mike Nicoles, NCM and ACG.

Once we know and understand these guidelines, we will then look at how to calculate these Key Performance Areas, (K.P.I.), without utilizing our own Dealer Management System, (D.M.S.)

Guidelines - Definitions - Formulas

Stock Order Performance/Demand Filled From Stock Ratio:

Overall Stock Order Performance, or Demand Filled By Stock Ratio, indicates how well the stock order purchases compare to overall purchases, or "demand". The formula to calculate Stock Order Performance, or Demand Filled From Stock Ratio is:

YTD Sales, (at cost) of *Processed "Normal Stocking Parts" - Divided By - YTD Total Sales at Cost.

Industry Guideline: 75% - 85%

(*Parts ordered and receipted as "normal stocking parts" and have met basic stocking criteria)

Level Of Service/Sales Closing Ratio: 

Level Of Service, or Sales Closing Ratio is defined as the ability of the parts department to provide parts from stock to customers. As you can see from that definition, this category can be misleading in itself. 

Technically, if I receipt my "Customer Orders" as normal stocking parts, I could actually score well in this category, but never even have the parts on the shelf to begin with.

In addition, as you will see from the formula below, if the parts manager doesn't record Lost Sales and Emergency Purchases, it will also lead to false calculations on this particular Key Performance Indicator, (K.P.I.)

It all depends how these parts are ordered and receipted in the first place and how the D.M.S. is calculating the information that is entered by the parts manager.

This is the main reason why I am a huge advocate of measuring "First Time Off Shelf Fill Rates". The formula to calculate Level Of Service, or Sales Closing Ratio is:

YTD Sales, (at cost) Minus YTD Emergency Purchase Receipts - Divided By - YTD Total Sales, (at cost), plus YTD Posted Lost Sales.

Industry Guideline: 85% - 95%

Gross Turnover Ratio:

Here's  another Key Performance Indicator, (K.P.I.) that, if not understood, can also be misleading. The formula to calculate Gross Turnover Ratio is:

Total Sales, (at cost) for the Last Twelve Months - Divided By - the Average Inventory Investment for the Last Twelve Months.

Industry Guideline: 8 Gross Turns Per Year

As you can see and read from the formula, Gross Turns is just an indicator that measures inventory "dollars" turning in the parts inventory. Technically, I could have a Gross Turn Rate of 8 or better and not even have a single dollar of inventory on the shelf. It's just a measurement of gross dollars of inventory receipted and sold through the parts inventory account, including outside purchases.

Measuring Gross Turns is extremely important though as it's a measurement of the proper inventory amount and "Days Supply" of any given inventory. In other words, if you take the average cost of sales monthly, multiplied by twelve, then divide that total by "8 Gross Turns", that will equal the proper inventory amount with a (45) Days Supply.

True Turnover Ratio:

True Turnover Ratio is more of a direct measurement of how the "stocking inventory" is performing. This Key Performance Indicator, (K.P.I.) can also be misleading if not totally understood. The formula to calculate True Turnover Ratio is:

Total Sales, (at cost) of Stocking Parts for the Last Twelve Months - Divided By - the Average Inventory Investment for the Last Twelve Months.

Industry Guideline: 5 True Turns Per Year

Once again, just by reading the formula, you can see that this measurement "keys on" parts that are supposed to be "normal stocking parts". That means these "normal stocking parts" must meet basic stocking criteria set by the Dealer Management System, (D.M.S.). Criteria such as Phase-In and Phase-Out Parameters, Best Reorder Points, (B.R.P.) and Best Stocking Levels, (B.S.L.).

Here's where it gets tricky and potentially misleading...

The Dealer Management System, (D.M.S.) is only going to reveal results as entered. In other words, if the Parts Manager receipts in Special Order Parts for example, as "normal stocking parts", this will give us a misleading True Turnover Ratio. 

Just because the Special Order Parts were ordered on the Stock Order, it doesn't mean they qualify as "normal stocking parts" because they haven't met basic stocking criteria as mentioned above. Also, if we don't utilize the D.M.S. Special Order Parts Program, these parts could also be considered as "normal stocking parts" by the D.M.S., depending on which system is utilized. 

So even though the D.M.S. Monthly Management Report says one thing, it doesn't necessarily mean these Key Performance Indicators, (K.P.I.) are actually true and realistic. This is why the Parts Manager's "Belief System" has to be truthful and accurate when reporting this information into the Dealer Management System, (D.M.S.).

True Turnover Ratio can only be measured "truthfully" if we follow the proper procedures in basic reporting practices and utilizing the Dealer Management System, (D.M.S.) as intended. We all know the old saying...."Garbage In?....Garbage Out!"

Another big contributor to misconstrued, misleading and incorrect information comes from our manufacturers and their Vendor Managed Inventory, (V.M.I.) Programs. So, not only did we have enough problems already with the above mentioned situations, let's get the manufacturer in there to really cause mass confusion to our Monthly Management Reports.

To start with, Vendor Managed Inventories, (V.M.I.'s) combine individual dealer set up criteria along with "group" criteria to define what the dealer should stock, or in their minds, the dealers' "normal stocking criteria". Problem with that is, no one's telling the various Dealer Management Systems, (D.M.S.) that these V.M.I. Parts should be considered as "normal stocking parts".

Parts receipted on the Vendor Managed Inventory, (V.M.I.) are coming into most Dealer Management Systems, (D.MS.) as "non stocked parts" instead of "normal stocking parts". The reason for this is quite simple as many these V.M.I. Parts have not met the individual Dealer Management System's, (D.M.S.) basic stocking criteria.

This means that even if the manufacturer is considering these parts as "normal stocking parts", they are not considered as such by your own system until they have had enough demand. All of which will impact the D.M.S. Monthly Management Report in a negative way when measuring True Turns, Stock Order Performance and "First Time" Off Shelf Fill Rates.

Parts purchased on the manufacturers' V.M.I. Programs should be considered as "normal stocking parts" and should be included when measuring the above mentioned Key Performance Indicators, (K.P.I.). The only way they can be measured properly is by positive actions taken by the Parts Manager.

One way to do this is to insure that the manufacturers Vendor Managed Inventory, (V.M.I.) parts are receipted into a "default parts source" that brings these parts in as "normal stocking parts". If the particular Dealer Management System, (D.M.S.) is unable to perform that task, then the Parts Manager would have to manually receipt these parts as "normal stocking parts".

As you can see, there's even more potential today for misleading and inaccurate information to find it's way to the D.M.S. Monthly Management Report. Unfortunately, too many parts managers trust what their D.M.S. Monthly Management Report tells them as many have never "done the math" themselves.

In my opinion, there IS too much misleading and inaccurate information on the D.M.S. Monthly Management Reports today. This is mostly due to the manufacturers' Vendor Managed Inventories, (V.M.I.'s) parts not being receipted with the proper stocking status. That one item alone effects so much on the Monthly Management Report as mentioned above.

There is no better time than the beginning of a new year to correct these inefficiencies in reporting to the Dealer Management System, (D.M.S.). The sooner we get these issues corrected, the sooner we will see accurate "annualized" information on the Monthly Management Report going forward.

It's time "Smart Parts" Managers, for us to get back to basics and "do the math" ourselves in order to get the right information on these Monthly Management Reports. Most importantly, it's time to give our dealers accurate information that will "truthfully" inform them on how their parts investment is performing. 

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

  

Ranking Dealer Management Systems, (D.M.S.) in 2017

One area of our industry that is definitely moving at a high rate of speed going into 2017 are Dealer Management Systems, or often times referred to as the "D.M.S." System. The options are growing and the competition is increasing more and more each day.

Recent articles and blogs by Automotive News and MotiveRetail.com agree that competition between D.M.S. vendors and providers has skyrocketed over the past few years and will continue to grow well into 2017 and beyond.

Both Toyota and Nissan have committed to expanding their D.M.S. network providers from two up to eight over the next few years. Like other manufacturers, both Toyota and Nissan are now seeing the need for more support integration to reduce overall dealer cost and to better support their dealer base with more options.

For years, we have basically seen just a couple of options, or choices as to which D.M.S. provider dealers ultimately ended up with. Not surprisingly, their choices were either Reynolds & Reynolds or ADP, now referred to as CDK, even though there were a few other smaller D.M.S. companies available.

The difference today is that technology has expanded to a point where dealers are looking at these other options even closer. Now, it appears that Reynolds & Reynolds and ADP/CDK aren't the only ones out there that can provide all the necessary applications for all dealer departments.

Most importantly, dealers now have better pricing and contract options without feeling "locked in" to any one vendor for long periods of time. High monthly fees, costly updates, hardware costs and lack of support are common concerns that have existed for years.

Some of the main reasons that dealers have put up with being "locked in" are fear of change, interdepartmental system preferences and accounting integration. Once a system has been in place for years, dealers tend to shy away from starting all over again along with the ramifications that go along with a major system change.

Before we  get into the "ranking" of today's D.M.S. Systems, let's take a look at who the "players" are in this industry verses just a few years back. It's not just a one or two player field anymore as there are at least six, in my opinion that are in the game now and one in particular that is moving up the ladder at a high rate of speed.

As I mentioned earlier and not to anyone's surprise, Reynolds & Reynolds and ADP/CDK have been industry standards when it comes to choosing a D.M.S. System that offers all the necessary applications in the areas of Accounting, Sales, Parts and Service Department Operations. Both have pretty much "perfected" their programs to the utmost in efficiency and usability.

In my opinion though, both have failed to stay up on technology, especially when it comes to updating existing programs and applications to today's Windows based technology. Even though Reynolds & Reynolds introduced "Ignite" and ADP/CDK introduced their version called "Drive", they still have not fully disconnected with their older operating systems.

Even though both "Ignite" and "Drive" have been out there for quite some time, I still see Fixed Operations personnel using the Reynolds & Reynolds "blue screen" and ADP/CDK's "green screen" almost 100% of the time. For those not familiar with this terminology, it just basically means that users prefer using their old screens instead of the newer Windows based option.

So now!....Let's meet the "New Players" in town!

The first two D.M.S. providers, other than Reynolds & Reynolds and ADP/CDK that I want to mention aren't really new to the game, but have been gaining market share over the past few years are "AutoMate" and "AutoSoft". Both have found their way into more dealers primarily due to dealer cost savings over Reynolds & Reynolds and ADP/CDK.

Keep in mind during all these D.M.S. Rankings, I will be measuring how each system stacks up in the areas of Parts Inventory Management and Service Applications, even though I will be making comment here and there when it comes down to Accounting Integration and overall efficiency.

In my opinion, one of the biggest advantages to AutoMate and AutoSoft coming into the marketplace was a more "user friendly" application system. Both seem to very easy to navigate through applications with easy to follow menus with Windows Bases "Action Buttons". Compared to Reynolds & Reynolds and ADP/CDK, this made it much easier for new users to adapt and learn D.M.S. applications.

On the other hand, what these two systems did lack, in my opinion, was the "in-depth" application software and options in the parts areas of set ups and controls, source ranking by piece sales, days supply options and matrix escalations.

In the area of service applications, I also felt that even though both are very user friendly for Service Advisors to navigate through the repair order process, both AutoMate and AutoSoft seemed to have limited "customized" reporting options for management to track overall productivity, sales and profitability.

Actually, even though Reynolds & Reynolds and ADP/CDK have the edge, in my opinion in these areas, all D.M.S. Systems out there need to do a better job providing more "customized" reporting options on "drilling down" specific areas related to parts and service applications.

The reason for my opinion is if D.M.S. providers were doing a better job in the above mentioned areas, there wouldn't be so many other vendor companies out there providing these customized reports and "drill down" options for dealers.

This is why so many of these outside companies need to acquire "Incription Rights" from various D.M.S. providers in order to gain access into the dealers' D.M.S. System. Once into the D.M.S., these outside vendors can provide dealers the information and reporting options needed to manage their Fixed Operations. 

Many of these outside companies specialize in follow up programs, specialized reporting options, marketing and other various retention programs. Most importantly, they provide dealers and managers information in a moments notice without having to spend time building these specialized reports and programs on their own D.M.S., if available in the first place.

Another player that has entered the Dealer Management System market is a company called "Adams". When I was first introduced to this D.M.S. System, I was pretty skeptical, as I'm pretty sure anyone else would be as well when diving into a system pretty much unheard of.

Although, from a parts perspective, I was pretty impressed as the Adams D.M.S. System allowed for most, but not all the necessary applications needed in order to manage a parts inventory. Keep in mind, every one of these systems are being measured up to our industry standard systems like Reynolds & Reynolds and ADP/CDK.

On the service side, the Adams D.M.S., much like all the others, can manage through the service repair order process, but once again, lacked the "in-depth" management reporting applications that, in my opinion are necessary in managing the service department.

Items such as op code utilization drill downs, technician productivity, exception reports and sales and gross analysis are very basic at best. Once again, side by side against Reynolds & Reynolds and ADP/CDK, a lot more to be desired.

The more I get familiar with these "new guys" in the D.M.S. provider market, the more I see how price and contract options are playing into the dealers' ultimate choice in which provider they choose. It seems that more and more dealers are willing to give up a little here and there as far as how "in-depth" a system can be versus the overall cost of the system.

The last Dealer Management System that I want to include in my "Top Six" is not last by any reason. In fact, I believe this system is by far one of the newest and biggest players to go up against all the others. This new D.M.S. System that's taking the market by storm, in my opinion and that system is DealerTrack.

When I was first introduced to DealerTrack a couple of years ago, once again, I was skeptical, as I am with any new system out there. Knowing what a "good" D.M.S. System should provide, especially in parts, service and accounting. Once again, another new system and lots of questions to be asked. 

In the beginning, in my opinion, I felt that DealerTrack had some great "basic" applications that I thought were at first, user friendly and second, state of the art technology that would take us away from those old "green and blue screens" days that most of us grew up with.

Although, what they did lack was "research and development", or "R & D", which, in my opinion, is where I lost interest initially. Even though the package looked great, it lacked many of the basic parts and service applications that most "Smart Parts" Readers are accustom to and familiar with.

Fast forward to today, I have had the privilege of seeing the "research & development" of this D.M.S. product grow to what I believe will be the new industry standard going forward. DealerTrack has taken it to the next level in parts, which I'm usually the staunchest of critics as to what a system needs to provide today's parts managers.

In service, I also believe that DealerTrack has gone to the next level in all service applications along with "user friendly" software that doesn't require service advisors to take tests, or on line tutorship's in order to navigate the system while trying to build customer relationships, which should be the primary goal for service advisors.

Their management reporting functions are "adequate" when comparing to other D.M.S. Systems. Although, I believe all D.M.S. providers need to do a better job by making it easier for managers, spending less time building reports, and more time managing the information on the reports.

All of the D.M.S. Systems in this ranking provide adequate accounting integration software and applications, with the exception of a couple areas of account security. By this, I mean that some of the accounting integration set ups have to be initiated in various parts and service applications, as opposed to being initiated and controlled in the accounting functions. All above mentioned D.M.S. Systems are guilty to some degree in this category.

Even though there are other D.M.S. providers out there and more coming on board, in my opinion, these are the top six that are most widely utilized in automotive dealerships today. Choosing the top D.M.S. depends on the individual dealers needs, size and various applications.

I do know that overall cost and contract terms have been a leading reason for more and more D.M.S. providers coming into the market. Competitive pricing and comparable, available applications definitely gives the dealer more options in choosing their D.M.S. provider. More importantly, for the industry, it will eventually lead to better product applications and even more competitive pricing.

Overall, my preferences as to which D.M.S. provider is leaning towards the future after seeing what these newer providers are offering, especially DealerTrack. After working with all the above D.M.S. Systems and growing up in this business a Reynolds & Reynolds advocate, it's time to open my eyes to change and new innovation.

All of these providers are working diligently with the manufacturers to provide dealers better products with better support integration. Other affiliated vendor acquisitions by Reynolds & Reynolds and ADP/CDK will also provide newer and better software applications related to customer follow up and customer retention.

Once again "Smart Parts" Readers!...we have a lot to look forward to in 2017 and the options for dealers are expanding with better technology at competitive prices. In my opinion, it's time to "get out of the box" in 2017, instead of just "thinking outside of the box"....

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

2017: "What Can We Expect?"

In December of every year, things get pretty busy, not only in our dealerships, but in our home lives as well as the holiday season approaches. With the hustle and bustle of both, we seem to get more consumed with the everyday stuff and before we know it....Boom!...here comes 2017!

With that said and looking ahead to 2017, I believe this coming year will not only be prosperous, it will be a "break out" year for our industry. As I mentioned in the intro, I believe there are a lot of indicators out there to support my opinion, including some stats and analysis from some prominent industry experts.

Each year, as many "Smart Parts" Readers already know, I take the time each December to do my research on what the current year has revealed as well as what it means looking ahead to the new year. Consistent to the past few years, 2016 showed continued growth in auto sales, even though it looks like it will fall a little shy of the new vehicle sales records of 2015.

My first question, or should I say concern is...when will we reach the peak and start the downward slide? Many of us in the industry know that our business seems to go in seven to eight year cycles where we experience a down slide in vehicle sales. This "trickle down" of lower vehicle sales can be felt dealer wide and all of a sudden, the fixed operations becomes even more of a necessity in dealership profitability and survival.

Are we at that point in history again? Could we have already seen the peak of new and used vehicle sales in 2015 and now be looking at that dreaded period in time again? Most importantly, if true, are we ready to survive the pitfalls and struggles yet once again?

To find the answers to these and perhaps many other questions and concerns looking forward, I once again turned to a source that has consistently led our industry, celebrating 100 years of service in 2017 and that source is the National Automobile Dealers Association, (NADA)

In November of this year, NADA Chairman, Jeff Carlson wrote an article that is available to all on the nada.org. website titled "The Next 100 Years of Evolution is Here". In his article, he expands on the future of our industry and how NADA "will continue to be proactive and forward looking in it's mission to advocate for the franchise system and provide dealers with the resources they need to succeed."

As part of NADA's commitment and on their behalf, Glenn Mercer, a highly regarded automotive consultant is currently conducting a thorough and researched look at what our industry has to look forward to by the year 2025. Not only will this study look at our end of the industry, it will also give us a perspective of what automotive retailing will look like from the dealer, consumer and manufacturers standpoint.

In Mercer's preliminary findings, he believes that we will see more evolution, but not revolution over the next 10 years with sales remaining consistent, while direct sales efforts will be focused on higher end vehicles. He also believes that private dealer ownership will continue to dominate in a slightly shrinking overall dealership total of approximately 16,500 by 2025.

Forecasts also indicate that light vehicle sales will be in the approximately 17-18 million with a continued decline in profit margins, much like today which will require dealers to focus, once again on the fixed operations to provide necessary revenue to survive and prosper. Mercer's research and perspectives are scheduled to be completed early in 2017. 

Chief Economist for NADA, Steven Szakaly predicts likewise as far as the projected light vehicle sales at 17.1 million units, thus predicting a "stable market" ahead and not a growing market. He also believes that the industry has "achieved record sales and pent up demand is effectively spent".

Szakaly continued with his economic outlook for 2017 as remaining strong with projected gross domestic product, (GDP) growth at 2.6 along with employment numbers increasing and gasoline prices remaining stable. He also added that increased infrastructure spending and certain tax cuts from an incoming administration could also mean a better long term outlook.

Some areas of concern he has though looking forward is rising interest rates, increased loan terms to an average of 68 months may lead to a slower, but still strong sales pace. This may also impact and increase new vehicle lease purchases and declining residuals and used car values.

Overall, the future is stable, with a potential for even higher growth pending any changes that may be implemented by the new administration. In my opinion, we just may "dodge a bullet" this time around as to our cyclical patterns of the past have proven.

So what does all of this have to do with us "Smart Parts" Managers?

Quite simply, once again, our dealers are going to look to us and all the fixed operations to "foot the bill" and to remain profitable overall. Fixed Coverage, or Service Absorption percentages are going to be the main topic in training from in-dealership all the way up to the NADA University level.

Here at ACG, we have already seen a drastic increase for training at all levels and most of all...parts training. The Parts Department has one of, if not the highest "net to gross" percentages in most dealerships today. As a dealer, if makes perfect sense to insure my Parts Department Managers and Staff have all the necessary training to maximize department profitability.

We experienced a very high training demand this year at ACG, with the highest increases in Parts Management Training. The demand was so much higher that it was felt all the way up to the NADA University level. I was fortunate enough to participate in the NADA University's first, but not last Parts Summit this past September to address this very issue of expanding parts training overall

Partnering up with NADA, along with other distinguished industry parts experts was definitely a great recipe for advancing the agenda and curriculum going forward. Opening this "round table" forum to new ideas was, as I mentioned in previous articles, one of the best ideas put forth by Chris Bavis and Mark Michalski, University Instructors at NADA.

The future looks very bright in my opinion for "Smart Parts" Readers and Managers! The upcoming year of 2017 could actually be a record year for training and overall fixed operations growth. With a steady sales forecast, projected strong economic growth and strong consumer confidence levels, 2017 could just be your "Best Year Ever!"....and ACG "Smart Parts" can help get you 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

Vendor Managed Inventories: Could The Manufacturers Really Be "Missing The Boat?"

As I do in many of my articles, I start out by referring to how things were "back in the day" and once again, I find it very apropos to start that way again in this month's issue of ACG "Smart Parts" when referring to how we get our stock replenished today versus years ago.

The one thing I do know is that "back in the day", we only received what we ordered, with very little intervention, or interference from the manufacturer. We may may not have had all the ways track parts history, trends or demands that we do today, but it was much simpler back then. Although, I will say that having the right mix of parts on the shelf was very difficult.

In many ways, Vendor Managed Inventories, (V.M.I.'s) were and are a welcome sight as we now have a way to somehow get a "consensus" as to what we should stock and what we shouldn't stock based on all this demand being recorded by the manufacturer. We can even earn added discounts by keeping within program "compliance" as well as spending less time creating and sending our stock orders.

Vendor Managed Inventories, (V.M.I.'s) also gave the dealer an added sense of security by "protecting" these purchases of qualified parts over a period of time. So how can we go wrong?....less effort, inventory protection, added discounts, allowances and much more!

As I mentioned in the introduction, I have written on this topic several times and have answered many of the common questions that Parts Managers have concerning Vendor Managed Inventories, (V.M.I.'s), but I haven't really "dug deep" into the "why" and "how" these programs work in the first place.

The first question is how a particular part becomes "qualified" to be a part included in a particular V.M.I. Program. That seemed to be a pretty simple one as just like most other parts in our own Dealer Management Systems, (D.M.S.), criteria must be attained in order to be a "qualified" part. The only difference is that a "collective" of demands have to be met by a number of dealerships in order for parts to qualify for the most part, but not all.

Knowing this going in, that answered the question to me as how parts are "phased-in" to any particular V.M.I. Program, but it didn't answer the question as to which dealers are to stock certain parts and which ones weren't. On top of that, what would be the determining factors to the Best Stocking Levels, (B.S.L.) and Best Reorder Points, (B.R.P.)?

This was where the research came in as I found that many Parts Managers were receiving Recommended and Suggested Stock Orders on parts that may only have one "hit" or "demand" in the last seven or eight months. 

How could this be that any V.M.I. Program should suggest stocking parts that have not even met my own phase-in, phase-out criteria? How could they possibly even know what my Best Stocking Level, (B.S.L.) and my Best Reorder Point, (B.R.P.) be on a part that doesn't really even qualify or even have enough history to know the answers to any of these questions?

Now, at this point, I'm really getting intrigued and inquisitive as to the "hows" and the "whys" these parts are ending up on more shelves than ever before. I do know that the pressure being put on Parts Managers in this case study by the manufacturers to meet and exceed "compliance" levels was very apparent. It almost seemed like they didn't even care whether or not the dealers' inventory levels on this "asset" were skyrocketing and actually adding to the dealers obsolescence numbers.

Even though these V.M.I. Inventories are protected and all can be sent back after a period of time at no additional cost, (not counting acquisition and holding costs, of course) we have to ask ourselves one important question....

"Why would I even buy parts to "test them" over a period of time, just to send them back at a later date?...I thought we were supposed to buy parts to sell them at a high rate of turn?"

Hmmm....interesting question, especially when I thought, as a Parts Manager, that I was supposed to be trying to have the right mix of parts with a high "First Time Off Shelf Fill Rate" and high True Turn numbers.

Not to be misunderstood, I do realize that these Vendor Managed Inventories DO help Parts Managers with those parts that are good or fast movers, but I am only referring to what's missing and that's why I believe the manufacturers' could be "Missing The Boat".

Let Me Explain...

During my research, I started to take down some notes as to the similarities in all these ten stores and I noticed a few things;

• All had excess inventory amounts in the 7 - 12 Months, "No Sales" Activity Area.
• All had inventory amounts in the over 12 Months, "No Sales" Activity in excess of 25%
• All had "Non Stocked" inventory amounts in excess of 50% of their total inventory
• All had at least 30% of these "Non Stock" were added parts from their V.M.I. Program.
• All of these added V.M.I. "Non Stock" Parts had a B.S.L. and a B.R.P. of ZERO!
• All of these Parts Managers DO NOT generate D.M.S. Stock Orders on a regular basis.
• All of these Parts Managers make little, if any adjustments to their V.M.I. Stock Orders.

With all of this information, it's no wonder how so many Parts Managers got to the point of "over valued" inventories, lower gross and true turn numbers, lower First Time Off Shelf Fill Rates and even lower Service Shop Productivity.

Here's What's Missing...

The one thing that was consistent in all these parts departments was when I asked them to run a D.M.S. Stock Order, they either forgot how, or they hadn't run one for a LONG time. Once we created the "in-house" D.M.S. Stock Order, lo and behold....look at all those great part numbers that we need on the shelf!

Why aren't they already on the shelf you might ask?....well!...these parts that are selling at a high rate in this particular store are not qualified, V.M.I. parts! So, rather than stock them and have no protection, let's just special order them when we need them, thus tying up the shop once again to wait for a part to arrive overnight that we should have had on the shelf in the first place.

The other thing that was missing that I hadn't figured out to this point was..."How can a part be suggested on my V.M.I. order and come into my inventory with a 0/0 B.S.L. and B.R.P.? In most D.M.S. Systems, this isn't possible unless these 0/0 B.S.L. & B.R.P. parts are actually forced in by the Parts Manager.

So, how does this happen?...

I recently figured out, or at least in my opinion, that parts that are on a particular V.M.I. suggested order that may have only one demand in my D.M.S. System, may actually have several, "qualified" demands in the V.M.I. Group as a whole. Even though the part hasn't met my criteria, it has met the group criteria and if I don't catch it before it gets ordered?...you guessed it!...I have now bought that part to sit on my shelf until it's reached it's qualified return period.

Even though there is no technical B.S.L. or B.R.P. in my system for these parts, they are forced in as a B.R.P. of zero and B.S.L. of one by the group criteria. Overall B.S.L. and B.R.P. is determined by either the V.M.I. criteria as a group for the B.S.L. and B.R.P., or the my own Dealer Management System's, (D.M.S.), whichever is greater.

So, if you are not watching or paying attention these V.M.I. Suggested Orders, it won't take long for it to get out of hand and overload you with lots of inventory as well as acquisition and holding costs that will skyrocket.

If the manufacturer really wanted to maximize on their parts sales, they would encourage Parts Managers to use both programs to get the best stock order efficiency from their V.M.I. and the dealers' D.M.S. Systems. 

In the last few months, I have actually created and generated over twenty D.M.S. Stock Orders for Parts Managers that had a wealth of part numbers that they all said they would normally stock. Only because they had stopped running their own stock orders on their own systems caused these great "stock out" situations. In fact, I found that many of these D.M.S. stock orders had many more suggested order lines than the V.M.I. suggested order had!

One other item I noticed in my research was that Parts Managers were actually "running out" of V.M.I. Parts! Once I explained to them that just because the V.M.I. Suggested Order has your fast moving part listed, it's very possible that the Best Reorder Point, (B.R.P.) may need to be adjusted as the V.M.I. Program for the most part, is only picking up your "Default" Source Settings on Low and High Days Supply and not your Source Ranking by Piece Sales Settings.

I believe that the manufacturers are missing out on additional sales as they are now steering Parts Managers away from their normal duties and responsibilities when it comes to basic parts ordering procedures. In order to have the right mix of parts, we have to use all of our tools in our tool boxes, both vendor managed and in-house programs.

In my opinion, there is no substitute for plane old, good Parts Manager skills, reporting Lost Sales, Emergency Purchases, doing Bin Checks periodically, running "in-house" Stock Orders, etc. I guess you could say that we had it pretty good "back in the day" and just maybe, it wouldn't hurt if we carried some of those "good practices" on into today's Parts Manager's day!

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

October 2016: Inaugural NADA Parts Summit - September 27-28, 2016

Back in April of this year I had the privilege to meet with Chris Bavis and Mark Michalski, both NADA Academy Instructors in their booth at the NADA Convention in Las Vegas. As "Parts People" do, it wasn't but a minute or two when we were in deep discussions about parts in general.

It was at that time they both mentioned that they were putting a meeting, or "summit" together at the NADA Academy with a format that I think was not only a great idea, but also much needed. A format that would invite those of us working and training "in the trenches" along with the people responsible for most of our industry standards today.

I was not only fortunate enough to get invited to this inaugural event, but I was also encouraged to contribute and bring my own ideas from ACG "Smart Parts". I can't remember a time or if I've ever seen a time where the people responsible for our industry standards "opened the door" to new ideas and concepts.

Chris Bavis and Mark Michalski, NADA Academy Instructors facilitated the summit along with a host of NADA Instructors, 20 Group Facilitators, Directors and Marketing Staff. NADA was well represented right from the start and as I noticed from day one, this was going to be great! NADA's vision for the summit was as follows;

"To invite leaders in the parts consulting and education venues to NADA to discuss the critical issues facing today's dealers in their Parts Departments, so we can collectively provide current and relevant answers to those critical items and improve all educational offerings to NADA members."

I want to start out with listing the other names of those attending and contributing to this Inaugural NADA Parts Summit along with their affiliations to our industry. Some came with presentations to share on various topics and some, like myself, came to listen, share and comment on all topics.

Invited Attendees;

Robert C. Davis, CPA & Partner at Dixon, Hughes & Goodman, (DHG), Memphis, TN
Mark De Lucia, Inventory Management Specialist, Dealermine Corporation, Clackamas, OR
Keith Ely, Commercial Dealership Consultant, KEA Advivors, Lawrence, KS
Carroll "Scooby" Barbre, Commercial Dealer Consultant, KEA Advisors, Lawrence, KS
Kent Ely, Commercial Dealer Consultant, KEA Advisors, Lawrence, KS
Greg Finn, Commercial Dealer Consultant, KEA Advisors, Lawrence, KS
Frank Burrows, Partner, Automotive Business Solutions LLC, Haymarket, VA
Kevin Burkhimer, Partner, Automotive Business Solutions LLC, Haymarket, VA
Mark Garafoli, Consultant, ADMI, Inc.
Richard L. Owen, Regional Fixed Operations Director, Group 1 Automotive, Kennesaw, GA
Dave Piecuch, Vice-President, Automotive Consultants Group, Inc., Pembroke Pines, FL

Topics of discussion and individual presentations included the following;

Obsolescence - How we got it in the first place, how do we get rid of it and how do we keep it from happening over and over again? Mark De Lucia's presentation illustrated how to actually turn dealers' "garbage into gold" by reinvesting cash received from bought up obsolescence back into active inventory that turns at a much higher rate.

Vendor Managed Inventories, (V.M.I.) - Chad Royston from NADA provided us all with great information on how to get the most out of individual manufacturer vendor managed inventory programs. Further discussions with those attending also brought out that too many Parts Managers are relying exclusively on the manufacturers' to control their inventories through these various programs and excluding their own Dealer Management Systems. Combining both the manufacturers' V.M.I. Programs AND the dealers' D.M.S. for optimum ordering procedures was the general consensus in the group.

E-Commerce & Wholesale - Is it right for me?...and just who benefits? This open topic for discussion brought out a LOT of information in my opinion. Many, including myself, offered various calculators to see if wholesale and/or utilizing companies like E-Commerce and Ebay are actually worth it to begin with. Are we actually considering all the costs including acquisition and holding costs?....obsolescence?....personnel?, etc. Great topic with great results from the group as the answer to this question can be easily determined and available to those "Smart Parts" readers out there.

Obsolescence in "Buy/Sell" Agreements - If anyone would have told me going into this Summit that I would be totally "blown away" by talking about obsolescence in a "Buy/Sell" Agreement, I would have bet against it. Robert Davis from D.H.G. had a great presentation loaded with factoids, information and comment on the "legal" side of things when it comes down to dealers in a "Buy/Sell" Agreement. I also didn't realize how evaluating and putting a cost on inventory that includes obsolete parts inventory could be so intense. Great stuff and great job Robert!

Parts & Labor Pricing/Inventory Mix/Guides/Theories - Another great set of topics were discussed on how we price our services, both parts and labor as well having the right mix of parts inventory in order to achieve a high "First Time Off Shelf Fill Rate" level. Richard Owen from Group One Automotive provided some great examples of utilizing a labor and parts matrix to maximize profitability while remaining competitive in the market. Even though this topic is not new to most of us, it was a great topic to discuss as far as which and what matrix works best as a general consensus in the group.

Parts Inventory Reconciliation - This topic wasn't really supposed to be a topic in the first place when I looked at the agenda, but when the topic came up?....Wow! Parts Inventory Reconciliation ended up being one of, if not the top topic when it came down to training needs. In most dealerships, the Parts Manager and the Office Manager do not speak the same language when it comes down to parts and accounting integration. There will definitely be more to come on this topic in the future as NADA, along with those at the Summit will be adding this topic to their training and educational curriculum.

Hiring and Managing the Millenneal Generation - Another great topic that was extremely informative with this presentation made by Jim Phillips and Chad Royston from NADA. As I learned from the information and facts provided, we can't take this generation lightly as it is growing each and every day. As in my "baby boomer" generation, there are characteristics to each generation and we tend to only look at how we do business through our own eyes, or "generation". Once again, information now available to "Smart Parts" Readers from any of us in attendance. 

Parts Bar Coding - Some may call "bar coding" the way of the future, but as Frank Burrows and Kevin Burkhimer from Automotive Business Solutions, LLC explained, it's actually been out there for over 35 years! Think about it, we all know what UPC Labels are, (Universal Price Code) as we see them in supermarkets, department stores and other retail outlets. It only makes sense that this technology needs to grow in our industry as well when it comes down to efficiently managing our parts departments. Great presentation and great stuff once again...I highly encourage "Smart Parts" Readers to research and check out Frank and Kevin's product.

Lost Sales Reporting & Special Order Parts - I purposely saved these two topics for last on purpose. If you can imagine, on Lost Sales for example, how many definitions we have all heard over the years? Now, can you also imagine a room full of industry leaders in the area of parts coming to a united consensus on the definition of a parts "Lost Sale"?...of course not! 

One of the most fun times at the Summit was discussing this topic and believe it or not, some left with a different definition than what they came in with. The bottom line on reporting Lost Sales, which I define as "Potential Missed Opportunities" is if whatever the definition the Parts Manager puts on it AND gets the results in at least 5% - 10% reporting (as a cost of sales), then THAT's the correct definition for him or her.

Getting that extra "demand" recorded is critical and that's really the most important part of recording these "potential missed opportunities" in the first place. Recording "questionable" or "maybe" Lost Sales won't hurt in the long run as these parts don't just jump on the shelf. They just get in front of the Parts Manager's eye in order to make the proper decision whether to stock them or not.

Special Order Parts was also a surprise to me as it's not really anything new, but it was amazing that it drew a lot of conversation in the group. It was also amazing to hear how many dealerships struggle with controlling Special Orders and how much they impact obsolescence. 

Many simple controls and processes were discussed and I believe the general consensus on this topic was to have a process and controls with consequences in the first place. As discussed, most failed Special Order Programs in dealers were actually a result of not having one at all.

In Conclusion:

In closing out this special edition of ACG "Smart Parts", I once again want to say "Thanks" to not only Chris Bavis and Mark Michalski, but also all those attending and the information shared among all of us. I know that there will be more of these to come in the future and I hope I'm fortunate to get invited as well. 

I believe that getting our biggest leader in setting our industry standards, that being NADA and those of us "in the trenches" working with you each day is definitely a recipe for success going forward. A first in my opinion, especially in a "round table", Summit format.

I know for a fact that new education and training programs from NADA in cooperation with those of us in the field will be coming soon and I recommend all of NADA's Members, especially to the dealers out there, to keep an eye on what's ahead and how you can make your Parts Department more profitable and a more "liquid" asset in the future.

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

September 2016: Special Order Parts "A Necessary Evil?"

As far back as I can remember, I have always thought of Special Order Parts as "A Necessary Evil" that I had to deal with each and every day. It was just one of my duties & responsibilities as a Parts Manager...it was just part of my job.

What I didn't realize though was the differences, in my opinion, dealing with Special Order Parts "back in the day" being so much different than it is today. Back then, Special Orders Parts represented the majority of all parts orders as proper stocking levels were much harder to maintain.

Longer lead times, greater intervals between stock order due dates and lower manufacturer "fill rates" highly contributed to the daily dilemma of having the right parts at the right time for our customers. In addition, Dealer Management Systems, (D.M.S.) didn't provide the necessary data to phase-in parts to inventory, or maintain a proper days supply.

Fast forward to today, with all our technology, information and even lead times less than two days in many dealerships, we are still dealing with this "Necessary Evil". In many cases, Special Order Parts has gotten even worse than it was "back in the day."

In my opinion, it all started years ago, first with "dedicated delivery" being offered by many manufacturers. Follow that with what I call the "nail in the coffin" when manufacturers started to provide their own stock replenishment programs, or "Vendor Managed Inventories", (V.M.I.)

There are many great advantages to both programs with some Manufacturers' V.M.I. Programs perhaps better than some others. One common thread in these programs though is that it's obvious that many Parts Managers have "lost control" on the basic fundamentals of Parts Management, which is protecting and maximizing the dealers investment.

Before we get to our main topic on Special Order Parts, let's work our way down to the how we got to the point of Special Order Parts becoming the "New Necessary Evil". After all it didn't happen overnight it appears that it's not going away soon.

First, let's start with the manufacturers offering "Dedicated Delivery" in order to cut down "lead times" and offer the customer a higher "Level Of Service". This was obviously a winner right from the start and most other manufacturers followed suit once introduced.

Dealers and Parts Managers alike "jumped on the bandwagon" with our first major contributor to increased Parts Special Orders. "Dedicated Delivery" provided an alternative to higher inventory values as parts were now available overnight. No need to stock as much because worse case scenario, we can get it overnight without added shipping and holding costs.

Even though this may have not been the intent of the manufacturer, the opportunity swung into the favor of the dealer, while the manufacturer absorbed the added cost of delivery and maybe even higher inventory holding costs.

Net result?...potentially more Parts Special Orders due to lower dealer stocking levels. Even though lead times were shortened, shop productivity is lowered as more and more vehicles are "tied up" overnight waiting for parts.

One other problem was born when "Dedicated Delivery" came about and that is that "Special Order Parts" seemed to disappear! All of a sudden, "Special Order Parts" got added to the overnight Stock Order and thus....got receipted as Normal Stocking Parts because these "Special Orders" were added to the Stock Order.

I noticed this "epidemic" soon after "Dedicated Delivery" started when researching various D.M.S. Monthly Management Reports. All of a sudden, I'm seeing Parts Departments that have NO Customer Orders recorded and a 99.9% Level of Service and Stock Order Performance, or Sales From Stock Ratios also near 100%!....Wow!...the perfect Parts Department!

So now, not only are we lying in our reporting on the D.M.S., we are are now reporting inaccurate "First Time Off Shelf Fill Rates" and "Stock Order Performance". This, of course also leads to false "Gross and True Turn" numbers. Eventually, it will also lead to higher obsolescence as the epidemic continues.

Now, let's move on to the second phase of what will lead us to the "Necessary Evil" part of Special Order Parts and that is the Manufacturers Stock Replenishment Programs, or "Vendor Managed Inventories", (V.M.I.). 

Here's where, in my opinion, the score sheet gets balanced between the manufacturer and the dealer. Dedicated Delivery provided the dealer overnight parts at no added delivery expense or added holding costs, so now the manufacturer will "manage" the dealers inventory....part two of how to increase Special Order Parts, our "Necessary Evil".

Even though "some" of these V.M.I. Programs work well, we have to remember one important thing. They do not completely replace the dealers own Inventory Management System, (I.M.S.) as both the V.M.I. and I.M.S. programs need to be managed properly.

To support my theory, I've asked the following two questions to many Parts Managers who rely solely on the manufacturers V.M.I. Programs;

Question One: "Have you ever had your V.M.I. Program recommend stocking parts that have not met your own Phase-In Criteria with little or no sales activity?"

Question Two: " Do you have active parts in your I.M.S. System with normal or high sales activity that you do not stock and are not "qualified" in your manufacturers V.M.I. Program?"

I have yet to meet a Parts Manager that has not answered "Yes" to both questions. As a matter of fact, I have seen "Lost Sales" Reports that have lost sales recorded on "Normal Stocking Parts" with very active parts life cycles, but due to the fact that these parts were not "qualified" V.M.I. Program parts?...you guessed it!...Now, these parts become Special Order Parts!

Not only are "Special Order Parts" on the rise, controlling them is another major problem. You would think that after all these years, we would have this situation under control, but that is definitely not the case in many Parts Departments today.

"Special Order Parts" are still ending up op on the shelf, in hopes that they will sell one day, but to no avail, they just add to the obsolescence problem. Lack of controls in dealing with "Special Order Parts" is still the major reason these parts end up on the shelf.

If you are a Parts Manager that is fortunate enough to have a manufacturer that accepts monthly returns on these parts, it is, of course much easier to limit the damage that these "Special Order Parts" can have overall.

Having a system in place, or process in handling "Special Order Parts" is crucial to minimizing the negative effects in the first place. In fact, most Dealer Management Systems, (D.M.S.) offer programs to electronically control "Special Order Parts", making it much easier to manage this "Necessary Evil".

Whether you have a system to electronically control these "Special Order Parts" or not, there are still some basic guidelines that are required to manage them properly. Customer deposits, prepayments, future service appointments, handing and return fees are just a few basic guidelines used by most Parts Managers to control the "Necessary Evil".

In my opinion, the "bottom line" is that even though we have some of the best technology and services available to us today, the problem still exists. In some respects, it's gotten even worse with so many more part numbers today needed to service so many makes and model vehicles.

One thing is for sure though, as "Smart Parts" Managers, we cannot overlook our basic fundamentals in managing our dealers parts inventory. We cannot let the manufacturers totally control our ordering procedures and most importantly, we cannot lose control of one of our dealers biggest assets.

Regardless to what some might think today...our dealers' still want their Parts Departments to be very profitable, with an expected high return on investment, limited or no obsolescence and a high customer level of service...the more things change, the more they stay the same...

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

August 2016: "Maximizing Order Efficiency"

Some of you "Smart Parts" Managers out there utilizing your Manufacturers Stock Replenishment Program may think you are already maximizing your order efficiency, but in my opinion, if you are not utilizing your own Inventory Management System, (I.M.S.) to compliment their programs, you just may be missing the boat.

I believe the question I asked in the introduction is a legitimate one because it appears that we, as "Smart Parts" Managers may have forgotten our roots. In the past, we relied solely on our own Inventory Management System, (I.M.S.) to generate and send our Stock Orders.

I believe there are great advantages and disadvantages to these programs that we all need to be aware of. Advantages such as order simplicity, added discounts, allowances, return reserves and inventory protection may sound great, but I would have to add...."at what cost?"

These advantages have kind of spoiled us to some degree because we just feel we "have to do it" because we won't be in compliance, miss added discounts and cash rewards for our dealer. In some cases, being compliant to these programs is directly tied into overall dealer programs from sales to service.

Dealer status and compliance to these programs that may tie in sales, service and parts can add up to a lot of "dealer cash" and in some dealerships, it may even be the difference of being "black or red" on the bottom line of the dealers' financial statement.

We have to be careful though when our overall "state of mind" is being controlled by the manufacturer because, before you know it, we aren't just being compliant...we are becoming "obedient" to the manufacturer.

Let's take a closer look at what I'm referring to...

After looking at some of these advantages, let's take a look at the possible disadvantages and risks that we could be encountering by being "obedient" to these programs. After all, the manufacturers only sell two things...vehicles and parts...and they have no problem with selling you more of each than you really need as far a days supply guidelines go.

More and more Parts Managers today in these programs are overstocking their inventories because they are being 100% "obedient" to their manufacturers' suggested stock orders. Many may think it's okay to utilize their suggested stock order as they are utilizing your own Inventory Management System, (I.M.S.) Set Ups & Controls to create these suggested orders in the first place. 

On the contrary, there's a lot that many "Smart Parts" Managers don't know about these programs, or how these systems even calculate individual and overall demand. How does the manufacturer know what your individual needs are to begin with?... 

Before we get into what you may know or may not know about how these programs work in the first place...I have another question to ask "Smart Parts" Managers out there...

"If it were your own money, coming out of your own back pocket...would you still just accept and place these suggested orders that they are recommending?"

Most of these programs offered by the manufacturer utilize a combination of basic Set Ups & Controls that ultimately determine what you see on these suggested stock orders. They combine individual dealer demands along with other dealer demands to generate these stock orders and determine overall days supply.

If you are a "Smart Parts" Manager in one of these programs, there is one very important thing to know and remember, especially if the program your are enrolled in is stocking your inventory based on your own Inventory Management System, (I.M.S.)

One of the main reasons, if the the biggest reason for Parts Managers ending up with "overstocked" and "over valued" inventories is because of a lack of control when it comes down to managing Days Supply and how parts are Phased In in conjunction with these manufacturer programs.

Source Ranking by Piece Sales has never been more important than it is today when you factor in these manufacturers' programs along with the Dealer Inventory Management System, (I,M.S.). Unfortunately, not all Inventory Management System Vendors offer Source Ranking by Piece Sales.

Source Ranking by Piece Sales for those out there who may not be familiar, is basically an I.M.S. function that allows parts to automatically move parts to different sources based on sales movement. Parts movement is what determines the proper Days Supply after initial Phase In.

We will get back to Source Ranking by Piece Sales in a moment, but first, let's look at how parts are "phased in" to your system from the point of view of the manufacturer. Keep in mind what I said earlier about the manufacturers utilizing your own Inventory Management Systems Set Ups & Controls along with other Dealers' Set Ups & Controls.

This combination of Set Ups & Controls with all these dealers is what ultimately determines what you see on your manufacturers suggested stock order. This is why I have Parts Managers asking me this common question when it comes to these manufacturers programs...

"Why are they sometimes suggesting parts on my stock order that I have never sold while other times NOT suggesting parts that I do sell on a regular basis and aren't even qualified?"

That's just one of the dilemmas I hear quite often as the biggest dilemma is yet to come. Having the proper Days Supply after "Phase-In" is far and above the biggest concern a "Smart Parts" Manager should have when utilizing these manufacturers programs. This is where having the option of Source Ranking by Piece Sales come back into play.

So!...Let's do the math!...

For example, if I have a part that sells only 6 times a year, my Low Days Supply, or Best Reorder Point, (BRP) would be 60 Days Supply as the part only sells every other month on average. My High Days Supply, or Best Stocking Level, (BSL) may be set 75-90 Days Supply.

Now, let's compare that to a part that sells 24 times annually where my Low Days Supply, or Best Reorder Point, (BRP) would be 15 as this part sells on average every 15 days. My High Days Supply,

Best Stocking Level, (BSL) may be set at 100% of my Low Days Supply, which would be 30 days.

A part that is fast moving and sells in excess of 100 times per year will actually have a Low Days Supply, or Best Reorder Point, (BRP) of maybe 5-7 days, based on lead times and a High Days Supply, (Best Stocking Level, (BSL) of 10-14 days.

As these parts move through their life cycle and movement changes, this Source Ranking by Piece Sales option automatically controls the source which has the proper Days Supply at all times. This helps the "Smart Parts" Manager to control "overstocked" and "over valued" inventory situations.

This is why I suggest that Parts Managers run their own Inventory Management Systems, (I.M.S.) stock orders at least twice a week right along side of their manufacturers recommended stock order. This is also why I referred to this as having the "best of both worlds". 

Having both stock orders in front of you helps to keep the manufacturer "in check" on suggested quantities as well as making sure that parts aren't missed or maybe not "qualified" by the manufacturer's suggested stock order.

I've actually had some Parts Managers say to me..."But, if I buy a part based on my own stock order and not theirs, it may not be qualified and won't be protected!"

Each time I hear that question I have to cringe because personally?...I could care less if it's protected because if these parts have met demand in my I.M.S., I plan to "sell" these parts and not "protecting them, or "returning" them once they are obsolete.

Here's the sad part, many "Smart Parts" Managers do not have this option of Source Ranking by Piece Sales which is the huge dilemma I was referring to earlier. Keeping in mind the Days Supply examples I gave earlier, without the option to rank parts in separate sources based on their movement, all parts are then "created equal".

In other words, no matter how many times different parts move whether 6 times a year or over 100 times a year, they will have the same Low Days Supply, or Best Reorder Point, (BRP) and High Days Supply, or Best Stocking Levek, (BSL) which is normally defaulted to 15 and 30 respectfully in most stores I run into that don't have the option to rank parts by piece sales in separate sources.

This means running out of parts that you need most and overstocking parts you don't need as much of, even though they have met "Phase-In" criteria. Thus, the dilemma I mentioned earlier and of course, one of the biggest disadvantages in utilizing these programs.

Maximizing Order Efficiency is more complicated today than ever before. It was much easier "back in the day" as it was as simple as ordering as much as you could on your stock order to gain the best discounts, allowances and return reserves. There were no "compliance" levels or program criteria just to get even half of the discounts we used to get years ago for just ordering efficiently.

Maximizing Order Efficiency now requires "Smart Parts" Managers to utilize all their resources to squeeze whatever they can to earn discounts, allowances, return reserves and overall dealer compliance for additional profits for the whole dealership.

Maximizing Order Efficiency doesn't mean you have to be "obedient" in order to be "compliant"...it just means that you have to know how to play the game and play it wisely...you have to be a "Smart Parts" Manager.....

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