April 2018: "Are We Getting The Right Gross Profit On The Right Parts?"

Opportunity comes in all shapes and sizes, or in this case, all parts gross retention ranges, and in my opinion, capitalizing on our gross profit opportunities can only be measured by one's ability to recognize it even exists in the first place.

Most "Smart Parts" Managers have their own pricing strategies and expectations on parts gross profit, whether we are talking about overall parts gross in dollars, or parts gross retention in general. In my opinion, this is where the problem begins for many parts managers.

We have grown so accustomed to accepting "the way it's always been" when it comes down to gross profit dollars and gross profit retention. Certain parts are priced to bring certain gross retention and that's been our expectation for years.

Here's where I believe we have been "missing the boat" as we haven't taken into consideration for the most part the "separation" that needs to exist between actual gross profit dollars and gross profit retention.

In other words, would we rather have a 40% parts gross retention on $200,000.00 in parts sales, or would we rather have a 20% parts gross retention on $1,000,000.00? I think the answer is quite simple, but this is what I'm referring to.

So, here's the question.....

"Are we capitalizing on ALL our parts sales opportunities by getting the right gross profit on the right parts?"

The key word in the above phrase is "ALL", as none of us really know how much opportunity from lost sales are missed due to overpricing certain parts. We can't know what we don't know as many lost sales go unknown and undetected. 

Maybe the customer calls another dealer, or another parts vendor to acquire a part because our part may be priced too high, or maybe just the reputation causes the lack of opportunity and no one would know the difference because the call didn't happen in the first place.

This is why I felt the need to "drill down" ALL of parts gross profit retention percentage ranges to see if we are actually getting the "Right Gross On The Right Parts". This is where it all starts as setting and getting the right gross profit retention determines the actual overall gross profit dollars.

We will also take into consideration where our parts sales sources come from, ranging from repair order sales to wholesale and retail sales within our dealerships and all outside dealership sales on all ranges of parts.

The most important part of this exercise, in my opinion, will be "where we draw the line", and make the separation from gross retention percentage to actual gross dollars as I referred to in my example earlier between 20% and 40% gross retention.

We will start out with parts sales that we would expect to retain a lower gross percentage all the way up to the parts sales that we have more opportunity to retain more parts gross. Determining these parts gross ranges is what will ultimately determine how much opportunity and overall gross profit dollars we can capitalize on.

Here We Go!....

Negative to Zero Gross Profit Retention Range:

That's Right!...who would ever think that we would have a category of "gross profit" that doesn't have any gross profit built in to begin with? Quite simply, if you are a "Smart Parts" Manager that deals in high volume parts sales that requires high volume purchases, there is a LOT of gross profit to be made from high volume purchase from the manufacturers.

Much like in new vehicle sales, high volume purchases incur high volume discounts which are 100% profit. So, in other words, the parts manager can sell parts at, or below cost just to gain the purchase discounts from the manufacturer and often times, these "monies" generated from purchases can be the difference of making or breaking the "bottom line".

Parts Sales In This Category:

Major components such as engines, transmissions, differentials and transaxles. Collision parts sold either at wholesale, or if the manufacturer offers wholesale compensation, and parts sold at cost to outside packaging vendors to be resold in the aftermarket, etc.

Note: High inventory turns, both gross and true are necessary and crucial in this category in order to realize overall gross profits retained.

0% - 15% Gross Profit Retention Range:

This gross profit retention range incorporates some of the above categories as it pertains to high sales volumes as well as some other parts sales that any size dealership parts department. It also incorporates parts sales that have a "required" low gross profit retention just to remain competitive. 

One example could be some highly competitive "lost sales leaders" such as "Lube, Oil & Filter" Services and others that even though a low gross profit is initially realized, the overall gross dollars retained could be substantial.

In the case of "Lube, Oil & Filter" services alone, as much as 10% - 15% of the parts department's monthly overall gross profit "dollars" are generated from this one single service operation in some dealerships. Low gross retention, but very high sales volume.

Even with a combined average of $7.00 to $15.00 gross profit dollars that are realized from the oil filter and oil sold from each "Lube, Oil & Filter" Service, it all adds up at the end of the month as this service is the number one "elective" vehicle service in the Service Department.

After all, there wouldn't be all those aftermarket lube shops out there if they weren't making money doing this primary service in the first place, and we can also include tires as I don't believe there is a shortage of aftermarket tire stores out there either.

Parts Sales In This Category:

Competitive parts, such as oil and air filters, oil, tires, batteries, wholesale collision parts, some major component parts such as engines, transmissions, transaxles, differentials, etc., including manufacturer controlled gross profit major components sold under vehicle warranty.

15% - 30% Gross Profit Retention Range:

Even though competitive and wholesale parts sales still fall in this category, we can start to "dial up" the gross profit retention percentage a little bit more. Some service specials still fall into this category, but they may have a little more profit opportunity as well.

Wholesale parts sales are of their own breed and in my opinion. Achieving the proper gross profit retention, while maximizing all sales opportunities can be determined by insurance companies, the market and the competition in a given market. 

Many studies and calculations have been done, including my own, on the actual cost of venturing into the wholesale business in the first place, so many other cost considerations need to be understood. Gross profit retention in wholesale parts sales is a whole other ball game.

Other examples in this category would perhaps be brake pads and rotors, packaged interval maintenance services and "a la carte" services such as coolant, brake fluid, transmission fluid exchanges, power steering fluid exchanges, etc.

The determining gross retention percentage factor in this range, along with the next gross profit range coming up are, in my opinion, the most crucial to the overall parts gross profit dollars. By their numbers, they are by far the leaders in overall parts sales opportunities. 

The problem is that many parts and service managers "overprice" these parts and services, trying to get, believe it or not, too much gross from these competitive areas resulting in lost sales due to outpricing themselves out of the market.

If this were not true, we wouldn't have all the competition from aftermarket service facilities and aftermarket parts stores. We seemed to have been geared to a "set gross profit retention" range and we end up losing business due to this fact.

There are many other parts gross profit retention ranges yet to come where we can achieve our overall goals in gross profit dollars and overall parts gross retention. 

Parts Sales In This Category:

Brake pads and rotors, cabin and air filters, batteries, wiper blades, coolant, brake fluid, power steering fluid, differential fluids, spark plugs, A/C coolant or freon, accessories, wholesale parts, (collision and mechanical), etc.

30% - 40% Gross Profit Retention Range:

As I mentioned above, many parts sales in this gross profit retention range can be categorized as some of the parts above along with some additional parts sales. As we move closer to the 40% parts gross retention range, we can now start to expand our gross profit opportunities.

These opportunities may require a higher skill level technician to perform some "captive" services and/or repairs such as steering, suspension and frame repairs, transmission and engine overhaul or replacement, air conditioning repairs, electrical repairs, etc.

The difference from the parts gross retention range of 30% to 40% is determined by the nature of these above services and/or repairs as being minor or major in nature. Minor services and/or repairs such as ball joint replacement, shocks and struts, some steering components, etc. would fall into the "minor" category.

Parts gross retention ranges on these "minor" component replacement parts would lean to the 30% - 35% gross retention range. The reason for the slightly lower gross retention range for "minor" component replacement is that we still have to "stay in the ballpark" with our pricing to remain competitive. 

The "major" parts component replacement parts would carry the higher parts gross retention, inching closer to the 35% - 40% range. These "major" component parts replacements tend to require a higher skill level to complete the repairs, thus, the parts retention range can move closer to the 40% range.

Parts Sales In This Category:

Engine mechanical and engine electrical components, transmission overhaul parts components, steering gears and racks, major suspension, wheel bearings, ABS parts and components, differential and transaxle parts, fuel injection and fuel induction parts, etc. These are what I call the "meaty parts".

                     40% Gross Profit Retention Range and Above:

We are now in the sales and gross range where we can make up our overall gross profit retention. These parts sales tend to be more "captive" and more "factory specific" giving us more opportunity in all parts cost of sales ranges. This is also where a parts escalation matrix can be applied.

Creating the right "cost plus" matrix is key to just how much parts gross retention can be achieved, anywhere from just above 40% all the way up to 100% or more, depending on the parts cost of sales range. The most important thing we have to keep in mind with this matrix is to understand customer perception, while utilizing basic, common sense.

We all know that we can get quite a bit more parts gross retention from "captive parts" that cost less than $5.00, but we still can't go overboard to the point that too much is too much. We also have to know where our biggest "opportunity range" lies by creating a Parts Ranking Report on our Dealer Management System, (D.M.S.)

This Parts Ranking Report can be generated on most, if not all Dealer Management Systems. The report should be generated in total piece sales and gross profit in a descending format, highest piece sales and highest gross retention down.

Generally, the biggest "cost of sales" range where up to 80% of our overall sales comes from the $10.00 - $30.00 parts "cost of sales" range. Once we determine the largest percentages of parts piece sales and gross profit retention, we can than structure the parts escalation matrix to maximize the highest opportunity ranges.

Another important factor for creating the "right escalation matrix" is that it has to be set up with a descending percentage, starting with the lowest parts cost range, with the highest percentage on the lower cost parts, with descending percentages as the cost ranges climb. 

Most importantly, the percentage needs to be "capped off" with one defaulting percentage at a cost of sales range of approximately $250.00. At which point, the matrix should reflect close to Manufacturer's Suggested List Price, which is usually cost plus 67%, which will result in a 40% parts retained gross profit.

Where many parts managers fail is they tend to include ALL parts in a particular "cost of sales" range, including some competitive parts along with "captive parts". Fast moving parts and even some medium movement parts need to be excluded from the matrix to remove the risk of lost sales and a negative customer perception.

This separation is usually done by creating different parts sources by annual piece sales. Many Dealer Management Systems have the ability to rank and separate parts in various annual piece sales ranges in order to keep the more "captive parts" separate from the faster moving, competitive parts.

Parts Sales In This Category:

Engine, Body Control, ABS modules, switches, relays, wiring harnesses and connectors, fuel pumps and fuel sending units, head bolts, front engine timing covers, pulleys and tensioners, certain engine and transmission "hard parts" and gaskets, driveline components, A/C compressors and clutches, manual transmission components, etc.

So, by these examples given, I think most "Smart Parts" Managers get the idea of what parts we need to "stay in the ballpark" on and what parts we can "hit it out of the ballpark" on. The most important thing that we all need to remember is....

"We can't spend a percentage, but we can spend overall gross profit, and in most dealerships that I know, it's the gross that pays the bills."

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

March 2018: The Top 5 "Unseen" Costs Of Managing The Parts Inventory

In most automotive dealerships, the success, or demise of how well the overall profitability and performance can be determined each month in the dealers' financial statement. Profit and Loss Statements are the clear facts and the overall evidence that is used to manage the successes and failures month to month.

Each month, most dealers hit their peaks of anxiety in the first ten days as office managers and comptrollers prepare the numbers each month to meet their deadline by the 10th of each month. Once revealed, the "dissecting" begins with the dealer reading the profit and loss statement from the bottom up.

For the most part, the facts are the facts as the financial statement reveals whether they can keep the doors open, or advance to the next level of financial achievement. Along with soaking in all the information in the financial, most dealers are also carrying the burdens of many families employed at their dealerships.

So, with all this said and revealed about the dealer financial statements, shouldn't we also be looking at ALL the opportunities in sales and profits as well as expense controls that may NOT be revealed in the monthly dealer financials?

Dealers often look at the opportunities in all departments based on their potential, but when it comes to expenses, if it isn't right in front of them, the "unseen" expenses and opportunities go by the wayside and never even come up in any discussion or meeting.

These "unseen" expenses and potential opportunities can not be more evident in the dealership then they are in the parts department. 

The parts department is also the one dealer department that most dealer owners are least familiar. In fact, many dealers are only concerned with the parts department profitability and perhaps inventory obsolescence amounts.

I believe it's time to expose these "unseen" expenses and potential opportunities in the parts department as we will break down the actual cost of "The Top 5 Unseen Costs Of Managing The Parts Department". 

Keep in mind that after we review these "unseen" costs, they are real as we will use a "real life" dealer scenario to determine these newly found "seen" costs of managing the parts department. 

We can also view these "opportunities" as a potential "cost" to the dealer because there is a cost for not capitalizing on potential missed opportunities in my opinion. 

First, lets list all important information that we will need to drill down this scenario in this example dealership which I will refer to ABC Motors, Inc. in Anytown, USA....

• Parts Inventory Value: $200,000.00, (Desired Inventory Level: $150,000.00 Based on Average Monthly Cost of Sales and NADA Guide of 8 Gross Turns Annually)
• Average Months Parts Cost of Sales: $100,000.00
• Average Months Financial "Discounts & Allowances": $3000.00
• Obsolete Inventory, (No Sales Over 12 Months): $25,000.00
• Overstocked/Excessive Parts Inventory: $25,000.00
• Parts Inventory Gross Turns: 6
• Parts Inventory True Turns: 3.5
• Overall Off Shelf Fill Rate: 95%
• Overall "First Time Off Shelf Fill Rate": 45% (Sales of Normal Stocking Parts)
• Number of Technicians: 10
• Combined Overall Shop Effective Labor Rate: $95.00
• Parts to Labor Ratio: 85%
• Total Average Number of Repair Orders Monthly: 1000
• Overall Labor Gross Profit Retention: 70%

This information will be needed when we start to analyze these actual "unseen" costs when we drill down the at least three of our "Top 5 Unseen Costs Of Managing The Parts Department".

Number 5: "Overstock/Excessive Inventory Amounts"

Once again, based on what we see here at ABC Motors, the dealers value of overstocked/excessive inventory totals $25,000.00. 

As we will learn when we get closer to our number one "unseen" parts department expense, annual parts "holding costs" average 29% annually, (excluding obsolescence holding costs of 7%). This percentage does not even include obsolete parts as we will also see when we get closer to number one.

Net "Unseen" Annual Expense From Holding Costs On Additional Inventory: $7,250.00

Number 4: "False Profits"

Number 4 in our countdown in "unseen" parts department expense is "False Profits". Even though a profit account is not really an expense, but by inflating fictitious gross profit, it will lead to false bottom line. This category of "False Profits" refers to the parts monthly "Discounts & Allowances" account on the dealers financial.

We also have to remember that the "Discounts & Allowances" account is for the most part "paper money" and not tangible unless the parts inventory meets annual gross turn guidelines set by NADA of at least 8 annual gross turns.

Based on the above information from ABC Motors, the dealer is realizing an average of $3000.00 per month in "Discounts & Allowances", but only achieves an annual gross turn number of six turns. 

NADA Guideline for annual parts gross turns is eight. This money in the "Discounts & Allowances" account is only real if expected annual parts gross turn numbers are at or above NADA Guide.

Net "Unrealized" and "Unseen" Annual Profit From 6 to 8 Gross Turns: $9000.00

Number 3: "Inventory Holding Cost"

Inventory Holding Costs is probably one of the most "unseen" expenses in the parts department. "Investopedia.com" defines Inventory Holding Costs as follows;

"Holding Costs are the costs associated with storing inventory that remains unsold, and these costs are one component of the total inventory costs, along with ordering costs and shortage costs. A firm's Holding Costs include the costs of goods damaged or spoiled, as well as cost of storage space, labor and insurance."

Determining the actual cost of holding inventory is defined and detailed by "driveyoursuccess.com" where they determine that annual inventory holding costs are a staggering 36% annually. 

This annual percentage is broken down as follows:

• Cost of Money: 3% - 5% (Difference From Interest Gains On Monies Invested In Inventory)
• Ruined Inventory: 3%
• Electricity Costs: 3%
• Lost Customers: 3% (Due To Inventory Not Available)
• Freight Costs: 7%
• Employee Overtime: 3%
• Damaged Inventory: 7%
• Obsolete Inventory: 7% (Includes Theft)

Total Estimated Annual Parts Inventory Holding Cost Percentage: 36%

Even if these stated Annual Inventory Holding Costs are higher than actual costs as I have always estimated them to factor in around 25% - 30%, they are real and as we can see, they can add up to a substantial amount in the area of "unseen" dealer cost.

So, in the case of ABC Motors, if we just calculate the parts inventory annual Holding Costs, not including their obsolescence and overstocked/excessive amounts, the number is still quite staggering.

  ABC Motors has $200,000.00 in inventory, even if we exclude the obsolescence, ($25,000.00) and their overstock/excessive inventory amount, ($25,000.00), the results are as follows...

Net "Unseen" Annual Holding Costs Expense From Active Inventory: $43,500.00

Number 2: "Lost Service Productivity"

I would have guessed that most "Smart Parts" Managers out there would have thought that Lost Service Productivity due to low "First Time Off Shelf Fill Rates" might just be our number one, but not quite. Even though these numbers that we will drill down are also staggering, we still have an even bigger number one.

In order to calculate and put the "unseen" expense, or in this case lost profits opportunities, we have to rely on excel calculators to come up with a feasible number in this category. 

Using the initial information that we started with in ABC Motors, we are actually able to put a number on what low "First Time Off Shelf Fill Rates" actually costs. 

Lost Service Productivity due to not having the right percentage of stocking parts on the shelf on the technicians' first visit can add up quickly. Keep in mind that contrary to the parts inventory, or even the new and used vehicle inventory for that matter...the technicians' time is a perishable inventory that we can never get back.

Based on ABC Motors "First Time Off Shelf Fill Rate" of just 45%, which is about the average in most automotive dealerships today, falls far short of NADA's recommended guideline of 85% - 90% in the area of "First Time Off Shelf Fill Rates".

A recent survey study revealed that the average technician, (excluding Express) works on an average of 4.5 to 5.5 vehicles per day, or repair orders per day. We also learned in this study that the average technician spends at least 25 - 30 minutes at the back parts counter each day.

Excluding those dealers who have a parts delivery system to their technicians, this time spent at the parts department is in my opinion, pretty respectable, even though I have met many service managers say that this number is much higher. 

Even still, for the sake of coming up with a valid "Lost Productivity" number due to low "First Time Off Shelf Rates", I'm okay with using this latest information from the study. 

The basis of my calculations will be based on the additional time spent at the parts counter due to ABC Motors "First Time Off Shelf Fill Rate" at almost half, (45%) of the recommended NADA Guideline.

After putting the excel calculator to work, the result of the added time at the parts counter, extra technician steps, moving vehicles in and out of the shop, or waiting additional time for parts to track down the parts from outside sources added up to 3.2 hours of lost productivity each day for the 10 technicians on staff.

Once we added up the lost productive hours each day and the lost parts sales based on current ABC Motors parts to labor ratios, current parts and labor gross margins, and an average overall effective labor rate of $95.00, it didn't take long before the overall lost gross profit was finally revealed.

Total Net "Unseen" Cost To The Dealer In Unrealized Profits: 
Monthly: $8,299.00  Annually: $99,593.50

At last, we arrive at our number one "Unseen" Cost Of Managing The Parts Department. Actually, our number one should not be a surprise to "Smart Parts" Managers. What may be a surprise is the actual net "unseen" cost AND missed opportunity that really costs the dealer due to simply "not knowing"....

Number 1: "Obsolete Inventory"

So!...how could "Obsolete Inventory" be numero uno when ABC Motors only has $25,000.00 in obsolete inventory over twelve months?

First of all, based on the information from "driveyoursuccess.com." we already know that we have annual holding costs of 36%, so that cost alone represents an annual holding cost of approximately $9,000.00, but that's not nearly enough to surpass our number two sitting at over $99,000.00.

Well, we've saved our best and biggest "unseen" net cost to managing the parts department for last. This $25,000.00 sitting in obsolete status not only costs ABC Motors annual holding costs. This $25,000.00, if reinvested in parts with active movement is where the lost opportunity lies.

If reinvested, this $25,000.00, with annual gross turns at NADA Guide, (8 Gross Turns) would actually produce an additional $100,000.00 in parts gross profit at an overall retained gross percentage of 33%.

This lost net gross gain, or cost to the dealer, doesn't even include potential Lost Service Productivity. Definitely the number one "unseen" cost to the dealer, even though $25,000.00 may not seem that bad....

Total Annual Net "Unseen" Cost To The Dealer In Holding Costs And Unrealized Profits: $109,000.00

Net Annual Total Of All Of Our Top 5 "Unseen" Costs To The Dealer: $268,343.50!!!

"I guess the old saying that what you can't see can't really hurt you doesn't hold true in this case because that missed opportunity of $22,362.00 at ABC Motors each month can really hurt the dealer and could even be the difference between a positive or negative bottom line for the whole dealership."

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

February 2018: Vendor Managed Inventories: "Compliance Or Obedience?"

Picture if you will, or imagine if you will, being a parts manager twenty or so years ago and not having a Vendor Managed Inventory, (V.M.I.) controlled by the manufacturer. As a matter of fact, there are still many manufacturers that do not offer Vendor Managed Inventories.

Whether the manufacturer offers a Vendor Managed Inventory or not, pretty much all the manufacturers are getting their hands into controlling, to some degree, the dealers parts inventory.

 Additional discounts, return accruals, or even penalties for not reaching compliance and loyalty levels can impact how a parts manager "manages" their parts inventory.

But, what is really happening here?...what is so different today versus twenty or so years ago when the manufacturers didn't have their hands in controlling our dealers parts inventories? How have these V.M.I.'s and manufacturers changed our culture, or way of thinking as parts managers?

Before I answer those questions, I do know what it has cost in many dealerships that I have visited over the past several years since these V.M.I.'s first came on board. Many parts managers have abandon their own Dealer Management System, (D.M.S.) when it comes to utilizing and generating their own stock orders.

Many don't even know there own basic setups, or even how to go in and see what they currently are, let alone know how they even work, or modify any of these basic setups.

Not to be misunderstood, it's really not the parts managers fault as it's just become the new way of managing our parts departments with the manufacturers pretty much running the show.

Basic setups such as Phase-In/Phase-Out, Low and High Days Supply, or Best Reorder Points, (BRP), or Best Stocking Levels, (B.S.L.). Other basic parts department responsibilities such reporting Lost Sales and Emergency Purchases have literally gone out the window.

So, when I ask why?...I often get answers such as..."because our manufacturer's Vendor Managed Inventory, (V.M.I.) provides all that for us".....and that's where the problems begin. It's also the main reason I get called in by the dealer to come in and fix it.

I mentioned earlier that I believe the whole parts manager culture and way of thinking has changed in many dealers as I have witnessed. It seems that in these situations, the parts manager really feels more of an obligation to the manufacturer than they do their own dealers.

They seem to feel more "loyal" and "obedient" to their Factory Rep than the one signing their paycheck, but again...not their fault as this is the new norm.

As I write each month on various topics, I often refer to many things as "opinion versus fact" and I want to make sure I separate the two appropriately each month. With that said, the following trends are "facts" that I have witnessed in many dealerships that rely solely on their Vendor Managed Inventory, provided by their manufacturer.

All have these same issues, no matter who the manufacturer is;

• Overstocked Inventory Levels Beyond Sales Demand Within a 12 Month Period
• Parts In Stock That Have Not Met Dealer Phase In Requirements
• Lost Sales and Emergency Purchases Not Reported To Minimum Guidelines
• Low "First Time Off Shelf Fill Rates", (less than 40%)
• Higher "Stock Out" Situations
• Excessive Obsolete Inventory Levels Beyond V.M.I. Protection Guidelines 

The only Vendor Managed Inventory, (V.M.I.) System out there that I have not experienced these trends as much is PartsEye, which is provided to several import manufacturers. I would also add that PartsEye is one of the few V.M.I.'s that actually penalize the parts manager for overstocking inventory levels beyond nine months and fifty days supply.

Toyota also has a similar program that actually helps the parts manager keep their inventory levels within guide and with fewer limitations and restrictions on parts returns. Parts managers also have more control of their inventories with plenty of incentives offered by their manufacturer.

This is probably why I rarely run into an Toyota dealership, or any import dealer utilizing PartsEye with an obsolescence problem, or overstocking situations. Many of them above NADA Guide on Gross and True Turn Calculations and very "liquid" inventory amounts and no frozen parts assets.

Most of the dealerships that I have been called into and had to "reinvent the wheel" so to speak were and still are General Motors and Chrysler dealerships that utilize their Retail Inventory Management, (RIM for GM) and Automatic Replenishment Ordering, (ARO for Chrysler) V.M.I. Programs.

Both programs have similar basic setups regarding parts phase-in as each use algorithms on a higher dealer group level while trying to maintain individual dealers stocking levels.

The only problem is that many parts managers accept parts on their V.M.I. orders, even if they have not not phase-in requirements for their own, individual dealers Dealer Management System, (D.M.S.).

In other words, it's very possible for a parts manager to accept a suggested part in RIM, or ARO that may have only sold once over the past twelve to twenty four months! If not caught and "deselected", the parts manager just bought a part that will sit on the shelf until it reaches it's qualified return date.

On the other hand, there are many parts that are not RIM or ARO qualified that dealers DO sell on a frequent basis, but are not stocked because they are not qualified and will not be protected. Personally, I have never been one to buy parts to protect them, as I would much rather buy parts to sell them, regardless of the "protection"....that's why we have phase-out parameters.

Two cases in point, first one being Chevrolet Cruzes, and apparently, they have turbo issues and are being replaced at a pretty good clip. As a matter of fact, in my last three Parts Installations in Chevrolet stores, these Cruze Turbos sold anywhere from 17 to 30 times over the past 12 months.

In each of these stores, each one had to be special ordered as this turbo is not a RIM qualified part.

In my opinion, this is where the culture has changed over the past twenty or so years, or, this is where parts managers today have not been given the proper information or training that they need. Regardless of this turbo being protected or qualified, it should be on the shelf, ready for sale.

Just think of the lost shop productivity that this causes. Back before RIM, most parts managers would have that turbo on the shelf without a doubt.

Case in point number two, Dodge Ram Diesels have a very popular breather that sits on top of the engine. My last two Chrysler dealer Parts Installations showed sales history on this breather as well, one with 24 sales over the last 12 months, the other dealer with 30 over the last 12 months.

Do you think we should stock this breather? Both of these dealers did not stock, or had "stock out" issues on this breather because it is not an ARO qualified part.

The other sad thing about this is that I have been told by several parts managers out there that their manufacturer discourages them or, in some cases said they can't run their own stock orders on their respective D.M.S systems.

Also adding and stressing that whatever parts they purchase outside of their V.M.I. guidelines are not protected and will go against their compliance and loyalty guidelines.

These, are to me, scare tactics being passed down by, unfortunately people that may not have any parts management experience, other than what is taught them by their manufacturer.

If true, than how are other dealers that have no V.M.I.'s provided by their manufacturer getting their stock replenished? My guess would be their own Dealer Management Systems, (D.M.S.) 

Let's tackle that one right now as here is a list of Dealer Management Systems, (D.M.S) that I am familiar with and very verse in that do have the capabilities of creating system generated stock orders based on individual dealers' parts demands with proper phase-in/phase-out parameters and proper days supply;

• Adams
• AutoMate
• AutoSoft
• CDK, (formally ADP)
• Dealertrack
• Reynolds & Reynolds
• Quorum

As a matter of fact, Dealertrack and Quorum offer automated parts sourcing based on annual piece sales for individual ranking utilizing algorithms to rank each part individually, versus utilizing ABC Source Ranking for annual piece sales ranges, which is just awesome. 

There are still many manufacturers that do not provide a V.M.I. Program option and it would just make sense that all of these Dealer Management Systems have to offer a system generated stock order program to replenishment parts to their proper stocking levels as well as proper phase-in/phase-out guidelines that qualify parts for normal stocking status in the first place.

It just seems that this new culture has changed many parts managers' priorities as they are more concerned about meeting compliance and loyalty levels to achieve discounts and accruals that even at their highest achievement levels only provide half of the incentives that we used to have twenty or thirty years ago and without all these restrictions and program guidelines.

Even though it appears that I am "bashing" certain Vendor Managed Inventory Programs, I'm actually just trying to let Smart Parts Managers know that their V.M.I. Program is not their only option. I actually like lots of what these programs have to offer, but they have to be utilized in conjunction with the individual dealers D.M.S. options.

Vendor Managed Inventory Systems not only offer incentives, they also offer information on parts demand in certain markets. They also provide key information for parts managers on possibly stocking parts that they may not have in the past with the protection that if they do not sell, they can be returned to the manufacturer.

In addition, some of these V.M.I. Programs are tied into overall dealer programs leading to many more dealer incentives on each new unit sold in the front end. Definitely worth taking advantage of if the dealership qualifies on all levels of sales, service and overall customer satisfaction.

The problem is, many dealers have become stocking warehouses for these manufacturers as they may feel, with the benefit of protection, the risk is lower. Although, what most parts managers do not realize is that there are holding and acquisition costs. 

There are also lost gross profits not being realized from parts that may sell five to eight times a year in that same shelf space where the part currently occupying that same space doesn't sell at all. Once you add in the lost service shop productivity, there are lots of missed opportunities.

Like many things in life, there needs to be a balance, especially in this situation where there is more than one single option in maximizing the dealers overall sales, profitability and inventory investment. When just utilizing the manufacturers' V.M.I. Program, and not including the dealer's Dealer Management System, (D.M.S.), we are not getting what could be the "best of both worlds".

Final words...I believe Smart Parts Managers should take advantage of every option, system and information out there in order to get the best benefits from all their sources. Don't settle for just what the manufacturer wants....after all, last I knew...the manufacturer doesn't pay the parts manager...the dealer does...

With that said....are you a parts manager that's being "compliant" and "loyal"to the manufacturer, or are you just being "obedient?"...

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

January 2018: "Moving Forward Into The New Year...Or Are We?"

As we put another year behind us and move forward into the new year, I found it very interesting, when doing my research that many industry analysts and economists in general having many varied opinions and predictions about what we can expect in the coming years in our industry.

In my opinion, when doing my research last month, I would have expected a pretty similar year as we had in 2017, with pretty much an even line, with no real gains, or losses in overall sales.

In 2017, we did see that the seven year climb on vehicle sales was coming to a halt, but other than that, with the economy on the rise, GDP on the rise and unemployment going down, things would appear to stay pretty steady in 2018.

This seven year climb coming to an end is really no big surprise to most of us who have been "in the business" for many years, as we all know that this industry has been "cyclical" in nature, every seven or so years.

To me, sales climbing for a period of years and then leveling out is not the real concern as much as what happens AFTER the sales hit that peak.

Do they start to slide down a slippery slope, or do they remain steady for a period of years before going back up again? I know we all don't want to take that ride on the slippery slope, but this is where the research may have some confused as we reveal this info shortly.

After we review some of this research, whichever way the opinions sway, I believe one thing is for certain and that is the future sales of automotive parts will remain strong.

We will start out with research on automotive sales in general as it relates to our current economic conditions, and then segue into our automotive parts industry.

The first area of research that I went to were the facts as I wanted to know what our annual sale of new vehicle units were and expected to be at the end of December 2017. Then I wanted to compare that number to the past seven years initially, then compared to the overall trends for the last decade or so.

By looking at the facts first, I thought that they would keep me from swaying one way or another as to what the industry analysts and economists are predicting. I also realized that even though I knew the facts, I had to let the facts take a back seat when it comes to predicting the future.

That's an area where "the experts" are supposed to come in and that, in my opinion, is where the confusion starts.

The first article I came across was a recent one by slate.com which compares..."the auto industry as an indicator to a slowing economy", while another one right after that by chicagofed.org. in mid-2017 states that we can expect..."solid and steady economic growth in 2017 and 2018". Quite a variation as I read through both articles.

It seems though that much of these varied opinions and prediction comes right back to the facts that I initially researched.

The peak of new automotive unit sales was approximately 17.5 million units in 2016 and they expect that number to drop to 16.9 million once the counting is done in 2017. New unit sales are predicted to be the same 16.9 million in 2018.

First of all, in my opinion, 2018 isn't really here yet and if the numbers are correct, going from 17.5 million new unit sales to 16.9 isn't that much different if my math is correct. So, I guess this may be the reason for the opinion swings in either direction. 

It is a decline, but it is still a far cry from when the bottom dropped out back in 2008 when new unit sales fell to approximately 10 million, now that's a number to be concerned about. Since 2008, the new unit sales have steadily climbed each year to it's peak at 17.5 million in 2016. One again, our seven year cycle proving itself yet again.

In prevedere.com's. 2018 Automotive Outlook states..

"U.S. auto sales experienced record numbers from 2008 - 2016, but the industry is seeing a steady decline in 2017 for the first time in eight years. And there is no reason to believe that sales will continue to drop in 2018."

According to Andrew Duguay, key economist for prevedere.com, goes on saying in his key webinar "takeaway"...

Despite a healthy economy and wage growth, cars have reached significant saturation among consumers and will be buying fewer cars in 2018. Due to this saturated market, there will be fewer customers despite wage growth. Auto dealers must get the full value out of every sales and cannot afford to incentivize customers through promotions. Marketing campaigns should be focused on baby boomers who have continued wage growth, disposable income and still value their expensive cars". 

In contrast, the Federal Reserve Bank of Chicago, (chicagofed.com), says some very key indicators lead them to believe that we will see steady economic growth, including the automotive industry. Key indicators such as;

• Real Gross Domestic Product, (GDP) to grow at 2.3, (June 2017), other estimates @ 3.2 in 2018
• Real Residential Investment 3.4 to 6.3, (2017,2018 vs. 1.1 in 2016)
• Car and Lt.Truck Sales to 16.9 million vs. 17.5 million in 2016 & 17.1 million in 2017
• Housing Starts growing from 1.18M units in 2016, 1.26M units in 2017 to 1.32M units in 2018
• Consumer Price Index 1.8 to 2.3, (2016 vs. 2018)
• Ten Year Treasury Rate from 2.13 in 2016, 2.70 in 2017, to 3.11 in 2018 

Confused yet?.....here's more!

One of the best articles that I found was from McKinsey & Company's "The Road To 2020 And Beyond" 24-page PDF, downloadable article subtitled, "What's Driving The Global Automotive Industry". Their in-depth research offers a great perspective on where the automotive industry is headed.

Their analysis implicates a very huge and optimistic outlook which surrounds itself by one narrative and that is...

"...the global automotive industry is about to enter a period of wide ranging and transformative change, as sales continue to shift and environmental regulations tighten..."

It appears that this article takes our industry into a vast worldwide market that can impact all of us here in the U.S. Their overall findings indicate that "the global automotive industry is in better shape than it was five years ago...and by 2020, global profits for automotive OEM's are expected to rise to almost 50%"...

With this shifting landscape in the global markets, automotive OEM's will grow even bigger and stronger worldwide with further opportunities in trade and commodities with world countries. So, even though the U.S. market may remain steady, or maybe experience very slight declines, the automotive industry will continue to grow.

Let's not forget the internet either when forecasting into 2018 and beyond. According to Carpark & McKinsey, not only are unit sales increasing on through the internet increasing, "internet connected" vehicles are on the rise.

By 2020, it is predicted that we will realize a 30% increase since 2012, of new vehicles with network solutions capabilities. By 2020, it is estimated that 1.32 billion units will have internet connectivity on a global level.

The outlook and opportunities seem to be growing each year with new technology connecting the world to much closer parameters. New areas of front end sales growth can also only mean one thing....more future parts sales!

So, how do these forecasts and predictions, either positive or negative impact "Smart Parts" Managers in 2018 and beyond?

The best research I saved for last of course as parts managers, we should want to know what to expect in the coming year and perhaps beyond. The good news is that there is a lot of "good news" for parts managers and fixed operations managers in general.

First of all, with market implications leaning to more of a flat sales market in the U.S., even though noty drastic, implies that vehicles are being kept longer and lasting longer than ever before. Average ownership is now reaching double digits in vehicle aging, thus requiring more service and parts. 

Even though vehicle maintenance requirements are getting less and less every year, the secondary dealer and aftermarket sales are increasing as sales on used vehicles remain strong and parts sales demands grow higher and higher.

My last bit of research comes from a recent Hedges & Company blog titled; "Car Industry Trends: Online Parts Sales to Reach $8.9 Billion in 2017", which is an increase of 16% over 2016 and expected to rise to over $10 Billion in 2018 and over $13 Billion by 2020.

Also, according to Hedges & Company, Ecommerce parts sales are projected to grow by 15% in 2018. Also, the Automotive Aftermarket Suppliers Association, (AASA) projects total aftermarket sales to have a compound growth rate of 3.6%, which is the same growth rate predicted for the "Do-It-Yourself", (DIY) retail sales growth.

Amazon still remains the auto aftermarket's single largest retailer, challenging other big players like Advanced Auto Parts, Autozone and O'Reilly's Auto Parts. Amazon also boasts a most recent Barron's article which states that Amazon auto parts prices were 22% less than the other chain auto parts stores. 

Hedges & Company goes on to say that it is no secret that the "brick & mortar" parts stores are having a rough time as their sales only grew at a 2.9% rate in 2017 and predicted to drop to a 2.8% growth rate in 2018 and 2019. So, online sales are not only growing....they are accelerating!

Not only are online parts sales accelerating, parts sales are shifting to mobile as well. Mobile parts sales added up to a minimum of $4 Billion in auto parts sold online in 2017 and also expected to grow in 2018.

And lastly....here's the big one that should put all of our "parts minds" to rest. Also according to Hedges & Company.....

"Total Ecommerce parts sales in the U.S., as tracked by the U.S. Census Bureau, had a year over year growth of about 16% in 2016. They estimate that total Ecommerce parts sales to be 7.7% of TOTAL U.S. Retail Sales, (all retail sales, not just auto parts)."

I guess my only question is...

"2018 is right in front of us...how much of this growth do we want as Smart Parts Managers?"....

Happy New Year From ACG Smart Parts!!!

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

December 2017: "The Year In Review"

It's that time of year again when we take a look back over the past year here at ACG "Smart Parts" and evaluate the events, the changes, the "wins" and the "losses", and most important...the learning experiences and opportunities.

Along with looking back at our personal experiences in our dealerships, we will also take a look back at what our industry has experienced throughout the year with some pretty interesting facts and trends reported by our friends over at the National Automobile Dealers Association, (NADA)

I also mentioned in the introduction that we have a few of our own "headliners" that seemed to be a commonality in many dealerships that I have visited over the past year. All of which indicate to me that dealers in general are getting even sharper with expense management, but ironically, even more willing to spend in the right areas that will bring the highest return on investment.

We will go more in depth on what I'm referring to later in this blog as I want to start with some interesting facts, trends and overall information reported thus far this year by NADA. Some of the data and information that I will bring to the forefront are mid-year 2017 composites and trends, while other information will be right up to date through November 2017.

2017 was another great year for up front sales, in both passenger car and light trucks, but what surprised me the most was U.S. Commercial Truck Dealers sales were and are up substantially over previous years. A side of the industry that has just seemed to creep right up there into the limelight.

According to NADA's ATD Division, (American Truck Dealers), "employment at U.S. commercial truck dealerships has reached it's highest point in five years....up 5.6 percent in 2016 over the previous year". These trends will obviously increase the career opportunities for many, especially those just getting into our industry as far as Fixed Operations positions.

As a matter of fact, according to ATD/NADA Economist Patrick Manzi,

"Commercial truck dealerships contribute to their communities with jobs that pay well and offer opportunity for advancement. In the Service Department, demand for technical positions remains high, as dealerships help maintain the commercial vehicles that are a vital part of the U.S. transportation infrastructure".

Commercial truck dealership's repair order counts went up drastically to nearly 8% over the past year os so, while sales and profits rose to nearly 6%. These drastic increases has led to a growth in U.S. commercial truck technician staffing to over 15%!

More repair orders and more technicians definitely leads to more demand for parts and the right parts staffing to meet the demands of the U.S. commercial truck fleet. The cost of one "downed" commercial vehicle for just one day could cost the consumer thousands and thousands of incoming dollars to their business.

Increased dealership employment didn't just affect the U.S. commercial truck dealerships, as new car and light truck dealership employment has also risen over the last couple of years. The numbers aren't in yet for 2017, but the trends we see from 2016 indicate that the average dealer employment went from 66 to 69 employees with average payroll increases up nearly 5% annually.

Much like the U.S commercial truck dealers, new car and light truck dealerships also showed increases in new dealership openings over the past couple years, approaching 17,000 in total dealerships in the U.S.

Even with the decrease in overall truck sales and minor increases in new car sales, overall dealer sales and profits continue to rise as the dealers' fixed operations continue to increase service absorption numbers to support the "front end" of the dealership.

NADA's forecast for new vehicle sales remained strong in 2017 as demand for new vehicles remains healthy and overall economic growth continues in a positive direction. Even though there has been some deterioration in consumers' credit scores for new vehicle sales, strong employment growth still makes credit less risky for lenders.

The used vehicle market still remains strong and is expected to continue growing as more and more vehicles come off lease going forward into 2018. All of which suggests that 2018 will continue to be a progressive year in all vehicle sales markets, including commercial vehicle sales.

All that said, it is quite obvious that the dealerships' fixed operations will be very strong going forward into the new year. Signs of a stronger economy and increased overall employment will definitely impact our share of the gross domestic product, (GDP) in 2018.

Lastly, as I mentioned earlier, I want to drift back over this past year from my own perspective and share what I believe are the three most prioritized areas that dealers focused on in 2017. All of which, made it a very busy year for us here at ACG "Smart Parts".

Number one was the overwhelming drive for dealers to "jump ship" and change Dealer Management System, (D.M.S.) Vendors. I can say honestly that I have been more active this year, compared any other year, working with dealers and parts managers, installing, modifying, or even changing basic parts set ups and controls.

Along with these transitions, I have experienced several new D.M.S. systems, some very good and some not so good, but overall, most of these new D.M.S. systems provide the features and functions needed to perform basic, daily parts operations. Some even going above and beyond what we have been exposed to for many years with previous systems.

Number two is the increased awareness and need for more training, particularly in the area of parts management. Dealers in 2017 have seemed to become more aware of the parts department role in the fixed operations and especially when it comes down to overall Service Absorption.

Parts Management training has also become more affordable, or at least here at ACG "Smart Parts" with newer technology allowing remote training without even entering the dealership. Remote access into many Dealer Management Systems, (D.M.S.) has allowed interactive training from thousands of miles away!

This innovative, ACG "Smart Parts" Training Model has allowed dealers who may have not even considered parts manager training due to the high training costs, to providing many new parts managers an opportunity to receive the best "one-on-one" parts training available at a reasonable cost.

Lastly, 2017 also peaked training up in all fixed operation levels, especially in the U.S. Commercial Truck Service Market. As I mentioned earlier, the U.S. Commercial Truck Sales & Service markets have skyrocketed over the past few years.

Increases in front end sales, back end service and parts sales, technician staffing, and more and more new facilities opening their doors is creating a "vacuum" of demand that will feed our industry even more in the coming years.

I don't know about you, but if you aren't excited about where we are and where we are going in the years to come, you may want to stop and take a breath. Take a look at what's happening right now because if you are not prepared and well trained for what's ahead....you just may be leading from behind in 2018....

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

November 2017: Parts Ranking Analysis: "Why Is It Important?"

For a Parts Manager, winding down the year usually means getting the year end physical inventory completed, annual parts reconciliation with Accounting and perhaps, preparing forecasts for the upcoming year.

One task that I feel is often overlooked, especially at year end, is running the Dealer Management System's, (D.M.S.) Parts Ranking Analysis Reports by Piece Sales, Cost of Sales and Gross Profit Retention Percentage. Even though it is important to run these reports each month, none can be more important than running them at years end.

The Parts Ranking Analysis Report really isn't anything new to many "Smart Parts" Managers as most Dealer Management Systems, (D.M.S.) offer these reports to some degree. What may be new is the important information that is provided in these reports that may get overlooked by the Parts Manager.

The Parts Ranking Analysis Report can be generated in most D.M.S.'s by either total sales at cost, individual piece sales, or even by sales and gross margins. Whether the report is generated by total cost of sales, piece sales, sales, or gross margins, the information provided is crucial to many areas of inventory management and overall sales and profits.

So....Why Are The Parts Ranking Reports So Important?

For me, these Parts Ranking Analysis Reports are helpful in at least five areas that can help the "Smart Parts" Manager get peak performance from the parts inventory while maximizing part sales and profits. I'm sure there are more, but let's take a look at the five top Key Performance Indicators, (K.P.I.) that can be managed from the information provided in these Parts Ranking Analysis Reports.

Days Supply:

Generating a Parts Ranking Analysis Report by Piece Sales, (descending, top down)) can reveal top moving parts which is extremely helpful when determining the correct days supply of parts in all piece sale ranges. 

As a matter of fact, in some D.M.S.'s such as Dealertrack, each part can be broken down to proper algorithms and weighted sales on low and high days supply, or best reorder point, (BRP), and best stocking levels, (BSL).

Also, current overall days supply can be calculated to prevent "stock out" situations as current piece sales demands will show if the current stocking levels match current demand activity. Some D.M.S.'s will calculate current demand activity, but for those systems that don't, these levels can be calculated manually.

For example, if the current days supply of a given part number is 34.6 days and NADA Guide is 45 days, adjustments may need to be made in that piece sales stocking criteria, or stocking group on the high days supply, or best stocking level, (BSL)

Gross Profit:

Generating the Parts Ranking Analysis Report, (descending, top down) based on sales at cost is a great tool in creating the proper parts "cost plus" escalation matrix. Other than our competitive parts sales, we all pretty much know that there are many opportunities to offset the lower gross, competitive parts sales with parts that are more captive and can carry a "cost plus" escalation matrix.

We can also determine where the majority of our parts sales at cost are actually coming from. For the most part, the majority of our parts sales at cost is coming form the $10.00 - $25.00 cost range. With this information provided by the Parts Ranking Analysis Report, we can properly manage our "cost plus" escalation matrix on captive parts.

In addition, the Parts Ranking Analysis Report, (descending, top down) can be generated on our highest grossing parts in order to insure the proper combination of gross profit retention and parts movement by piece sales. 

Some of our highest grossing parts may not necessarily be our fastest movers as well as the other way around. One thing for sure though, we definitely don't want our slower moving parts to also be our lower grossing parts. The right combination of movement and price will determine maximum inventory efficiency and profits.

More importantly, if the parts sales at cost are source ranked by piece sales, or stocking group criteria, we can separate the competitive parts from captive parts. This allows all parts to be priced accordingly to maintain proper gross retention margins, while remaining competitive in the marketplace.

Service Productivity:

Here's one category where the Parts Ranking Analysis Report by Piece Sales can provide great information for our Service Department. First of all, there are only two reasons why the Parts Department doesn't have the part, they either never stocked the part in the first place, or, they ran out. 

This report also illustrates trends on piece sales movement over a shorter period of time to help avoid "stock out" situations. Even though some systems have "out of stock" reports, I prefer not to wait until I run out and potentially lose shop productivity waiting for parts.

The Parts Ranking Analysis Report, (descending, top down) on the top gross profit part numbers can also help the Service Manager insure that the Service Menu Parts are not over priced, with gross margins not respective to a competitive market. 

Inventory True Turn:

In the category of Inventory True Turns, creating the Parts Ranking Analysis Report in what I call "both directions", (descending, top down & ascending, bottom up) can provide very important information for the "Smart Parts" Manager in the area of Inventory True Turns.

Even though there are other reports that our D.M.S. can provide in the area of True Turns, including our own calculations, what these other reports don't provide is trends. The other D.M.S. Reports on True Turn, as well as our own calculations are all after the fact and final. We can't go back and fix something that's already happened.

By generating these Parts Ranking Analysis Reports in both directions by Piece Sales, we can actually see the movement ascending from the bottom and descending from the top. Descending from the top, on the faster moving piece sales, we can take steps to insure proper stocking levels are in place, or Best Stocking Levels, (BSL)

Ascending from the bottom on the slower moving piece sales, we can take the proper steps to avoid "overstocking" which can inflate the overall inventory value, leading to a negative effect on the inventory True Turn numbers.

Controlling Obsolescence:

Last, but surely not least, the Parts Ranking Analysis Report by Piece Sales, (ascending, bottom up) can illustrate trends on parts sales starting to drop off and headed in the obsolete direction. Other D.M.S. Reports on obsolescence are also available, but they don't provide ascending and descending trends with part numbers.

Much like most D.M.S. Reports, we get the final information, after the fact which leads us to ask "What Happened?", versus "What's Happening?" with the information we can see in these Parts Ranking Analysis Reports. 

If these Parts Ranking Analysis Reports are created consistently every month, and especially at year end, in the area of obsolescence, we can actually see the parts that are headed down in both movement and gross profit retention much sooner than waiting for an end of month report, or end of year report.

Lastly, one of my favorite Parts Ranking Analysis is the Piece Sales Report, (descending, top down) which gives me all the information to determine Best Reorder Points and Best Stocking Levels in all piece sales ranges.

All the algorithms, weighted days supply over the last month, or even the whole year can be found right in the these Parts Ranking Reports. Depending on the D.M.S., we can actually break each individual part number down to it's own individual BRP and BSL as well as the recommended overall days supply.

No matter which particular D.M.S. you may have, most do provide, to some degree, these Parts Ranking Analysis Reports. Unfortunately, in my opinion, they don't get utilized enough in the above areas. Why are there Parts Ranking Analysis Reports important?....I guess that's a question we all need to ask ourselves...

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