March 2023: " Is Anyone Fact Checking Your Stock Order?"

As we move on to March of this fairly new year, we are going to ask a question that has probably never been asked before of the Parts Manager. Why would any Parts Manager have to ask this question which is the title of this month's issue of ACG "Smart Parts"?

After all, it is one of the primary duties and responsibilities of the Parts Manager to "manage parts", which includes ordering, stocking and receipting automotive parts to sell.  One of the main differences in managing a Parts Department today versus years ago is that there are many more factors that come into play in having the right mix of parts.

For one, there are many, many more part numbers to manage in today's automotive parts inventory in order to provide for many more vehicle applications and manufacturers. Also, the life span of automotive parts today is much shorter than it ever used to be.

We have to trust the "facts" when creating and reviewing our Stock Orders. This means we have to trust the initial set ups and parameters that go into creating an accurate Suggested Stock Order to begin with. Are these set ups and parameters "factual" in giving us the results we want to see?

Even if these set ups and parameters are "factual" and accurate, are we going to trust that information and make the right decisions? Are we going to override what we see, or are we going to go with what we see? The answer to these questions have many variables that lead us to our final Suggested Stock Order decision.

Here's just a few questions that run through the Parts Managers mind...

• What if the part doesn't sell and becomes obsolete?
• Is the part too expensive or too big to stock?
• Do I need to stock that many of that part when I can get it overnight?
• If the part is on Back Order, do I wait until it becomes available?
• What if I get stuck with those "package quantity" parts that I can't return?
• I know I've sold a few of those, but do I really need that part?

If any one of these questions looks familiar, then you are not alone because these are some of the most common Parts Manager questions that run through their minds as they review their Stock Orders, especially if we are running our own Stock Order on our DMS.

The sad thing though is when the Manufacturers Vendor Managed Inventory, (VMI) Suggested Stock Order comes up, we tend to let it go through because it's so called "protected". The myth there is that many Parts Managers don't realize that they are just buying many of these parts just to hold and send back down the road.

Whether all of the above mentioned is either truth or speculation, then why do these two following questions come up over and over again in the Parts Department?...

"Why don't we stock these parts that we are selling all the time?"

"Why do we keep running out of this same part we are selling all the time?"

It's time to do some "Fact Checking"...

Let's start out with some "facts", or perhaps you could also say "truths" about our automotive parts industry, which doesn't make it any easier for the Parts Manager. Whether we are managing a Parts Department today, or many years ago...

1.) We will never have, or stock all the parts we need at any given time. That's why we report Lost Sales to begin with in order that we may achieve a First Time Off Shelf Fill Rate, (FTFR) of 75% - 85%. Reporting those Lost Sale Demands is the only way to achieve the right inventory "breadth" and FTFR.

2.) All parts will eventually become obsolete as obsolescence is and has always been a thorn in the side of most Parts Managers. It's not a matter of parts becoming obsolete, it's more a matter of how we manage obsolescence before and after it happens.

3.) There have always been and will always be backordered parts, even though we have more now than ever before. In my opinion, backorders are becoming more of an excuse for not doing our jobs as Parts Managers. Though frustrating and time consuming, managing backordered parts has to be a mindset where when they happen, our job has not ended...it's just beginning.

4.) Having the Proper Set Ups & Controls in any DMS, or Manufacturers Vendor Managed Inventory, (VMI) is crucial to getting the right "facts" out of any Suggested Stock Order. Phase-In/Phase-Out Parameters along with the right Source Ranking by Piece Sales Set Ups is where the math meets "facts" in determining accurate results, no matter today or many years ago.

And now...the million-dollar question!

"I'm the Parts Manager, why do I need anyone Fact Checking my Stock Orders?"

Earlier, I mentioned six common questions that go through the Parts Managers while reviewing a Suggested Stock Order, even though there are perhaps many more. As Parts Managers, our thought process, or Behavior Patterns are generally different from other department managers. We tend to be Critical Thinkers and perhaps "over-think" many things.

This most common Parts Manager "Behavior Pattern", or Personality Profile is both a blessing and a curse when reviewing any Suggested Stock Order. Reviewing all this Suggested Stock Order data requires a lot of research and math before making the right decision.

A blessing in a way that a Parts Manager has to be a Critical Thinker when managing the Parts Department as it involves managing several thousand part numbers as well as managing the dealers second highest asset in most dealerships. There are more transactions in the Parts Department in a single day than in the entire dealership in whole month.

It's also a blessing because we tend to be overprotective, non-trusting, cost conscious, and anti-obsolescence minded and that's a great thing! Especially in the eyes of the dealer because the dealer has to trust the Parts Manager, just like the Office Manager, or Comptroller.

On the other hand, our personality could be a curse as Parts Managers with this Personality Profile tend to "over-think" many things as logic tends to weigh heavily in their decisions. If things aren't "black & white", this tends to lead into "over-thinking" many decisions, which isn't a bad thing, it's just the way it is.

This "over-thinking" is very evident in the six questions I mentioned earlier that run through a Parts Managers mind when reviewing their Suggested Stock Orders. The "what if" always comes into play when trying to predict outcomes that we haven't experienced yet.

So!...Who should be fact checking the Stock Order with the Parts Manager?

Being that many Parts Managers look at things one way as we have reviewed, we need another set of eyes to get a different perspective. What better choice than the Service Manager, or perhaps the Lead Counterperson? The Service Manager tends to see trends of what jobs are selling and the Lead Parts Counterperson because of the several number of transactions they experience each day.

In order for this to be a success though, the relationships between the Parts Manager, Service Manager, and/or the Lead Parts Counterperson has to be one of trust and openness. Personally, I have always welcomed that second pair of eyes in order to get the best results from what I'm stocking on the shelves.

Many Parts Managers are reviewing their Stock Orders, primarily looking at total demands, history, price, type of part, make, model and year usage, return status, etc., but the Service Manager looks at what they are selling up front and overall Service Cycle Times.

Just to be clear though, we are not suggesting that the Service Manager be the final say as to what the Parts Manager should be ordering, we are just looking for another set of eyes to give the Parts Manager a second opinion on the facts that lie within the Suggested Stock Order.

The Lead Counterperson is looking at repetition, trips to the same bin location, stock outs situations, Lost Sales entries, chasing the same parts, in-coming phone calls, etc. All of which play a big role in what we are experiencing each day versus what we are seeing on that Suggested Stock Order.

Ultimately, it should definitely be the Parts Manager that has the last say on what the final verdict should be when actually placing the final edit version of the Stock Order. Offering suggestions, adding input, listening to our customers, and communicating back to the Parts Manager is where the "fact checking" is defined as "assisting" in the Stock Order Review.

The same goes for the Service Manager when developing, adding or modifying their Labor Ops and Service Menus. The Parts Manager should be "fact checking" and assisting in those decisions as well, especially on final "out the door" pricing on Service Menus and Labor Ops. 

In my opinion, we need to humble ourselves and let our pride out the window and welcome these other sets of eyes, even though we are ultimately responsible for the parts inventory asset, controlling obsolescence and parts profitability. We cannot be closed minded when it comes to maximizing our opportunities.

After all, Parts Inventory is not an expense that we need to trim down, it's an asset that the dealer expects to turn several times a year, especially Parts True Turn. In my opinion, it's time to share this information and stop trying to predict potential future results that we have no control over.

If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ www.smartpartstraining.com, or...just pick up the phone and call me at :

(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...

 

February 2023" The "Origin" of Lost Sales

Reporting Lost Sales, or even the mention of Lost Sales is not "unfamiliar" to any of us, but what is "peculiar" about this topic is, if it's supposed to be so important, why aren't we reporting any or enough Lost Sales? If reporting Lost Sales is supposed to be one of the most basic duties as Parts Manager, why are these results so low?

We will answer these two basic questions and more as we move on with our February issue of ACG "Smart Parts", but before we do that, we will have to trace this whole issue of reporting Lost Sales back to it's origins and how we got to this point.

Even though there are many "Smart Parts" Managers out there that do a great job on reporting Lost Sales, it appears that they are still the minority, even though they are reaping the many benefits from these reported Lost Sales.

Whether these negative results are due to lack of proper training, definition, accountability, or even the sense of urgency, there is a "common thread" in all this. Our "Belief Systems" is where it all starts as most Parts Managers learned from previous Parts Managers how to become the manager in the first place.

Even though our "Belief Systems" do not lead us back to the "Origin" of Lost Sales, our "Belief Systems" can prevent us from going back to where these Lost Sale opportunities all start and how we can improve these numbers.

Unfortunately, and in my opinion, the lack of basic training plays a big factor in these less than desired results in Lost Sales Reporting. Even the basic terminology on what a parts "demand" is and how these demands play a huge role in having the right inventory at the right time.

Let's get started on this journey back to where Lost Sales originate and how we will learn why it isn't really any surprise that even though we know what they are, we will learn "why" they aren't being posted at all or even close to enough.

That being said, let's start it all off by asking the big question...

"What is the true "Origin" of Lost Sales and why aren't we seeing the results that we should be"?

The "true" origin of a potential Lost Sale actually doesn't come from any person, whether in the Parts Department, Service Department, or a phone call with someone checking on a part. It all actually starts, or "originates" with a "vehicle" in need of repairs and requires a replacement or added part such as an accessory.

There are only two reasons why we don't have a needed part as we either ran out of the part or we never stocked the part in the first place. This is where our Lost Sale "opportunity" starts as we now discover that there is a "need" for a part at the time of inquiry and one of four things are going to happen... 

1.) We either have the part and the customer chooses to buy, or not buy the part.

2.) We don't stock the part and the customer chooses to Special Order the part.

3.) We don't stock the part and the customer wants us to chase the part.

4.) None of the above three happens and results in a Lost Sale Opportunity

The next step requires human decision making and this is where we start to see the lack of Lost Sales Reporting that dates way back as far as I can remember and for many reasons. This "human decision" process that leads to a lack of Lost Sales Reporting are listed as follows and not in any particular order.

1.) Lack of Proper Lost Sales Training & Definition:

Even though we just listed the proper definition, in my opinion, there really hasn't been any proper training on Lost Sales Reporting for years. We have learned from our predecessors how to become a Parts Manager and for many years, there hasn't been really any "sense of urgency" in reporting them in the first place.

Many Parts Managers and Parts Counter Staff don't even know what a parts "demand" really is, which is either a Sale or a Lost Sale and both can trigger a "hit" on a part. So that means that a Sale of a part is the same as a Lost Sale in the Dealer Management System, (DMS). Each of these two demands are necessary for gathering enough history on a part for potential stocking of the part.

2.) Fear of "Double Posting" Parts:

This one is big one as many Parts Managers I have spoken to do not report enough Lost Sales as they fear that a single part may be "double posted", meaning that we recorded a Lost Sale, and then the customer eventually purchased that same part, resulting in two "hits" on one eventual transaction.

They seem to have this fear that if we post more Lost Sales, eventually this will end up with more parts "jumping" on the shelves that we will never sell and eventually become obsolete. What many of these Parts Managers don't know is that "double posting" the same part happens more often than they would think.

Case in point, we may have a customer that comes to our counter to check on a part that we don't stock and doesn't order the part, basically just inquiring to see if we have it or not, and rightly so, we post a Lost Sale. That afternoon that same customer comes back and Special Orders that same part we posted as a Lost Sale earlier from a different Counter Person, thus resulting in a "double posting" of the same part.

News Flash!...it doesn't matter! We could "double post", or even "triple post" that same part as the parts Phase-In Criteria requires two or three separate "events", in different months over the course of several months before it even triggers for Phase-In. Even then, it doesn't "jump" on the shelf as the Parts Manager decides whether to accept the part or not for normal stocking.

3.) Added D.M.S Steps in Lost Sales Reporting:

This is also another big one as many Dealer Management Systems require way too many steps just to post a Lost Sale, which results in many Missed Opportunities for posting Lost Sales. This is probably the most common reason for lack of posting, so this is why I recommend having a simple Lost Sales Log right next to the computer so when in doubt, we just right it down.

This is also the way we used to record Lost Sales "back in the day" before we had computers to begin with. Difference is, of course we didn't have a computer to record these Lost Sales, so we just collected the data on these sheets and manually added them up to see if there was enough Lost Sales demand over a period of time and added them to stock.

At the end of the day, the Parts Manager can review these Lost Sales Logs from the Parts Counter Staff and enter them all in at one time. Also, the Parts Manager can review these lists to see if he or she wants to even post some of these Lost Sales for those possible exceptions such as sheet metal, engines, transmissions, or any other part that we would not stock.

Now that we have traced the "origin" of where Lost Sales begin, it's now time to seek out the "source" of where we can actually "find" Lost Sales. Keep in mind that reporting Lost Sales is a good thing and we shouldn't worry about double posting, or whether it is a Lost Sale or not. I would much rather see it and not need it versus needing it and not seeing it.

Lost Sales Opportunity Sources:

1.) Incoming Phone Calls:

These calls from customers inquiring about on a non-stock part that doesn't result in either a Special Order, or purchase from another dealer or vendor should be posted as well. Best time is the first time to enter that "Potential Missed Opportunity", or Lost Sale, even if they do come back to order the part.

2.) Service Department Quotes:

Big, BIG resource for gathering these "Potential Missed Opportunities" for recording Lost Sales. Basically, we just need to print off an extra copy of the Service Department Quote and keep one in the Parts Department. 

At the end of the day, we simply match up these quotes as to what was purchased and wasn't purchased and if these parts not purchased were not in stock, all should be entered in as Lost Sales. We shouldn't even question these missed opportunities, especially in our Service Department as in most dealerships, over 70% of our parts sales are from Service.

3.) Sales Department Opportunities:

Yes, we do have Lost Sales Opportunities from our Sales Department whether in Accessories, or just basic inquiries from those Sales Customers as it once again provides another resource as customers that are shopping for a New or Used Vehicle are in a "buying mode" and we shouldn't let those opportunities slip away.

4.) Technicians & Service Advisors:

If we are not utilizing our techs and advisors as a resource for Lost Sales Opportunities, we are truly missing the boat. They are the ones that are most involved and most exposed to our customer base, and we should be encouraging them to provide us with as much information as possible and giving them positive feedback for their participation.

Posting Lost Sales is no different today than it was "back in the day" even though they have become much easier to post. Though some of these reasons for not posting them hasn't changed, we still have to have that sense of urgency. 

Lastly, it is a fact that posting Lost Sales is the Number One ingredient in expanding our parts inventory breadth and increasing our "First Time Off Shelf Fill Rate" to at or above industry guide of 75% - 85%. That being said, if we are not posting at least 10% of our total cost of sales, we just aren't getting it done.

This why Lost Sales still tops the charts in most 20 Group Meetings across the nation when we start talking about Parts. The question is always why we aren't reporting enough and oddly enough...these are the same Parts Departments that have low "First Time Fill Rates", lower percentage of Normal Stocking Parts and higher obsolescence...seems to be a pattern here!

Find & Report Them!...Don't Ignore Them!

If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ www.smartpartstraining.com, or...just pick up the phone and call me at :

(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...

January 2023: 2023 - A New Era of Parts Managers

Happy New Year "Smart Parts" Managers and I want to welcome in the New Year with my first question to all past, present and future "Smart Parts" Managers out there...

"So!...what made you want to become a Parts Manager, or perhaps become a Parts Manager?"

You don't have to answer right away because I've often asked myself that same question. For most of us "back in the day", we most likely fell into the role by happenstance. Maybe we didn't go onto college, or military service and we were just looking for a job. Then perhaps, we stumbled onto a parts counter position and then down the road...Voila!...we became the Parts Manager.

Believe it or not, many of us "old timers" did wind up as Parts Managers just as mentioned above and we learned from the previous Parts Manager. We also learned just the way they taught us and may have or may not have been a good thing. We never asked why, and we just did it the way they did and when asked why we do it that way, we simply said..."That's the way we've always done it!"

Problem with that statement is, we never knew if what we were doing was right or wrong, as long as we got the parts. Some of us were fortunate enough to get the proper training and knowledge as I was able to receive and attain. 

For many Parts Managers though, they just did it the same way every year. To the point that many Parts Managers would have perhaps 30 years of Parts Manager experience, which was actually one year, thirty times, never actually knowing what it took to be a successful Parts Manager.

This leads me to my second bold question of the New Year...

"What's so different today and perhaps coming in the future versus many years ago and what does it take to be a successful Parts Manager today and going forward?"

Let's begin our journey to the past, present and future...

Parts Managers in the Past:

I guess I fall into this category all the way to the present, but as I mentioned earlier, the qualifications on being a Parts Manager in the past was completely different than today, and perhaps in the future. Primary qualifications included being a trustworthy employee, maybe some tenure in the Parts Department before becoming the Parts Manager with a basic education background.

We weren't required to have a Financial or Accounting background as we were basically paid an hourly wage, or salary and we would never see a Dealer's Financial. As years went on, we may have received a "paste and cut" version of the Parts Sales & Gross Page as we may have achieved a bonus on total sales and gross. 

We never saw an Expense or Net Profit number to actually see how we ended up from a profit or loss standpoint. This was considered privileged information that we were not allowed to see or focus on as Parts Managers. 

We learned basic duties on how to look up parts in a catalogue and micro fiche well before computers came of age. We learned how to keep track of those parts we sold by writing them down as they sold and walking the aisles to see what we needed.

We checked our inventory to see what we stocked on a "counter pad", or we just walked to the bin to see if it was there. We usually had it as many parts fit many applications for many years and we just remembered the part numbers and where they were on the shelf, (pretty weird huh?)

We then learned how to order parts for restocking the shelves and customers by "mailing in" our parts orders, or perhaps via phone, or teletype machine, until eventually, on very primitive computers. We often picked those parts up ourselves at our local Parts Distribution Center, (PDC), or waited for them to come via mail, or UPS.

As we transitioned into the role of Parts Manager over the years, we were fortunate enough to witness change along with new innovations and new computers. We watched vehicle parts transitioning to vehicle components and computer chips becoming the brain of the automobile. Today, most vehicles have anywhere from 30 to 50 or more microchips controlling nearly every vehicle function.

Overhauling transmissions, engines, alternators, starters, rear ends, wheel cylinders, etc. have become a thing of the past as component replacements has become the new normal. Overhauling and actually "repairing" a component was how it was done "back in the day".

Lastly, and before we move on, electronics, computer software and fiber optics started controlling many moving parts that used to be driven via hydraulic pressure, vacuum assist, pumps, manual levers, air and even gravity. 

Parts Managers in the Present:

First and foremost, and as a Parts Manager from the above category, the most dynamic and "welcome" change from past to present is more and more women are becoming Parts Managers. Not only are they becoming Parts Managers, but they are also great Parts Managers!

I've had and still have the privilege to train and work with many women Parts Managers and their personality types and behavior patterns are well suited for the position. Not only that, but it also seems that all the women Parts Managers that I have worked with have or have had a more extensive educational background as opposed most of my Parts Manager gents out there.

Overall, today's Parts Manager, whether a guy or a gal, has to have a more extensive educational background than we did in the past. Today's Parts Manager should have an educational background that incudes Basic Standard Accounting, especially Automotive Standard Accounting.

Parts Managers today also have to be verse in both parts inventories, the Controlled Balance Inventory that we manage on the DMS side, and the Accounting Ledger Balance Inventory listed on page one of the Financial. These inventory variances were never a concern years ago that could be devastating to a dealer if not managed properly today. 

Other educational skills include computer software training to include Excel, Word, and other Microsoft Office Applications. Even more important is Financial and Personnel Management Training as managing the Parts Department has become "managing a business". Each dealership department has to stand on its own and be profitable, especially in these times.

We are now required to not only "manage the business", but also be a "profitable" business where we have to manage sales, gross and expenses to a desired net profit amount. We have to know, achieve and maintain industry guidelines on all sales, gross, expense and net profit categories.

Lastly, and not to be left out of today's Parts Manager's educational background is Inventory Management Skills Training as the parts inventory is one of, if not the most important dealer asset. It's much more difficult today to manage the parts inventory compared to years ago.

Managing proper inventory Stocking Levels today requires that certain skill of "balancing" between what the manufacturer wants us to stock versus what we should stock based on our own customer demand in order to maintain proper First Time Off Shelf Fill Rates.

Parts "life cycles" are much shorter as manufacturers increase their inventory breadth with more parts and more applications than years ago. A parts life cycle years ago would often see one part number fitting many applications for many years. 

Today, it's quite the opposite as many parts will only fit one application depending on vehicle options and for a shorter time span of year and model usage. Stocking the right part at the right time, along with eliminating obsolescence before it happens has become a high priority in protecting the dealer's investment.

In addition, today's Parts Manager has to "multi-task" and "juggle" through this ever-changing supply chain and back-order issues just to provide the service our customers' demands in this high pace world we live in. I can honestly say that we never had to deal with these issues in the past that we are experiencing today.

Today, we also have to be "network savvy" as E-Commerce purchases and sales continue to rise. Our parts purchases and sales are coming from a much more diverse network of online sales and purchases websites and warehouses. We continually have to use all our available resources to find parts and get rid of parts at a marketable price.

I have spoken to many Parts Managers that have been out there as long as I have, or even longer and they are spending many more hours a day managing these issues than ever before. We also joke about how so much has changed over the years and how much fun it used to be years ago.

Parts Managers in the Future:

Even though the future Parts Manager will experience all the above mentioned in the present, I believe it's going to get even more intense for the Parts Manager of the future. More and more electric vehicles will be hitting the market which means even more technology and "knowledge" that the future Parts Manager must have.

Mandatory training and education will be, in my opinion, a big player into managing the parts inventory in the future with algorithms taking over stocking levels, seasonal parts sales along and with even more "manufacturer control" on parts inventories in general.

I also believe that supply chain issues will be somewhat of a new normal as component replacements such as auxiliary batteries, control units, DC converters, motor drives, on board chargers, etc. become more in demand. These types of parts don't sound cheap to me and will most likely have limited supplies, manufacturers, vendors and warehouses all over the world.

Managing the parts inventory, in my opinion, is going to change drastically in the future as we spend less time "managing" parts inventory and more time "processing" parts inventory. Even though we will always need those maintenance and "wear and tear" parts, most other component parts will not be stocked and have to come from outside sources.

That being said, this is why I believe that these supply chain issues will only increase in the future as most dealers will not want to invest in a more expensive parts inventory with less movement at higher acquisition and holding costs. Who knows...we may be more of a Parts "Acquisition" Department in the future.

Online parts purchases and sales will also continue to grow as we will do what we have to in order to provide the service our customers demand. As mentioned in previous issues, E-Commerce sales and purchases are expected to continue rising and supply chain issues grow.

Even though we will always have to stock the right parts at the right time by any means, we will have to see what those parts are. In my opinion, only parts demand will dictate what we have on the shelf, which means, we should never go back on our basic Parts Manager instincts and processes which starts with the continued process of posting Lost Sales.

What lies in the future is definitely a mystery, but what we do know now is that we are seeing signs of what's to come. We have to constantly train ourselves and our staff in order to keep up with change and evolution. It all starts with our willingness to learn as we go, accepting and growing with the environment in order to achieve our goals.

If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ www.smartpartstraining.com, or...just pick up the phone and call me at :

(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...

December 2022: Moving On To 2023: "Could This Be Our Year?"

As we wind down yet another year here at ACG "Smart Parts", it's time once again to look back to see what we have learned in 2022 and take a look ahead to perhaps what we can expect moving forward. One thing for sure is that this past year has been another challenge much like it has been for the past two plus years.

Predicting and forecasting for future events is not a certainty but what is for certain right now is that the automotive parts industry is hotter than ever! Who would think that after all we have been through these past couple of years or so, we would we even make that kind of statement.

Continued Pandemic awareness, rising inflation, employee shortages, on-going supply chain issues, parts backorder situations, new and used vehicle shortages and so on. Most importantly though and in my opinion, is the Lack of Consumer Confidence.

Based on the Conference Board Consumer Confidence Index, and as listed on their web page @ www.conference-board.org., this following statement was just released this past month of November...

"The Confidence Board Consumer Confidence Index decreased in November after also losing ground in October. The Index now stands at 100.2, down from 102.2 in October. The Present Situation Index, based on consumers' assessment of current business and labor market conditions decreased to 137.4 from 138.7 in October. The Expectations Index, based on consumers' short-term outcome for income, business, and labor market conditions, declined to 75.4 from 77.9"...

According to Lynn Franco, Senior Director of Economic Indicators at the Conference Board, she goes on to say...

"The Present Situation Index moderated further and continues to suggest the economy has lost momentum as the year winds down. Consumers' expectations regarding the short-term outlook remains gloomy. Indeed, The Expectations Index is below a reading of 80, which suggests the likelihood of a recession remains elevated"...

So, with all the above said, and once again, how can we even think that 2023 is going to be "Our Year?" Furthermore, and the most important question is...

How Long Is This Going To Last?...

Here's the Good News!...

First and foremost, we are in an "Essential Service Industry", as we operate in the Transportation Industry, much like the Airline Industry, Rail Transit, or perhaps the Food & Clothing Industry and the Healthcare Industry just to name a few.

Even though we are not "Recession Proof", our Automotive Industry is essential to our way of life and must move forward, no matter what the economic situations are. What we do have to do is adapt to these conditions and remain in business and be profitable.

According to hedgescompany.com, we learn even more about how even through these times, our Automotive Parts Industry continues to grow. We learn that even though the economy is not good, our Automotive Parts Industry is "Recession Resistant". 

Let's start off with some basic facts as we get into the most recent data that proves our continued growth in these times. You would think with all the "doom and gloom" that we just revealed earlier in this issue, and at some point, something has to give to send us in a downward spiral.

Fact # 1:

The number of Licensed Drivers in the United States are actually climbing as industry analysts predict that we will reach 240 million Licensed Drivers by the year 2025. Miles driven is also up average 1.3% over the last few years, even though some analysts predict that this percentage will drop over the next few years as inflation and prices rise.

Fact # 2:

People are not returning to Public Transportation, or "Ride Sharing" as we witnessed prior to the Pandemic as online Parts Purchases continue to rise at a 9% growth rate as listed in the most recent Compound Annual Growth Rate, (CAGR) numbers. This number also equals forecasts made by The Auto Care Association as their forecasts reveal robust, continued growth through 2023.

Fact # 3:

E-Commerce Parts Sales continue to skyrocket as 2022 hit 38 billion in sales and is expected to rise over 40 billion in the coming year. In fact, it is predicted that E-Commerce Parts Sales, both in first party and third part sales will reach 67 billion by 2030! The Digital Influence on parts sales, both online and offline are up over 2% this year, even with inflation.

Fact # 4: 

Personal consumption on parts sales as a percentage of total income has also risen and continues to rise, even with rising fuel prices. Light Duty Truck and SUV sales continue to outsell regular passenger vehicles at a clip of 2-1. Truck enthusiasts especially are spending more and more on optional, non-essential truck parts such as accessories.

Fact # 5:

Used Vehicle Sales are up drastically as New Vehicle Sales drop to the lowest levels in years due to Supply Chain Issues, especially with the digital microchip shortages. This has resulted in record Parts & Service Sales over the last couple of years as these Used Vehicles have required higher maintenance and repair costs.

Fact # 6:

Consumers are keeping their vehicles for longer periods of time as New & Used Vehicle Ownership hits near the double-digit range in years. New & Used Vehicle financing is even pushing payments terms to 6 years or even more. Vehicle Loan Interest Rates are also on the rise, thus forcing the consumer to keep their vehicle through the loan payment cycle, closer to the end of the loan payment period.

Fact # 7:

The Automotive Parts Industry continues to pour in over a trillion dollars each year into our economy at a clip of 3.0% to 3.5% of our overall Gross Domestic Product, (GDP) and continues to grow even higher. These statistics don't even include the revenue generated from the manufacturing of automotive parts that are shipped overseas and around the globe.

In Conclusion:

Our automotive industry, in my opinion, is just going to keep growing and growing with even newer innovation, technology and the rise of totally Electric Vehicles. As we keep growing, and with each step upward, we will always need our vehicles serviced and repaired, no matter how our vehicles are powered.

Our "need for speed", and our personal choice on how we travel along with our overall passion for the automobile will be with us far beyond my lifetime. Consumer Confidence may drive our personal choices as to what we buy and when we buy, but if you are in an "Essential Service Industry" like we are, they will always buy.

Question is...

"Will They Buy from You & Could This Be YOUR Year in 2023?"

If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ www.smartpartstraining.com, or...just pick up the phone and call me at :

(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...

November 2022: Winding Down In 2022 - "What Have We Learned?"

It's hard to believe that we are "winding down" this current year of 2022, but do we actually have that mindset of "winding down" this year, or are we "winding up" and preparing for the new year right around the corner?

It has definitely been a challenge this year, much like the past couple of years as we, once again are having to endure through struggles in our personal and business lives. Backorders and Supply Chain Issues still haunt us and just trying to cope with our current economic situations is more than anyone could wish to deal with.

That being said, and in my opinion, we have always adapted to our environment, especially in the automotive industry as we just pick ourselves up, brush the dust off our sleeves and get right back into the arena to battle yet another day.

In this issue of ACG "Smart Parts", we are going to focus on what 2022 has taught us to this point. We have already published ten issues thus far in 2022 through October and each issue has had a significant topic, meaning and focus to help guide us through these times.

Each month's topic has also included a solution to what we are currently dealing with, surviving through and most importantly, prospering through these times. Unfortunately, we don't often read between the lines, and we tend to complain, or have excuses for undesired results.  

Quite honestly though, we are not alone as it rains everywhere, and we are all having to deal with backorders, supply chain issues, employee issues, manufacturer demands, increasing costs, customer demand and a whole lot more.

This month's issue will challenge all "Smart Parts" Readers as we will highlight each month's topic thus far in 2022 and give actual reason, benefit and result to each month's topic. In other words, we will resurrect the topic of each month and if, only if, we applied these recommendations from ACG "Smart Parts"...ask yourself this question...

"Where Would I Be Right Now?" 

Let's begin with January 2022...

January 2022: The Top 10 "Do's & Don'ts" for 2022

There is no better way to start off any New Year, especially this year with what we should be focused on and what we should avoid. In January of this year, we highlighted our Top 10 "Do's & Don'ts" as Smart Parts Managers.

Starting at Number Ten and winding down to our Number One, we focused on proper Special-Order Processes to avoid adding more to our Obsolescence, then on to Ordering Parameters, Managing & Maintaining Proper Stocking Levels in order to stop Obsolescence before it happens.

We also focused on Updating Pricing Levels each month as costs is always changing, just like at Walmart, or any department store. So why don't we update our prices more often, or at least review our pricing strategies as often as we should? Unfortunately, many dealerships haven't updated their prices for many years due to the fear of losing customers to other dealers.

In my opinion, if we are worried about losing customers due to adjusting for these inflationary times, then we have other issues that may be causing low customer retention rates. Customers will always come back if we provide great service and a fair price.

Parts Monthly Reconciliation, Proper Posting of Lost Sales & Emergency Purchases led us down to our top "Do's & Don'ts" in January of this year along with providing more Parts Training, more aggressive Parts Pay Plans and Incentives topped out as our Number Two and Number One "Do's" for January of this year.

February 2022: D.M.S. Utilization:

D.M.S. Utilization was and is still a hot button in many dealerships today. For years, our Dealer Management Systems, (D.M.S.) have gone way underutilized. As a matter of fact, the average utilization factor for most systems is a shocking 20% - 25%! That means we are only using our system's capabilities up to a measly 25% at best.

Sad thing is that dealers are paying lots of money for these systems and they are not being used to their potential. One of the main reasons for these poor results is a lack of "proper" training on these systems, or what their capabilities are. D.M.S. Training Installations fall far short of the training needed to even come close to better utilization factors.

Sadly, many D.M.S. Installers don't even know what they are installing, especially in the Parts Department as "cookie cutter" set ups are installed that don't even meet basic math equations. On top of that, many D.M.S. Installers have never worked in a dealership before and can't even communicate on a dealership level.

March 2022: The Parts Department In The EV Revolution:

I have to admit, this was one of the most fun issues for me this year! I'm not saying I am for or against EV's, but it did challenge me to do the research on Electric & Hybrid Vehicles in general. I felt like I was in High School again as the research and information was amazing.

The topic in March was driven by many Parts Managers asking me...

"What kind of Parts are we Going to Sell on these Electric Vehicles?..."

This question led me on a quest to find that answer and lo and behold, I got more than I bargained for as I believe that we will be even more profitable in the Parts Department as these "EV's" evolve as they do require maintenance and will have "wear and tear" parts issues as well.

This issue probably has the most in-depth research of 2022, and you just may want to read it again as they will have a more significant impact to Parts Departments in the very near future. I know I learned a lot by doing the research as well as opening my mind to something fairly new.

April 2022: Dealing With Supply Chain Issues:

Our April issue still haunts us today as backorders, cross-ship parts, restricted parts, etc. are still huge issues. The key on our April issue is not so much that we have these issues, it's more about how we are dealing with these Supply Chain Issues.

First and foremost, we all have Supply Chain Issues, and we have to deal with it. We have dealt with many similar situations in the past such as Union Strikes, Petroleum & Refinery Strikes, Railroad Strikes and so on. We just have to have a mindset of dealing with it versus using it as an excuse.

In our April issue, we drill down hard on overcoming this on-going Supply Chain Issues. Backorders for example, do we just lay down when we see them pop up, or is our job just beginning as we now have to find this backordered part elsewhere? 

Unfortunately, many Parts Managers are settling in and not taking the extra steps, or "effort" to do their job, which is providing parts to our customers. In my opinion, we can't just settle and tell our customers, or Service Manager that nobody has it and it's on national backorder. We need to have a "somebody has to have it" attitude.

May 2022: Mapping Out The Parts Department Floor Plan:

Our May issue was a little different and isn't often thought of as a crucial topic in the Parts Department, especially in these times. Ironically though, our Parts Department "Floor Plan" plays a key role in our overall theme this year

We just got through talking about Supply Chain Issues in our April issue and that alone directly dovetails into having the right Parts Department Floor Plan. Not only should our parts be conveniently "binned" from fast moving parts, to slower moving to bulkier parts, we need to have adequate "air space" to stock the parts we need.

On top of that, and especially in these times, we may have to carry the added Days Supply of the parts we sell the most. This means we need to have the adequate pace to stock these Extra Days of Supply, even if we have to "overstock" these hard to get, fast-moving parts, and store them in outside storage units.

Lastly, our May issue was a hot topic because many Parts Managers "understock" their fast-moving parts inventories due to a lack of space. That may have been okay a few years ago because we were replenishing our Normal Stocking Parts pretty much overnight.

It's a different situation these days as many manufacturers are experiencing much lower fill rates from their local PDC's compared to just a few years ago. We cannot afford to run our Days Supply of parts down below or close to our "Lead Time" Days that potentially lead to stock out situations.

June 2022: Expanding The Parts Inventory "Breadth"

If you haven't noticed by now, there is a pattern here and a progression in our issues in 2022. Expanding the Parts Inventory "Breadth" in order to have better inventory coverage and better "First Time Off Shelf Fill Rates" should be our Number One Goal as "Smart Parts" Managers.

Ensuring the right D.M.S. Set Ups & Controls, with the right math, allows to have better inventory coverage with higher "First Time Off Shelf Fill Rates". Expanding the inventory "Breadth" increases Cycle Times in our Service Departments and Collision Centers.

The best part is, having the part on the shelf lessons the chances of increased backorders, cross ship parts and restricted parts. Having the right part at the right time, during these times is a great advantage as the parts we make the most gross profit on are those parts that we normally stock, much like having the right vehicle on the lot.

July 2022: Managing The Tire, Gas , Oil & Grease Inventories

Our July issue was a little different as it took us down the road of Parts Reconciliation and Proper Accounting. Parts Reconciliation in general was and still is a very hot topic dating back to the beginning of the Pandemic.

Due to the Pandemic and economic changes over the last couple of years, dealers are getting even smarter, watching their expenses and maximizing on sales and gross opportunities more than ever. All this includes dealers getting smarter on their Accounting Practices.

The Parts Department asset in most dealerships today, is the second highest asset they have next to the Used Vehicle Inventory. Who knows, the Parts Inventory maybe the Number One asset for some dealers with shortages in finding vehicles in general to sell.

That being said, the Tire Inventory and the Gas, Oil & Grease Inventory usually have the most discrepancies when reconciling the parts inventory in general. In July, we broke it all down as managing all these parts inventories, especially reconciling them, can actually "make or break" a dealer if the Ledger Balance Inventory climbs well over the Controlled Parts Inventory on the D.M.S.

August: "Don't Take Your Foot Off The Gas!"

Here's where we started stepping up as in August, we challenged dealers and "Smart Parts" Managers to not laying down and accepting the status quo, or maybe just falling into the trenches with everything that's going on with all these backorders, supply chain issues, employee woes, etc.

"Enough Already!" is what I was hearing quite often as many parts managers have had enough as they were saying that it's not fun anymore. Day after day, fighting with manufacturers to get parts, answering that never ending, preverbal question all day long..."When is my part going to be in"?

All the while, in August, we sent out our battle cry to not only let these times not get the best of us, but it was also time to step on the accelerator of go to the next level. Backorders seem to be a way of life now and instead of complaining about them, we just have to deal with them as part of the job.

Instead of thinking that our job was over when we experience these backorders, it's actually just beginning as we have to do our best to either change, or upgrade the backorder status, find the part by other means, i.e. OEConnect, or even Aftermarket options if necessary.

"Are you Seeing a Pattern Here Yet?"

September 2022: "It's Time To Raise The Bar!"

Our September issue was a perfect follow up to August where we encouraged "Smart Parts" Manager to keep their foot on the gas. Now that we have our foot back on the accelerator, it's now time to raise the bar and take it up a notch.

This year has also seen many dealers going above and beyond normal industry guidelines. Used Vehicle Grosses have never been higher, and many dealers are actually more profitable now than ever! Who would have thought that enduring a crisis like a pandemic would reap these kinds of results? I, for one wouldn't have thought it would be like this.

You would think that just surviving through, (which many of us did) would be the primary objective, but it's going much higher and beyond that. Dealers are breaking records in sales and gross profit as retained gross percentages are climbing, especially in the Parts Department.

It seems that the mindset got to the point where dealers thought that they had to get what they could get, no matter what, in order to survive. Survival is one of our basic human instincts and it appears that when we got in "survival mode", something happened.... we made more money! What a concept!

September taught us that not only was it time to raise the bar, we realized that it was already happening all around us as we were finding ourselves achieving new and higher guidelines, or expectations. Now, we have to raise the bar just to keep up with everyone else! If not, we will just be left in the dust.

October: Managing Through Inflation In The Parts Department

We have now worked our way up to our last month's issue of ACG "Smart Parts" and if these past couple of years haven't been enough to deal with already with the pandemic, supply chain issues and the like, now we have to deal with Inflation and a potential Recession! It's now time to toughen up even more!...Seriously?

Our October issue took us through our "Top 10 Factors" that we have had to focus on in order to get through these inflationary times. On top of that, we learned not only how to get through these times, but we have also learned how to succeed and prosper through these times.

We started setting new and exciting Achievable Goals, we beefed up Parts Department Training and Staffing Needs. We added more Aggressive Pay Plans & Incentives, while Controlling Expenses even better. Finally, we started to utilize our Purchasing Power by Shopping Vendors and better controlling our Stocking Levels.

We also learned that we have to "constantly" review our Pricing Strategies in order to keep up with rising Inflation. We just can't afford to have a "set it and forget it" mindset as prices are always changing which means we have to keep up with these price changes. In order to maintain our gross margins, it just makes sense to adjust with the market as it is constantly changing.

Managing obsolescence is more important now than ever before as our assets, especially our parts inventory asset has to "turn" at industry rates, or even better. We cannot afford to hold onto obsolete inventory anymore as Acquisition & Holding Costs are rising at an alarming rate.

Returned, or sold obsolescence, even at $.50 cents on the dollar, or perhaps less can actually be re-invested on parts that turn several times a year and can actually bring back a "Return on Investment", (ROI) of well over 250% - 300%. Cash is king, especially in these times as well as getting the best return on our assets.

Lastly, in October we highlighted one of the most important factors of weathering this storm and that is accountability. First and foremost, we have to hold ourselves accountable before we can hold our employees accountable. It all starts at the top as we, the "Smart Parts" Manager has to set the example.

Our focus all year has been on this challenge that we all face and to not let these current events sway us from our overall goals and expectations. It's actually quite the opposite as we have to hit these challenges head on and consider them opportunities.

It takes a "Smart Parts" Manager to evaluate the situation, come up with a plan and then execute the plan to expected results. If you think about it, these past couple years are really no different than any other year because no one knows what lies ahead. 

The only thing we do know is that we alone are ultimately responsible for our own destiny and results, no matter what the environment throws at us, just like it has always been. We can have all the knowledge and background training in the world, but if we don't have the desire to succeed, the environment will suck us in and dictate the outcome.

If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ www.smartpartstraining.com, or...just pick up the phone and call me at :

(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...

October 2022: Managing Through Inflation In The Parts Department

Inflation in itself is an interesting topic that we are all familiar with as the economy is one of the biggest concerns for all of us in this country. It affects each and every one of us every day and "coping" with it is a struggle in itself. It's also one of the biggest topics, discussions and conversations that everyone can relate to.

On the receiving end of Inflation, we really don't have much we can do in the way of preparation as it's more of how we deal with it and make the necessary adjustments purchasing goods and managing our own expenses. Being "frugal" and watching our pennies is our primary means of preparation.

On the other hand, and from a retail perspective, we are on the other side of Inflation as a free market provider of goods and services, especially in the Parts Department. Preparation for Inflation takes on a whole different meaning as we have to consider many other different factors.

One might think that just adjusting our prices to Inflation is all we have to do as the "trickle down" effect takes center stage. After all, we just have to adjust our prices as our costs increase and then just pass the added cost down to the consumer to remain profitable.

In all actuality, it goes much further than that as just merely adjusting our prices to meet the added costs we incur is one of the last factors in preparing the Parts Department for these inflationary times. We have to have a different mindset with a "preparation to meet expectation" attitude and focus.

In this issue of ACG "Smart Parts", we are going to list out our "Top 10 Factors" in preparing the Parts Department for these inflationary times. Some might think that there can't be that many factors in inflation preparation in the Parts Department, but I believe that all these "Top 10 Factors" play a huge role.

We are not alone in the Parts Department as most other businesses that offer retail goods and services are going through the same thing, having to consider many factors in inflation preparation. As a matter of fact, and as we review our "Top 10 Factors", you may see that these factors may apply in any business.

We will review all these factors in order of importance from an ACG "Smart Parts" Perspective, starting with our Number One all the way up to our Number 10 factor in "Managing Through Inflation In The Parts Department". Preparation is also the key to success and if we aren't prepared, we won't meet the expectations.

We all know Inflation is already here and we have been dealing with it for a couple years now, but are we really prepared? Are we really considering all the right factors that we should be in order to not only survive Inflation, but succeed and prosper through it? 

Question is....

"What's Your Answers to These Questions?"

Let's Begin with our "Top 10 Factors" in Succeeding through Inflation!...

Number One: Goal Setting/Guidelines

First and foremost, and if we haven't done it already, we have to have a plan. We all know that we have to meet or exceed industry guidelines, but the bar has been raised as we mentioned last month. Dealers have been "raising the bar" over the last couple of years and to some degree, the demands have increased from the status quo.

Not only do we have to "raise the bar", most importantly, we have to communicate these new goals and guidelines all the way down to our parts employees as no one should be left out of the overall objectives. Everyone has to be on the same page and understand what each staff members duties & responsibilities are.

Number Two: Training

Parts Training has become more important than ever as I can attest to over these last couple of years from the Parts Manager down to counter staff, shipper/receivers and parts delivery staff. Every position is crucial from proper receipting of parts, posting Lost Sales and Pricing Policies.

Parts Manager Training on the Proper Set Ups & Controls on the D.M.S. in conjunction with the Manufacturers Vendor Managed Inventory, (V.M.I.), if offered, is crucial to understanding and maintaining proper Stocking Levels and the process of Phasing In the right parts at the right time.

If you don't know it already, Parts Counterpersons are "salespeople", and they have to be trained in selling skills. They have to also have a personality that accommodates the sales environment and be dressed appropriately to represent the dealer's profile.

The Front Parts Counter area needs to display accessories, apparel, etc. and have a "store front" feel to it to invite customers. It cannot have a "service counter" look to it and should be updated frequently with new products and displays as opposed to old, outdated accessories that just collect dust over time.

Number Three: Proper Staffing/Employee Incentives

Proper staffing in the right position in the Parts Department is key to providing efficient service to technicians and front counter customers. Technicians standing in line waiting for parts is a "Productivity Killer" as time is a perishable inventory. 

If a technician is waiting for parts for even 15 minutes can cost $50.00 to $100.00 in parts and service sales that we can never get back. Unfortunately, many dealers under staff the counter staff based on sales resulting in Lost Service Productivity.

Parts employees should also have sales incentives as they are salespeople after all. Incentives based on Overall Sales, and/or Service Productivity promotes higher sales and team effort in increasing Service "Cycle Times". It also incentivizes the Parts Department to have the right part at the right time and much faster.

Number Four: Controlling Expenses

Controlling expenses is not a new thing, or is it any less important at any time, especially during these inflationary times. But what is more important now more than ever is reviewing our vendor invoices on a monthly basis. Most often times, we just pay the bill each month from the same vendors without batting an eye.

In addition, payables and receivable staff don't often communicate with managers on the bills we are paying each month. All Managers, and not just Parts Managers should authorize all semi-fixed expenses each month and "sign off" legibly so that there is no confusion as to what is being paid and who's paying for it.

Paying for employee overtime has also been an issue the last couple years between the pandemic and rising inflation. More and more dealers are cutting back on hourly and/or salary-based compensation as a means of controlling overall dealer expense as our employees are our biggest expense.

This can be a "Catch-22" though as we can't expense our way into profit in most situations and we don't want to cut our staff and hours too low where it effects overall sales and gross. We need to staff properly based on industry guidelines and in sales, our sales staff needs to perform as well to industry guidelines.

Number Five: Purchasing 

This category of purchasing goes beyond just buying part in the Parts Department as we are referring to all purchasing controlled by the Parts Department. Sublet Purchases, Shop Supplies, Cleaning Supplies, Waste Oil & Hazardous Waste Removal, etc. are just a few of examples of the "purchasing power" of the Parts Department above and beyond just parts purchases.

That being said, there should only be authorized parts personnel that have the "power" to create and authorize a purchase order, whether buying parts or any other of the above examples. In addition, all purchases, invoices and purchase order numbers need to be "married up" for Accounting Reconciliation. 

Parts purchases also have to be reconciled to ensure that the price we pay is the price we cost out on the repair order or parts invoice unless there are adjustments to be made in Discounts & Allowances to balance with the Parts Ledger Inventory in Accounting.

Number Six: Shopping Vendors

This category kind of "dove tails" into our Number Four on Controlling Expenses, but with a little twist. Not only should we be authorizing only what we purchase, we should also be "shopping" our vendors at least twice a year to keep them honest.

One example is that I just changed my Auto Insurance Company after being with them for over thirty years. The increases in rates over the last year have been astronomical and they just thought I would go along with it. 

They took for granted that I had been with them so long and that I would just accept these crazy rates. The end result was a huge savings with a top insurance company with even better coverage. All I got for excuses from my previous auto insurer was..."prices are going up everywhere". 

We have to do the same thing in our Parts Department as our dealer's "purchase agent". As mentioned, we need to keep them honest and shop, compare and barter with other vendors who are trying to make it through these inflationary times as well. You may be surprised at what some of these vendors may offer in order to get our business!

We just don't have to settle for the status quo when it comes down to spending the dealer's money. We just have to be diligent and do our homework and take the time to do the research. After all, and as in my auto insurance example, if it was your money...what would you do?

Number Seven: Stocking Levels

Some may feel that our Number Seven should have higher priority, but when you think about it, and other than our Number Four on Controlling Expenses, all the other factors have to come into play in order to properly manage our Stocking Levels.

One thing for sure that we all have experienced Supply Chain Issues over the past couple of years and to some degree, we still are going through it. That being said, it becomes even more imperative to have the right Stocking Levels while battling Inflation.

Not only the right Stocking Levels, but the right Stocking Levels on the "right parts" and that can only come from our D.M.S. with the Proper Set Ups & Controls based on the math and our own individual demand history from Sales and Lost Sales.

The last thing we need is to increase our Stocking Levels while adding to the obsolescence problem. We have to have the right parts at the right time while "Phasing-Out" the part that have no demand in over seven or eight months while we still have a 35% - 40% chance of selling those parts and not restocking them, unless they meet Phase-In Criteria all over again.

Number Eight: Controlling Obsolescence

This category just makes sense as a follow up to our Number Seven on Proper Stocking Levels. Obsolescence is also a category that is no stranger whether managing through Inflation or not, but what is different now is we cannot afford to hold on to it.

The IRS Standard Depreciation of any commodity or inventory is half of the cost of what is displayed on the D.M.S., which is approximately $.50 cents on the dollar. Acquisition & Holding Costs alone add up over the years and for the most part, the dealer has already made money on those obsolete parts over the years just on price increases alone.

The cash back from selling the obsolescence for whatever we can get can be reinvested on parts that sell, or "turn" several times a year on faster moving parts. Unfortunately, the old theory that many dealers still have today that "it has to be worth what it costs" is old school. These dealers still don't realize the ROI that can come from selling it for $.40 - $.50 cents on the dollar.

Lastly, we have to "stop the bleeding" and control obsolescence from happening in the first place which can come from having the right D.M.S. Set Ups & Controls along with an "In-House" Scrapping Program, (an ACG "Smart Parts Exclusive"). 

An "In-House" Scrapping Program also frees the dealer from the clutches, controls and dependency on the manufacturer for trying to build return allowance from purchasing more parts for that little bit of protection that never matches the obsolescence build up each year.

Number Nine: Pricing Policies

Wow!...we finally got to the meat!...our Pricing Policies to combat Inflation!...

Even though pricing is the final "end game" in battling inflation, we absolutely cannot have the "right" Pricing Strategies unless we do all of the above first. Developing the right Pricing Strategies while maintaining, or even growing our customer base is absolutely crucial.

The amazing thing is that developing the right Pricing Strategies is the easiest thing we can do because it's all about the math. The key ingredient to developing these strategies is our cost factors, as cost is constant. What we pay for parts is what we pay, and we have to structure our gross profit from "cost up".

We also have to keep up with our cost factors as most manufacturers have already had two major parts price increases this year alone. They are passing the ball down to us and we have to pass it on down as well to ensure our gross margins. Gross pays the bills, and we have to be able to afford our Number One Asset, which is our employees.

Developing and maintaining our Pricing Strategies is not a "set it and forget it" category as we need to review, modify and update, if necessary, each month to ensure our gross margins. We have to compare our results each month to industry guidelines and make the necessary modifications.

Number Ten: Accountability

Our Number Ten is the "glue" to all of our "Top 10 Factors" in our battle against inflation. Everyone, and I mean everyone needs to be held accountable to their Duties & Responsibilities. We cannot achieve our goals if we deviate from the process and dealer guidelines listed above.

Parts gross killers include discounting, price overrides, costing errors, pilferage, parts security, lack of training, housekeeping, accrued obsolescence, accounting errors, improper reconciliation, etc. and I could go on and on. We have to maintain control and accountability at all times.

As mentioned, parts is all about the math and if we don't achieve our gross numbers, then somebody is overriding the math, it's that simple. If we don't receive the results we expect, there has to be a logical reason.

Inflation is just another period in time that we have to adjust to. Getting through it and prospering through it are two different things....

If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ www.smartpartstraining.com, or...just pick up the phone and call me at :

(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...

 

September 2022 - An ACG "Smart Parts" Perspective: "It's Time To Raise The Bar!"

It's hard to believe that we have reached yet another milestone here at ACG "Smart Parts" with our 150th Edition. In this edition, and as a follow up to our last edition titled "Don't Take Your Foot Off The Gas!", we are going to challenge "Smart Parts" Managers yet again in this month's issue.

For years, we have measured our individual dealership success by meeting or exceeding the standards set by industry analysts, companies and of course, the manufacturers. These guidelines have changed to some degree over the years, but overall, they have been the standards that we have all been compared to.

These comparisons, or "composites" have given us industry information in many areas in all dealership departments and help us determine if we are above average, just average, or below average. This collective information has also helped many dealers meet or exceed these guidelines by sharing different processes and ideas with other dealers.

Since the Covid-19 Pandemic began a couple years ago and, in my opinion, much has changed in how dealers operate their businesses. Along with supply chain issues, employee shortages and rising inflation, dealers had to adapt to a different way of doing business in order to survive.

That being said and fast forwarding to today, I have noticed that many of our industry guidelines are being replaced by new goals and guidelines set by individual dealers. One good example of this is what dealers are achieving today in their average "front and back" New & Used Vehicle Gross Profit Margins.

Many have over doubled their "front and back" New & Used Vehicle Gross Margins to offset supply chain issues and overall lower New & Used Vehicle Sales. Many are actually making more with less with Floor Plan Expense dropping by thousands of dollars.

This phenomenon is also true in the Fixed Operations as dealers became even more dependent on their Service Absorption, or "Fixed Coverage" in the dealership's "back end". This trickle-down effect, in many dealerships today between the front and back end has made them more profitable than ever!

"So, what has all this done to our industry guidelines, especially in the Parts Department?"

In my opinion, the results of these past few years have definitely impacted our industry guidelines, especially in the area of parts for sure. As a matter of fact, the impacts are so great that we need to start thinking about "raising the bar" on some of our parts guidelines.

In this issue, we will break down five of these guidelines and perhaps, get a new perspective on where we should set that bar. Even though, we are not challenging or disagreeing with these industry guidelines, we are just challenging ourselves to achieve what is possible.

Question is...

"If other dealers are doing it...What should MY new guidelines be and how far do I raise the bar?"

Let's Begin...

First and foremost, we can't just throw crazy numbers and percentages out there to achieve some crazy goal as these goals and guidelines have to be S.M.A.R.T.* Each guideline has to be carefully thought through, make sense and most important, the math has to work as well because Parts is not about opinions, it's "black & white".

* Specific, Measurable, Attainable, Realistic and Time Focused

In each guideline category, we will list the current industry guideline and then we will list our ACG "Smart Parts" Perspective Guideline and as you will see, the math will have to work to match other parts industry guidelines. Also, we will back these ACG "Smart Parts" Perspective Guidelines with formulas, and/or definitions to confirm the perspective guideline result.

The following five guidelines are not listed in any particular order, and we will list industry guideline first, then followed by our ACG "Smart Parts" Perspective Guideline. We will follow with our reasons and explanations for "raising the bar" if need be, or if we maintain our current parts industry guidelines.

Customer Pay Parts Retained Gross Percentage:

Industry Guideline: 40% - 42% (Matrix When Possible)

ACG "Smart Parts" Perspective Guideline: 45% - 48% (Matrix Captive Parts, Flat Price Competitive)

This guideline is the one that I've seen climb the most over the past few years in many dealerships that I have visited as well as the most under achieved guideline. It seems that many dealers are either "over-achieving" the industry guideline, or they are not even coming close which has resulted in the biggest gap of all the guidelines.

In my opinion, there should only be two Pricing Strategies on Customer Pay Parts. One being the proper utilization of a Parts Pricing Matrix in the right "cost plus" ranges on "captive parts" and the second Pricing Strategy being "flat priced" parts for "competitive parts".

The reason the industry guideline is at 40% - 42% is because most Manufacturers Suggested Retail Prices are set to retain an average of 40% - 42%, even though some are higher and some lower, the overall average will retain a 40% - 42% retained gross, which matches the industry guideline.

The ACG "Smart Parts" Perspective Guideline for Customer Pay Retained Gross Profit goes a little further. The reasoning for "raising the bar" on Customer Pay Gross follows two basic, commonsense principles. Plus, this 3% - 5% increase in Customer Pay Gross Retention doesn't really change customer perception when it comes down to what people buy.

The first basic principle is the cost of doing business has gone up expensively, especially in Parts from Acquisition & Holding Costs, Cost of Employees, Insurance, etc., just to name a few impacts of what we are experiencing today versus just a few years ago.

The second basic principle is customer perception when buying parts and services in our dealership. As I mentioned, the average MSRP of parts today is pretty much set to average the current industry guideline of 40% - 42%, which from a "cost plus" standpoint, we are marking up from cost by 67%.

In addition, and another fact is that approximately 80% of our parts sales are coming from the $10.00 to $40.00 cost range. That being said, if I have a $20.00 cost part, the manufacturer will most likely have an MSRP of approximately $33.40. This is where it all starts as this price at MSRP drives the customer perception, if any.

If I were to "matrix" that same part that costs $20.00 cost + 82%, instead of 67%, I would be selling that same $20.00 cost part at $36.40, which is only $3.00 more. The difference though is that I achieved a 45% gross profit margin instead of 40%. In my opinion, if the customer says "yes" to $33.40, they will also most likely say "yes" to $36.40.

This, of course only applies to those "captive parts" when customer perception doesn't usually play a role as much as "competitive parts" would. In my opinion, those "competitive parts" should be "flat priced" and weighted for average pricing at cost + 67%, which would retain a 40% gross margin.

Parts Sales Per Employee/Gross Profit Per Employee:

Industry Guideline: Sales: $45,000+/Gross Profit: $15,000+

ACG "Smart Parts" Perspective Guideline: Sales: 50,000+/Gross Profit: $20,000+

The reasoning behind this one is quite simple as the math doesn't lie. Our industry guideline math results in a 33% overall gross profit margin and we should be trying to achieve at least a 40% retained gross margin overall. The ACG "Smart Parts" Perspective Guideline does result in a 40% overall gross margin.

The other reason for the higher gross margin is now with most manufacturers having to pay full list on warranty parts, or a substantial "uplift" to dealers for those warranty parts, our target should be at least 40%. With exception given only to those few states that have not yet litigated for this warranty parts uplift, a 40%+ parts gross profit overall is achievable.

Lastly, and if anyone hasn't noticed yet...the cost of everything is going up. We are actually selling the same parts for more as all manufacturers have raised their prices this year at least once, if not more already. That means our Parts Staff is selling at higher price and higher gross with the same effort and number of transactions, and not necessarily selling more parts.

Lost Sales Reporting:

Industry Guideline: 5% - 10% of Total Parts Sales at Cost

ACG "Smart Parts" Perspective Guideline: 10% - 15%+ of Total Parts Sales at Cost

Actually, the industry guideline for Lost Sales Reporting has gone down over the past few years as the guideline for reporting Lost Sales used to be at 10%, but now has been reduced to 5% - 10% which does not make sense to me. In my opinion, Lost Sales should actually be called "Potential Missed Opportunities".

Lost Sales is a key component in recording "parts demand" along with parts sales. The more we record parts demand, the more we will see and be able to manage on potential parts that may phase into the Dealer Management System, (D.M.S.) The less demand we record, fewer parts will phase in, resulting in a lower inventory "breadth", or coverage.

Posting Lost Sales at a higher rate will result in better inventory coverage and defining what is a true Lost Sale is very simple. At the time of part inquiry is our best opportunity to post Lost Sales as one of the four following things will happen...

Number One: We have the part and we sell it, or...

Number Two: We don't have the part and we Special Order the part, or...

Number Three: We don't have the part and we have to chase the part, or...

Number Four: None of the above three happens and we post a Lost Sale.

Overall Fill Rate/Level of Service:

Industry Guideline: 90% - 95%

ACG "Smart Parts" Perspective Guideline: 85% - 90%

It may look like we are actually lowering the bar on this one, but that's not exactly true. First of all, Overall Fill Rate, (Level of Service in some D.M.S.'s) has a different definition than most may think. The Overall Fill Rate, (Level of Service) is defined as "Total Sales at Cost Minus Lost Sales at Cost".

All this category means is that we sold the part, whether today, tomorrow, next week or next year, minus any Lost Sales posted at cost. This is why the industry guideline is 90% - 95% because that's the opposite of the industry guideline for Lost Sales Reporting at 5% - 10%.

That being said, we could actually report no Lost Sales and the Overall Fill Rate, or Level of Service will show up the Parts Monthly Management Report as 99.9% or 100% Overall Fill Rate, or Level of Service. So, I guess in that case, we would look like a hero at 100% Fill Rate!

This also explains the ACG "Smart Parts" Perspective Guideline for Overall Fill Rate is at 85% - 90% as it too is the opposite of the 10% - 15% Lost Sales ACG Guideline. So even though the ACG "Smart Parts" Perspective is lower the industry guideline, the results are better.

On a side note, the most important fill rate to measure is the "First Time Off Shelf Fill Rate", which is the actual percentage of time the part is sold on first visit. That calculation cannot also be measured on the D.M.S. as it has to be calculated the old fashion way....

Total Sales of Normal Stocking Parts at Cost Minus Emergency Purchases at Cost

Stock Order Performance:

Industry Guideline: 75% - 85% of Total Parts Purchases at Cost

ACG "Smart Parts" Perspective Guideline: 75% - 85% of Total Parts Purchases at Cost

I agree with this industry guideline, but I wanted to put this one in because most Parts Departments will never achieve this guideline if they are only utilizing the manufacturer's Vendor Managed Inventory Programs, (V.M.I.) to replenish their stocking inventory. 

If we don't utilize our own D.M.S., (with the proper set ups of course by the math) in addition to the Manufacturer's V.M.I., the best we could ever achieve is a 50% - 55% Stock Order Performance as the Manufacturer's V.M.I. only covers approximately 50% - 55% of their total inventory breadth.

This guideline 75% - 85% should also be our guideline for our First Time Off Shelf Fill Rate as it only makes sense that if 75% - 85% of our parts should be ordered for stock replenishment and it's our guideline for Stock Order Performance, then we should be selling those Normal Stocking Parts at a rate of 75% - 85% as well.

There are many industry guidelines that I agree with and abide by, but I believe that these five industry guidelines not only can be attained, but they could also reach our ACG "Smart Parts" Perspective Guidelines as well. Sometimes it doesn't take much to make a difference and achieve higher levels of expectation.

To me, it's the "expectations" that we have on ourselves that allows us to achieve even higher levels and the first step to getting there is to realize that it's "Time To Raise The Bar!"

If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ www.smartpartstraining.com, or...just pick up the phone and call me at :

(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...