Special Ordered Parts not used in the shop

[Robert a Bamert jr]

I would like to know what others are doing
about the shop ordering parts ,and then not
hanging those parts on the car , or only useing some of what was ordered?

[mike.cunningham-1]

Bob,i dont't have to tell you what a problem this is.We are a Ford dealership and have a 30 day return program. While it is not the best at least it lets us get rid of some of these service dept. special order parts.We also have the pipp program,where we can return parts.Last month we returned almost 30,000 dollars worth of special order parts.I hope this helps you somewhat mike

[Chuck Hartle]

Robert,

This is everyone's problem. It's commonly refered to as 'forced stock'! It is obviously the number one cause of idle capital (obsolescence). There are several suggestions here for you to ponder.

1) As Mike suggested, use your manufacturer's return program diligently. We found the break even point to be anything over $100 that is returnable to the mfg be sent back.

2) Charge the service department the return fee that the mfg charges for sending the parts back. We actually implemented a pay plan that not only charged the service dept. for parts returned but deducted the amount from the service advisor's pay.

3) Educate both parts and service personnel as to the real costs associated with ordering parts that do not sell. In short, when your service people (techs, advisors, and service manager) complain that you don't have the parts they need in stock to fulfill their repairs, show them the amount of 'forced stock' that is choking your ability to put the right parts on the shelf!
Service departments can be their own worst enemy and the parts department has no control over the situation, generally speaking.

4) Most parts departments put special order parts on the back burner. Out of sight, out of mind. When you begin to look at special order parts and make it a priority your people will begin to make it a priority too.

5) One very successful thing we did was hire a 'special order' clerk whose salary was split between the parts and service department. She only kicked in after a part was on the shelf over 15 days and we had not secured an appointment for the customer. Her job was, by hook or by crook, to get that customer to commit to coming in. If, by the 25th day, we did not have an appointment, we pulled the parts and either returned it or put it to general inventory. We paid her a bonus on how many appointments she could secure and how low the 'forced stock' amount was for that month. We reduced our forced stock inventory by 70% over a 6 month period.

Some dealers have gone as far as not to even let the parts department order the part unless the service advisor has another appointment scheduled and the service manager has to sign off on the order form.

If you want to 'pull' your forced stock inventory report, run an english statement or 6910 report (if you are ADP or ERA) by selecting all parts with YRSL equal to zero and with O.H. greater than or equal to one
and with MNS less than or equal to 12. For ERA dealers your fields are
"12 MONTH HIST~" equal to zero and
"QOH" greater than or equal to one and
"AGE" less than or equal to 12.


This is not a 100% accurate as you may have forced parts into your inventory that did have one or two sales but did not qualify for your phase in. It will however, give you a great indicator of how severe your forced stock problem is over the past twelve months.

Anyone else have a 'silver bullet' process for this?

Chuck Hartle'

[This message has been edited by Chuck Hartle (edited 02-25-2000).]

[This message has been edited by Chuck Hartle (edited 02-25-2000).]

[Robert a Bamert jr]

thanks for all the good ideas,i've been charging the service dept back for unused items,and with some of the high dollar parts i've been charging a percentage, or handling charge. i was trying to see if anyone else was also doing this.its been a fight every month with service doing this,and i've ed.them on how its hurting all parties involved,especially since service and parts are payed commision out of the same pot,but the fight still goes on .

[David S]

First let me apologize for the length of this reply. It is long, but significant to the discussion.

I have concerns with some of the solutions that are typically used. Charging the service department only perpetuates the barrier between parts and service. And returning the parts to the manufacturer ignores the fact we have a customer out there that is not satisfied affecting CSI as well as long term retention. Hiring someone special to handle the job of the advisor just adds to our expenses and reduces the net. Beyond all, wouldnt we rather make the gross by selling these parts?

There are two postings on this site that are very closely related. Your post Special Ordered Parts Not Used In The Shop and NS Stocking Status Syndrome. I feel I need to address both in this reply.

There are hundreds of different view on how to control inventories and use the systems that are available. There are those that feel the current systems are not enough, that we need advancements and changes to the systems for them to work correctly. In truth there may be some changes warranted. But if everyone had what he or she wanted out of the systems, the systems would be wildly complex and probably cause more problems than the changes would solve. We might as well work with what we have, so lets use the systems the way they were designed.

First, there is no specific stock status code for forced stock. Changing the status code for these parts make things more difficult than need be. A part number that has not Phased In should be listed as NS status. I dont think we should be changing these to a BLANK status or AP status. Though I may occasionally refer to parts as forced stock the definition of these parts is -- Non-Stock status parts that have on hand quantities.

To determine the value of forced stock, run a report listing all NS status parts with a quantity on hand greater or equal to 1 and last received prior to 30 days ago. I use the 30 criteria to exclude parts recently ordered (giving the service department the benefit of the doubt). Anything and everything else is forced stock.

Now, how do we reduce our exposure to forced stock?

First, to wake up the Service Department, relate your forced stock to their pocket. Below is a calculation that will equate lost gross profit in both the service and parts department to the value of parts not installed by the service department.

You will need the following numbers. I recommend using only customer pay. From here you can calculate the rest of what you need.

1.Monthly Parts Dept. GP%______________%
2.Monthly Parts Sales $_____________
3.Monthly Labor GP%______________%
4.Monthly Labor Sales$_____________

5.Calculate Parts/Labor ratio. (#2 divided by #4) $____________
6.Calculate Average Parts Mark up. 1/(1-#1) _____________
ex. 1-.32=.68 1/.68=1.49
7.Calculate Lost Parts Sales. ($1.00 x #6) $_____________
8.Calculate Lost Parts GP (#7 x #1) $_____________
9.Calculate Lost Service Sales.( #7/#5) $_____________
10.Calculate Lost Service GP.(#9 x #3)$_____________
11.Total Lost Gross Profit (#8+#10) $_______________

As you can see in #7, to represent forced stock I use a part with a dealer cost value of $1.00. I have used this calculation several times and have found that it is not uncommon to find that for each dollar absorbed in to inventory or returned to the manufacturer, the dealer loses as much as $2.00 in gross profit or more. Think about it. If you look at your inventory management report and see $40,000 in Non-Stock investment, you will likely equate 75% of that value to the service department. If $30,000 of your inventory is forced stock due to the service department, your dealer could be looking at as much as $60,000 or more worth of profit that was just forgotten because someone didnt want to do their job.

What can the service department do to prevent this situation?

Chuck Hartle is correct; many dealers have set policies to force the service department to pre-schedule appointments for customers with special ordered parts. Dealers that I have worked with have shown me that this is a very powerful approach. In the typical dealer, an advisor hands a customer the keys to their car and say We will contact you when the parts arrive. Subliminally, they are telling their customer that the car is safe and reliable to drive. There is no sense of urgency to return for the parts. I myself have heard customers say, Ill get the special ordered part when I return for my next oil change. By the time the next service is due, the customer and advisor have forgotten or just dont care anymore. Conversely, if we think of the dentist office, getting a commitment from the customer is a very effective way of making a sale. The dentist hands you a card with your next appointment. Though some fail to show, most people return for their appointment. So at the time an advisor places a special order, they can set an appointment convenient for the customer. The customer puts it on their calendar and is more likely to show. In addition there is an another advantage for the Advisor. With the old way of handling customers, the advisor has to contact 100% of all customers with special orders each week. With pre-scheduling the advisor only has to contact the small percentage of customers when the part is on backorder or delayed. Thus freeing up valuable time for the advisors for other tasks.

David S

[Robert a Bamert jr]

Makes alot of sence,and thanks for the formula.

[Mark Homesley]

Isn't this a great topic for discussion?
While sometimes I'd like to debit service for the return charges for special orders generated by them but not picked up by the customer, I agree that doing this only contributes to the parts/service "conflict". We instituted several simple steps that have helped us in reducing the quantity of SOP's not picked up.

1. Out of sight,out of mind?? We moved the special order parts bins up by the tech counter (and right by my office where I see them every day). When you see them all day long you notice when they begin to age and then you can start asking questions.

2. Have the service manager OK any expensive or trim items. Sometimes he won't be aware that they are ordering a seat cover or door panel for Mr. Smith, but the trim shop could probably repair it...and keep the warranty cost down as well.

3. We have a dedicated service administrative
support staff who take the appointments, do warranty, close orders etc. We incorporated calling on SOP's as part of their responsibilty. We use a extra copy of the special order form that they work off of, they indicate when the customer is scheduled and then we attach that to the part for documentation.They do a great job contacting customers and setting up the appointment and all you have to do is recognize their effort!!

4. Once a week run a RPG report in descending dollar value of the SOP's. Get the biggest bang for your buck when the support staff is super busy, they can call these customers first. Don't forget to look at the report from the service manager's perspective and see if there are any parts that can generate 3 or 4 hours labor for him. Be sure to note that on the report and he feels you're looking out for his department as well.

5. Try running a SOP RPG report by tech. See anyone who orders more than their share? Maybe some training or counseling is needed.

I think we all need to make the issues of Special Order Parts a team effort in our dealerships. Chargebacks and fingerpointing are counterproductive and in the end neither department "wins". Certainly the dealership loses...$$$ as well as employee and interdepartmental satisfaction and...oh yeah,
do you suppose our customers lose too?

[Chuck Hartle]

Great Stuff....

David, your still stuck on that 'rocket science theory, aren't you??? I like the calculation.

Mike, I love what you are doing too... I like those special orders out in front where everyone has to look at them.

That is probably the best conclusion. Special orders will only be a priority if you make it that way. We all want to increase our bottom line and if you could really trust your Service Advisors to follow up properly on them, then that would help.

In my 3 years as a fixed operations manager, I came to the reality that we are asking 'WAY TOO MUCH' of the service advisor position this day in age. We ask them to write up vehicles, make appointments, answer the phones and help customers with technical questions, understand our manufacturer warranties, understand all the service contract programs, and try to upsell service all in one single bound. The successful dealerships I have seen recently are taking away all the side issues service advisors have to deal with so they can concentrate on the customers in the shop and give them the attention they need. When we build the 'accountability' pay program into our service advisor's pay plan, we made sure they had the time to follow up with those customers.

Let's face it. We can all speculate on the best way of handling the situation. But, we all know that all the 'sunshine in the world' will last only so long. What I am getting at here is that we all chase our pay checks. Unless you have a clearly defined job description (aka pay plan) that spells out what is needed to be done, you can profess all you want but eventually the employees seem to find the optimum gaps in the plan with the least amount of work.

I must apologize David for not being explicit enough about the special order clerk. When we 'hired' a special order clerk we decreased our expense and increased our net dramatically. I combined our Service, Parts, and Body Shop Manager's pay plan off the same bottom line. Over the next 6 months we combined service and parts positions that were traditionally considered either a service function or a parts function and split the employee cost between departments. The result, 3 less employees.

What else you got? David, I do love that calculation. I am going to play with it on some of my clients systems. I will let you know the result....

Thanks all,

Chuck Hartle'

[This message has been edited by Chuck Hartle (edited 02-28-2000).]

[Bob Smith]

Hello and Good Morning all...

Well, this is my first post to any of the boards within this fine information center.

I've been getting "The Parts Manager" delivered to my office for a little over a year now and have realized some benefits from the input of others. (I usually try to go it on my own but I recently realized that seeking assistance does not mean that you're inadequate.)

I recently signed up to have the daily news and weekly headlines delivered to my mail box and today I saw this topic and thought I would put in my two cents. (Got a few minutes?)

This subject is near and dear. Special ordered parts are definitely a problem in my store. We are a GM & Nissan store with 27 (+/-) technicians that pretty much have free reign when it comes to ordering parts. We (I) instituted a procedure that requires the Service Manager or Shop Foreman to sign off on any parts over $100 being ordered or picked up to try and get hold of a problem situation. Well - that worked okay until I found out that the Manager (also the FOM) and the Foreman were merely signing and not checking into why an ECM, ABS Module, etc., was needed, if at all. (And yes there are several "used" items on my shelves.) It didn't limit or cure the problem of NS dollars sitting on the shelf.

We're still in limbo on this problem and I think that using the formula that David supplied will enlighten us. I'll keep you informed David - and thanks for that!

One of the problems I have is that the Service Advisors are very busy with customers, techs, policies, etc. (as mentioned by Chuck) and they don't have (or won't make) the time to contact sp-ord customers.

I gave the duty to my secretary and provided her with the tools she would need to be sure the customer was contacted, several times if need be, and had every opportunity to come back for installation. (I should mention that before we place an order we exhaust all possibilities of picking the item up same day.)

With our ERA system we are able to run reports inside out, upside down, etc..(as you probably know).

I have three reports setup to identify sp-ord parts from receipt, to 14 days, and 24 days in age. Laureen uses these reports to their fullest and is quite successful in getting the customer back but there is still that percentage of people that just don't feel the urgency of getting a console cover installed until their next 3,000 mile service.

The 24 day report is my queue to input a return request for MECHANICAL components from GM or any item over $5 from a Nissan VOR order receipt. From input of the return request I have about 24 more days to hold the item(s), which should give the customer ample opportunity to get here. If the customer is a no-show the part gets returned and a note is placed in the customer file indicating that we had it, sat on it and sent it back. These help to reduce the NS value but a GM door trim panel (not mechanical but ordered by service) can run $400.00! What a waste of the return reserve.

So, once I'm done writing this (which is very soon - sorry for the length!) I'm going to sit down (oh wait - I am) and use David's formula to show how much profit we are not capturing, Mark's report for the biggest bang, Mike's idea of putting the special orders out front and a big paddle for the offenders.

Thanks for the discussion area and - I'LL BE BACK!

[mike.cunningham-2]

David---thanks for that formula.At our next manager's meeting this will definetly open up some eyes.The formula was easy to use but the results were i'd say mind blowing....the total lost profit of almost 40k is literly being thrown away.Hopefully I'll be back to you with good results.

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mike cunningham

[This message has been edited by mike.cunningham-2 (edited 02-29-2000).]