NS stocking status syndrome

[Chuck Hartle]

Hi Chris,

Sorry it took so long to get back to you. First off, before I get going, let me tell you that the subject of 'LOST SALES' is open to so many different opinions that it could be debated in the Automotive "Supreme Court" (if we had one).

Second, I know very little about UCS (I apologize) just due to the fact that our friends in Houston make it difficult for someone in my position to dial into a dealers system to look at things. However, based on what you have said, I think that is totally crazy that they would do that.

In my opinion, the term lost sale is an open term. I probably have heard of at least 5 different interpetations of what a lost sale should be.
Do you post a lost sale because
a) you are out of the part (stock out)
b) you are out of the part (backorder)
c) you don't stock it at all
d) your price was too high
e) your wholesale customer canceled because you couldn't get it to them quick enough
f) you delivered the wrong part the first time

I am sure we could build a lot more than this, but you get the point. Here is a great way to look at what lost sales can do based on the liberal way we look at it today.

Dealer #1 needs a part he doesn't stock and the customer is down in the shop.

Dealer #1 calls 4 Dealers in his locality to try and find the part:
Dealer #2 is out and posts a lost sale
Dealer #3 is out and posts a lost sale
Dealer #4 doesn't even stock it, adds the part to his system and posts a lost sale.
Dealer #5 finally has it and sells it to Dealer #1.
Dealer #1 receipts it and sells it. The parts advisor posted a lost sale up front.

You now have 5 dealers who have post 4 lost sales and 2 sales for a single transaction of the part. And our manufacturers want to track our sales and estimate our inventory needs?

I am sure this will open some more conversation(it always does). To get to the point Chris, at least you know what your DMS is doing, so I would suggest that you set up multiple phase-in sources and make it just a bit harder for the parts to come in. With Ford we use the following criteria for phase-in

Part Numbers that start with F4 or less have a phase in of 4/10

Part Numbers that start with F5 to F7 have a phase in of 3/9

Part Numbers that start with F8 and greater have a phase in of 2/7.

While this is not perfect science with Ford part numbering logic, it does 75% of what we want it to do.

OK, I am ducking.... Fire away....

Chuck Hartle'

[jdpetey]

Hello Chuck,

I won't go into the lost sales topic completely, but I will say your example with the 5 dealers is a little interesting.

We would now have either 5 dealers with a potentially useful lost sale entry, or 5 dealers with a dead end entry.

I would like to take the optimistic side and hope that in some cases it could lead to the phase in criteria for some dealers who have had valid hits leading to a little better chance of obtaining the part locally.

Naturally,this does not apply to all parts.

Parts advisor training in the lost sale area is usually lacking & most don't care enough to make a difference.

jdpetey

[Chris]

Hi Chuck,

Interesting concept re: phase-in. I want to take a close look at the demographics of the front and back counter sales. Typically the front counter repair shop sales deal with older vehicles (vehicles out of factory and/or extended warranties). Front counter body shop sales generally deal with current to 5 or 6 year old vehicles being repaired by insurance policies. A high percentage of back counter sales are vehicles no more than 4 years old still under factory and extended warranties. And yes I am acutely aware of the term "customer retention". Coming from the Import arena I was shocked at how low the retention is in the domestic franchise and this varies widely given the service department's operation procedures.

Enjoyed your lost sale scenario. While hardly typical of 5 dealerships, it could pose a best case or should I say worst case. Can't say I'm a big fan of lost sales in a proactive parts department. By proactive I mean a department that orders maintenance, common repair, and body parts as soon as part numbers are available for a new vehicle. Would anybody recommend posting lost sales for trim items? I sure hope not. If another dealer calls in to check a part number does the parts advisor always know what the part is? Hence I don't recommend posting lost sales in that situation. How about that call from a wholesale customer for a wiper motor for a 96 model vehicle which you've never stocked or a wheel bearing for a 94 car that you are out of stock pending a stock order. I would think both of those would warrant a lost sale hit.

I do have the ability to individually modify sales history but due to the shier volume of special orders it makes it entirely to time consuming.

You are absolutely correct regarding our friends at Houston being proprietary. So much so that a parts manager in the UCS environment doesn't even have access to the screens necessary to modify days supply, phase-in or phase-out. Rational being that a parts manager should call in and speak with a professional at UCS.


------------------
Chris Bledsoe
Pts Mgr
Pulliam Ford
Columbia, SC
sysop@clynx.com

[Hank D]

Some things don't need to be complicated to work well. I tell my guys that a lost sale is any part that could have sold if we had it. When in doubt, ask the customer if he would have bought the part if we had it in stock. If service needs the OEM part and parts gets an aftermarket, record a lost sale of the OEM.

Yes, our "friends" in Houston won't give up the time of day, and would like to have exclusive rights to it. Very flexible system if you have 3 years to work with it and an IQ of 165 or better. Very easy to muck up the works if you play too much.

ADP won't let you phase out in fewer months than phase in. If you want AP if less than sales in 3 months out of 9, you can only test 9 months for stocking status. They don't seem to have any problem letting you phase in after 9 months but phase out after 12, but that doesn't seem to make good sense to me.

The multiple sourcing can work great, but requires alot of training of counter people or alot of the parts mgrs time swapping sources. I must agree that the manufacturers sources are good for them, but not for us.

[David S]

Chuck:

You pose an interesting scenario. As I see it this is only a concern for the manufacturer that is trying to determine total demand at the dealer level. If the manufacturer is trying to initiate or run a stocking guide requirement, this scenario should cause some difficulty for them.

For the individual dealer, does it really matter what another dealer is posting or not posting as a lost sale? I would submit that it doesnt. As a Parts Manager responsible for my own inventory I would want to capture total demand for my own store so that I could make sound stocking decisions for my customers. To capture total demand I would want my counter personnel to post all lost sales. If there is an inquiry on a part that is not in stock and not sold, regardless of the application or source of request, I want a lost sale posted. I can then be the final filter after the DMS has determined a part meets Phase In criteria.

To all:

What a great topic!

We are all creatures of habit. Though I may never stock a truck bed or a left side muffler bearing on a 30 year old car, if we let our counter personnel start making the decision when to post a lost sale and when not to, the counter personnel will likely start to make less and less lost sale entries. Posting of lost sales needs to be habitual.

Some of the cleanest inventories I have ever seen have Lost Sales numbering in the range of 5-10 lost sales per day per parts employee. Most of the worst inventories I have ever seen have little or no lost sales posted. If I can capture total demand (sales and lost sales), as a knowledgeable parts manager I can then make a decision based on this total demand, the part in question (cost and size), and model range. While eliminating parts that dont make sense I would have many more opportunities to stock parts that my customers (retail, wholesale, or shop) would want.

David S.

[Mark H]

Well said David. I think once you begin making exceptions as to what constitutes a lost sale it seems the entire process of posting them then becomes open for interpretation by everyone involved. Post all lost sales no exceptions and let the manager sort out what to stock. Period.

MH

[Chuck Hartle]

I love this subject. Never have I seen a subject that offers more "discussion" that what constitutes a lost sale.

Hank, I enjoyed and agree with your answer. Don't you really wish it was really just that simple? In doing over 40 stock orders per week now, we find that most of the lost sales posted by parts advisors are in reality "frustration" postings. It becomes pretty obvious when you all of the sudden have 8 sales recorded with 4 of them being a lost sales posting and both were on the same day.

David,

Our experience has been quite different than what you see with your Toyota dealers. The best way we have found to track 'true demand' is not by the number of lost sales posted per day, it is by the number of parts added to the system on a daily basis. We have found, quite consistently, that a customer actually calling in or showing up at the dealership and walking away without a purchase a minimal.

In measuring the effectiveness of how well your parts advisors are tracking true demand, run a report on how many parts were added to the system daily or weekly. We have found that roughly 40-50% of the parts added have a demand and/or sale and that for every $100,000 worth of inventory you should see approximately 20-30 part numbers added per day.

Where we do see an increase in 'true' lost sales posting that are legitimate is the smaller the store the more it goes up.

Next...........

Chuck Hartle'

[David S]

Chuck:

Maybe I misunderstand you again.

I too can see some value at looking at the number of new parts added to the system. But once added to the system we can still only track true demand by capturing all sales and Lost Sales.

I know you have stood near many counter personnel in your career. I know you have heard many phone conversations between customers and counter personnel. During these conversations, parts are requested and parts are looked up via the EPC or fiche. During many of these conversations you will hear employees say thanks and hang up without making a sale. You have seen many technicians check price and availability at the back counter. Way too often an estimate is provided to the ASMs without a sale being made.

By running reports of parts added you are not tracking true demand you are tracking the number of new parts added to the system. To track true and total demand you must post the lost sales. Using the figures you posted, if there are sales made on 40%-50% of all parts added, then you are missing true demand data on the other 50% - 60% of the parts added. If you are not capturing true demand on these parts that would lead me to believe that you are missing data on many other lost sales as well. As a result of not capturing true and total demand you are providing a disservice to your customers by not Phasing In parts that should be stocked.

To further address your response to Hank, if you have identified frustration lost sales posting that is only an indication that the Parts Advisors are in need of more training and a better understanding of how the systems work.

To address UCS concerns, by the end of next week hopefully I will be able to provide some insight. Our friends in Houston will be providing me a 5 days of education next week. I will try to address all of these issues and any more that you can give me.

David S.

[Chuck Hartle]

The other perspective, David. We should start a parts counterpoint series. (I think we already are.)

Again, I have no argument with your conclusions. However, as you can see by this thread everyone has a different opinion of lost sales.

The definition of 'lost sales' is almost as adverse as the dealer body itself. That is why I said this should be debated in the Supreme Court of Dealerships.

Let's continue with this discussion by asking a two questions.

When was the last time that you, as a parts manager, had a education awareness meeting to describe your policies regarding the proper procedure for tracking and posting lost sales?

Do you have a handout or documentation that each parts advisor has describing your method for tracking lost sales?

I have no problem with your conclusions David, but running reports and looking at lost sales tracking methods with hundreds of dealerships show that it just isn't happening the way it should. We either see too much or not enough. You are right about doing yourself a disservice if your people are not tracking true demand properly and the effects it can have on your parts inventory. The real crime here is that many parts advisors make snap decisions on their own as to whether or not they should add a part to the system or not.

We have seen very few dealers who actually have a written policy on tracking lost sales and even fewer who have bothered to go through the education process of it.

What is Toyota doing to change this. Does Toyota have a written policy on the definition of lost sales and training for this?

Thanks,
Chuck Hartle

[David S]

Lost Sales posting should not be one of those issues that must taken to the Supreme Court of Dealerships. It continues to surprise me that some aspects of Inventory control are accepted at face value while other areas are debated so much.

Though we certainly have some very knowledgeable Parts Managers contributing to this discussion board, too often a Dealers Parts Manager was once the counter person and inherited the job when the last guy left. I have no objection to this process of promoting from within, after all thats the way I moved up in the automotive world. Unfortunately, many of these Parts Managers dont recognize what they dont know. And worse, their Dealers do not provide them with the support and encouragement to send them to training. Often when the Parts Manager is not trained and doesnt understand the dynamics of Inventory Control their employees are then handicapped as well. That is the main reason why time after time we see dealerships without enough Lost Sales or Lost Sales being posted inappropriately.

In the world of Toyota we certainly recommend having all policies and procedures documented and followed. In conjunction with other aspects of Parts Operations we do address Lost Sales. From the Service and Parts Dealer Operation Guide to Parts Operations Seminars and Parts Operations Consultations, Lost Sales is a topic throughout. During nearly every consultation I have performed there has been an Education Awareness Meeting with Parts Advisors. Once the entire Parts Department has an understanding of the dynamics of Inventory Control and the importance of Lost Sales we see dramatic improvements in the tracking of total demand. Therefore the inventory becomes more responsive to the customers needs.

To reiterate posts made in the past, the definition of a Lost Sale is not rocket science. (I know you hate that term) If there has been an inquiry on a part that is not in stock and that part is not special ordered or picked up for sale, a Lost Sale should be posted. Our systems as lacking as they may be can then retain total demand history for the Parts Manager to disseminate.

David S.