Parts Movement

[TonyCuylle]

Here is the situation:
We have a very small dealership with an inventory of about 30,000. Our service manager is telling us that we should have certain repair parts on the shelf even though we only sell them maybe once every 12 to 13 months. He says that this would be in the interest of "Customer Service" to have these parts. Certainly this would be very easy to do, however our obso inventory over 12 months not sold would increase. Can someone out there give me their take on this. This has become a big issue at our dealership.

Thanks

[Chuck Hartle]

Hi Tony,

This is a loaded question. There are many factors that have to be looked at before you can really answer this question. To do it just in the name of "Customer Satisfaction" is ridiculous. A parts manager serves two masters, their dealer and their service department. Of course you would like to carry more parts so that your technicians can turn more hours, thus create gross. However, you have to look at your individual store and volume to determine how "stockable" you can make a part.

Several questions you need to ask yourself are:
1) How much inventory, based on volume and room in the department, can I carry?
2) How much idle capital "obsolescence over 12 months" do I have now?
3) What are my system settings and personal preference for allowing parts into stock.

A store as small as yours typically lives off of daily orders and/or local parts stores to satisfy customer demand. What is important to remember here is that if you have set your phase-in criteria so tough that only extremely fast moving inventory could ever phase in under currrent settings, you may want to relax that somewhat if you have the room to carry more parts.

All too often I have seen where small dealerships have 10% of their inventory doing 90% of the sales with a lot of idle captial because the service department (technicians and service writers alike) over order to make sure the customer is satisfied on their next trip. Thus, the service department "chokes" the parts department's ability to carry good product because they are overstocked on unused or forced inventory.
If the service manager's pay plan was tied to inventory control to some degree, do you think that they would want more in inventory in the name of customer satisfaction?
You should "NEVER" stock a part because a technician, service writer, or service manager suggests it! But, you should "ALWAYS" add the part to your system and let your true customer demand dictate it based on your phase in criteria. There are, of course, times where healthy speculation of stocking parts are necessary. For instance, a new model comes out with new maintainence parts such as oil filter, air filter, and spark plugs are used. To put some of these in right away is prudent, just don't overstock them.
Bottom line.... Service and Parts go hand in hand... one needs the other to effectively build customer satisfaction, profits, and return business. I would suggest that you seriously look at your currrent practices to see if you can indeed improve upon your stocking practices to help build some width into your inventory.

Chuck Hartle'

[joe r]

Tony,

Don't forget to post a lost sale to the factory part number every time you buy a part from your local jobber. You will find a lot of faster moving parts phasing in with legitimate lost sales to justify them.

Good luck!!!!

Joe R

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[Farfinator]

Hi Tony,
Playing devil's advocate for a moment, I would first ask how is your fill rate. Is this manager reacting to a "trend" or just sensitive to a few problem customers. Second, I would ask whether these are the hard, big dollar items or the little sh@t that causes carrovers..like for a 50 cent clip.
No doubt, as Chuck and Joe stated, you can't stock based on what the service manager and tech's say, but you can investigate whether there is any merit to their concerns. Bolstering your stocking criteria on the low dollar stuff, if you are running out, may prove wise..Nobody wants to incur the cost and inconvenience of VORing a stupid clip.
I wouldn't, however, lose sleep over the demand to stock that 1 in 12, $1500 control module. If your fill rate is at appropriate levels, the guy is probably just frustrated
with a difficult customer. The proof is in your numbers...Does your fill rate reflect his concern or solid performance from your inventory?

[TonyCuylle]

Our fill rate is actually quite good, the whole problem is that during a Performance Group Inc. meeting a gentleman informed me that it would make good sense to stock some items that only sell once every 12 or 13 months. These are not 50 cent pieces but regular parts. I am just gathering information from people like Chuck and yourself to prove to Performance Group Inc. that what he is suggesting is not common place amoung dealerships.

[Chuck Hartle]

Tony,

Some great points are brought up by everyone involved here. First of all, Fill Rate and Level of Service are figures that can be altered and misleading based on the way your dealership does business and the way you receipt your parts into inventory. For instance, if you have a small inventory and 90% of what you do is Customer Pay related service items, you can actually show a great fill rate yet stink when it comes to the way your customers are handled.
I have seen many small dealerships with exceptional fill rates and large wholesale operations with low fill rates. Why? The wholesale dealer is doing 50-60 percent of his business outside the dealership and he is ordering 20-30 percent of his needs and receipting it properly. However, since their shop is only 40% of the business and they do an average job in customer pay maintainence work, their fill rate drops down to 70-75 percent.
The real key here is job fill or same day fill rate. The customer came in and the customer left on the same day with a completed repair. If you were to really break down fill rate by Customer Pay, Internal, and Warranty, you can just about bet that customer pay would be very high and warranty and internal new very low. With the constant proliferation of models and part numbers warranty same day fill will obviously be low until you generate a trend.
As "Far" mentioned, are you reacting to a trend or a single situation. All too often I see manager's who react by gut instead of letting that expensive DMS do the work for them in tracking trends.
Theory and practice are two opposites when it comes to inventory control and what best to put into stock. We can cram all the right theory and practices to you via seminars and training sessions, but you have to go back and make it work. Understanding your own dealership environment and demand is your key to controlling and stocking the right inventory.

Chuck Hartle

[Farfinator]

Hello Again Tony;
I could be wrong, but I get the sense that your store may be experiencing lack luster C.S.I. and that management has tried to implement advice from this Performance Group to try and bolster your store's performance.
You are now being challenged to implement stocking changes that you are clearly uncomfortable with and probably have a right to be. You have 3 options:
1. Buck the change entirely and run the risk of appearing a non-team player.
2. Educate the team, so they have a greater understanding of the department's performance and objectives.
3. Advise the team of the risk of obsolescence growth. Set-up a trial source of the stock they are asking you hold and establish right up front that this is a "TEST" in the spirit of cooperation and that the performance of this stock is highly suspect. Request a monthly review of that source's performance. If it proves positive-fine-You are are great guy for the effort. If not, the modest, negative impact to your inventory is not a reflection of your skill, but of a team decision and you are still a great guy for giving it a try.
Proving a philosophy or direction is wrong immediately may not be as valuable as demonstrating cooperation, the willingness to try, and the ability come up with a compromise.

[TonyCuylle]

I would like to thank both Chuck and Farfinator for your input into this situation. You both have confirmed to me and the dealer principle the obvious facts about parts inventory and movement. I am trying very hard to co-operate with the service department in such a way that we do not hurt the integrity of our parts inventory. I have made the service manager aware of the problems in dealing with a low volume dealer. He now understands our position. We have also implemented a manual report for the next 2 - 3 months that will track our actual fill rate to the service department by part number. This was received by email by someone else in the group. This will enable us to test each part and to provide proof to the service manager that he may have a problem with his service advisor and the lack of selling ability on the advisors part. Thanks again Chuck and Farfinator.

Tony

[fr/ek]

hi tony:
i'm new to the parts manager but not new to the business, i've been in parts since 1976
and have worked for multiple franchises both
domestic and import. first let me say that i believe most inventory guidlines to be antiquated. the concepts being laid out by the so called inventory experts are contradictory at times and a one size fits all motiff. with that said the the single most important question is what franchise are
you dealing with ? you must use the strenghts
of the franchisors parts policies to your advantage. reply if you would like to hear my theories