ADP & GM Parts Sourcing Escalators

[jdpetey]

Something caught my attention the other day when I was in the process of entering a PNC to our system. There was a change in price for the new number. So, I went into function PM and entered the cost, suggested trade and the suggested list price. After exiting PM, I went to invoicing where most of us 'check numbers', and I noticed that my list price was lower than what I had just entered. What was wrong?

I immediately called ADP and asked them to see if they could help me.

I was informed that the part was in a source that had a price escalator that had been created because their was no list price for that source. This is when I realized that when GM got rid of TARGET ORDERING, someone should have taken the escalator off of that source. Man what a huge mistake I had just uncovered. We have been selling sooooo many parts for tooooo little!

I knew there were some sources that didn't have list prices, but someone (Before Me) had altered the process to arrive at some desired list price. At the time, I was in no position to question any of this.

Now source (102) has had the escalator removed, and the list prices are correct. But sources 104 & 106 have several parts, i.e. engines, transmissions, that have no list. Source 106 has a multitude of different parts such as chemicals, accessories, engines and durastop brake parts, all with different markups. I can't just go in and add an escalator to this source to correct the situation, because some parts will be too high while others (Durastops) will come down in price.

I could possibly create separate sources for engines and transmissions with an appropriate escalation, since there is no suggested list without an escalator.
Then there are accessories with a very low markup when there's no source 106 escalator.
Durastops in 106 etc.

I need a practical & feasible correction.

It seems to me that when GM went to the new GM SYSTEM, (APPROXIMATELY 4 YEARS AGO), noone at our store saw the need to modify some of the source pricing. Unless there was some type of bulletin recommending dealers to reveiw this area and I didn't see it because I wasn't in a position to see or make the necessary changes.

It also seems as though ADP & GM should get on the same page and restructure the default sourcing for parts, separating parts that couldn't possibly have the same escalators.

Anybody have any answers?

Thanks jdpetey

[Chuck Hartle]

You have answered your own question! You need to create several sources to break these parts out properly and to make sure you make your profit margins.

You answered your question by quantifying the fact that ADP and GM don't get together and separate these parts properly. They probably never will.... Especially when it comes to identifying or suggesting any pricing matrix or pricing escalator as this could be cause for price fixing.

You can assume, rightly, that you are going to have to create the sources based on your needs and pricing desires. It will never happen on the computer vendor/ manufacturer level when it comes to pricing.

Once you build your sources remember to go into your PMU program (Parts Master Update) or Function 11 (Parts Master Profile) and make sure that the new sources you create 'DO NOT' update the source field. This way, once you take the time to build the source and the system setup guides and pricing, your parts will stay there until you change them...

Chuck Hartle'

[Gerry Laughlin]

Chuck,
This whole thing has steamed me for the last few years, I do believe it is intentionally set up this way in an attempt to force the dealers to use "suggested list". As far as fixing the problem, the factory does not really have to get involved. I had suggested to ADP a few years back that they revamp their escalators to take into account "Gross Percentage". As usual no one listened. Till then I have had to make do with using escalators off of the list. The downfall with this is that for those parts with no list you can only use one escalator, (list = .00-.01). Hope this helps a little bit.
Gerry Laughlin

[Chuck Hartle]

Hi Gerry,

I really don't think the problem stems from ADP or GM trying to 'force' you to use the suggested list.

Personally, I think it is just a matter of trying to handle 18,000 dealerships with over 100 makes. Trying to focus on any specific manufacturer is just not cost effective for them. In other words, ADP (and even Reynolds and Reynolds) are great at being all things to all people, but they seem to fall a bit short when it comes to individual attention.

Without getting into a disertation, here is something I do when any manufacturer does not publish a list price. Run a report to pull all parts without a list price. Most Mfgs seem to have a suggested mark up of 40%. Take your cost price and divide it by the recepicol. For a 40% profit margin, you divide your cost by .60. For example, if you have a cost of $20.00 and divide it by .60 you get a list of $33.33. This will allow you to continue to use your matrix based on the 40% margin.

Let me know if you have any questions regarding this or other pricing issues. Thanks for the suggestion!

Chuck Hartle

[Gerry Laughlin]

Chuck and JD,
Perhaps I should clarify. I don't think ADP is trying to force us to use suggested list. I am perhaps a bigger fan of ADP than you are Chuck. Now GM on the other hand, I believe has never had much use for Matrix pricing, there is nothing in it for them, it can only hurt them, not help them. Back in the days of wholesale comp and target it sure seemed as though sourcing was tied a lot closer to pricing, except it was tied to the dealer cost (after discounts).
Anyway to get to the point, if you use the list price as your escalator you can let the computer do the work instead of pouring over reports. A quick example would be:

price field: list
price break field: list
.00 - .01 cost + 100
.02 - .99 cost + 200
1.00 - 9.99 cost + 100
10.00 - 9999.99 list
etc....
Notice the price break field, "List"
this would give anything with no suggested list a 100% markup, anything with a suggested list of .02-.99 a 200% markup and so on. You still have to sort out the engines and trans but that should not be much. I still use a holding source for new numbers added to the system so it has been pretty much of a neccessity for me to have a setup like this on my hold source. This is only an example but with your own tweaking it should work. I am sure sourcing like Chuck says would produce more bang for your buck in the long run, but it always seems as though there is never enough time to review all the reports I get these days.
Gerry Laughlin

[Chuck Hartle]

Gerry,

Good Point!!!!!

[Rex]

jdpetey,

You will have to do some work to get things set up, but source breakouts really are the way to handle the pricing issues. Once you have your sources set up, though, you can run a report daily of new parts entered the previous day by source, and move the ones that need to be moved. It's not such a chore when you do it daily. If you use sources for phase in/phase out, stock order review time is the time for changing those parts.

I have thought about sourcing a lot lately, and added several. Sourcing is used for:

- factory categories
- phase in and phase out criteria
- new and/or special order
- pricing
- part groups
- ordering (programs)
- did I miss any?

This can get fairly complex. What if you have a part that is new, is in a particular part group, and has no list (requiring an escalating source)? The number of sources needed can grow exponentially.

What do you think?

Rex


------------------
www.powerprograms.com

[jdpetey]

Thanks for all the input guys!

As of late I have created a few sources to separate some of the parts. With ADP, batch changing is the quickest way to move groups of parts to the desired sources.

I've come to the conclusion that the origin of the problem is that the GM ORDERING system that was in effect when PAD,CIO,VIP and Target was around, HAS CHANGED, and the sourcing that was originally created to separate TARGET parts, for ease of ordering, is still in place.

This source had no list price so that dealers could price according to discounts.
This ALSO created lost sales because TARGET parts could only be ordered on TARGET Orders. If a dealer ran out of a specific part right after receiving an order, he would have to wait until the next TARGET order, or, place a smaller order sooner, giving up the desired discounts.

SO, GM decided to do away with that idea so that dealers could get these parts a little easier and at the same time not offer volume discounts.

Up until recently, all GM parts could only receive the standard 3.75% discount & 6% return reserve, NO EXTRA DISCOUNTING TO BE FOUND! Now if your a qualifying dealer, you can place orders with special option codes to receive all disounts or all reserves.

If balanced out correctly, faster moving parts can be ordered at greater discounts and reserves can be maintained. Sounds a little similar to the old way, no?

The OLD SOURCING worked well at separating those parts, but as a standard, it's outdated.

THANKS AGAIN EVERYONE!
jdpetey