Non Stock Parts Are Critical To The Health Of Your Investment – Part 1

I know, everyone focuses on the quality of the stocking Investment, but where do you think those part numbers came from? More to the point Non Stock (NS) parts are an integral part of Inventory Management. Consider for a moment:

  • Typically 20% or more of your sales come from NS parts every month in dollars.
    • When we measure True Turn we subtract NS sales from total sales, annualize that value, and divide it by the Total Investment to see how effective our Investment is. The portion of sales coming from NS dictates, to a large degree, how good that is.
    • Since no one can have every part needed, you have to assume that some sales will always come from NS parts. They should just be new part numbers or ones that have not yet Phased In based on your DMS settings.
  • Most Warranty work starts out with new NS parts that we’ve never sold before.
    • When you experience a repair for the first time it usually has a few new part numbers involved with it. That is normal and is the usual way new numbers are introduced into your database.
    • It is not unusual to see a flurry of the same Warranty Repair since many times they are due to component- or assembly-related issues. However, the parts used will probably not Phase In for a few months due to the way DMS’s are set up. This is where some of the Factory systems such as RIM or ARO can be helpful, tagging these parts early for you and guaranteeing their return. So you can expect Techs to ask “Why don’t we have these in stock?” They have a point, but unless a part meets the test of time, as well as piece sales, the probability of resale may not be very good.
  • Since most NS parts are not in stock (hopefully) we have to acquire them outside of the Stockorder process, meaning Customer Orders or Emergency Purchases, which will most probably will impact Gross Profits.
    • Once again, Warranty Repairs are the concern here, since we are not in control of the Markup like we are with Customer Pay (CP). Even if a Customer Order is placed with a factory, depending on which one it is, it may come with a surcharge, depending on how quickly it is needed. Emergency Purchases are even more expensive since they come with anywhere from a 5% to 20% cost penalty, depending on the market. The real danger here is when the Special Order Process (SOP) is not functioning properly and we acquire parts this way only to find that the vehicle has gone. This goes for all Pay Types.

Written by Jim Richter

This is Part 1 in a two-part article. View Part 2

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