Obsolete Parts: How Do I Get Rid of Them and Prevent Them? – Part 2

Jerry Wakefield NewsletterThis is Part 2 in a two-part article. If you missed Part 1, you can read it here: Part 1.

 The first part of this article addressed some of the methods I have seen and used to reduce obsolete parts. You will most likely have to discuss one or more of these options with your dealer, but have that conversation. Remember that’s why he hired you–to manage his investment and get a return on his investment, which is your parts inventory.

 Now let’s look at preventing obsolete parts: Well, there’s actually no way to prevent having some of your inventory from becoming obsolete. Statistically, 3% of your inventory will become obsolete annually, and there’s really nothing you can do to change that. Unless you want to live out of the PDC which I have seen done, but this creates more concerns on parts availability for your technicians and customers. So what can we do?

 If you work for a dealer that has a manufacturer parts replenishment system, this can be the greatest tool there is. When utilizing these programs, the manufacturer assures that what you don’t sell is returnable, thus eliminating the concern of obsolete parts filling up your shelves. And most of these manufacturers have some type of return reserve earned for the occasional mistake of ordering the wrong part. The greatest challenges are the special order parts, wholesale returns, and the SWAG method of ordering parts.

 For special order parts you must have a process that ensures the part that is ordered will be installed on the customer’s car or picked up. Pre-paying for these parts before they are ordered will most likely ensure the customer will return. This should be done on internal special orders, also.

 Now what about warranty parts? We can’t make a customer pay for them in advance, can we? And the manufacturer won’t let us bill them for it until the repair is completed, correct? Recently I was working with a dealer where the general manager would take all of the fees associated with returning a special order part off of the service advisor’s commission. No, I don’t know if it’s legal or not in your state, or something you could do and not lose every service advisor you have, but it is a way. One of the best ways of ensuring a warranty special order part gets installed on a customer’s car is to make an appointment in advance for that repair. This ensures customers know if a part is needed for their car, and they are willing to come back to get it installed in a reasonable amount of time.

 Wholesale returns can be another major contributor to obsolete parts. Do you have a return policy? Can you offer the shop an incentive to keep returns low by offering added discounts available if return percentage is kept below a certain percentage? Do you review the estimates sent to your store on items that may likely be returned because they have been fixed, such as inner structure components? Are you going to keep wholesale shops from returning parts? Most likely not, but you can manage it, and make it beneficial to the shop to be mindful of what they order, and their opportunities to make more profit, and not necessarily at your expense. This is a policy that should be written and discussed with all of your wholesalers.

 SWAG ordering (you all know what SWAG means) is something I don’t see quite as often as I used to, but it still does happen. From time to time I’m sure you’ve heard from a technician, “You better stock these–we’re going to sell them.” All I can say is, don’t. Post a lost sale to that item. Let the demand phase the part in, not the technician. Or maybe you are asked to buy a certain type of accessory because the sales manager wants to start putting them on vehicles. I would not order more than the one needed for the car they first put it on. Again, post another lost sale, and wait for the demand to justify the stocking of the item.

These are the some of the reasons I have seen obsolete parts grow to an enormous percentage of the dealers’ inventory that I have visited and worked for. And these are some of the tools I’ve used to help eliminate obsolete parts. We sure can’t change what happened in the past, but we can sure affect the future of these items and how much we have on our shelves.

 

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