On the surface there doesn’t seem to be anything so simple and mundane as receipting parts. In fact, the chore is usually given to some of the least qualified people in the Parts Department. However, nothing can be further from the truth. Inaccurate receipting can cause discrepancies between the GL and the DMS Inventory (PAD), shortages in the bins, improper GP% calculations, incorrect Stock Orders, and opportunities for theft.
Common mistakes made every day:
- The incorrect quantity is entered due to keystroke errors or not accurately counting the pieces that come in. This can overstate or understate the onhand quantities and cause delays in performing work in the shop, especially if it is a shortage. It messes up bin checks and can cause CSI issues if a customer is told to come in to pick up their part and it is not there.
- The order number for the parts is not properly credited. You now have the part on hand but the original order is still open in the DMS, so your Stockorder still thinks you have the parts coming and will not add them to future Stockorders until they are cleared. Parts Managers must always check on old open orders to clean these up.
- The wrong price is entered for cost. This happens frequently and the Parts Manager is often the culprit. In an effort to avoid paying commissions on a part bought from another dealer, the actual purchase price is entered, not the dealer net. That changes your Matrix calculation, hides true GP%, and will result in a decrease in PAD value when the next price tape runs. These parts should always be put into the PAD for vendor published cost and the premium paid charged to a separate account.
- Bin Locations are not specified at the time of receipt for new inventory numbers. This results in missing parts. It commonly happens when the part is a Special Order and the assumption is that it will be in a SOP bin. Which one? There may be a dozen of them.
- Non-OEM parts are not processed through the PAD. In the assumption that you will never need that part again some Parts Managers allow these parts to be sold on an “In and Out” basis. This is a bad practice and will hide many aftermarket parts that you actually could and should stock, especially if they are used in Used Car Recon.
- The Order Type is incorrect. Most DMS systems categorize parts orders and receipts into five categories. Posting the receipts to the wrong type can cause a loss of management’s ability to properly analyze their purchasing for the month.
- Stock Orders – parts to put on the shelf for future sale based on their sales history.
- Supplemental Orders – Stocking parts that have been added to an existing Stockorder.
- Customer Orders – These are your Special Orders that you source from your OEM or Wholesale Distributor (GM and Ford.)
- Emergency Receipts – These are OEM parts that you source from other dealers and usually pay a premium for. These will NOT have an order number and must be receipted accurately so that management can see what they purchased each month outside of the OEM provider. These represent a loss of GP $$’s, especially if the part is used on a Warranty repair. They also do not provide Purchase Discounts and do not count toward Loyalty calculations.
- Other Purchases – These should only be non-OEM parts. Depending on your DMS, you may have to receipt Bulk Fluids this way, even though most of them are a stocking item.
Reviewing these each month will tell management how effective their Parts Purchases were.
- Theft opportunities are abundant here. Under receipting and taking the difference is not uncommon; especially on volume parts where the thief is counting on mistakes in posting out parts on RO’s and Invoices to cover their pilferage.
There needs to be a check and balance between the Packing Slips and the Invoices on a daily basis to be sure that all receipts are accurate before the Invoices go to the Office. Just because you may have a scanner doesn’t preclude mistakes from happening. In fact, it can make matters worse in the wrong hands.
The other check and balance is to run a proper Daily Perpetual Inventory (DPI) where the entire warehouse is counted constantly. My recommendation is a minimum of 4 times annually if the Investment is under $1Million, and 3 times if it is more. If you want more detailed information on DPI, contact me and I’ll walk you through the process.
Written by Jim Richter