YES! You Still Need to do a Daily Stock Order!

Jim NewsletterAt the risk of repeating myself, and getting back on my soap box, one of the most common and infuriating mistakes I see Parts Managers making today is the over reliance on factory provided inventory control tools. Yes TOOLS, not replacements for your DMS. I don’t know if its carelessness, lack of training, or brain washing, but at almost every dealership I visit that has a factory supported tool, the parts managers are overly reliant on it to a fault.

 

How much do they really control?

I can’t count how many times I’ve had a parts manager tell me that RIM/ARO/Advantage/etc. does everything they need to manage the Investment; NONSENSE! Typically I see these tools managing between 45% and 65% of everything, and of course they are only interested in their own products. How many dealerships only work on their own products? None that I know of unless they are not in the used vehicle business.

These systems typically rely heavily on demand through their PDC’s to forecast what all dealerships will need. They cover this by saying that they ‘guarantee’ return of any parts that do not sell within a specified period of time. However every store has its own micro-market, and until their local demand matches what the factory deems as ‘ready for stocking’, they are condemned to Special Orders or Buy-outs unless they use their DMS to identify and stock these parts for their customers. I’ve heard “but they won’t be guaranteed;” so what! Prior to these tools nothing was guaranteed and we bought those parts anyway didn’t we?

Typically only repair parts are managed, unless the store is into Wholesale or has its own Collision Center(s). Tires, Batteries, Fluids, Hardware, and Materials are not, along with Accessories and Aftermarket items. These often comprise a sizeable portion of the dealership Investment and can only be controlled through the DMS.

What should a Parts Manager be doing?

As I said earlier these are excellent tools, but you need to use every tool available to you to properly manage the entire investment. You also need to use the DMS to correct the short comings of these tools, and believe me they all have some issues.

  • Some are too quick on the trigger, bringing parts in on one demand based on PDC related history.
  • Some are too conservative; phasing a new part in at a very high probability of future sale and phasing a part out too quickly, especially in seasonal markets.
  • Some require an unreasonable retention period. Common thinking has set 10 Months No Sale as Technical Obsolescence (less than 15% chance of future sale), and 12 Months No Sale as Absolute Obsolescence (less than 1% of future sale.) Longer than that makes no sense for the dealership.

Best Practices

We all spend a lot of money to provide the best DMS that the dealership can afford. They are not all created equal, and yes you do get what you pay for; Having said that, they all provide some level of forecasting that you need to be utilizing in addition to the tool provided by your factory(s.)

  1. Ensure that your Parts Inventory Controls for Phase-In, Phase-Out, Days of Supply, and Non-Stock Test are where you want them. You’d be amazed how many times I find that they haven’t been adjusted in years, and may have been set up by a prior manager many years ago. If you don’t know how to do this get some help ASAP!
  2. Learn how to use your factory tool completely, not just the Daily Suggested Orders. Most of them have options for temporary and permanent Exclusions, Lost Sales weighting, Minimums for parts that require more than 1 to do a job, and alerts to do returns.
  3. After doing the factory Daily Suggested Order, run a Daily Stock Order on your DMS. Most of them will break out the factory controlled parts from the rest so you can see them separately. This will reduce Special Orders as well as Emergency Purchases (Buyouts) for parts that you could, and should have had in stock.
  4. Manage items like tires and batteries in separate sources. This way you can do a short stock order on just these items, especially since they usually come from different vendors.

The Parts Inventory usually represents the largest concentration of Net Working Capital in the dealership. Make the best use of your Investment and DMS a priority.

 

About the Author