This is Part 2 in a two-part article. View Part 1
- Most demand for NS parts from the Workshop results in lost Productivity in the stalls since the work can’t be completed at that time.
- Tech Time lost cannot be restocked like unsold parts can be. Time lost waiting for parts to be delivered, even Aftermarket sourced ones, is lost forever. Even if a Tech has two bays, one of them will be sitting idle, producing no revenue until the parts arrive, allowing the Tech to complete the work. Parts Operations must be ready to expedite these orders for the good of the dealership.
- Once again, an effective SOP process is critical to maintaining Productivity, and Service needs to advise Parts Operations what they intend to do with these jobs on a timely basis.
- Most Wholesale demand for NS parts that we do not have result in Lost Sales.
- Wholesale Repair customers call around until they find the part(s) they are looking for at a price they can resell from. Availability is their primary concern since most small shops only have a few bays and they recognize that 1 bay may be costing them a high percentage of their production capability. If you don’t have what they need they move on.
- Collision customers can also be in a hurry, especially if they are trying to complete a Supplemental Repair and the Insurance Company has them on the clock. A lot of bumper covers are sold this way when the LKQ version, specified by the Adjuster, just won’t fit.
- The majority of unsold NS parts that are not returned to the vendor becomes Obsolescence.
- Here’s where the importance of the SOP process really comes into play for the Investment. NS parts that have been on the shelf for more than 60 days (RIM dealers excepted) will almost always become Obsolescence unless they are returned to the vendor(s). This may entail Restocking Charges, use of Return Allowance in lieu of Aged Obsolescence, and always takes up Net Working Capital that could be better applied to selling parts.
- It has been estimated that every piece in stock costs about 20% annually to own; that represents Cost of Money, and Fixed Expenses such as Rent, Utilities, and Insurance. The longer you keep NS parts, the more they cost you.
- NS part numbers become the developmental database from which almost all future stocking parts come.
- Regardless of how they get into your DMS, NS part numbers become the basis for the development of future stocking parts. Lost Sales is the most cost effective way, but the majority of these numbers are purchased by most dealerships.
- NS part numbers should be retained for a sufficiently long test period to allow them to Phase In with high probability of future sale. We recommend a minimum of 24 months in TEST status. Most of the DMS systems in use allow you to control this setting. Ideally 50% or more of the part numbers in your DMS should be in TEST status, and not have any quantity on hand other than what is current.
This should give you a better understanding of the role that NS parts play in the development of your Investment as well as in everyday business. They are a substantial piece of our business which, if we do not handle them properly, can cause us needless expense and loss of profits.
Written by Jim Richter