In previous articles we asked the question: “Are you sure that what you think you have in Parts Inventory Value is correct?” Since most dealerships today have more Net Working Capital invested in their parts inventory than anywhere else in the business, it’s time to treat it like the valuable asset it is and not treat it like a dusty library in the back of the building.
You get what you pay for…
There are 4 key factors involved in making sure your investment works well for you.
- Hire qualified people. This goes for management and staff. You don’t have to have the most experienced Parts Manager from the start, but be sure that person can be brought up to that level.
- Quality is more valuable here than quantity. Good people can produce much more quality work than weak ones do, and you rarely have to go back and do their work over again, and again, and again.
- Turnover is very expensive, resulting in lost customers, reduced efficiency in new hires, and overall disruption of daily routines which becomes disturbing to existing staff. Take the time to hire the right people rather than the first warm body that comes through the door.
- Invest in training once you’re sure that you have a winner! The best trained people do the best job.
- Compensate your people fairly. Set up payplans that are achievable and affordable for the dealership. Once you’ve done that LEAVE THEM ALONE! There’s nothing more disruptive than the payplan of the month. Theft is usually stimulated by feelings of inadequate pay for work done so be sure that your people can work for what you can afford.
- Provide a quality DMS which has a good Parts Inventory Control module.
- Don’t just shop price when looking to replace or upgrade. Get references and talk to them. Some of the newer PC-based systems can be very effective and represent good value, but others are built on old technology and will not protect your investment properly.
- Interview the managers that are using the system, not just the Dealer and Office Manager. Don’t just go by the salesperson’s demo. Talk to a professional who uses it every day, and if the salesperson doesn’t want to give you at least 2 co-operative references, you’d best be careful about the claims being made.
- Equip your Parts Vault with good storage systems, quality lighting, and secure doors and counters. The easier it is to find parts, the less time it takes to sell and deliver them.
- If your parts warehouse looks like a child’s bedroom after a sleepover, then you’ve got a problem. That’s your money lying on the floor, hanging from pipes, and stacked up in the corner. Sometimes this can be caused by inadequate or old style bin systems, resulting in having more parts than can be put away properly. If this is the case, invest in some modular storage systems which incorporate high density drawers as well as product-specific shelving for items such as tires and batteries. There are some very creative products out there today that make brick and mortar unnecessary…..up to a point.
- Dim lights make things hard to find. Be sure that overhead lighting is even and bright enough to make reading small print on labels easy. If it takes too much effort to identify a part on the shelf, then mistakes are going to be made. Parts put up in the wrong location become parts that can’t be found, resulting in stalled jobs in the shop and needless Special Orders for parts that should have been found the first time.
- Security needs to be everyone’s concern.
- Doors to the warehouse should only be accessed by parts personnel and dealership management.
- Do you have a Key Management system in place? Do you know who has the keys?
- Are dumpsters adjacent to the shipping and receiving doors where parts could be hidden for retrieval later on? Are those doors open and uncontrolled during the day?
- Who has access to what functions in the DMS? Can they control cost and sale prices? Can they minus a part out that they just put in that dumpster? Can they conveniently avoid receipting a part that they want for themselves?
Managing a profitable parts department takes more than selling parts over the phone and at the counter. It takes good Inventory Management Skills, good People Skills, constant upgrading of Professional Skills, quality resources to work with, and retention of good people. How well does your team stack up?
Written by Jim Richter