Having worked with many different parts managers that represent more than 35 different manufacturers, we see factory programs come and go. Today, several domestic and import franchises are assisting dealers in stocking the “right” parts. This is being done with manufacturer-sponsored daily replenishment order (DRO) programs. Depending on your franchise, it may be based on a regional or national sales demand history.
The purpose of this article is not to debate if these DRO programs are good or bad, but, to show the importance of a Lost Sale.
As I visit with parts managers, I will ask to review the month end report. In addition to seeing the health of the inventory, I like to review the “lost sales” section on the report. In Reynolds & Reynolds this information can be found in the 2213 report. If you are using CDK (ADP), it can be found on the MGR report.
I have found that many parts managers don’t ask their counter people to perform the lost sales function. When asked, “Why not?” the most common response is, “I’m on a DRO program with the factory, so it doesn’t matter.”
Most DRO programs are still based on demand, both yours and a regional or national demand history, as well. Let’s start with what a demand is.
Sales + Lost Sales = Demand
The proper reporting of lost sales is vital to the ability of the parts department to efficiently monitor and satisfy the demands made on it. If we are to rely on the information from our inventory management system that has been set up, we must provide that system with the proper information. Recording lost sales in the management system is critical to obtaining accurate ordering and stocking levels. However, it is easy to find controversy among parts people over lost sales. Tracking lost sales is far from an exact science. For some parts managers, a lost sale is registered any time a customer, or even a service department technician, inquires about a part and we can’t say “Yes” to having that part.
Here are some examples of lost sales and occurrences where there was not a lost sale:
Customer comes to parts department, asks price and agrees to buy part. Walks away without ordering part when counter person can’t produce part. LOST SALE.
- Tech needs valve cover gasket, customer pay repair order. Out of stock and purchased at NAPA parts store. Part sold with Non-OEM part number. Lost sale should be recorded. Sale was made, but not with OEM part.
- Tech needs part on estimate. Parts department doesn’t have part, but tech never returned to say he needed part. THIS WAS NOT A LOST SALE.
- Tech needs part. Parts does not have it, says they can get it. Tech says, “No, that’s ok. I’ll see if I can get by.” THIS WAS A LOST SALE.
- Customer calls on the phone. Asks price. Doesn’t make it clear as to buying intention. THIS IS NOT A LOST SALE.
Each manager must decide what is best for their department. See if your counter people answer the questions the way you would like. If they don’t, then it sounds like a training opportunity. If total demand is not tracked properly, it’s much more challenging to have the right parts on the shelf and ready to take care of that next customer.
If you need help with your parts department, don’t hesitate to contact one of our experienced M5 Consultants.