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Chaos with Ford’s New DPA Program Conversions!!

Ford Motor Company is the most recent Manufacturer to release a program of “Manufacturer Suggested Restocking”.  I want to be up front and let you know that this “is not” an ASR (Automatic Stock Replenishment)  program, like General Motors, Chrysler, and Porsche.  It is more like Hyundai’s Smart Stock program. 

The Ford “Dealer Parts Advantage” Program seems simple enough in thought.  Here are the highlights:

1)  Carry Ford’s Top 300 parts in inventory (about 2/3 of this list are Motorcraft)

2) Set your OE and Motorcraft Sources up with Ford’s phase-in criteria, and then you must accept and put in 90% of parts that meet that Phase-In Guide.

3) Follow the two rules above and you will qualify for Ford’s incentive dollars.

4) Ford’s 45 day return program on 3% of the prior month’s net purchases to return special order parts will then go to 60 days and 4% of the prior month’s net purchases.

Seems simple enough, and that Ford has taken into account the programs offered by the other Manufacturers and tried to make it more user friendly for their Dealer Base, kudos to Ford.  With that being said, and after working with more than a handful of Ford Clients through the conversion process, it has been chaos for Ford Parts Managers in this process.  It turns out that ADMI, the consulting company overseeing the conversion of the dealership DMS system setups, has no real set design or rules in place for converting the Dealer Base. Here are several examples of what we have experienced thus far.

DEALER #1

We had a Ford Client in the Northeast that converted back in August.  This dealer was on the ADP WebSuite release.  Through the whole process, ADMI wanted him to change his phase in criteria to ”3 in 8″ (3 months sales in an 8 month period) for all of his OE and Motorcraft Sources.  Ford Remanufacturer Parts are excluded from this program!    It was fairly painless as adjustments were made to the source table to reflect that criteria.  We also had to add two new sources for the “Ford Top 300″ parts, one for OE Top 300 parts and one for the Motorcraft Top 300 parts.  We had to add those parts not currently on the DMS system, identify the 300 parts with “TOP300″ in the COMMENT Field, and move them into one of the two sources.

DEALERS 2 & 3

Somehow, the rules have changed from August to October?  We have two Dealerships in the Northwest that are “Sister” stores and on Reynolds and Reynolds ERA DMS system.  I tried to get the parts manager to tell the ADMI Consultant to “just give us the phase in guide” and we would take care of it for them.  It didn’t happen that way at all.  What occurred was a real revelation to both the Dealer, Parts Manager, and Myself.  Here are the highlights of this conversion:

1) ADMI Consultant does a “WebEx” or “LogMeIn” connection to the Parts Manager’s PC.

2) ADMI walks the Parts Manager through changing every source, regardless of pricing or product, to change it to the new phase in criteria. 

3) ADMI has the parts manager move all of his parts from 47 sources into4 sources.  Two OE Sources and Two Motorcraft Sources.

4) ADMI has the parts manager take all the “Top 300″ parts, identified in the “REMARKS”  Field with “DPA” and set the minumum quantity to “2″.

5) After almost six hours on the phone with this parts manager, the setup is completed.

Not long after this the parts manager calls me to tell me that he had to “change” all his settings and had no choice as the Consultant stayed connected to insure that he, the parts manager, completed all the changes in the DMS. And, suddenly, there are some pricing issues that have popped up (moving price sensitive parts from their original set source, duh?)

What is rather disturbing, after we went in and reviewed the settings, were as follows:

A) The Phase In Criteria was set at ”2 in 6 with 3 pieces”.  Translated ; “2 months with sales in a  6 month timeframe with a total of 3 pieces”.  This is not the “3 in 8″ phase in criteria used for teh ADP Dealer in the Northeast?  I had the parts manager call the Consultant and the response was “we have a different criteria based on each Dealership and DMS, we don’t use a cookie cutter approach with the same template for each dealer.”  Hmmmmmm…

B) But can you explain taking the dealership from 47 sources, of which only 18 of the sources were OE and Motorcraft related?  More to follow on this subject!

C) The Ford Remanufacturer Sources were left intact, as with our first dealer.

At this point, we finally have a template for our Reynolds Clients to follow.  While I will not give you exact numbers of the Ford Dealers on our program, I can tell you that we have more than a handful on both the ADP and Reynolds DMS systems.  So, even though our Parts Manager in Dealer #2 has gone through some lengthy brain damage and time, he has given us a template to follow for his sister store and the other Reynolds stores. 

LISTEN UP HERE!!!!!

We move into the sister store and quickly applied the same settings that were used for the setups in the first store.  After repairing and expanding the sources in Dealer #2, putting back some source by movement and special pricing source groups, yet keeping the integrity of the phase in and phase out criteria supplied by ADMI, we laid it out accordingly and made all the significant changes to mirror “all OE and Motorcraft related sources”. 

Well, if you have not guessed it by now, the same ADMI Consultant took this parts manager by the “WebEx Hand” and forced him to make changes, including his Ford Remanufacturer Sources!  The Phase in was fine, but once again, without any regard for the Dealer’s system settings!  Again, afterward, we had to go in and tweak the source table to get the dealership back on course and pricing accordingly.

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Well, as of this writing we have gone through 7 (Seven) of these dealership nightmare conversions.  One thing is painfully evident in this whole process, the ADMI folks are not on the same page with regards to system setups and in some instances are wreaking havoc on pricing strategies and inventory depth all in the name of “Making their job easier”!  For the sake of not turning this into a novel, I have highlighted some of the “observations”, “questions” and “different answers” we have run into over the past few conversions.  If you are a Ford Dealership and have not converted yet, this may help you out!

** Why are you changing my days supply settings?  Nowhere does it say in the DPA Program that we have to follow a “canned ” day supply setting!  This is a phase in process and not a days supply process?

** Why do we have to set our minimum to “2″ on the Top 300 parts?  We had three dealers told they needed to do this and then one dealer questioned the need for doing this and the ADMI Consultant told her that it was “only a suggestion”, not mandatory!  Tell that to the other 3 parts managers!  After talking with each of the three parts managers, they confirmed that indeed they were told to do this and “batch changed” all those parts to a minimum of two!  Based on the last comment of “only a suggestion”, the three managers have undone the minimum of “2″. 

** Why do ADP dealers have a “3 in 8″ criteria, and Reynolds Dealers have a “2 / 6 / 3″ criteria, and ADP Drive dealers have a “3 periods in 24 periods with a period defined as 7 days” criteria?  In essence, some dealers are going to be unfairly judged compared to others!  Shouldn’t this all be “3 in 8″ to make it fair for us all?

** Is Ford Remanufacturing part of the program or not, I’m confused?  Nowhere did it say that it was and half of us do and half of us don’t?

** Since it is obvious that you don’t have the access to our DMS for the purpose of controlling it, how are you going to be able to accurately measure this process so that I, as a Ford Parts Manager, am going to be able to earn my incentives fairly and accurately?

** Are you really suggesting that I reduce my inventory (or source) controls for your advantage or can I have source by movement and pricing strategies as long as I follow your phase in criteria?  Again, some have it and were left alone, others were forced to consolidate them!

** I am paying for this conversion, so why do I have to do all the work when I am writing the check for it?

Enough!  I think you all get the point.  The point being that there is a lot of confusion and double talk in the setups and design strategies!  The best illustration I can give for this so far is it is like having your house burned down, and then you are told how to rebuild to the way someone else wants it rebuilt instead of they way it used to be!  And, your contractor doesn’t follow the exact plans in front of them!%$%

If anything, I must applaud Ford for even thinking of undertaking this monsterous approach and conversion and allowing the Dealer’s DMS to do the work.  But, go back and read the simplicity of the approach, and it has been anything but that!  But look at the downside my fellow Ford dealers and parts managers, you could have been put on a RIM program?

I’ll have more on this as the program evolves and such, but if you have not converted over, beware that you are in for a shock if ADMI consultants continue to wreak havoc and double talk about the proper settings and such, and certainly taking over your days supply setttings.   I would love to hear “Your Story” and settings as you moved through the process!  Forever forward!!!!!

What Percentage of Parts Meet Your Phase In?

I have started an informal study with the ultimate goal of discovering this; “What percentage of Part Numbers, added to a Dealership’s parts inventory control system, actually achieve an active stocking status?” 

I thought I would share what I have found out so far, to whet your appetite before the study is completed at the end of July.  So far, a shocking 3.71% of all part numbers added in a twelve month period actually qualify for active status.  The lowest we have was a Honda dealer who was at .74% of parts activated for stocking.  This dealer, and in all fairness, does not stock any sheet metal whatsoever. 

The highest so far is a large Chrysler store on ARO that has 8.03% of the parts reaching active stocking status.  Again, in all fairness, I had to look at what percentage of these parts were actually ARO controlled.  The ARO controlled percentage was 6.84% of the stocking parts!  And, ironically, 4.18% of these parts had a 12 month history of 2 or less.  What does this have to say about the manufacturer’s controlled inventory program?  For one, you can say that they have provided more breadth or width into the inventory process.  On the other hand, you could complain that of the 4.18% of these parts now on the shelf available for sales, these 315 part numbers represent only 206 sales over the past twelve months!  Was there really a need to have them at all, or is the dealer “storing” inventory for the manufacturer?

In the early stages of this study, I have to ask some important questions about the whole inventory control process and automatic replenishment programs offered by the manufacturers versus the DMS Phase In process?

1) Does it enhance a dealer’s inventory for better customer satisfaction results?  (What the ultimate goal should be, period)

2) Or, are dealerships parts operations becoming a stocking avenue for the manufacturer’s supply chain process?  In short, are the manufacturers using the dealer’s resources of shelf space and investment dollars rather than stocking the parts themselves?

3) Are the manufacturers doing a great job of marketing and selling the replenishment programs to streamline their own supply chain? 

When  you think about it, the average dealership has about 4% of the entire part number population that ever reaches stocking status.  If  there is one point that I can clearly make in this study so far, it is that there is a huge part number proliferation process in the dealership environment!  When you think about it, that means that 96%, on average, of the parts added to the typical DMS system has less than 2 sales or lost sales considering a 3 in X phase in criteria!  All of this hubbub about replenishment programs is to promote width and better customer satisfaction?  It has got to make you think twice about all the fuss over 4-6% of the overall inventory process?  We’ll finish this up and report more later….

ADP Users.. A Way to validate Parts Sales to Accounting!

Your at the beginning of a new month!  You, as the Parts Manager, have just finished your month end reconcilitation and the office comes back and declares you are off by “X” amount of dollars with the Accounting GL.  What do you do?  Where do you start?  This article is going to be short and sweet, as I am going to at least get you started with the first thing you should do if you are on the ADP DMS Computer System.

You almost have to assume that this day and age there should be very little posting of sales manually on your system!  Assuming that all parts sales are going from Parts to Accounting Electronically, there is a way to pull that information on the parts side so that you can verify it with the sales reported on the accounting side in AGRO or a DOC in MIS showing your sales by each profit center (parts sales account).

I have found the PDA.PARTS archiving file to be very helpful and accurate when trying to reconcile parts sales to the accounting sales side of the business.  Enter this English Statement to pull your parts sales history for the month of April, 2011:

From ENG;

? LIST PDA.PARTS BY SALE-ACCT BREAK-ON SALE-ACCT

? TOTAL T-COST TOTAL T-SALE TOTAL GROSS

? WITH CLOSED GE “01APR11″ AND WITH CLOSED LE “30APR11″

? ID-SUPP DET-SUPP (P)

This report will give you all your parts sales, by sales account, that were closed in April with your total cost, total sale amount, and total gross.  It makes it easy to run your department sales DOC or report in AGRO and compare it to this report.  Give it a try!  See if you balance with your accounting department!

If, for some reason, you are one of the rare dealerships that get an error when typing in the above English Statement from “ENG”, such as “PDA.PARTS FILE NOT FOUND”, you can still go into “PDA” from Function Code; “G”enerate Custom Reports; Part Sales; and enter the above information in there and save the report in typical RPG type formatting.

If you fnd you do not balance with your accounting report, here are some things to consider:

1) Is it the Sale amount that is lower but the Cost amount is the same?

* Some accounting departments post new car sales commissions back to the sale amount on internal sales so the amount shows a lower gross profit as sales are deminished.  This doesn’t affect your inventory GL, but does affect your gross profit!

* Also, many accounting departments charge back denied warranty claims against the warranty sale amount.  Thus, if you are earning Cost + 40% on warranty sales, you should have 28.6% gross profit or higher.  If you sale amount is lower and your cost is right on, check with your business manager to see if this practice is used?

2) Is it the Cost amount that is lower in parts than in Accounting?

* If your Cost amount is lower than the accounting amount, something is getting posted outside of the electronic download from your nightly job stack.  Also, you might want to check that your CI-SAVE process is in every scheduled JOB Stack routine set up on your parts application!

* This is usually where you find posting issues with Accounting.  Something got posted to the wrong account!  A real biggie here!!!

3) Is it the Cost Amount that is higher in parts than in Accounting?

* Check out any manual transactions that may have been sold out of Function Codes “PS” or “DS” to see why your cost are higher than the office. 

This is a great exercise to master and validate on a monthly basis to keep the accuracy between parts and accounting spot on. Good luck, and good selling to all!

ADP RRH (Report Receipt History)

Over the past several months, I have been getting a lot of phone calls about how to try and make the reconciliation process for Month End between parts and accounting go smoother!  It seems that the variance between parts and accounting seems to be way off, either way! 

I have been doing this for about 15 years now, and the one factor that has always bothered me with ADP is trying to come up with a valid way to look at all the detailed receipt information  to match the ADP MGR reports.  In fact, back in early March I somehow ended up in a phone conference with a person at the dealership and an ADP Expert on the phone.  I had always thought that since I have always been able to validate sales numbers between parts and accounting with the PDA.PARTS archive file, that somehow this could be done with the PDA.TRANS file.  Not so, at least in my experience.  The PDA.TRANS file always seemed to be about 60-70% of what was stated on the MGR Summary & Annual Activity and Benchmark Reports.  Yet, on this phone conference, the ADP Expert pointed out that you can’t trust the PDA.TRANS file.  It didn’t take a brainiac to figure that out and an easy statement to make considering I had already “telegraphed” the answer prior to mentioning this.  The answer I got was even more disturbing.  This person claimed that it was next to impossible to get the accurate detail for the Receipt Total on the MGR.  We were just supposed to trust the number!  That was the wrong answer and I needed to discover how to get this done.

Through several “trial and error” processes and discussion with folks from ADP and the industry, it finally occurred to me what needed to be done to finally be able to accurately pull receipt data and match it to the MGR.  The report is called RRH (Report Receipt History).  Not a commonly used report, this can become invaluable if you are properly archiving your receipt history, should a discrepancy come up between parts and accounting.  The problem, as we discovered with all of our ADP Clients, is that the retention period was set up for basically one day or at most one week. 

You set the retention period in Function Code “RA” (Receipts and Adjustments).  When you go into RA, you enter into “sEtups” and in the second half of the page is the retention question.  This is where we found that only one dealer had more than 7 days and 90% of the dealerships we adjusted had a one day retention period.  Change this to 365 days minimum to start keeping detailed information that you can utilize in case of a inventory audit due to a shortage or gain that is out of whack!  The reason, we believe, that most of these dealerships were set  up for such a short retention period was the choice of the parts manager.  You see, when you keep more than several days, if you want to go back and look at outstanding orders, you have to sift through tons of receipt data to try and find what you are looking for in the RA Function Code. Change the receipt retention to 1 day and it all drops off the system with your next job stack. 

However, you can sort your receipt history in RA by date, which would eliminate the need to go much further than a screen page or two to find recent information!  Since we have “upped” the retention in RA for the RRH reporting for our clients, we have gone back and been able to literally balance the receipt detail to the penny on the ADP MGR Reports! 

One other great benefit from doing this; being able to build a report in RRH by specific dates and total by your ONUMB.  This makes it really easy to pull data and total it by the order number, which is usually how you end up getting invoiced by your manufacturer or vendor, and then cross referencing it the the posting journals you can retrieve from accounting in AGRI.  This saves adding up all the specific parts on a order and totalling it up to match the posting record. 

Over the past 15 years of working with dealerships that have had a parts to accounting issue, we have found that 8 out of 10 stores ended up having a posting issue with accounting, usually on the accounting side.  The best way I know how to make this brain damage go easier on the ADP system is to follow the instructions above! 

Got a question or need to try and figure it out?  Feel free to give us a call or drop us an email.  Good Luck and Good Selling!

How Does Your Manufacturer Rate?

Probably the top question that I get from Parts Managers day in and day out is, “How does my inventory rate compared to others you have seen?”  Today, I want to try and take this to another degree.  Typically, we look to our 20-Group composites for some of the answers when it comes to ”same franchise dealership performance”!  Unfortunately, the 20-Group composite shows inventory value, and obsolete inventory over 12 months old, but very little more about inventory performance.  Not to say that the 20-Group composite books don’t have a wealth of great information, especially when it comes to sales and return on investment, but what about the real inventory performance and how it is working?  I will take this to another level in this article.  I am going to take 60 dealerships of all makes and compare inventory performance based on the manufacturer.

I will base this on the 5 Inventory Performance Factors;

1) Productive Inventory Value

2) Watch Inventory Value (Productive parts with excess value)

3) Excess Inventory Value

4) Forced Stock Inventory Value (Parts in stock never meeting phase-in criteria

5) Obsolete Inventory Value (Meeting 13 MNS and 13 MNR both)

We work with a number of dealerships and manufacturers.  Here are the ones that we can evalute with enough dealerships to give concrete statistics on:

Chrysler, Ford, General Motors, Honda, Acura, Toyota, and Nissan

Based on these Seven Manufacturers, I will show you the inventory statistics based on the Five factors listed above and rank each one from 1-7 and state the percentage of inventory for each “Factor”.  Enjoy!

Productive Inventory as a % of Total Inventory

1) Chrysler 39.2%

2) Nissan 35.3%

3) Honda 30.1%

4) Acura 27.8%

5) Toyota 25.8%

6) Ford 21.4%

7) General Motors 19.6%

Watch Inventory as a % of Total Inventory

1) Acura 12.7%

2) Honda 12.5

3) Ford 11.8%

4) Toyota 11%

5) Nissan 10.9%

6) General Motors 7.8%

7) Chrysler 7.7%

Excess Inventory Value as a % of Total Inventory

1) Chrysler 13.8%

2) Nissan 18.9%

3) General Motors 19.2%

4) Ford 22.1%

5) Toyota 22.8%

6) Acura 24.1%

7) Honda 26%

Forced Stock Inventory Value as a % of Total Inventory

1) Honda 28.1%

2) Nissan 29.5%

3) Chrysler 30.1%

4) Acura 33%

5) Toyota 35.4%

6) Ford 40.3%

7) General Motors 43.3%

Obsolete 13/13 Inventory Value as a % of Total Inventory

1) Acura 2.4%

2) Honda 3.4%

3) Ford 4.4%

4) Toyota 5%

5) Nissan 5.3%

6) Chrysler 9.2%

7) General Motors 10.1%

The above statistics were based on 60 dealerships with at least 4 dealership statistics from each make, if not many more!  The inventory values were from the end of February 2011. 

Based on the above information, we can come to some conclusions.  Overall high marks go to Nissan & Chrysler.  Honorable mention to Honda, Acura, and Toyota.

What this really points out is that Manufacturer based programs such as RIM and ARO has some real faults.  Chrysler is miles ahead of GM when it comes to productive inventory value!  Almost 20% more of a Chrysler inventory is productive than a General Motors RIM controlled inventory.  Chrysler is also 6% lower in Excess inventory value than GM.  But, where they both fall short is that they have almost double the obsolete inventory value of the other manufacturers.  Now, in a bit of fairness to General Motors, we did not take into account the 13-15 month parts that are RIM guaranteed that dealers have to hold onto until the 16th month, but I would have to conclude that it is a very small portion of the overall obsolete value.

This painfully points out that manufacturer controlled programs are designed to increase inventory width and performance, but they suffer deeply when it comes to giving the dealer avenues on which to purge idle capital, especially obsolete inventory.  General Motors numbers in this statistical comparison really show a weakness compared to all other manufacturers when it comes to inventory performance. 

The real kudos goes to Nissan here!  While they were not at the top of any category, they were always right in the park based on strong productivity and overall lack of idle capital in the excess, forced, and obsolete categories, they get my nod as having the best overall balance. Unfortunately, I don’t need to mention who is at the bottom of this statistical analysis!  Good Luck and Good Selling!!

Job One, Mastering Special Orders

Once upon a time, not that long ago, Dealership Parts Operations used to be pretty “cut and dry” . You had a card system or a pad that you checked off inventory, and then ordered from that. With the introduction of computers, came the realization that maybe the parts operation isn’t so “cut and dry” as it looks. With technology came the dealer’s ability to analyze it more thoroughly and actually realize what kind of a return that it could bring. In terms of tools and programs to manage the parts department we have come light years in a matter of about 20 years! All transactions are basically “electronic” this day and age.
A few years ago I heard a story about the Chemical Pesticide industry. It claimed back in the 1920’s and 1930’s, that the average farmer would lose about 20 percent of their crops per year from insect damage. With the introduction of pesticides and such you would think that this would have literally depleted bad crops, especially from insects and such. It was reported, that in the early 2000’s, that with all the pesticides and billions of dollars invested in ridding the industry of damaging insects, that the crop loss was about 20 percent! I am not a farmer, but it doesn’t take a genius to see that you have to wonder why you make the investment based on those statistics.
Changing back to the Automotive Industry, we can come to some of these same conclusions. With all the E-Tools out there, the number one concern of just about every Parts Manager is his or her obsolete inventory! In talking with several supply chain experts in 2010, it seems like obsolescence is growing in dealerships instead of disappearing. There are some circumstances that have altered this to some extent but after all, Tomatoes are Tomatoes and Potatoes are Potatoes!
You could point to things such as model proliferation. There are more models that are introduced, more models that change from year to year, and this all leads to a heck of a lot more part number population to make critical stocking decisions. Manufacturer programs can change, return policies can affect the issue, but the reality is that obsolete inventory continues to be out there. You may be fortunate enough to be with a manufacturer who takes back parts based on national movement codes, or a stocking criteria you follow based on the Manufacturer recommendations. You may be on a manufacturer program that limits returns to only the parts that they recommended for your stock that have become obsolete, such as RIM or ARO programs. If the short history of these programs are any indication of the future, it proves that the manufacturer is willing to only guarantee what sells, not what doesn’t! This should not be a surprise to anyone in the industry.
This leads me to what I want to convey in this article. How can you, as a dealer, general manager, parts & service director, or parts manager attack this problem and keep the sales rolling? In a nutshell, it simply comes down to controlling your Special Order demand! The DMS computer systems out there do a wonderful job in forecasting your demand, even the Manufacturers do well on a more “global” basis! What this really means is that only a small portion of your inventory that has been selling or qualified for stocking all of the sudden stops selling and you’re stuck with “instant” obsolete inventory. When you really get down to it, it is a matter of how you control the parts that aren’t selling to your customers and/or didn’t qualify for stocking on a regular basis!
We call this “Forced Stock” inventory! Ironically, we have been talking about this for the past 15 years. Every dealership parts operation has it, knows about it, but there is not one major vendor who reports or tracks it for the parts operation. I am talking about those parts that were over-ordered by the technicians to solve a customer’s problem. You know what I am talking about; the technician orders 3 parts to fix the car and keep Customer Satisfaction and Fix-it Right scores high. Yet the parts that were not needed, especially in warranty repairs, come back to parts. Now you have an instant “idle capital” issue. Also, returns from wholesale customers, especially body shops, can really increase the amount of unwanted forced stock into your inventory. Other issues include speculation, or the well known SWAG method; or ordering errors by Parts Advisors, especially those who are new and learning on the job! Imagine if you could add up all the mistakes and money spent by Parts Advisors ordering the wrong parts as they were in the learning process. In our experience, the more well trained and long term Parts Advisors that a dealership has, the less in forced stock inventory they have!
Now that I have explained the issue and giving you a dose of reality as to the causes of forced stock, how do you begin to attack it? There is not enough ink or time in this article to completely attack it, but there are some things you may want to consider implementing at your dealership. As a consultant that deals with these problems day in and day out at dealerships of all manufacturers and regions, it comes down to the nutshell, special order control! It is odd how the blame for most of this comes down to the parts manager level, as one would think. After all, they are in control of the parts process and ordering procedures! Or are they?
Let’s examine this a little further. When it comes to controlling the wholesale, there is more control there than anywhere else. After all, they can make the decision not to sell to wholesale customers who return too much or take advantage of return policies. A simple, yet effective way to handle this is the “30-5 ; 25-10” rule. If you are giving a 30% discount to a customer and they are returning more than 5% of their purchases, you have a problem! If you are giving a 25% discount to a customer and returns exceed 10% of their purchases, you have a problem. What it the best solution to this issue, begin charging restocking fees that would cover restocking these parts and accrue these dollars to purge idle inventory. If that doesn’t work, they will either seek out another vendor to purchase the parts from or you can simply “fire” the customer and not do business with them. The most common compliant I get from a parts manager when presenting this scenario is, “I don’t want to lose my valuable customers by doing this!” The key word in this phrase is “valuable”! I can promise you, that you are losing money if they exceed the numbers listed above, are they really valuable and profitable customers? Why not chase them to your competition and focus on the good loyal customers who don’t take advantage of your operation, or focus on more profitable shop sales.
Now we come to controlling the process for “in-dealership sales”, or the special order process. We all know that you can’t have a customer pre-pay for warranty repairs. And, in many instances, the customer who is paying usually doesn’t have to pre-pay for those parts either when on a repair order. In a “perfect world” inventory, any customer that you order a part for can’t have their car back until it is repaired. That’s not realistic! Technicians over order parts for repairs and you certainly can’t ask your Parts Advisors to become “The Parts Police” in each case. What you can do, however, is track which technicians are over ordering and returning the most parts! How do you accomplish this, by simply putting the technician number in an unused field on the computer, such as BIN2, COMMENT or other field. Now you can develop some reports and being to attack that issue.
The buzz phrase used by consultant’s today to help combat customers not coming back in, especially for non-critical warranty repairs, is “Don’t order the part(s) unless the Service Advisor has secured another appointment!” This and $5.00 might get you a good cup of coffee at Starbucks, but it doesn’t mean anything with regards to the customer coming back in at that appointed time. While it is prudent to secure the appointment, that should be a given and I would bet a lot of time is spent on the parts side trying to validate the next appointment.
It finally gets down to “Who is responsible to contact the customer and get them in after the part is ordered and received.” Ah, we finally are going to get somewhere here! I cannot begin to tell you how many times I have seen the “both arms pointing in different directions” by both Service and Parts when it comes to this responsibility. A simple fact is that in most dealership fixed operations, once a special order has been placed and the vehicle cannot be repaired that day, it is “out of sight” for Parts and Service Advisors alike! After all, the commission plans pay them based on what they have sold, not what they have ordered! The Service Manager pins the blame on the Parts Manager for these issues and vice-versa! What really needs to happen here is for the Parts and Service Managers to team up and attack the issue right in the heart! Put the responsibility on the Parts and Service Advisors alike and develop some sort of compensation percentage or depletion of compensation based on the lack of customer returns for special order parts.
One other thing that can be done and is probably more relevant than trying to build a compensation plan based on the above would be to hire a “Special Order” clerk and have them be totally responsible, and their pay based on, the lack of special orders in process waiting for customers to return. They can handle the appointments, review the issues, and be proactive about keeping those parts perpetuating at an accelerated rate. When that is the only focus of that person’s job description, you have a solution for this. It may not solve some of the other underlying issues I have already discussed, but I can just about promise you that this “Special Order Clerk”, working for both departments, will more than pay for themselves in short order when it comes to controlling the turns of your special order inventory! And you just might be able to work with one less Service Advisor and/or Parts Advisor to cover the cost?
When you consider that the average dealer has about 25-30% of their parts tied up in unwanted forced stock inventory, imagine what you could if it was under 10% of the overall inventory? Less obsolete dollars, greater turns on inventory, and a healthier return on your investment! What is your forced stock inventory value? Use the simple equation below for reporting your forced stock value;
Select, report, and total all parts in your inventory with 2 years sales or less in the last 12 months. If you have a typical phase in criteria of “3 in X”, you know that with 2 years sales (YRSL field for ADP or 12 MONTH HIST field for ERA) or less it could have never qualified for stocking in your inventory! This may only get 95% of the problem, but just based on this simple equation, divide this total back into your total inventory value. If you are above 20%, which I am betting that 95% of you all are in this boat, go back and re-read this article and “attack”!

PlayBook Enhancements Released (Version 301)

Reviewing a Dealerships Parts Inventory Has Never Been Easier

POWAY, Calif – December 20, 2010 – Partsedge.com Incorporated is pleased to announce it has released major reporting enhancements to it’s PLAYBOOK® application. Partsedge.com continues to expand its PLAYBOOK® functionality, with just one report from your DMS and using our PLAYBOOK® application any CEO, Dealer Principal, Parts Manager or any other dealership personnel can use the application to review & make critical business decisions within their parts operation.

ENHANCEMENTS

This upgrade includes additional inventory breakouts detailing the performance of specific groups of parts on hand such as;

• Inventory by Manufacturer or Make Code
• Factory Controlled Parts on RIM (GM) or ARO (Chrysler).
• Parts on your shelves with no sales history.
• Parts in each source or group separated by manufacturer.
• Actual days supply on hand.

The “One-Click” filtering now has multi-level “undo” functionality allowing the user to browse backwards and forwards through previously applied filters.

Parts file processing now recognizes parts files from the DealerTrack and Automate DMS as well as some parts files specific to the Heavy Truck industry.

Availability

PLAYBOOK® is available now. A free limited time trial can be downloaded at www.partsedge.com. To
schedule a free training session contact a Partsedge representative at 1-800-825-7562.

About Partsedge.com Incorporated

Partsedge.com provides advanced parts planning concepts to automotive dealerships. For more information, visit www.partsedge.com.

_____________________________________________________________________________

©2008 Partsedge.com Incorporated. All rights reserved. Partsedge and the Partsedge logo are either registered trademarks or trademarks of Partsedge.com Incorporated in the United States and/or other countries. All other trademarks are the property of their respective owners.

Excess Stock (One of the 5 majors)

It has been a while since I posted, and several of you have commented on my lack thereof.  With our PlayBook program, we identify the 5 Major areas of inventory control:

1) Productive Inventory

2) Watch Inventory

3) Excess Inventory

4) Forced Stock Inventory

5) Obsolete Inventory

Today I will deal with #3, Excess inventory.  Excess inventory, from a dealership parts operation, is typically overlooked and very rarely attacked for the reason that most excess inventory consists of faster moving items, such as oil filters, air filters, spark plugs, cabin filters, and brake pads, just to mention a few. 

It is too easy to over order these items, either in the name of making sure you don’t run out, or in the name of getting a larger discount for volume purchasing.  In either case, excess inventory can be equated to “idle capital”.  In many  instances, this looks good on the “Months No Sale” report for the simple reason that you are selling these faster moving parts over and over on a daily basis.  But the reality is that while that popular “Oil Filter” will almost assuredly stay in the Zero (0) months no sale category, you could have a year’s supply of them that will drag down inventory performance or take up valuable space in the parts department that could be used for other parts!

In defining “Idle Capital”, I simply point out that these are parts in inventory that either did not meet the phase in demand set in the DMS settings; parts that have aged over 12 months; or inventory that has exceeded the best stocking level or “high days supply” setting on the system.  In essence, it is numbers 3,4,5 from the above list of the 5 major inventory categories.

Excess inventory is defined as those parts that have an on hand quantity in stock that exceeds the high days setting or in dealership lingo… the “Best Stocking Level”.  In a bit more detail, let’s assume you have a 30 day high days setting and a given part number sells 30 a month, or 1 per day.  For the sake of understanding the reordering process, let’s assume that the low days supply setting is 15 days.  (Best Reorder Point)  Therefore, on this given part, your reorder point would be 15 and the system would wait to get to 15 before reordering it back to 30 (ordering 15 more) to get it back to the best stocking level. 

Now, let’s assume two more things.  The current on hand is 150 and the cost is 3.00 each.  Your total value of the 30 that are at best stocking level is $90.00.  The other 120 filters total $360.00.  In short, you have a 5 month supply and $360.00 worth of inventory that could be spent or redirected elsewhere.  Start adding this up and you can have a considerable amount in wasted or idle inventory looking good but not turning. 

This brings me to my  point for this short blog.  When you see a large amount of excess inventory (over 20% of the overall inventory), you will usually see that your turns (both true and gross) are low even though your obsolete inventory may be in line.  You will also notice in many instances that the gross turns will be high, but the true turns will be much lower.  This is one sign of too much inventory!

What percentage of your inventory is classified as “excess”?

PlayBook Application Launched!

Who writes the reports at your dealership? How long does it take to find out how much you have in returnable accessories?  Which parts do you buy from another dealer? Which ones do you sell at 50 off? Can your report generator show you which parts were moving last month – but have no demand this month? Will it break out sheet metal and tires? How long does that take?

Sure, you can generate reports for almost anything in your inventory on your DMS -but who has the time for that? We didn’t – we put the best parts of the Partsedge process into a flexible utility to QUICKLY access  critical information from your parts inventory.  Select, sort and view nearly any combination of parts in seconds for expert “on the spot” decision making.

It couldn’t be easier. You drop ONE captured report into PlayBook and you get an easy to read and “user-friendly” way to quickly reveal productive, excess, forced, and obsolete stock at YOUR dealership.

The Playbook Application can be downloaded with a free 30 day trial period from the “Links” column here or from the following link:

Download PlayBook by Partsedge

Download PlayBook by Partsedge

You can contact us at Partsedge (800.825.7562) to schedule a demonstration too.

Tired of relying on “Query Genius” experts (knowing the RPG; English; or 6910 processes)

Want almost instant management information that you can process and then get instant details with just a couple of mouse clicks?

Want a program that is not DMS specific, and levels out the reporting, regardless of system settings?

Then this is the program for you.  You have more questions?  Give us a call at 800.825.7562.  Starting in November;  Live Webex training for the Playbook application…

Inventory Control… What to do!

Having done 9 Marathons and numerous half marathons,  and because I don’t typically listen to music when I run, I get a lot of time to think about things.  Especially the parts business as a whole.  It is no surprise (and no secret) that most of us still in the game are just happy to be plugging along. 

The parts business is a lot like running a marathon, if you will allow me to give you the similarities between the two.  You just don’t walk out the door today and decide “I am going to run a marathon today”.  Oh, I guess you could, but your chances of being a “DNF” (Did not finish) are very, very good!  Most who decide to do that, and there are a few, end up choking and throwing up in the first couple of miles. 

The key to a successful marathon is prep; months of it!  And, to continue to improve means years of the months of prepping for each one. 

One of keys I learned in the Parts business a long time ago was to watch what my Manufacturer was doing, not what they were saying, and try to immulate it.  After all, I was told that the Manufacturer – Dealership business was all about the “College Educated” Guys versus the “High School Educated” Guys.  This, of course, coming from the DPSM’s and such working for the Manufacturer.  But, as I learned early on, you can learn a lot of successful practices from them and apply them.  Obviously, we don’t want to follow the route of GM and Chrysler of late. But I can tell you that from a parts supply chain standpoint this was certainly not the cause of their problems. 

Through careful study of the supply chain process, I learned a lot of ways to help control my inventory.  Thus, this improved the width of my inventory and ultimately great customer satisfaction too!  It took years of learning, watching, and implementation to get lean and stay lean.  And, of course, always looking for ways to improve. 

In these tough times of trying to survive and stay profitable, there are some very tempting opportunities that might just not be that opportunistic!  I’m talking specifically about purchasing parts from the unfortunate dealers who didn’t survive.  Now is the time to really make sure that you aren’t “over purchasing”  just to try and make a buck in the short term.  I will have more to say about this when I do a webinar for Dealer’s Edge on August 6th.

Just remember, keep your inventory lean and mean, don’t fall prey to any short term scheme’s that won’t help you overall.  When you look into purchasing an excess inventory, never exceed a 60 day supply.  Just remember the ol’ addage that there are no “get rich quick” gimicks out there.  Lean, mean and long term processes work the best in the long run.