The parts department is one of the most complex parts of any dealership. There is the constant balance between having enough inventory on hand to meet the demands of both the service department and counter customers, but not having too much inventory that just sets on a shelf tying up precious dollars. Establishing great processes in your parts department will help set up your dealership for success during season.
1. The Process of Having the Right Inventory on Hand
Your inventory integrity is all about having a process and a system in place to make sure that you have what you need when you need it. If a part is not where it’s supposed to be, you’re wasting time—bleeding money, and lots of it—just looking for it. With thousands of parts and maybe several hundred thousand dollars invested in your parts inventory, if you can’t find what you need promptly, you have a system breakdown. Keep in mind that a well-run parts department has a well-run system.
By having the right parts in the right place, your parts team won’t have to spend time sorting through a box of parts to hopefully find the one they are looking for, wasting your customer’s valuable time. The best way to make sure you can maintain the balance, is by utilizing your business management software and using the information from the system to help manage the department.
2. Having Processes in Place for Phasing In and Phasing Out Inventory
Your “phase in” point is the number of unique demands for a part before you consider making it a normal part of your stocking inventory. In most of the dealerships I consult with, we typically “phase-in” a part when we have received 3 demands for that part in a 90-day period of time. It is imperative that your parts team is documenting lost sales — times when a part is requested but the customer leaves without the part. These should always be factored into your “phase-in” point. Using your business management software, it’s simple to run a report to evaluate the demands and make a decision based upon the information.
The “Phase-out” point is when your parts department will discontinue keeping a part in the stocking inventory because of the lack of demand. In most cases, when a part demand becomes less than 3 for a 12 month rolling period you would remove the part as a normal item in your inventory.
3. Processes for Maintaining Restocking Levels
Most business management systems are able to alert you when a part falls below a certain level of inventory. I can’t tell you how important it is to use this feature! As an example, if I have a mower blade that I sell a lot of, I may want to set my minimum level of stock at 6 blades and maybe my maximum level at 18. Once the level reaches 6, your software will automatically let you know that it’s time to reorder so you don’t run out and can meet the demands for both service and counter customers.
Making sure you have the right inventory and maintaining it at the correct levels will go a long way in reducing the number of both special and emergency orders you have to process on a daily basis.
Dealer Development Team- Dealer Toolbox Management