The parts department is one of the most complex parts of any dealership. It serves as the first impression for many customers and has challenges that no other department will face. At times, it may even seem like an impossible task to make everyone happy. Keeping your parts department running smoothly boils down to three key processes.
- The Process of Having the Right Inventory on Hand
A critical measurement of a parts department is to determine how often a customer, or a service department has a need for a part. Is your department able to satisfy that demand from your inventory on-hand? Your “Percent of Fill” will tell you not only if you have enough parts on-hand, but also if they are the right parts. When looking at your parts department, it’s important to keep in mind that it exists to have parts when they are needed.
To determine your parts department’s “Percent of Fill,” take the cost of parts sales, subtract emergency purchases and customer orders, then divide that by the cost of sales plus lost sales. What should your “Percent of Fill” be? We like to see it in the mid- to high-80-percent range on average. Once you have determined your “Percent of Fill,” you will know if you have the right parts on-hand when they are needed to meet the needs of both your service department and retail customers.
- 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 we consult with, we typically “phase-in” a part when we have received 3 demands for that part in a 90-day period. 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.
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.
- Processes for Maintaining Restocking Levels
Most business management systems can alert you when a part falls below a certain level of inventory. It is so important 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 must process on a daily basis.
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