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Jan. 18, 2010 – Improving inventory turns in the parts department

January 18, 2010
Filed under Archives

These articles recap some of the opportunities uncovered by our GSA powersports consultants during actual consulting visits. These are followed by recommended actions that address these opportunities. Our goal is to provide you with ideas to help improve your dealership.

Dealership
This 30-plus year-old, single-line dealership recently moved to a new, professionally designed facility. They sold just under 500 new and used units this past year. The owners have worked in most of the positions, so they have an intimate knowledge of dealership operations.
They are located in a rural town with a population of 40,000. However, their surrounding market area contains more than 200,000 people. They are located on a main road less than a mile from a major freeway, but they have no freeway visibility. It was suggested they use billboards to build awareness and attract more of the passing traffic.
Previously this series has examined the store’s sales and F&I departments as well as an analysis of the total dealership. In this third part, GSA?consultants report on the parts and accessories department.

Analysis
Marv is the parts manager. He has been an avid motorcyclist since he was a teenager, and is also an active snowmobiler. He has a customer relations background. He was recruited to be the parts manager while he was a customer of this dealership. He enjoys managing the parts department, but also sells units on occasion.
The parts counter is located in one corner at the rear of the showroom. It would be more effective in the center. They are considering going to kiosks, which could be more centrally located.
Marv comes in early and works on Internet sales as well as parts management. He also has a technician background. He sometimes ends up doing service writing or bringing up service units — whatever is necessary.
There is an open-to-buy system, but they do not do cycle-counting. Parts have geographical bin locations, but the clothing and accessories must be categorically binned to enable cycle-counting. The entire cycle-counting procedure was explained and reviewed with the owners and the parts manager. The goal is to get through the inventory four-six times a year. This will improve accuracy while reducing shrinkage.
Everyone has access to changing parts quantities. This is an open invitation to theft. It should be restricted to the parts manager and the dealer principals.
Most of the service writing is being done at the parts counter and the staff tends to congregate in this area. This is limiting customer access and decreasing overall store efficiency.
Parts are being sold to service at cost. This deflates the parts profitability figures. The parts-sold-per-employee number is down a lot. Part of that could be from the sales to service, but not that much. There needs to be some deeper diving into this.
There is quite a bit of obsolescence that needs to be addressed. Almost a quarter of the inventory has not turned once in 12 months. These obsolete parts need to be turned into revenue that can be used to purchase high-turn inventory.
There is no specified parts-to-service person. The service staff comes into the parts department and pulls parts. This needs to be controlled. The parts department has to deliver parts to service so inventory accuracy is retained and service techs do not lose expensive time in the parts department.

Action Items
Use passwords to limit access to changing part quantities to the parts manager and GM.
Implement an aggressive program to eliminate obsolete inventory. Several options were discussed for doing this.
Develop written “non-negotiable” standards lists for department personnel. Hold staff accountable.
Begin random cycle-counting of all P&A. Count at least one bin per day, every day.
Begin doing monthly random 25-number inventory spot checks. Should maintain inventory accuracy of 97 percent or better.
Eliminate all access to the parts department by non-parts staff.
Print slow-mover reports (less than two sold in six months) every two weeks. Reduce slow moving inventory.
Print non-moving inventory report (no sale for 12 months) every two weeks. Utilize OE and supplier programs to send back non-movers or find other ways to get rid of obsolete inventory.
Monitor inventory valuation, number of turns and GP on a monthly basis.
Utilize the rider gear checklist to stimulate sales of riding gear at the time of the unit sale.
Assign specific staff members to handle parts to service. Parts to service orders must be a priority.
Consider physically stocking hard parts based on size and movement rather than numerical sequence.
Create categorical bins for all clothing and accessories sized to be counted in one hour or less (when possible).

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