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Improving P&A efficiency and profitability

Steve Jones, Columnist
July 9, 2012
Filed under Columns

In the May 21 edition, I wrote an article describing 10 ways to maximize your opportunities for PG&A sales. However, selling is only part of the picture when it comes to successfully operating this part of your business. Improving sales — and making a good profit from the sales — also depends on proper control of your inventory. Having the right mix of products, in the right quantities, at the right time will have a major impact on the potential for profitable growth of your P&A department.

I recently had the pleasure of conducting several workshops on parts management. During these classes, it became evident that some dealers have not implemented many of the essential department processes. The following is a list of proven methods of improving efficiency and profitability in your PG&A department.

Are you using these processes in your business?

1. We have an open-to-buy system for inventory purchases. The owner establishes maximum dollar values for PG&A inventory levels. We adjust for seasonality and sales trends.
Yes        Mostly        No

2. We let our customers determine what we are buying. Our staff focuses on customer wants versus what the staff as a whole likes. We preview new products with selected customers to help us develop our stocking program.
Yes        Mostly        No

3. Only the GM, owner and/or parts manager can change part quantities in our DMS. This reduces errors and internal shrinkage.
Yes        Mostly        No

4. We have geographical bin designations for fixed-location part numbers and categorical bins for movable or multi-location inventory (such as helmets or clothing displays).
Yes        Mostly        No

5. We use the bin numbers instead of part number sequence so we can place fast-moving parts near the counter and stock parts by physical size to maximize our storage space.
Yes        Mostly        No

6. Bin locations are sized to be counted in about an hour’s time. We cycle-count one bin per day, every day to ensure inventory accuracy and eliminate the need for a year-end inventory count.
Yes        Mostly        No

7. The owner or manager does accuracy spot checks by counting 10-25 randomly selected parts, clothing and/or accessory numbers every month.
Yes        Mostly        No

8. We monitor slow movers (no turns in six months) so we can reduce the stock of these before they become obsolete. The goal is to improve the number of turns while reducing obsolescence.
Yes        Mostly        No

9. We eliminate non-moving inventory (no sales in 12 months) by any means possible to control obsolescence. We strive to keep obsolescence less than 12 percent of our inventory value.
Yes        Mostly        No

10. We enforce a 100 percent deposit on all special orders. These parts are returned to the supplier if not picked up within a specified time.
Yes        Mostly        No

Self-Analysis: For each of the above statements, place an “X” in the box that most accurately reflects your current status.

If you answered “Mostly” or “No” to some of these, you have uncovered opportunities to improve your parts, clothing and accessories operation.

Before you implement new processes, be sure to establish your baseline performance benchmarks so you can measure the results of your changes. Also, remember that you will have to continuously monitor and reinforce the use of the processes. They are only important to your staff as long as they are important to you.

Steve Jones is senior projects manager at Gart Sutton & Associates. He has worked in the powersports industry for more than 30 years, for dealerships and manufacturers, and as a consultant and trainer. Contact him at steve@gartsutton.com.

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