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August 8, 2011 – Find a way to part with obsolete P&A inventory

August 16, 2011
Filed under Uncategorized

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.
Part 3: Our GSA Consultants report on their analysis of the parts and accessories department.

DEALERSHIP DETAILS
After working in this dealership, the current owner purchased the operation in the late 1980s. He has three major product lines. He is an enthusiast with a powersports technical background who had worked in other dealerships prior to buying this one.
The population drawing area is around 70,000. There is a wide variety of economic support in this area, providing stability through economic downturns. The dealership sells less than 500 units per year.
The dealership is visible from a major highway. The older facility could stand some renovation. There is minimal parking available. The service department is in a separate building and another building is used for cold storage and some unit assembly.

PARTS MANAGER
The former parts manager recently left the dealership and he has not been replaced yet. Meanwhile, the owners and the sales manager share working the counter and handling the processes for this department.
There is a huge amount of obsolescence. They have not been doing most of the processes or printing the reports needed for proper department management.

PARTS DEPARTMENT
At 38 percent, gross profit is high. However, escalators are used to help absorb ever-increasing P&A prices. Parts are being discounted to sales, so this is deflating P&A gross profit while inflating gross profit in the sales department. Inventory turns are not monitored and they do not run the slow-movers (no sales in six months) and non-movers (no sales in 12 months) reports on a regular basis. This would help dealership personnel anticipate and react to obsolete inventory. Currently, 73 percent of their inventory has not sold in more than 12 months. Some inventory dates back to when the owners purchased the dealership. The non-moving inventory should be reduced to less than
15 percent. Some old inventory is being sold through an online company, but they need to move faster and take all necessary steps to sell, donate or dispose of this inventory and replace it with faster-moving P&A.
Parts have not been properly recategorized in the computer to enable tracking of sales by category. OE and aftermarket price guides are often incorrect in this area. This is a long task, but it is worth doing it in the end, and it is easy to maintain once it has been done.
The parts counter is not readily visible from the front of the store. It’s blocked by helmet and oil displays. The counter is covered with catalogs and displays and has little open space for transactions. Making this more customer-friendly would encourage additional sales. They have a lot of underutilized space in this department. Everything is organized by sequential numbers. The space could be compressed by utilizing bin codes and relocating larger parts to larger shelves and smaller parts to smaller shelves. The dealership should also move fast-moving parts to the front of the aisles. Lacking bin numbers, they don’t do cycle-counting and rely on year-end inventories. This can result in increased shrinkage and inventory accuracy errors. There are two little-used storage areas that could become additional showroom space.
There are no “theme” displays with accessories, units and mannequins. These would help increase accessory and unit sales. They have a nice changing room with full-length mirrors.
They have one small “clearance bin.” Setting aside an area for clearance items with large signs would help drive floor traffic. People want to see what’s new and what’s on sale.
A designated person — not a tech — should pull service parts. You can’t afford to waste tech labor time by pulling parts.

ACTION ITEMS

  • Monitor inventory value and number of turns regularly.
  • Restrict the ability to change part quantities to the owners.
  • Assign a designated parts-to-service employee to improve productivity and inventory accuracy.
  • Clear off “clutter” on the parts counter.
  • Place OE parts orders at least twice a week to ensure customer satisfaction and improve tech efficiency.
  • Accessorize units on the floor to increase visualization by customers.
  • Create a dedicated P&A “sale” section in the showroom with adequate signage to attract attention.
  • Properly categorize P&A in the computer so you can accurately track sales by category.
  • Print slow movers and non-movers reports monthly. Take action immediately to reduce obsolete inventory. Sell it, eBay it, donate it or dump it.
  • Sell parts at retail to sales and service. This is the only way to accurately compare department gross profit with national numbers.
  • Gart Sutton has been a leading provider of on-site dealer consulting, dealer 20-groups, online financial composites, accounting rescue services, and OEM and dealership training solutions for more than 30 years. For additional information on these services, visit www.gartsutton.com.

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