At every level, the parts department is a complex area to run for a dealership. There is the constant balance between having enough inventory on hand to meet the demands of both the service department and counter customers as well as not carrying too much inventory. Too much inventory ties up precious dollars that the dealership could use in some other manner.

You also have to make sure that the inventory you do have is correct in terms of numbers of specific parts you are carrying and that those parts are actually in the right spot. You want to avoid having to sort through a box of parts to find the one you need.

To make sure you can maintain the balance, you need to make the best use of your business management software to help you manage the department. Being able to run reports that evaluate the usage of the parts you have in inventory and to confirm that your parts are in the right location will add to the parts manager’s ability to maintain tight controls.

Stocking Rates

Many times, dealerships have to resort to special and emergency orders on parts because the integrity of their parts department processes has broken down. A part they should be stocking because of past demands is no longer being stocked or the inventory of the part has been depleted. Not having the right parts stocked at an appropriate level to meet the demands of both the shop and the counter customer leads to increased costs because of the need to order outside of a normal stocking order and additional freight. And more importantly, it leads to service department and customer dissatisfaction.

Your inventory integrity is all about having a process and a system in place to make sure you have what you need when you need it. If a part is not where it’s sup­posed to be, you’re wast­ing time — and bleeding money, and lots of it — just look­ing for it. With thou­sands of parts and maybe several hundred thousand dollars invested in parts inven­tory, you have a sys­tem break­down if you can’t find what you need promptly. Keep in mind that a well-run parts depart­ment has a well-run system.

Create a High Performance Dealership with Bob Clements is a new series brought to you by Yanmar.

More from Bob Clements

Yanmar — Don’t settle for less when you can have more. For example, Yanmar makes all its compact tractors’ major drivetrain components – the Yanmar engine, transmission, and axles — in-house. Because they’re made to work perfectly together, you and your customers get a hardworking machine with more usable horsepower, less power loss, and a smoother, more comfortable ride. Yanmar’s tractors are designed to work as hard as you do for a lifetime. Strengthen your dealership with Yanmar today: AgMarketing@yanmar.com or call 770-877-9894.

Making Updates

On a reg­u­lar basis, you should update your phase-in, phase-out cri­te­ria, restock­ing points, and lost sales and ensur­ing the business management sys­tem is made aware of the demand for a par­tic­u­lar part number.

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, the “phase in” point for a part is when we have received three demands for that part in a 90-day period. Using your business management software, it’s simple to run a report, evaluate the demands and make a decision based upon the information.

The “phase out” point is when you discontinue stocking a part because of the lack of demand. In most cases, when demand for a part becomes less than 3 requests for a 12-month rolling period, you would remove the part as a normal item in your inventory.

Your restocking levels again should be set in your business management software, so that you are alerted when a part falls below a certain level of inventory.    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 my maximum level at 18. Once the level reaches 6, your software will automatically let you know that it’s time to reorder. Again, making sure you have the right inventory and that you are maintaining it at the correct levels will go a long way in reducing special and emergency orders.

Locating Inventory

One simple area that I see missed by many parts departments is running a simple “no-bin” checks report. Your business management software will show you any part that you have in your inventory that is not assigned a location. It’s so important that everything in the parts department has its own defined spot. I know that more experienced managers know where everything is, which is great. However, that doesn’t help the department if something happens and the manager can’t be at work for 6 months. Every part that’s in your inven­tory should have a bin loca­tion or a place, so that a coun­ter­per­son can find the part.

Take a moment, run the “no-bin” report and then make a note on any part that doesn’t have an assigned location. Next, have a parts person find it, put it in the proper spot and then make sure the system is updated. There’s noth­ing worse than know­ing you have the part, but not know­ing where to find it.

Adding Cycle Counts

If you are not doing “cycle counts,” that function should become another part of your reg­u­lar inven­tory main­te­nance func­tion. The parts man­ager, again, defines the process for check­ing a cer­tain num­ber of parts locations to make sure cycle counts are cor­rect. If the software says you have six pieces of a spe­cific part num­ber, check to make sure there are six in the bin or at that location. I encourage managers to keep cycle counts ran­dom, but I also encour­age them to check the bins they touch the most. Keep in mind that people who come into your parts department — those who are not parts people — are generally the reason your counts are off.

Many parts man­agers, when they run a stock order, will go back and check quan­tity on-hand against what the sys­tem is sug­gest­ing to order. That’s just another form of a per­pet­ual inven­tory or cycle count. Again, it’s a daily event and should be part of an estab­lished process. Never forget that processes work in the parts department.

Read Part 2.

Create a High Performance Dealership with Bob Clements is a new series brought to you by Yanmar.

More from Bob Clements

Yanmar — Don’t settle for less when you can have more. For example, Yanmar makes all its compact tractors’ major drivetrain components – the Yanmar engine, transmission, and axles — in-house. Because they’re made to work perfectly together, you and your customers get a hardworking machine with more usable horsepower, less power loss, and a smoother, more comfortable ride. Yanmar’s tractors are designed to work as hard as you do for a lifetime. Strengthen your dealership with Yanmar today: AgMarketing@yanmar.com or call 770-877-9894.