Let’s play a quick game called “Would You Rather?” I’ll go first.
Would you rather do a complete inventory of your parts department or get a root canal? For many of you, the answer is easy. A root canal would win every single time.
Most people feel wildly overwhelmed doing parts inventory. I get it. Your stores have so many parts, so many people touching parts and so many customers needing parts. As a result, performing an accurate inventory can seem like a distant cousin of Sasquatch—you are not sure if it even exists, but you are willing to keep searching.
So, let’s get your parts inventory in tip-top shape.
The hard part is keeping the inventory correct.
Fast-Moving Parts Are Your Best Friends
You may have several SKUs in your parts department, but for most dealerships, about 50 parts are the department’s superstars. The superstar parts are front row and center. Almost every customer wants those parts.
If we had to choose only one place to ensure your inventory was accurate, these fast-moving parts would be it. This area has a greater impact on the department’s daily dynamics, both for internal customers (the service department) and customers walking up to the parts counter.
The first thing you need to do is pull a list of your 50 fastest-moving parts from your dealer management system (DMS) if you have one. Every system is a little different, so if you have not done this or need extra help, call your software company, and they can walk you through how to generate this report.
With the report in hand, you can now get to work. Start walking through the list, count the parts you have in inventory and ensure the number matches your DMS. If it does not, update your DMS to indicate how many parts you have in stock.
Repeat this process until you have touched all 50 of your fastest-moving parts and are confident that the parts you have in stock match the parts your DMS indicates. This is not rocket science; it is the art of parts management.
This process may take some time but is the easy part.
Cyclical Inventory Counts Are King
Much like the laundry pile or dishes that never seem to be done, your parts inventory is always waiting to be completed. Ensuring our inventory is accurate involves a revolving cycle.
We need to develop a plan to inventory a handful of parts daily.
Seriously, this task is not that hard, and your DMS will generate a list for you.
When I mention “cyclical inventory counts,” most people look at me as if I have a foot growing out of my head. Cyclical inventory means that you look at a small group of parts and inventory them daily.
The size of this list will depend on your inventory and the number of fast-moving parts you stock.
Remember those MVP parts we just talked about? These parts will appear in your cyclical inventory count list more often than others simply because they are more likely to turn over quickly.
Why does this matter? At the core, out-of-line inventory costs you big. The problem affects the bottom line and the customer experience.
So, how do you know whether your inventory is correct? Here is the easiest gut check/non-scientific way to understand your inventory’s accuracy.
If a customer called and said they were an hour away, and your software showed you had two copies of the part they needed in stock, would you tell the customer to come in without putting your hand on the part?
If that idea sends you into a mild panic, and you say, “Never, ever in a million years would I do that,” your gut is saying that your inventory is not even 50% accurate. That seems like a problem to me.
Keep Non-Parts Employees Out of Department
This rule applies to everyone, especially technicians. I promise you the technicians in your dealership do not wake up hoping they can cause chaos in your life. Still, they often need a part. You are usually busy. They just come, grab the part, then forget to put it on the work order or mention they took it.
The greatest disruptor to inventory is people who should not be in the parts department walking in and grabbing a part.
The other thing to remember is that a technician who looks up and pulls their parts loses an average of over $18,000 of billable time annually compared with a technician who only turns a wrench all day.
Make a list of who specifically is allowed in the parts department.
To help your parts inventory manager, consider hiring a parts support specialist. This person’s No. 1 responsibility is simple: They are the inventory keeper. As we all know, just because something is simple does not mean it is easy.
The inventory keeper is a full-time or part-time employee, depending on one metric. The metric is the number of technicians in your service department.
Why would a parts person’s employment status be tied to the number of techs? The answer goes back to where we started this: Technicians are the greatest parts inventory disruptors.
If you have fewer than seven technicians, the parts support specialist can typically be a part-time role. If you have more than seven techs, you need a full-time person to guard the vault, which is the parts department.
So, what does an inventory keeper actually do—and, more important, how do you pay for them?
As your daily stocking order arrives, an inventory keeper’s primary responsibility is to put it away. Yes, we are hiring someone whose main job is to put away parts.
The funny thing about shelving parts is that something almost otherworldly happens when you touch parts, look up parts and put them away. You become a parts expert.
The inventory keeper’s next job is to ensure technicians have the parts they need when they need them. That is right, no more technicians standing at the parts counter, waiting for you—or, even worse, just grabbing the parts themselves.
Once the inventory keeper has completed these gargantuan tasks, they can help with inventory counts (more on this in just a minute) and check customers out.
Now, how do we pay for this person? We add a percentage to all parts sold through the service department. The starting percentage for most dealerships is 5%, but many dealers charge between 7% and 10%. We do this because selling a part through the service department costs more than it does over the parts counter.
What About Lost Parts?
A few years ago, I was working with a parts manager group when the conversation about lost parts arose. The parts managers had been in the dealership world for a long time and were excellent at their jobs.
They spoke fluent parts, which is an entirely different language, and could recite their fill rate out of stocking inventory, phase-in and phase-out numbers and their margins based upon pricing strategies.
Their struggle was that parts still went missing sometimes. One parts manager told me, “Sara, we can’t help if sometimes we just lose parts.”
Do you mean we just lose parts? What is an acceptable number of parts to lose? Does the number change if you have cash in the parts?
Could you imagine if, on a weekly or monthly basis, the sales department came in and said, “Well, bummer, we lost another RV today. It just happens sometimes.”
Your response would be, “Stop what you are doing and file a police report because we do not just lose RVs.”
However, in the parts department, losing parts seems to “just happen” sometimes.
Here is the cold, hard truth. If you are a parts manager, your primary responsibility is managing inventory. I get it; this may not be your favorite part of your job, but you are in charge of protecting the dealership’s inventory and growing profitability through inventory sales.
The job is not for the faint of heart, but once you have a good process for inventory management, you will have the capacity to truly grow your parts department.
Sara Hey is the vice president of business development at Bob Clements International. She has worked in her family’s business and with family-owned dealerships over the last 10-plus years.
