Quarterly Return Tips

While in the midst of return time I thought I would forward a few tips. Don’t forget to process your return as soon as you receive it, then coordinate with the PDC to pick it up – don’t wait for them to call you.

·         On your main x3.4 screen

o   F10 lets you see your prior returns

o   F15 shows your available accrual

o   Option 16, beside any return shows the suggested ASR versus MOQ break down, then F16 toggles to the actual amounts you submitted

Once you use option 5 to work with, the default view is always by part number. If you chose to print the return in BIN sequence then the screen won’t match the report. I get the screen to line up with the Bin sequence report once you enter the return simply Tab to the Bin field and type in the bin where you want to begin, press enter and the screen resorts. Remember, each time you exit then return, it will default back to part sequence.

·         To minimize overage/shortage rejections

o   When packing a part in a supersession chain, be sure to clearly reflect on the screen the quantity for the actual part going in the box and remove the quantity for any part in the chain that you are not sending. If you want documentation on this, let me know and I can send it to you.

o   Before you submit your return, If you remove a part from a box, be sure to unpack the part from the screen too, this way the PDC won’t anticipate receiving something that is not there.

Last – if you add parts to the return via the F6 function, be sure to enter the return AND pack quantity (must be the same number). This step not only adds the part but packs it at the same time, which saves you time. 

What is a Lost Sale?

What is a lost sale? I think this term can be misconstrued as often you may not lose a sale but it is a reflection of inventory effectiveness and ultimate client satisfaction.

1. With regards to inventory performance, a lost sale should be recorded when a request for a part is made and the part is not in inventory at the time of the demand (period), regardless if it is on order, or can be picked up elsewhere.
2.  When Customer Satisfaction is the driver, some believe that a lost sale should not be recorded if in the end the client gets what they need upon their initial visit without having to return. This can assume the part was picked up elsewhere, all ready on order, or even if the part was intentionally ordered on an emergency purchase – ultimately the repair order was filled.

I choose to err on the side of #1 and here is why. Despite the fact that I may ultimately fill the request, there are some hidden costs:

·         Costs associated to procure the part elsewhere (driver, gas, time, etc)

·         Emergency purchase – loss of earned accrual, VOR fee’s

·         Client satisfaction/expectations – vehicle not repaired in the time expected

·         Costs for unexpected loaner car out longer or even cost for a rental

·         Loss of shop and/or technician productivity

I’d like to hear your thoughts on the subject.  What is a lost sale and when is it appropriate to record one?

Interview with a Parts Manager

So after two years of blog posting and more than 20,000 page views I thought it would be time for you to hear from a few of your peers. These are Parts Managers who really have their departments running smoothly, and profitably.

In my travels I have seen many parts departments. Some were impressive, and some…not so much. Some run by a staff of many, some by few, and even still some where there was just a lone individual. Effective inventory management basics are essentially the same and apply to any parts department regardless of size shape or volume.

Foremost must be the internal relationships between departments. Victor Jones at Infiniti of Elk Grove had the following to share, “Keep an open relationship with your service manager; your shop should be your best customer.” And Victor added, “Get to know your Techs, they can be very helpful, and can teach you things”. This is insightful because technicians can certainly help you understand a lot about how Infiniti’s are designed and constructed. Knowing which parts are associated with others can be helpful when using the parts catalog for instance or describing something to a client about the function of their vehicle.

Continuing on the subject of relationships, Darryl Stewart at Infiniti of Peoria had the following to say, “All parts advisors will work together to give the best service possible to our technicians, in order to allow them to be more time efficient and maximize all parts and labor sales potential”. And I think marc DiGiamberandino from Holman summed it up best, “We run the backend as one department. It’s not parts and service, it’s Fixed Operations”.  

Ok, so we’ve sung Kumbaya and made nice with all the other departments, now what? All the parts managers who replied back to me had very specific processes in place to manage special ordered parts. Some are reviewing the SOP shelves weekly or at least monthly. Keep in mind that SOP’s are captured business, no selling necessary just get the client back in the door. Darryl, says, “Parts employees must keep the communication open and notify all special order customers including the service department immediately when parts arrive and communicate any change in expected arrival dates. Any lack of communication with our customer can affect customer satisfaction and profits.” Communication with these clients is vital, and think how this can have a positive impact on retention – you are all aware of retention right?

Infiniti of Peoria has a fairly detailed Employee Daily Tasks document along with another entitled Parts Team – the latter outlines all that is required of the parts staff in an effort to ensure the department is run effectively. Additionally, Victor, Darryl, Marc and Jesse all detail how they perform routine spot bin checks. Darryl indicates that “currently we have 230 parts bins and count the entire inventory every month (on the average 21 day month 4 employees average 2.75 bins per day). Jesse Harris from Roswell is even using the Parts Verification software that utilizes a bar-code scanner that a few others also use (contact Jeff Chaffee at Inf of Thousand Oaks in California). In order for ASR to work effectively on hand counts must be accurate.

One last point of interest is departmental goals – do you have any and do you track and monitor your progress. Goals are like a road map. Without the map, you could get in your car and drive but never quite know where you are headed or how long it may take to get there…wherever “there” is. Set goals, either sales or profit related. How about growing business – gaining two new wholesale accounts each month – that seems reasonable and doable. Are you familiar with running various reports on Infinitinet, or using Excel spreadsheets to monitor your progress? 

Make sure that your goal is SMART

·         Specific - what are you going to do?

·         Measurable - If you can’t measure it, you can’t manage it

·         Attainable - If goals are set too far out of your reach, you probably won’t commit

·         Realistic - Realistic does not mean easy, rather do-able

·         Time sensitive - Putting an end-point on your goal gives you a clear target to work toward (end of the month, quarter or year)

Thanks to those who shared their input. If you have anything to add, feel free to comment to this thread.

Tis’ the season

I've been getting a lot of calls and emails lately on the typical end-of-year routines:

• Physical Inventory
• Discrepancies
• Appreciation/Depreciation

Apparently, many out there have not, or do not compare notes with accounting throughout the year – meaning MONTHLY, DOH!!!!

Let me reiterate a statement from my last post from December 7^th:

Do not wait all year long, only to find out after doing a formal inventory that Parts and Accounting are several thousand dollars apart. It is easier to go back 30 days to try and find a problem versus going back 12 months to research.

Before comparing notes however, you must ensure you have all your homework done. Check the following every month before giving accounting an inventory figure.

• Have you provided accounting with your monthly appreciation/depreciation (page 1 of the transaction summary, x35.2, as the monthly parts price update variance may not be the sole app/dep). Bare in mind that your accounting office may only make an update to app/dep once a year. Be sure to track your changes monthly so when they make theirs you’re both on the same page with the correct number to adjust by.
• Have you verified inactive parts (x32.6). They must be activated (x3.1, F20) or else they won’t count in your inventory value.
• Negative on hands (x32.6) – you cannot physically have a quantity less than zero – this will lower the value you reflect putting you farther apart from accounting's number.

If you are fortunate to get a copy of the financial statement beyond the sales and gross page consider your self lucky, and in the minority. Many do not get the expense pages or the 1^st page that reflects the parts inventory value. If you are in the majority – those who are blind to the financial statement, then your only real option is to arrange with your accounting manager to provide at minimum, the values that accounting states are in accounts 24200, and 24400.This is a reasonable request.

Now you can compare their figure to yours. As for the parts figure, only use the ending value found on page 2 of the Transaction summary (x35.2) or the value of “all” vendors found on the Valuation report (x35.3).

Regarding inventory, if there is a clear discrepancy after all the counting, checking and verifying be sure to understand whether accounting makes the adjustment or not, otherwise, you will start the next period out on different pages.

I have a whole write up on x35.2 called “Inventory Analysis Explained”. If you want a copy, send me an email. additionally, read throughout this blog to find other pertinent posts that talk about these topics and many others.

Discrepancies with Accounting?

How does this happen? You buy a $5 part, and sell a $5 part; accounting debits and credits your inventory accordingly so how could there be a discrepancy?

What leads to discrepancies?

• ·         Appreciation and depreciation not being reported correctly
• ·         Discounts not being reported correctly
• ·         Parts returns from wholesale accounts
• ·         Parts that get swapped over the counter but inventory does not get adjusted
• ·         Inventory that gets misplaced
• ·         Etc, etc, etc

Parts managers have a constant challenge to ensure what they say they have is in fact what they physically have. Challenging still is convincing accounting personnel that somehow they made a posting mistake somewhere along the line.

Vital to minimizing discrepancies is having a reconciliation process in place. Ok, now that may sound a bit formal but in reality it could be as simple as merely comparing inventory values with accounting every month, or it can be as sophisticated as running multiple reports and filling in spreadsheets that get reported to your corporate office.

If you have no process in place, remember that you as the Parts Manager are ultimately responsible for the Inventory figure that accounting states you have – you have to prove them wrong but it is still all on you. Start somewhere, and ask questions when something does not make sense. If this is new territory for you call another parts manager within your group or even at another dealership, I’m sure they would be willing to assist and advise you.

Do not wait all year long, only to find out after doing a formal inventory that Parts and Accounting are several thousand dollars apart. It is easier to go back 30 days to try and find a problem versus going back 12 months to research.

If you have a solid reconciliation process in place, please chime in and comment here.

Those outside the U.S.

In just the last month, individuals from outside the U.S. have found there way to this blog.

	Pageviews
Ukraine	9
Germany	4
United Kingdom	3
France	2
Russia	2
Brazil	1
Indonesia	1
India	1
Philippines	1

If you are from one of these countries above,  I am very curious to learn if the information you find here is relevant and useful to you. Are any of you affiliated with Nissan or Infiniti dealers in these countries?

Don't hesitate to add a comment.

It's all in the numbers...

What happens when a service consultant writes up a work order but fails to get all the right information? For instance, if a job line said “perform alignment” what does that mean? Should the technician, simply perform an alignment? If I was the technician I would at least want to know if the vehicle pulls to the left or right. Tires could be improperly inflated. The customer may have hit a curb or there could be some other suspension related symptoms. Simply performing an alignment would not necessarily fix the problem. We need more information right?

Now let’s look at this from the parts department perspective. Who has been told to “reduce days/months supply” for example? It’s not so simple. In order to do this we need more information.

Do you know how to calculate days or month supply? 

To do this you will need some data. You need to run a transaction summary report from x35.2 – it’s the first report on the screen.

Should you only look at factory parts or do you include non factory parts too?

How about tires and chemicals? Could these be contributing to longer days supply?

Should these commodities be factored out? They could be if you have them in their own classes. Now you need to know what combinations of Vendor/Class to pull.

• Vendor “ALL” & Class “ALL”
• Vendor “INF” & Class “ALL”
• Vendor “INF” & Class “REG”, or how about Vendor “INF” & Class “TIR”

Next, specify the date range for January 2012 to October 2012, or the last full month.

Now you will make note of three numbers:

1. On transaction summary, page 1 make a note of the beginning inventory value (cost column).
2. Then on transaction summary, page two, get the ending inventory value (cost column) found just below the Sales category.
3. Two lines above that, you should see a totals line (not Total Changes) in the Sales category. Note the number on the totals line found in the cost column – this is your “cost of sales” (COS) for the period you selected.

To keep things simple, take the beginning and ending inventory values, add them together then divide by two to get the average. Another way to do this is to get each month’s inventory value, add them all together then divide to get a more precise average.

Next take the COS number and divide it by the number of months for the period you ran. If you ran Jan-Oct, then you would divide by 10.

Now you are ready to calculate your months/days supply. It goes like this:

average inventory value / average COS = x

You should get a number something like 1.97 for instance. This is months of supply. To turn this into days supply, multiply it by 30.

1.97 x 30 = 59.1, or 59 days supply

How do you combat high days supply? Well first, with ASR, average days supply (190 dealers) is around 58. This is because ASR’s goal is to satisfy off the shelf fill rate. While you can calculate the days supply number, with ASR it is not easy to manage to a days supply number. There are several things you can do to make sure the days supply number is as accurate as possible.

First, you need to ensure your inventory value is accurate and that it is in sync with accounting's number. Next, there are many things to check and clean up:

• Negative on hands
• Work in process
• Open orders
• Pending RFC’s & cores
• Unpaid special ordered parts

All of these can contribute to an inaccurate days supply number. Again don’t forget about factoring out certain commodities that have long shelf lives (tires chemicals, etc). This is easy to do if they are in their own classes.

ASR Stuff

This information was previously emailed but I felt it was worthy of a post here to the blog...

This is something that comes up all the time - “How do I account for work in process (WIP)”?

Many newer parts managers who have experience with other DMS systems may not be clear on this point as Infinitinet looks at WIP differently…

            Never, ever, under any circumstances add WIP to your inventory total as it is already included.

Any parts report you generate that reflects an inventory value is based on ON HAND quantities. On Hand is the sum of Available + Open as noted in x3.1 for example.

When you generate a WIP report (x32.6) use this as a point of reference only – do not add that amount into your inventory value, this means that accounting should not add it into your inventory on the GL either.

Recently, several PM’s have raised this concern only to learn that for some time accounting has been adding WIP back, which creates a major discrepancy between Parts and accounting. 

How should you measure your performance

What key statistics do you use to determine if you are improving your parts department performance and efficiency?

Though important, if you merely review last months overall sales, gross and net profit compared to prior month or prior year that does not necessarily mean you are excelling. Keep in mind that in that same time your customer base has likely increased too so you may just be staying in step with business.

True turns, gross turns, days or months supply are not indicators of your performance. In fact these numbers can likely be false based on what you include or leave out. Additionally, these calculations are not only old school but only very basic components that measure the state of your inventory to a certain degree. It’s like going to the doctor and getting your blood pressure or temperature taken – it doesn’t really tell you much. These indicators have nothing to do with how effective you manage your department. Your management of the inventory investment is a part of the picture but there is much more to it.

So what types of information should be considered when trying to assess how well your parts department performs? Personally I look at Department performance based on two components; inventory performance and sales performance. I would include the following regarding an evaluation of inventory performance:

• Lost sales – do I really need to say anything more about lost sales?
• Aged inventory dollars (no sale for 10 months and greater) - In my book, anything over $10,000 in this category is a lot of wasted money. Review aged inventory regularly.
• Return utilization – maximize every return opportunity, 90% of what is suggested or better is the goal to strive for. In turn, this will help to minimize the aged dollars above.
• Off-the –shelf fill rate – 93% to 96% is where the good dealers are at. Yours could be higher but keep in mind if you do not record lost sales it will be higher because lost sales are part of the fill rate calculation. This merely means that your fill rate is inaccurate, and not true.

Regarding Sales performance, of course increased sales and increased gross is certainly good, and expected. Here are some of the things I would look at regarding sales performance that you likely may not be paying as much attention to as perhaps you should:

• Expense reductions – do you know what your expenses are? Do you monitor expenses and try to find areas to reduce your exposure? Are you even privy to the expense portion of the financial statement? At the end of the day, it all comes down to net – right, so watch the expenses and your net may increase.
• Wholesale growth – assuming you are in the collision and mechanical business. How many new accounts did you gain? How many accounts spend $1,000 or more each month and how much do they return? What effort you put toward increasing the number of active accounts or do you simply wait for the phone to ring?
• Accessory sales growth – I know this is a tough area but if you do not put forth any effort don’t expect to make much money either. Are your displays current and do they provide clients with information about the accessories available? Do you have a pricing program worked out with the sales, and service departments?
• Service department sales specials – when you promote and display products in the service drive and in common areas they can lead to clients making additional purchases. When they can’t see these products they likely will never inquire about them. Floor mats, wipers, and tires are typical items to consider displaying and promoting. And don’t forget to change the displays often, just like any retail store does. This helps to keep things attractive and enticing. Take a field trip to a competitors store and observe how they display and market their wares.
• Special Ordered Parts – review these regularly with service. Try to get prepayment upfront, and set up appointments at the time of the order – this sets the hook. The biggest thing you can do is ensure you have solid communication between Parts – Service – and the client. That is the only way SOP’s will move off the shelf. Don’t forget with nearly every SOP there are labor dollars too.

These are some of the areas you might not think about regularly but you can really gain additional sales and exposure to your clients when you focus some attention on them. Try zeroing in on one of these areas for a month or two. If you put forth the some real effort, there will be a payoff.

Anybody miss me?

2012 ASR training wrapped up this month with the last class in Irvine CA. And yes, I did stop for an In-N-Out double-double, animal style, while I was in the OC. 

I have been a bit remiss in posting due to the travel schedule recently and the fact that I have frankly run the gamut for posting parts inventory management articles without seeming repetitive or redundant – just check out the archives to the right of this page to see the many items previously written.

For any of you who are Nissan dealers also, you should be familiar with the Dealer360 community forum and understand how the sharing of information between peers can be a great source of knowledge and insight. That’s what I would like to see happen on this blog too.

Perhaps I could open the door to questions – is there something ASR or Infinitinet related that you would like to know more about? How about sharing – does anyone have a process they found works for them that would be worth sharing? Another subject: setting goals, growing wholesale and tracking performance – what works and what doesn’t? How do you motivate your staff? Is it incentive driven or based on penalties.

There are a multitude of topics that could be discussed and I would really like to hear from you, as would others I am certain. There are a lot of new parts managers out there who are barely finding there way, not to mention understanding what their new role entails. Many have found the articles posted here very helpful, so again, please review the archives and do not hesitate to chime in on my aforementioned suggestions using the comments box.

Special Ordered Parts

One way to improve client loyalty, retention, and keep technician and service department productivity high is to develop a process for special ordered parts, and most importantly, a solid client communication and follow up process. Added benefits include minimizing aged inventory and improved parts/labor sales.

With nearly every SOP there is associated labor, which means increased sales and gross profit. SOP’s are guaranteed business – nothing more to sell, just get the client back.

Special order parts tend to age faster than a stocked part because parts ordered for specific customers have little to no chance of being sold except to the customers who requested the part.

If you take your eye off the Special Order ball, this can be the beginning of a large problem. A parts manager that manages the special order parts process on a regular basis will have a handle on their obsolete inventory value. Sadly, approximately 85% of dealerships don’t control their special orders as effectively as they could. And don’t forget two very important factors:

A large portion of idle inventory or obsolete inventory comes from four primary areas of the day to day parts operation:

• Over-ordering by technicians to satisfy customer problems; i.e. they order 3 parts for the customer vehicle, knowing that one of them will fix it, giving back the two they didn’t need.
• Returns from wholesale customers, especially Body Shop Accounts – hard to control.
• Customers not returning for parts special ordered, especially non-critical items under warranty.
• Parts ordered in error, either by not having the right information and/or lack of training by parts advisors.

With Retail customers, I recommend prepayment for any special ordered part. There is nothing wrong with asking for prepayment for a special ordered part. When this is made a policy, then exceptions to the policy can be made.

Get these customers in and move this idle capitol. This will help fill the shop, improve technician productivity and also improve service retention, not to mention the Parts department sells more parts.

The biggest problem with SOP’s is the communication to the client, and regular follow up. The parts manager and service manager should get together to understand the importance an SOP process has for both departments.  

Even if you do not have a problem with unsold special orders, a policy with procedures for dealing with them is vital. Parts and Service must be in agreement with the process that should entail a simple documented process, visibly posted so that everyone is aware. It should include instructions for:

• Processing special orders
• Contacting special order customers
• Dealing with unsold special orders

Here are some tips to help you manage these parts:

• Make sure every department, senior management, and all parts personnel are made aware of the seriousness of holding special orders.
• Get prepayment from Retail Customers, every time – is that wrong?
• Use all methods available (cards, telephone, e-mail, texting) and make at least three attempts to contact or notify the customer about their special order. A bullet proof communication process is vital.
• Make individual employees who order parts for the customer responsible for complete follow-up of the order.
• Develop an agreed upon cost-sharing policy with departments that have ordered parts on a customer's behalf.
• Whenever possible, make customers aware of return deadlines for unsold special order parts so they can be routinely returned in accordance with manufacturer programs or returned without penalty.
• Make it a policy to review unsold special orders weekly-to avoid the threat of obsolescence.
• Check Infinitinet and verify that Appointments have been made before the Service Customer leaves.
• Remind the Advisors with the Special Order Parts Received report for their customers daily or weekly.
• Encourage your Parts Personnel to require all the necessary information for accuracy in ordering.
• Finally, and maybe as important as the rest, involve the whole Dealership with Special orders. Talk about SOP's in Management meetings. Explain to Management what the downside is to having too many unused Special Orders. Make sure the Service Manager knows that most of these parts are his/hers. 

It’s the little things…

Do you ever discover an issue and scratch your head trying to figure out “how’d this get to be such a mess”? There wasn't any single catastrophe that caused the problem, rather several little things that added up to wreak havoc.

In the ASR/Infinitinet training I conduct, much time is spent going over what may seem to be basics or fundamentals. Any sports team spends time doing the same thing; they practice basic drills and fundamentals like ball handling or throwing or kicking. These kinds of exercises are critical to the performance of a team and the same principles apply to any job. Understanding the basics establishes the foundation from which to build upon and also helps to maintain consistency and become more effective.

So what types of basics am I talking about as it relates to parts inventory management?

In no particular order they include:

• Recording Lost Sales – of course I’m going to lead with this one – you should all know me by now! Recording Lost Sales are critical to the effectiveness of ASR. A lost sale should be recorded for any request for a part you do not have at the time of the request, even if you can find one or have one on order. Remember multiple lost sales for the same part and recorded during the same ASR week (Sat-Fri) only count as one demand.
• Work with orders screen – you should have no more than two screens of orders, or 22 lines. Is there a reasonable excuse that there should be more than 22 current pending orders? Be sure to keep up with receiving all parts that arrive to bring them into inventory electronically. Remember an ASR part that shows on order because it was not received properly will not reorder which may result in an out of stock condition. These un-received parts may also lead to negative on hands too.
• Negative on hands – it is impossible to have less than zero of a part so check these regularly, but only after clearing up x3.3 (work with orders) first. Negatives will also affect the inventory value you believe you have. If you have $5,000 in negatives, your inventory value will increase by that much when you raise the negatives back to zero.
• Inactive parts – these are usually part numbers that are manually created but then not activated. The create part number procedure must conclude with “F20” which activates the part. Your inventory value is a reflection of only active numbers, which means that if you do not activate the part, you will not show that dollar amount in inventory, but accounting will and now you have a discrepancy.
• Return utilization – maximize every return opportunity. The ASR and MOQ portions of your returns should exceed 90%. Any thing less than that means that you are either holding on to parts you could have returned or suggested parts are not even in your inventory, therefore you can’t send it back. That is a bigger issue and an indication that on hand counts are not accurate. Maximizing returns can help minimize aged inventory create space and put money back into the dealership. You can check your actual compared to suggested with option 16 from the x3.4 screen.

Are there more little things? Certainly, but these are the real basics, and I am surprised by the number of dealers that do not perform well in these areas. These are the little things that really add up and can have a dramatic impact on the effectiveness of your inventory and your ability to satisfy customer demand.

Food for thought...processes

Who out there was in this business during the 80’s and remembers how there were lines of customers out the drive all the way to the street? The body shop business was not controlled by the insurance companies. We were making money…life was good. Today? Not so much. Gone are the days when business was all around you and it was a challenge to simply keep up with it.

Remember when servicing cars included parts you could replace (cap, rotor, plugs, fuel filters, an occasional set of plug wires, clutches). Vehicle quality has improved dramatically – great for the vehicle owners, more challenging for parts and service. The collision business has changed a lot too. The rules and restrictions from insurance companies have made it more difficult because of two big factors: time and cost.

Like anything else, this business has evolved. I’m not sure into what, but evolved nonetheless. You still must work hard but not in the same way. Today, process is more important than ever. Without processes in place levels of service diminish, business will suffer, and what does that really mean? It means that customers will go elsewhere because they have many choices.

Put yourself in their position. You are all consumers of goods. You all shop at electronics stores, department stores, the mall, the grocery store. Why do you elect to shop where you do? In some cases it is because of price and selection, however how much of that decision includes quality or level of service. What is it that some of those stores do that makes it easy to do business with them? What can you adopt and adapt from them into your own daily practices?

In my training I talk about how the parts department has several customers (wholesale, service, sales) but at the end of any request you get from these customers is someone driving an Infiniti. There are lots of luxury vehicles, Mercedes Benz, BMW, Audi, so much like the many choices you have with who you choose to do business with, vehicle owners also have many choices when it comes to purchasing and servicing their vehicle. Why pick an Infiniti?

This goes back to processes. Let’s say you need to special order some part for a home repair. If the store did not contact you to let you know the part was in would that be frustrating? Or how about when the part that comes is the wrong size because too few questions were asked to ensure accuracy? Wouldn’t that be frustrating? Wouldn’t that cause you to think about doing business elsewhere with someone who knows what they are doing?

So now you’ve lost that service customer or you’ve lost that wholesale account simply because your processes are not clear and understood by everyone in the department…fix it!

I mentioned how this business has evolved and how customers have more choices than ever. Losing them is easier to do now than you may realize and with the way blogs and social media have the ability to shape peoples perceptions the last thing you want is for an unhappy customer to post something online for their 9,374 friends to like or not like and then get passed along to even more people.  

Look at your processes. Ask other department managers for their opinions, it is likely they may see or detect something you cannot. Talk with your staff. Ensure they all know what the process entail and that all steps are covered. At the end of the day, this can help save these customers and give them a reason to do business with you.

Reprice, or not to reprice? That is the question.

Ok, so it is a lame title but after a week out of the office visiting Infiniti retailers having traveled from Buffalo to Atlantic City, with a few scenic stops in between, that is all I can muster today so bear with my lack of creativity.

When is the last time you have looked at your pricing matrix? I posted on this before, but after having visited a few dealers last week, and getting to know many new parts managers over the phone in recent months, it is clear that some out there haven’t looked at this for some time or have inherited a department and never gave this a second thought. There are dealers out there whose retail price (typically price code 8), is set to = 100% of price 4…yes that’s right, the same as suggested list.This is because they simply were not aware of where to go and what to do.

Has the cost of new vehicles gone up in the last couple years? How about your service department labor, not to mention the cost of gas, milk, and Girl Scout cookies? I love the Samoa’s – the ones with the coconut. Isn’t it time you take a look at your pricing matrix? Is parts not worthy of an annual pricing structure increase?

To assess where you may need tweaking take a look at page two of the Transaction Summary report (x35.2) which will break down all your sales types. Look at the gross profit margin % column. Here are a few key indicators:

• CT Retail should be around 38-43%
• CT Wholesale should be around 20-24% (if it is below 19% you are losing gross and not making a dime on wholesale)
• W/O Customer should be around 34-40% depending on how competitive your maintenance services are set up.
• If CT and WO Internal is low, like in the teens, you may want to revisit that pricing structure with management, or it may simply be what it is – some dealers actually get full retail on internal.

So if these figures look light, you may want look into how your pricing is structured, and of course, I have a document for that. Email me for the pricing matrix instructions, or you can find it via NNANET/Workspace/Online Manuals.

International Success?

In the last month I have seen international page views of this blog increase. I am curious to learn from those abroad if something here has been of interest to you. Are any of you Infiniti Parts Managers in other countries? Are these posts helpful for your business? Please share any comments.

United States - 577

Russia - 80

Brazil - 7

Thailand - 7

Ukraine - 6

France - 5

Japan - 5

United Kingdom - 4

Canada - 2

Colombia - 2

ASR - Infinitinet Parts Training for 2012

All, I am happy to announce the calendar for Parts training for 2012. A session for Irvine CA will be offered soon when a date can be determined.

The only course being offered this year is the Level I/II course and the locations/dates are listed below. Each location is available for enrollment now. Log into Virtual Academy to enroll. If you do not now how to do this, contact me and I can provide you instructions to get there.

The intended audience for this course includes parts managers and parts personnel who are new to Infiniti or have not attended this course previously.

This Level I/II course is the same as the one offered in 2011 and combines the main elements from the level I and level II courses that were offered in previous years into one combined course.

Topics covered in this course include:

• ASR System Overview, ASR Features, ASR Returns
• The impact of Lost Sales
• Work with Orders (x3.3)
• Management of your capital investment - Obsolescence and Special Ordered Parts
• The Parts Department and ASR
• Management Reports - which ones to run, what they tell you, and when to run them
• Quick Reference Materials that include:

ü  Smart Ordering

ü  The effects on gross profit and accrual with VORs vs. Stock orders

• Gross vs. Markup - detailed explanation including markup matrix, calculation

Additional documentation includes Infinitinet training documents that will assist in handling backorders, creating new classes, processing RFCs and performing cycle counts through spot bin checks.


Classes will be held in the following locations:

• Ft. Lauderdale Training Center - 6/6/12
• San Francisco/Livermore - 6/20/12
• Chicago/Aurora - 7/11/12
• Nashville/Franklin - 7/25/12
• Dallas - 8/8/12
• Somerset NJ - 8/22/12

Write it off?

An unfortunate, yet very common occurrence in the parts world is having to deal with parts in your inventory that are non-returnable. Of course these parts can exist because of a variety of reasons including returns from wholesale accounts (anybody have a halfway primered hood with a bent corner???), parts that somehow became damaged while simply sitting on the shelf after 4 years, parts that may have been previously installed and are now ineligible for return, or even parts with damaged packaging and torn part number labels.

Whatever the reason, these are parts with a dollar value in your inventory. You cannot simply discard them without some agreement from your executive management to take that loss. And this is an important consideration because if they are written off, and you are allowed to discard them both physically and electronically (adjust the quantities out), parts needs to ensure that accounting adjusts the 242 account to eliminate a discrepancy.

Also, keep in mind that once these parts do get written off, you cannot put them back in your inventory to take advantage of a gross-profit opportunity – this is illegal. These parts must be discarded with proof of how they were disposed of.

So how does this work – that is my question to those reading this blog. Do you have an annual write-off or scrap methodology. How about donating viable parts to trade schools? Then there is the 669 account (I call it the slush fund), which can be used to offset the write-off amount.

I would like to hear from those who have a process in place for this so please comment here and share your methods for the sake of others that read this blog. 

Yep, Lost Sales...again!

Lost Sales is a funny thing. They are one of the most fundamental aspects of effective inventory management, yet one of the hardest to make routine or habit.

First and foremost it is the responsibility of the Parts Manager to clearly define to his or her staff what a Lost Sale is and isn’t.

Second, the PM must also explain to their staff why recording lost sales is important and how it affects the way parts may ultimately phase in.

Third, a PM must understand that in order to record lost sales effectively, the recording philosophy and process must be taught, monitored, and most importantly enforced.

With regular training (since 2007) and monthly reporting from Corporate to the dealers, Infiniti dealers have increased their lost sales recording over 440% (yes, 440%). The net affect has seen improved off the shelf fill rates, less VOR’s, and increased return utilization, all with minimal impact to increased inventory value.

 ASR on Infinitinet is different from other DMS and RIM systems.

ASR looks at lost sales differently compared with how other manufacturers do and how other DMS systems treat lost sales - with ASR there is ZERO risk. If a part is phased in by ASR there must be transactions to justify it. If an ASR part has no activity for the next 12 months ASR will ask for it back at 100% credit.

Is a phone inquiry (assuming the part is not in stock) simply that, an inquiry? Yes, perhaps. Should it be a recorded as a Lost Sale? Yes and here is where recording a lost sale in that instance is not a bad thing.

If a request for that part never occurs again, then the one lost sale didn’t hurt as there would be too few transactions for ASR to phase it in.

If an instance (sale or another lost sale) does occur in the future, then ASR would track the history and determine, over time, and based on the phase in matrix, if it meets phase-in criteria.

My point is the lost sale does not hurt and establishing the habit is important. Multiple transactions that occur between Saturday to Friday (the ASR week) for the same part number are only counted as 1. Recording a lost sale does not automatically phase the part in, and will only if there has been enough demand. you prefer to order or carry in stock.

When you record too few lost sales, this will have an impact on your ASR order utilization, thus forcing you to place more manual orders to compensate. Let ASR see all the demand, then ASR will place the orders.

Keep in mind the role that the Parts department plays in service retention, shop and technician productivity and even the availability of loaner cars. ASR needs to see all the demand.

I have a few rules - when in doubt, record the lost sale – always better to err on the side of doing so versus not.

Next, record all lost sales from your service department. This will impact the parts that your service clients need rather than what you may prefer to carry in stock.

Last, and likely controversial, my definition of a lost sale is “any request for a part that you cannot satisfy from your shelf at the time of the request” (period)…regardless if the part is on order or down the street at another dealer. The fact is you did not have the part in stock.

One last thing, and this may or may not be common knowledge, each individual who is able to sell parts should be recording 2-3 LS per day as a guideline. If you figure at a minimum of 2 per person per day, and considering Saturdays (about 312 business days), the magic number to strive for, annually, is 624 per person.

Now start tracking your department’s performance (do you know how? If not email me). 

Ok, I’m done.

So how do you measure success or improvement?

Is it measured by dollars sold, or gross profit banked? Perhaps.

How about measuring your fill rate as it relates to CSI, or retention – you do know what your client retention is don’t you? You should. Keep in mind if you don’t have the parts readily available to service your clients vehicles that could ultimately be a factor in whether they decide to come back to see you in the future; you do play a part.

There are still some old-school methods in place to measure success or improvement ans some new ones, and there are many factors to consider. How about a reduction in aged inventory? This can be measured very easily from reports. Also, there is ASR return utilization. You can calculate this very simply too. Additionally, your FOM’s get a report from me monthly that reflects aged inventory and return utilization. These are just a couple of things to think about.

Key to being a good manager is understanding what to look for and how to track it. Certainly, this can seem daunting but start small. Focus on one or two key areas to track until it becomes routine. You may then find it becomes easier to track additional measurements.

Throughout this blog (scroll through the archives) there are more than 50 posts related to being more effective, knowing what reports to run and when, and why. If you are presently not tracking or measuring something, how will you improve in that area?

Feel free to chime in and share your thoughts on things you do routinely that have helped you recognize improvement and success.

Parts Pricing and Overrides

Do you find yourself overriding prices from time to time? Having to override pricing means relying on everyone remembering to do it which creates inconsistency. Of course, there may be specific situations that require an override but there are ways to avoid this especially if the override is something you need to do routinely.

Depending on the scenario parts pricing can be controlled in several ways.

First, the prevailing pricing matrix. This is setup by vendor – when was the last time you looked at this or modified your margins, and do you know if it is setup correctly for each vendor? I have complete documentation for this. If interested, send me an email and request it.

Second, you can control parts pricing at the part level via x3.1. If your Retail field (price code 8), or any of the other price fields (A-H) listed above Retail, for a particular part is too high or too low (this is dictated by the matrix), you can change that price on the field itself but that does not lock it in. The next time you run a monthly price update that field will change back to reflect the matrix pricing.

To lock in a price in x3.1 for a particular price field, enter the part number then press F21. In the next window simply tab to the price field in question, enter the new price then be sure to select “N” for repricing. This locks in that price and ignores what the matrix wants to dictate. Here is a tip – you may want to keep a record of part numbers you alter in this manner noting the original price and the date it was locked in.

The third way you can affect parts pricing, based on the scenario, is actually found in a service configuration screen.Go to x78.1, Work with Service Coverage Codes. Coverage codes are what service uses to indicate “who pays” on a work order line. For example, coverage code “C” is a fairly common one. Find “C” for make INF and select option 5 to work with. In the middle of the screen you will see the price code that “C” uses to price out parts on a work order line. You may want to look at other coverage codes to determine if the correct price field is listed.

Here is where this gets interesting. While you are looking at the details of the coverage code, at the bottom of the screen is F8 – parts pricing by vendor…press F8. Here you can specify to use different price codes for different vendors.

These are three different ways you can affect your parts pricing and create consistency by minimizing unnecessary price overrides.

Returns, Inventory & Training

Infiniti retailers should all now be in the midst of the first ASR return for the year. If you are new to this process and would like to have documentation to help you through the return procedures just send me an email. Be sure to submit in a timely manner, and if a delay is necessary you must contact me so I can make a note of it.

This is also a good time of the year to prepare for your annual inventory if you have not all ready performed one. Be sure to review my previous post from December 15^th regarding the recently fully revised Physical inventory guide to help guide you through the inventory process as well.

I have sent emails to many of you, other parts personnel, and your FOM’s, regarding Parts training for CY12. I am interested in learning what you want to learn. I intend to continue the ASR/Infinitinet course that I have been conducting but frankly the responses have been very light. I have only heard from 39 people interested in some form of training this year. These 39 are spread out all over the country and I won’t be able to justify the travel and materials expense for an audience that light. If you are interested in training, please email me and let me know what you are interested in.

Lastly, I am interested in learning what new technologies you might be using to manage your inventory. For instance, on the DealersEdge website there is a thread with a link to a YouTube video

(http://www.youtube.com/watch?feature=iv&annotation_id=annotation_583705&src_vid=rSdP-CslnmQ&v=F6nubvVWdrg)

that shows a PM from a domestic store using an IPhone to scan parts and conduct inventory – that’s pretty cool. If you have something you’ve found that has helped create efficiencies for your parts department, feel free to reply to this post and share with everyone else.

Revised Physical Inventory Guide

Now available is a revised Physical Inventory guide. 

The existing guide has been updated to include additional tips and information along with fresh screen prints, and is in color. 

Usually, around this time of year, there are plenty of calls in preparation for conducting an annual inventory. If you are interested in this revised version drop me a line and I will forward a copy to you via email.

Hello – yes I am still here!

The last several weeks have been quite busy and I apologize for being so silent. This is a busy time at Nissan North America and the latest project that has occupied so much of my time has been the NASPC Parts Manager Survey. This is an annual survey that falls into my area of responsibility. The survey is conducted through Carlisle, an independent company who facilitates an annual Parts Manager, Service Manager, and recently, a Technician survey all under the NASPC title. Once the survey has concluded, Carlisle provides the raw data results (scores and verbatim comments) to each manufacturer that participates.

This year 19 OEM’s participated (Nissan and Infiniti each count as one). Later this month Carlisle will present their findings to our Executive Management. Each department has all ready received copies of the raw data scores and during the upcoming meeting we hope to identify the priorities and define the next steps.

I want you all to realize that we do listen to what you have to say, we are concerned about trying to do the best job that we can but also want you to bear in mind that while some changes can be easy to implement, others can be quite challenging, especially when it has to do with resources or technologies.

Hopefully, once we get past the upcoming holidays, I can report back to you with our plan moving forward based on your feedback.

On a different subject, I have quite literally run through my library of training topics to post here so I am not sure what more I can do on this blog from a training perspective. I very much wanted to see greater participation between you and your peers here but I guess everyone is simply too shy to share.

Please do look through the archives, especially if you are new to this blog. I will attempt to keep this blog alive with relevant content for you but please do not hesitate to comment on a previous post in an effort to spark more discussion.

Till next time…