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A Guide For New Parts Managers – A How To

Fixed Ops Magazine – So You Made It As Parts Manager Pg 32-36

By Shawn Larkin – Nov/Dec 2017 Issue

View Article Here;
http://bit.ly/2ApTNV6

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Every Dealer Has The Problem. It’s Not Your Fault – Unless You Don’t Do Something About It

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Your Options Are Limited – But Here You Are…

Your Full List Of Options For Idle Parts Inventory

Options are limited, but in alphabetical order below. Pick the one that fits your dealership:

Auction:
After all expenses are paid, usually 10-15% of original parts cost is recovered. But get rid of all those parts at once.

Cash Discovery Program:
A dealer-to-dealer network, where parts are at 50% of dealer cost. Parts moved in bulk.

D2D Link:
Available for Dodge, GMC, and Ford dealers. A Part-By-Part transaction platform. Manual process with various parts prices Discounting required to make it lucrative for other dealers to purchase.

Dealermine:
A dealer to dealer network, where parts are at 50% of dealer cost. Parts moved in bulk.

Ebay:
An established audience. Listings are typically 1 part at a time with time required per listing unless dealer has signed with a digital software company to provide this service. Typically, the majority of a dealer’s inventory is listed on eBay with this software.

NADPE:
A dealer-to-dealer network, and an emerging technology, where parts are exchanged evenly at dealer cost, in bulk. No write down of parts.

Write Off:
Write off the part in full, and toss in garbage. 100% loss. Problem disappears from shelf, and reallocated to financial statement.

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A Disruptor In A Positive Movement In The Auto Industry

NADPE is out to disrupt dealership parts departments

Read the story here

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You’re Not Exempt – I Assure You, You’re Not

If you think your dealership is exempt from slow-moving/idle parts inventory, think again.

Walk back to your parts department and ask someone, or look at part’s managers inventory reports closely. You have more ‘2002 Chrysler Concordes’ In your inventory than you’d expect.

On average, it’s nearly $88,000 per dealership. Fact.

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Don’t Just Take Our Word For It…

…everyone is talking about NADPE

“I’ve gotten rid of more than $40,000 of worthless stock, painlessly”

“Recently there has been a major shift from the manufacturers AWAY from return accruals and therefor parts returns. With this in mind, there couldn’t be a better time to launch NADPE”

“Most vendors manufacturers have gone to an auto replenishment order system, and it has increased inventory amounts by hundreds of thousands of dollars. Where in the past I was able to keep idle parts at zero, I now have some parts that have had a birthday and a half, sometimes two birthdays, on the shelf. It’s unacceptable, but it’s a problem for every dealer. That’s where NADPE helps.”

– Randy Buyers – Parts Manager
Ontario Chrysler

“Your only loss is removing your obsolescence parts on your shelf that are collecting dust”

“If parts managers are staying on top of it and uploading their inventory, NADPE is a sure-fire way to prevent losing up to half the value of their parts.”

“Most dealers set phase-out at nine to twelve months. I believe that if a part hasn’t sold in three to five months, there’s no reason to keep it on the shelf. I’d rather eliminate that part from inventory and replace it with parts I’ll turn over regularly. That’s where NADPE really becomes effective.”

– Scott Campbell – Dealer Partner
Mid-Town Ford

“I was surprised to see how well my list matched up with other
Dealers in nearby locations, especially considering we both deal with the same vehicles in our services departments, there were still a lot of parts that matched up.”

– Aaron Robertson – Parts Manager
Herron GM

“General Motors was in last week, and my obsolete parts are now less than 3% of my inventory. So I would say GM return reserve and your program has worked very good”

David Dolomount – Parts Manager
Murray GM

“I’m still waiting for the catch with your program, because I don’t see it.”

– Brad Pierson – Dealer Principal
Knight Weyburn Dodge

“Take a minute to focus on this. It’s brilliant and despite what you might think, nobody is actually doing this their way. It’s incredibly simple and designed by a Fixed Ops Manager who came up through Parts. I know these people.”

– Tim Alderson – President
Alderson Consulting

“There are only a few options for dealer parts exchanges currently available with the most comprehensive – by far – being North American Dealer Parts Exchange.”

– DrivingSales.com Article – For The Parts Managers In The Room – Let’s Talk Idle And Obsolete Inventory

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What Do You Think – Is There A Correlation? PS. The Answer Is YES

Here is an easy way to see the correlation between;

Parts Inventory and Used Car Inventory

Active Parts = Similar to Used Car Inventory Which Sell within 60 Days

Non-Stocking Parts = The 2002 Chrysler Concorde You Shouldn’t Have On Your Lot – It Won’t Ever Sell

Obsolete Parts = That Used Car Over 120+ Days Old. These are parts that haven’t sold in 12 months.

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Non-Stocking Parts – Defined

Typically understood as Parts that haven’t sold within atleast the last 10 of the last 12 months. But don’t use “demand” to define Non-Stocking parts.

It’s a misconception to qualify parts inventory by using only 9 or 12 months-no-sale to define Non-Stocking parts, which never qualified for inventory stocking in the first place.

Non-Stocking parts includes all parts which don’t have enough demand to be in inventory in the first place. This could include parts that haven’t sold in as little as 1 month – but only had 1 sales demand in the last 12 months. Here, you would want to refer to atleast the classic “3in12” stocking criteria to see wither a part should be in inventory or not. Anything less than 3 separate months of sales demand within a 12 month rolling period is considered “Non-Stocking”.

These are the parts you use your used car inventory control methods on. Clear them out as fast as you can.

 

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Two Places Idle Parts Inventory Hide – Part 2

Phased-Out Parts

These are parts which are in inventory that lack demand. Phased-Out Parts once had demand to keep them in inventory. Once they lose demand, they are called “Phased-Out Parts”.

These parts need to go immediately. These parts haven’t sold in the 9 of the last 12 months. These parts have about a 35% chance of ever selling within a 12 month period. Don’t neglect parts with over 12 months with no sales, either.

In using a traditional inventory control method, anything over 9 months-no-sale is really your target number for parts which were previously active, and now are phasing out.

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Two Places Idle Parts Inventory Hide – Part 1

Special Orders

Addressing the first issue is an straightforward task. Implement and enforce policies to reduce special order parts from entering the building, such as having the customer commit to those parts via prepayment. That includes Special Order Parts that are requested in the shop. This means a customer must prepay special order parts if the car is leaving your shop as well as over-the-counter purchasers too.

This isn’t a new concept, and will be explored further in the future. Much has been written on controlling and implementing policies to control Special Order Parts.

Like an oddball color or a bespoke model used car that you wouldn’t bring in unless you already had a committed buyer, you simply don’t chance holding the bag with special-order parts you won’t be able to move otherwise.

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