Effective Parts Management – What to Measure and Monitor

The following parts performance metrics are considered essential to managing a profitable parts business. Each analytical routine should be readily available from your software vendor. By monitoring these data points daily or weekly, your Parts Manager can take corrective action immediately, not at the end of the month. Again, why wait until statements are published to try to identify problems or issues?

Parts Decision Support Metrics

First, the Parts and Service manager must collaborate to maintain and ensure the integrity of the mathematical model called the Stock Status Report. The entire parts service program is based on accurate information: the quantity of the part physically in the bin equals what is shown in the Stock Status Report. However, to maintain this integrity, every transaction, stock in, item out, must be precisely recorded in a timely manner.

These are the areas that need to be monitored.

DAILY
  • Off-Shelf Fill Rate—By line item, partial fill no fill
    To Service Department Overall
    For Strategic OEM Models
    To Key Accounts
    Overall Fill Rate
  • Gross Profit Margin on Parts Sales
  • Back Orders—
    Build a strategy to pursue 5-6 alternate sources
  • Emergency Orders—
    Build strategies to minimize
WEEKLY
  • The Weekly Summary Report
    Gives accurate details on month-to-date sales, profits, expenses, aging, on hand, on order, back order, and total inventory value.

Parts Decision Support Metrics (cont.)

  • Re-Order Points
    Are they correct based on replenishment time
  • Days Supply
    Determines minimum and maximum order size
  • Economic Order Quantities (EOQ)
    Provides deeper inventory for smaller dollar items
  • Automatic Phase-In Report
    Adds items if more than 3 hits in 12 months.
  • Automatic Phase-Out Report
    Removes items if less than 2 hits in 9 months.
  • Negative Inventory Report
    List of parts that have been sold more than shown available to sell in the computer system. This can be due to posting timing or invoicing the wrong part number. Once all packing slips are posted, if there are still parts negative, bin counts need to be verified and on-hand quantities adjusted.
  • Open Purchase Order Report
    List of all parts on open purchase orders. This list should be compared to the parts that are actually in transit or on back-order from each vendor for accuracy. Discrepancies help find posting errors or orders that have not been placed in error.
  • Work in Process Report
    Used to keep track of parts that have been charged to repair orders and unposted counter invoices or pick tickets.
  • Plus and Minus Adjustment Report
    List any adjustments to stock on hand. Will help you keep track of “who” and “why” adjustments are being made. It also gives the necessary information your accounting department needs so a journal entry can be made to adjust the general ledger inventory account for the same dollar amount
MONTHLY
  • Monthly Stock Status Report
    Answers questions: Is it in stock? Should it be in stock? How long has it been there? How many should we have? What’s on order?
  • Lost Sales Report
    List of part numbers that have had an opportunity to be sold but the parts were not in stock. This may be due to stock out or not having a new uncontrolled part in stock.
  • Sales Aging Report
    A detail or summary report showing part numbers in any of the aged categories. Can be effectively used to identify a “plan of action” for reducing over-aged parts.
  • Obsolete Stock Dollar Ranking Report – Monthly
    Lists by dollar value, obsolete line items by OEM.
    Used to focus on reducing high-dollar, over-aged parts.
  • Automatic Deletion Report – Monthly
    Lists all parts that currently have zero on hand and have not had sales in a specified number of months. This report should be printed and bin maintenance performed. This would include verifying zero bin counts and removing empty boxes and bin tags. Any counts can then be corrected and the parts deleted from the inventory.
  • Core Management System
    Vendor core reconciliation and follow-up on outstanding core credit requests.

The competent, professional Parts Manager knows how and when to use each of the tools in the kit. And, a very good place to start when seeking support on how to best do this is with your software vendor. Your dealership has made a very large investment in this information technology, but it is up to the Parts Manager to fully utilize this profit optimization, customer relationship development, and, operations enhancement tool.