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What’s ‘In the Back’: Keeping Your Parts & Accessories Department in Shape
By Mel Selway
What your customers don’t see behind closed doors is a foundation that should operate efficiently.
In my previous month’s column, I suggested that the parts department in some RV dealerships might require some inspection — at least occasionally — to ensure that it is being operated efficiently and profitably.
In fact, the suggested inspection is part of your management exercises identified in the title of this article. I suggest that managers should exercise their “pects” in order to build a strong backbone for your dealership. Each manager should inspect what is expected in order to gain the respect of their associates.
Exercise Basics
It is necessary that management clearly state what is expected. Establish department/dealership operational objectives and policy. This requires identification of what is important — to the dealership culture, to the economic viability of the department/dealership and to serving the customer base. This might require a management team meeting to brainstorm these expectations or at least to refine existing ones.
After establishing these expectations, they must be clearly communicated to each associate — preferably at the same time, verbally and in print. Then, it will be necessary to routinely inspect the performance to these expectations to determine if they are being achieved. I invite owners/GMs to inspect the parts manager, who should be inspecting the parts associates. So, what could be some expectations for the parts department?
First Set
Asset management is a major function of the parts manager in an RV dealership. For this column, I am including the following list of items as assets, though many might argue that some are more properly considered expenses. I am not asking you to accept my classification. However, I am asking that you consider my reasoning after you read this column.
- Parts, accessories and other goods necessary to service/repair RVs
- Dealership supplies to include stationery, dealership maintenance, shop supplies
- Personnel
- Space
- Storage and display equipment
The dealer management system (DMS) database (parts and accessories; customer)
Parts and accessories inventories meet the accepted definition of an asset, so first we will look at the inventory of goods that are controlled within the parts department. In last month’s column, I suggested that you inspect the level of a few randomly selected items to determine if the level is appropriate to the needs of your customers and of the dealership. What did your research expose?
You did perform the spot-check, didn’t you? Inspect what you expect to gain the respect of your associates.
Below are a series of steps I suggest you could follow to determine if you have the right amount of stuff. I am assuming that you will research items that are stocked because they have a recurring, recorded demand. If any of this asset management research mystifies you, I suggest that you contact a consultant to assist you.
The Right Stuff, in the Right Amount
- Select a stock item, perhaps a fluid used to maintain an RV (cleaning, lubrication, waste or other).
- Decide what the gross turn (GT) for this type item should be — for this example, we will use a GT of 6.
- Divide 365 (days in a year) by the GT to calculate the days of supply (DOS). a. Example: 365 ÷ 6 = 60.83 rounded to 61 DOS
- Add up the total demand for this item that is recorded in your DMS or in your manual tally sheet. a. Example: 191 demands over a 22 month period
- Divide the total demand by the total number of months of demand history. a. Example: 191 ÷22 = 8.68 demands per month on average
- Divide the quotient from step 5 by 30 to determine the usage per day. a. Example: 8.68 ÷ 30 = 0.29 units per day usage on average
- Multiply the DOS (calculated in step 3) by the answer from step 6. a. Example: 61 x 0.29 = 17.69 rounded up to 18 = required on-hand needed
- Compare the answer from step 7 to the current on-hand quantity. Is the answer greater than, equal to or less than the current on-hand quantity of the item?
If the answer from step 7 is:
- Greater than your on-hand quantity, then you could be understocked
- Equal to the on-hand quantity, then you are probably at the correct level
- Less than the on-hand quantity, then you could be overstocked
This example is based on straight-line averaging of your demand history and does not take into account factors such as seasonality, pack quantities and purchase programs. However, it does provide a starting point for you to determine if the level of inventory is reasonably appropriate, and more importantly, it demonstrates that you are inspecting your expectations.
Second Set
Though the supplies needed to maintain the dealership are eventually classified as expenses, I suggest that you consider them as inventory until they are issued.
Waste control systems is a commonly used function in an RV. Like your RV customers, it is important to establish a supplies control policy that minimizes waste. If you implement and enforce an effective supplies control policy, then you could improve the net profit of your dealership.
I suggest that you assign a part number, a bin location, cost per unit and a pricing scheme to as many of your dealership maintenance supplies as possible. Yes, even those 1/4-20 x 1-inch hex bolts. For those items that are purchased from several vendors, assign a part number (PN) that reflects the items rather than the source. For instance:
- PN = DLB — for drop light bulbs that might be purchased from various sources, rather than the PN that is assigned by each source; this enables tracking of the purchase and issue of one PN rather than multiple PN representing the same item.
This will minimize the replenishment efforts, and it establishes the perception of a secure, controlled inventory of the supplies. This makes a statement to your associates that you expect a return on your investment and that you intend to inspect the operations to determine if you are achieving that return.
Without control of these supplies, your associates will assume that the supplies have no value and may help themselves to legal pads, pens and the myriad other supplies that are required to operate the dealership. By controlling these, your parts manager can track the usage and costs involved and make appropriate purchasing decisions aided by the DMS.
Third Set
Personnel is usually listed as an expense on the financial statement; however, I am asking you to consider dealership employees as an asset.
In last month’s column, I suggested that you evaluate the selling skills of the parts associates and the service advisers. What are the results of your investigation?
Inspect what you expect. Every sales opportunity is important. Perhaps some selling skills training for parts associates and service advisers could improve the dealership income picture.
Speaking of your parts associates, what do you expect from them? Do they know what those expectations are? For instance, do you expect eight hours work for eight hours pay? How do you know if you are receiving full value for the wages you pay? Do you occasionally see a parts associate standing around? Perhaps you could add to your management exercises and inspect your expectations so that you could gain the respect of your associates.
To optimize the utilization of your personnel asset, implement to-do lists of assigned maintenance tasks. Create a form that includes areas for recording the task status, the name of the person assigned to a task/project and a description of the task/project. I invite you to contact me if you would like a sample TDL form.
Instruct your parts manager to walk through the parts department and create a daily to-do list of assigned maintenance tasks. This list might include cleaning the lighting fixtures, merchandising a display fixture, mopping the floors or any other tasks necessary to keep the department spick-and-span.
Why is it necessary to assign a task to a specific associate? If a task isn’t assigned, there is no accountability and, therefore, most likely no performance to expectation. Before the end of shift, inspect the to-do list and determine the status of each task. Interact with each parts associate and physically inspect their work. Congratulate or counsel as needed. You will gain their attention and their respect because you have expressed an interest in their work and established that this work is important enough for you to take an interest.
At all times, the image of the dealership is an important intangible asset. You may sell the same goods as any other RV dealership. It is how you offer them for sale that makes you different.
This concludes our exercise routine for this month. In future issues, I will offer other methods for you to make the backbone of your dealership as strong as possible. You can expect that!
Mel Selway is the president of P.A.R.T.S. Inc., a Sahuarita, Arizona-based firm providing business management analysis and training to retailers. He can be reached at 520-336-8606 or melselway@aol.com.
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