Dec. 1, 2008: Increasing staff key to store’s PG&A profitability

These articles recap some of the opportunities uncovered by Gart Sutton & Associates’ powersports specialists during consulting visits.
These are followed by recommended actions that address the issues. Our goal is to provide ideas to help improve your dealership.

Dealership details
This store began as a single-line store in the 1980s. They moved to a high-traffic highway location in 2001. Since then, they have added several major product lines. They are located in a rural town with a population of 17,000. They are 60 miles from a major city. The bulk of their sales are in ATVs and UTVs. Their current volume is around
400 units, but the store has done close to 600 in the past. The store changed ownership last year.
In the first two parts of the series on this dealership, GSA consultants provided an analysis of the operation and on the sales and F&I departments. For this third part, the consultants report on the PG&A department.

Analysis
There are only two full-time staffers in this department including Bob, the parts manager. Bob’s duties at the counter — receiving, shipping, stocking and handling service parts — have restricted him from doing much in the way of managing the department. It is highly recommended that another full-time person be added so someone can be designated to handle parts-to-service as well as shipping/receiving. This will lead to increased sales, efficiency and profitability for P&A as well as service. Shrinkage rates and inventory accuracy will improve when technicians are no longer pulling their own parts.
For the number of lines carried, P&A has a very small inventory. They depend on the fast service available from the OEs due to their proximity to a major hub. Bob has done a good job of binning the hard parts and locating fast-moving items near the counter. He has not created any categorical bins for the floor displays, however. He will need to do this in order to implement cycle-counting of one bin per day. Bins should be sized to be counted in an hour or less.
There are considerable dollars tied up in obsolete inventory. This should be sold online, in the store, to accessories outlets or donated in order to free up space and money for high-turn items. On a monthly basis, Bob needs to print an obsolescence report and start weeding out inventory that doesn’t turn at least two times in six months. He also needs to monitor margins and inventory valuation on a monthly basis. Implementing an open-to-buy system (spreadsheet was provided) will allow him to take control of the inventory value.
The counter area is very small for the traffic observed. The area is pretty well overwhelmed when there are more than three customers and the two parts people. It was suggested that a kiosk with a terminal be set up near the main counter.
The view through the opening into the parts storage area is not in line with the quality of the store. A free-standing display wall/backdrop might be used to improve this.
Parts staff should be involved with every new purchaser, utilizing the Riding Gear Checklist to increase sales and customer satisfaction.
The general manager needs to develop realistic monthly department goals that Bob can break down to his staff and provide rewards for performance improvements.

P&A Action Items
• Add a parts/service liaison person. They also can take on shipping/receiving/stocking duties. This will free up Bob to do more management as well as handle customer traffic. It also will reduce inventory shrinkage and increase service productivity.
• Reduce/eliminate non-parts staff in the parts storage area.
• Eliminate obsolete inventory. Use the Internet, accessory dealers, donations etc. Turn any income into high-turn inventory items.
• Learn the reports in Lightspeed and monitor gross profit, obsolescence, lost sales, parts valuation, number of turns.
• Develop categorical bins for floor stock. Size these to be counted in one hour or less.
• Expand parts counter area to handle increased traffic during peak periods. Can move some catalogs and printer to open space and/or add a “kiosk.”
• Once baselines have been established, set goals for P&A sales and margins.
• Put all processes in writing.
• Report on parts department performance to benchmarks at monthly manager meetings.
• Implement cycle counting – print one bin list each day and count the inventory. The goal is to count all inventory four-six times per year to maintain accuracy and eliminate the need for a YE physical inventory.
• Consider utilizing an open-to-buy system to control inventory levels.

Gart Sutton has been a leading provider of on-site dealer consulting, dealer 20-groups, online financial composites, accounting rescue services and OEM and dealership training solutions for nearly 30 years. For additional information on these services, visit www.gartsutton.com.