Apr. 6, 2009 – A valuable PG&A inventory tool

By Neil Pascale
Editor
It’s a fairly simple tool that can make huge differences in how effective a dealership is in presenting a sought-after parts and accessory inventory and overall profitable PG&A department.
Plus, it’s already installed at most dealerships.
That tool: the tracking of lost sales.
Dealership management systems have different ways to report it and track it — see accompanying article — but the concept is the same in each instance. Have parts and accessory staff note when a customer comes in and asks to purchase an item that either is not currently in stock or is not carried by the dealership.
By keeping track of such lost sale chances, a dealership can fine tune its inventory to reach a more desirable inventory. Such a result will then cut back on aged inventory, a cash flow killer for many dealerships.
“To focus my cash flow on the fastest-moving, quickest-turning items means I will get the most bang for my buck,” Kent Meadows, an Assurant Solutions regional vice president in charge of training, said of the importance of tracking lost sales.
The tracking of lost sales, however, appears to happen infrequently at dealerships, at best. A September 2007 study by ADP Lightspeed for Powersports Business found 86 percent of dealerships were either not tracking or tracking less than one lost sale per 100 counter invoices. Eleven percent were running at 1-5 lost sales per
100 counter invoices.
“The challenge we had in tracking lost sales was people didn’t really see the value and believe in doing it,” said Tory Hornsby, general manager of Dealership University, a dealership training company. Hornsby was referring to when he worked at a dealership and why such tracking did not occur with any regularity.
“I kind of relate that back to the traffic log,” he said. “You have to believe in it and know what’s in it for me in order to be good at doing it.”
Val Miller, the parts manager for Lynnwood Cycle Barn in Lynnwood, Wash., oversees a parts department staff that does track lost sales. Miller uses that tracking, which he prints out at least monthly, to help him make buying decisions as well as adjust his min/max volumes on different parts and accessories.
Miller says the dealership does not give the parts staff an incentive to reach a certain lost sales track quota, fearing employees would fabricate parts in order to meet the quota.
Meadows of Assurant Solutions advises dealers who want to improve their lost sales tracking to start with the service department.
“The first place to look in service is on repair orders,” he said, noting nearly 49 percent of all parts sold by Assurant 20 Group metric dealers came on repair orders. For Harley dealers, repair orders make up about 32 percent of their parts sales.
“The seasonal clothing items are on the other end of the spectrum, as they are often only a one-time order,” Meadows said.
Hornsby of Dealership University said reviewing a store’s special order history as well as asking distributors and manufacturers for a list of their top-selling products also could improve a store’s inventory selection. On specifically lost sales tracking, Hornsby says PG&A staff has to be careful about what to report, ensuring the consumer is more than just browsing.
“Were they going to buy it if you did have it in stock is what you have to find out,” he said. “A lot of times people ask for a particular part and look at it but were not going to buy it.”
Miller of Lynnwood Cycle Barn has noted the same occurrence. His dealership started stocking a suspension stabilizer for touring Harleys after lost sales tracking found an interest in the product.
But after the store stocked the item, Miller noticed more consumers were interested in seeing it rather than buying it. “It’s not that it’s been a bad seller, it’s just not been a top seller,” he said.
A good measure of when to stock a lost sale item, Hornsby says, is after a dealership has received at least three-four demands for the product.