Oct. 15, 2007: Tackling challenges in a dealer’s parts department

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. The goal is to provide ideas to help improve your dealership.
Dealership Details
This multi-line dealership was a recent buyout that was moved to a large, modern facility. The store is located on a high-traffic highway in a rural area that draws from a nearby city. Projected annual volume is around 400 units. The owners have no previous experience in the powersports business but own a successful, high-margin sports equipment business. They are discovering a powersports dealership is a complex business with tight margins.
The goal for this engagement was to identify and establish the processes necessary for the profitable operation of each department. In the last article, our consultants reported on the overall dealership situation and the sales and F&I departments. This time, the series concentrates on the parts department.
The Parts department
The data management and point-of-sale system is ADP Lightspeed, but there has been little training on the software, and basic reporting functions are not being utilized. Lost sales, parts turns, valuation and profitability are not monitored. There is no open-to-buy system. The parts and accessories have not been categorized in Lightspeed. There is a large amount of “dead inventory” acquired from the previous dealership during the buyout. A spot check of part numbers revealed 80 percent accuracy in old inventory, but 0 percent accuracy in current, fast-moving stock. All indicators point to significant issues in receiving, as well as in entering sales into the point-of-sale system. The possibility of a large amount of shrinkage is great. The lack of accurate data makes it impossible to determine the sales volume, margins or profitability of the department. There is no categorical binning or cycle-counting activity taking place. Hard parts are in boxes with bin labels, but the accuracy of the inventory, let alone the bins, is highly suspect.
An immediate and thorough inventory count is required to establish a base for measurement and improvement.
Accessory displays in the showroom area are good, as is utilization of the OEM fixtures and signage. There are some fair displays of accessory items in the parts counter area, but not much in the way of impulse items. There is some accessorizing of new motorcycles on display. There has not been any consistent accessorizing of ATVs, however. Many ATV purchasers buy the vehicle to enable the use of a particular accessory, such as a plow, winch or mower. Adding accessories to most of the units will help separate their units from competitors and make price comparisons more difficult. This also will stimulate more accessory sales.
The parts manager is new to the position. He has not had any formal training for this position. He has a desire to learn and understands the department has significant issues. He is very receptive to change and appears to have the aptitude for management.
The lack of staff for this department is making improvement difficult, however. He is unable to effectively manage the department since he is continuously involved in parts counter activity.
Recommended Actions

  • Begin tracking lost sales.
  • Deny parts inventory access to service personnel to improve service profitability and reduce inventory errors.
  • Complete a physical inventory of all P&A. Correct Lightspeed inventory and bin locations.
  • Identify slow and non-moving P&A inventory (less than four turns per year). Dispose of this through whatever means necessary.
  • Add staff as necessary to allow the parts manager to properly conduct management functions.
  • Create a parts-to-service liaison position with back-up.
  • Develop a fast-ship menu for special orders and service parts. Offer the service to all appropriate customers.
  • Increase inventory of fast-moving P&A — hard parts in particular.
  • Assign categories to all stock numbers.
  • Create categorical bins for clothing and accessories. Bins should be sized to be counted in one hour.
  • Create geographical bins for all parts. Bins should be sized to be counted in one hour.
  • Begin cycle-counting, one bin per day, every day. The goal is to monitor and control inventory errors and shrinkage.
  • Put all parts department processes and procedures in writing.
  • Create an open-to-buy system for P&A. Orders can only be placed up to budgeted levels for general categories.

    Author, speaker and educator, Gart Sutton has been retained by every major powersport manufacturer/distributor. He is a frequent keynote speaker for national motorcycle conventions and state motorcycle dealer association events. Visit www.gartsutton.com.

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