I’ve started an informal study with the ultimate goal of answering the question; “what percentage of Part Numbers, added to a Dealership’s DMS, actually achieve an active stocking status?” Here’s what I have found so far. A shocking 3.71% of all part numbers added in a twelve-month period actually qualify for active status. The lowest we have was a Honda dealer who was at .74% of parts activated for stocking. This dealer, and in all fairness, does not stock any sheet metal whatsoever.
The highest so far is a large Chrysler store on ARO that has 8.03% of the parts reaching active stocking status. Again, in all fairness, I had to look at what percentage of these parts were actually ARO controlled. The ARO controlled percentage was 6.84% of the stocking parts, and, ironically, 4.18% of these parts had a 12-month history of 2 or less.
What does this have to say about the manufacturer’s controlled inventory program? For one, you can say that they have provided more breadth or width into the inventory process. On the other hand, you could complain that of the 4.18% of these parts now on the shelf available for sales, these 315 part numbers represented only 206 sales over the past twelve months. Was there really a need to have them at all? Or is the dealer perhaps storing inventory for their manufacturer?
In the early stages of this study, I have to ask some important questions about the inventory control process and automatic replenishment programs offered by the manufacturers versus the DMS Phase-In process.
- Do manufacturer programs enhance a dealer’s inventory for better customer satisfaction results? This is and should be the This is and should be the ultimate goal for dealers.
- Are dealerships parts operations becoming a stocking avenue for the manufacturer’s supply chain process? Put bluntly, are the manufacturers using the dealer’s resources of shelf space and investment dollars rather than stocking the parts themselves?
- Are the manufacturers doing a great job of marketing and selling their replenishment programs to streamline their own supply chain?
When you think about it, the average dealership has about 4% of the entire part number population that ever reaches stocking status. If there is one point that is clear in this study so far, it is that there is a huge part number proliferation process in the dealership environment. When you think about it, that means that 96% (on average) of the parts added to the typical DMS have less than 2 sales or have actually lost sales considering a 3 in X phase-in criteria. With all of this hubbub about replenishment programs as a good way to promote width and better customer satisfaction, numbers like these have got to make you think twice about all the fuss over 4-6% of the overall inventory process.
I can appreciate the value of a replenishment program. I do not appreciate being penalized for not excepting 100% of their suggestions. When the recommendations include parts that require a VIN number to order or are parts that are almost impossible to store safely it makes no sense. I cut them. These are parts like engines, headliners, windshields and airbags. I have been doing this job for over 40 years. I embrace new technologies with enthusiasm. What surprises me is that I have never been asked for input. Talking to other managers I find that they are constantly working on “work arounds” to keep their inventories healthy. This, in my mind, points to the possibility that more research needed to be done and more pilot programs run before launching something that could be truly detrimental to the health of the department. Lastly, I would say that penalizing a department for not complying is not accomplishing their goals. Parts managers are an anal group. We know our trade and have honed our craft over many years. There are many ways to track success. Let’s keep our eye on the ball. Our customer is the ultimate judge of our success. Let’s be partners in this and find ways to help the manufacturer help the dealership.
Hello Stephen,
Thanks for your well thought out comment. I don’t think there is a GM or Chrysler Parts Manager on the Planet that is “In Love” with their ASR (Automatic Stock Replenishment) Program… aka RIM and ARO. And, Ford is in the midst of launching RIM too!
ASR Programs, in my humble opinion, were designed by the Manufacturers for primarily their benefit to control the supply chain of products. While we work with over 50 dealerships that are GM or FCA Chrysler, we see that typically 35% to 45% of the entire “Guaranteed Inventory” has less than 2 year’s sale! That is huge, and most of this is caused by the Manufacturer forcing Dealerships to be “Compliant”, whether that percentage is 85% to 90% of what is suggested.
In the name of building ‘breadth / width” into the Dealer’s inventory, it has really created an opportunity for the Manufacturer to “push” low volume sale parts into the Dealer’s inventory, requiring the Dealership to carry the holding costs. In short, “Better on the Dealer’s shelf than in our Warehouse!”
And, to boot, with the evolution of “Warranty Retail”, the Manufacturer is making it harder to work out of an obsolete situation at most dealerships. Since there is no allowance earned on “Guaranteed” inventory, they offer very little in the way of allowance on Non Guaranteed inventory. Hence, the “Cost Shifting” that will require any Dealership to start accruing money from the Gross Profit monthly to purge Non Guaranteed Inventory.
What we have seen is that the average ASR store has approximately 45% to 55% of the inventory guaranteed. It boils down to one fact, “The Manufacturer will only guarantee what sells”, and they don’t want it back anymore if it doesn’t sell!