Manufacturer Parts Programs are typically offered to dealerships as a way to achieve higher levels of service and potentially higher profits with the promise of less work for parts management. Manufacturer programs will guarantee the returnability of suggested parts in the future if the dealership will stock them now.
On the surface, terms like these can appear to be good for business, but are they? Dealerships give up things like return allowance and other financial incentives in exchange for returnability guarantees.
Some of these programs can be mandatory or even come with a minimum compliance objective on their suggestions. More than a few have been known to significantly overstock dealerships or regularly guarantee parts which due to demand, are unlikely to ever get sent back on a manufacturer return. Why would a manufacturer do that? Some speculate that manufacturer parts programs like these are really more of a shell game where the manufacturers have cleverly shifted the costs of storing some parts whether they sell or not, out to the dealerships.
A guaranteed return on a part you didn’t really need is better than nothing but when the estimated holding costs for retail inventory in the US ranges from 21-36% per year, the expense adds up pretty quickly, and guaranteed or not, dealerships should make the effort to avoid holding any parts that aren’t going to sell.
What can dealerships do to minimize the negative effects of manufacturer parts programs, without falling out of program compliance?
Our solution starts by separating out parts into sources based on their manufacturer program codes. Then, we treat guaranteed and non-guaranteed parts as separate inventories with separate objectives for Productive, Forced, Excess, and Obsolete stock. Finally, we review your manufacturer program proposals every day, denying and accepting the right amount of parts to keep you compliant without stocking any more of the questionable parts than necessary.
These are just a few of the many ways we help Parts Operations become more proactive, productive, and profitable.
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