Manufacturer ASR Parts Programs are typically advertised to dealerships as a way to achieve higher levels of service and potentially higher profits with the promise of less work for parts management. Some manufacturer programs guarantee the return-ability 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 really?
Looking deeper
While each manufacturer is different, we’ve seen time and time again that programs force dealerships to give up some return allowances and other financial incentives in exchange for a return-ability guarantee. More than a few have been known to significantly overstock dealerships or regularly guarantee parts that, due to demand, are unlikely to ever get sent back on a manufacturer return. Why would a manufacturer do this? Some speculate that ASR’s 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.
How to manage
First, you’ll want to make sure you’re tracking your manufacturer’s ASR program as two separate inventories: guaranteed and non-guaranteed. The key is staying compliant enough to avoid major penalties while rejecting all parts you don’t really need. A guaranteed return on a part you didn’t really need is better than nothing, but with estimated holding costs for retail inventory in the US ranging from 21-36% per year, that expense adds up pretty quickly. Dealerships should make the effort to avoid holding too much depth in their inventory if they want to improve the health of their parts and service departments.
With PartsEdge clients, we separate 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 work with our parts managers to set perimeters so we can review the manufacturer program proposals every day, denying and accepting the right amount of parts to keep compliance without stocking any more of the questionable parts than necessary. PartsEdge saves Parts Managers hundreds of hours each year by taking all the guesswork out of DMS management and sourcing setup and optimization allowing them to focus on creating a successful operation. As a result, our clients see an average 20% drop in total inventory, 15% less idle inventory, a 50% increase in ROI, and a 20% increase in parts sales. If you’re ready to put our parts power tool to work, send us a message! Our testimonials speak for themselves.