Understanding the Basics of Inventory Control

Different Commodities in Parts Departments

First, every parts department handles varying commodities. These include maintenance items, collision parts, chemicals, and gas and grease. Additionally, dealerships often have preset sources or stocking groups. Whether you're on a stock replenishment program or not, these settings depend on sales and asset accounts.

Separating Commodities for Better Control

Parts managers often struggle with mixing different types of inventory. For instance, they may find collision parts mixed with hard parts and accessories. By breaking them out separately, you can better manage inventory, day supply settings, and pricing. This methodology helps you control sales and inventory more efficiently.

The Challenges of Setting Up Sources

Fear and Complexity

The fear of setting up sources is common among parts managers. This is due to complex steps involving multiple programs, especially with systems like CDK or Reynolds. The complexity often deters managers from properly organizing their inventory. Many get frustrated when initial setups fail and revert to previous, ineffective methods.

Lack of Support from DMS Vendors

Moreover, a major issue is the lack of expertise from DMS vendors. They often do not provide adequate support for setting up systems. Consequently, parts managers feel like they are navigating the process blindfolded.

The Importance of Regular Review and Adjustment

Updating Systems Regularly

It's crucial to periodically review and tweak your sources. Chuck suggests doing this quarterly or even monthly. Most parts managers learn through the University of Hard Knocks, rather than formal education. Ensuring your sources are up-to-date can prevent inefficiencies and better manage your dealership's investment.

Seeking Education and Consulting

Various consulting companies like ADMI offer valuable resources. Parts managers seeking additional education can turn to NADA, NCM, or similar organizations. Nonetheless, these resources are limited, making self-education an ongoing challenge.

Balancing Stock Levels

Avoiding Overstock

Balancing sufficient stock while avoiding overstock is essential. Overstocking ties up capital and consumes valuable space. Chuck stresses the importance of setting up accurate day supply settings. Whether through a manufacturer-controlled system or independently, realistic settings help report inventory accurately.

Tracking and Managing Excess Inventory

Subsequently, managing excess inventory is another critical task. Dealerships often see excess in commodities like bulk oil and tires. Setting realistic day supplies for these commodities can help in better tracking and reporting excess inventory. Also, accurate categorization of inventory (such as in watch and excess categories) plays a significant role.

The Debate on Number of Sources

The Milk and Canned Asparagus Analogy

Chuck employs an analogy to explain diverse strategies for sources: milk and canned asparagus. Some managers prefer fewer sources, thinking it simplifies management. Yet, this approach forces them to manage disorganized chaos. Combining high-turnover items like milk with low-turnover items like canned asparagus creates inefficiencies.

The Case for More Sources

On the other hand, breaking out sources according to commodity types simplifies inventory control. This aids in accurate pricing, better stock management, and realistic reporting. You're able to manage each category based on individual turnover rates and asset settings.

Manufacturer Guarantees and ASR Programs

Understanding Manufacturer Guarantees

Manufacturers guarantee different percentages of inventory. For example, Subaru covers about 75-80%, while GM and Chrysler cover around 40-50%. Programs like RIM (for GM) are designed to manage high-velocity parts. They rarely cover the entire inventory, highlighting the need for efficient tracking tools.

Maximizing ASR Programs

ASR programs are here to stay. They offer many advantages, such as pre-set replenishment and inventory guarantees. Manufacturers may not cover the entire inventory, but they do manage fast-moving parts efficiently. Therefore, it's crucial to maximize these programs by understanding their rules and leveraging them to your advantage.

Conclusion

Effective inventory control is vital for any successful parts manager. By understanding different commodities, managing sources correctly, and balancing stock levels, you can streamline your process. Keep educating yourself and reviewing your systems regularly to overcome challenges. Ultimately, proactive and well-organized inventory management leads to better efficiency and profitability for your dealership.

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