Financials

The parts manager of the dealership today is managing an average parts inventory that approaches $300, 000.  Some manage more while others manage less.  In order for a manager to manage his department he must have available to him, all the tools necessary to ensure a good return on your investment.

Dealers closely monitor the purchase of used and new cars while scrutinizing the expenses of the dealership.  But how often does a dealer look at the parts manager or the purchases made by this department.  A dealer that hands a parts manager a blank check (Purchase Orders) at the beginning of the year, should keep a very close eye on what that manager is doing with that blank check.

Additionally, a dealer asking a parts manager to manage and give a good return on investment has got to give that manager the tools to succeed.  One such tool is access to the financials as it pertains to the managers department.  All of the tools.

You wouldn't want to fly with a pilot that had no instruction manual.  Why would you point a parts manager fly and not give him the tools to succeed?

The Beginning Continued

Another post today for a couple of reasons, one being the need to create more posts so the blog gets hits when folks do searches looking for the information that this blog is here to address.

And the other to continue with the discussion of Obsolescence.  If you read the first blog I suspect, yes even hope, that you got the end of month report and took a look at the numbers for your dealership.  I said anything over 12 months is obsolete and that is true, but increasingly there is another school of thought that states:

              Anything in inventory over 9 months with no sale is obsolete.

So if a part doesn't have a sale between 7 - 12 months it is considered obsolete with a 75% chance of never selling.  Mike Nichols and some of the other inventory gurus now believe that there should be 0% of inventory value in the over 12 month category and less than 2% within the 7 - 12 month category.

I think this may be a little tight but it is totally doable within the manufacturers terms of trade.

How does your inventory compare to these numbers?

The Beginning

My name is Kenneth Pratt and I am a soon to retire Automotive Parts Manager with extensive inventory experience and with this first blog post I am hoping to start my traveling consulting business.  My wife and I plan to travel throughout the U.S.A. over the next few years and I would like to offer my experience to any Auto Dealers that have issues with their fixed ops departments, especially as it relates to the Parts Department.

In the past few years I have worked for one dealership in the Pacific Northwest.  I have been very blessed to have an owner who has afforded me the opportunity to step outside my Parts Manager job description and be involve in asset purchasing (additional dealerships), complete financial statement disclosure, access to all relative prompts in Reynolds and Reynolds for accounting, safety and hazmat policies and training and orientation just to name a few.  I have learn a great deal and can decipher a financial statement involving most manufacturers.  I have been with my current employer since 1998 with a three year absence.

I have been a Parts Manager for several manufacturers:  Volkswagen, Subaru, Chevrolet, Nissan, and Toyota.

It has been my experience that a lot of Dealer Principals may not always understand the parts business and how much it can effect the bottom line of the total dealership. Obsolescence can be a big hit to the bottom line of a dealership.

What is Obsolescence?  In a nutshell, it is any part in your inventory over 12 months with no sale.  You have had this part on the shelf for more than a year and no one has purchased any of them.  Less than 10% of your total inventory value should be represented by these items.   Thus, a $200,000 inventory should have no more that $20,000 in this group of aged items.  Ideally you would have less that 5% of your total inventory value in the group and there should be a plan for disposal of these items.

Do you know the value of your obsolete items verses your total inventory dollar value?  It maybe time to look at your Parts Managers end of the month report.

If you want to know more I have references available and I will gladly look at one end of the month report and tell you what I see for FREE.  I will be working on a flat rate fee when I start to travel.  Please feel free to leave a comment on the blog.  My phone number is 253-561-3698.  My email address is HaveTrailerWillTravel9@gmail.com