WELCOME TO THE WEB WORKSHOP

Transcription

1 MANAGING PARTS PROFIT FOR EXECUTIVE MANAGEMENT (The Key Indicators to Managing the Parts Manager) Richard Owen Fixed Operations Specialist WELCOME TO THE WEB WORKSHOP

2 Primary Parts Goals Maximize Sales Maximize Profits Maximize Owner Retention 2

3 Objectives Improve Asset Management Improve Off the Shelf Fill Rate Increase Fixed Operations Profits Reduce Exposure To Loss Improve Return on Investment 3

4 ?? ASK QUESTIONS?? There will be question breaks along the way All Rights Reserved 4

5 PARTS MANAGEMENT IN ORDER TO IMPROVE, WE NEED TO KNOW: WHERE HAVE WE BEEN? WHERE ARE WE NOW? WHERE DO WE WANT TO GO? 5

6 Inspect What You Expect! Track and Trend YOUR Parts Departments Performance! 6

7 Management Reality People are resistant to change Gravitate to familiar processes No decision IS a decision All Rights Reserved 7

8 When Customers Arrive for Service, What do they expect? Instant Attention Immediate Action Fixed Right the First Time Free to Cheap Costs 8

9 The Hidden Employee The Technician-Owner of the Time Inventory If Well Trained Can do the job the first time IF they have the right parts. 9

10 The Reality There is a direct connection between Technician Proficiency, Profitability AND Parts Availability What s Needed? Well managed parts operations that delivers the highest rate of off-the-shelf availability on demand! 10

11 WHILE Controlling the buildup of obsolescence Controlling inventory security, both physically and documented Controlling any write down of inventory investment Maximizing the Return on Parts Inventory Investment 11

12 The Typical Parts Manager No Formal Asset Management Training Parts Driver Counter Person Assistant Parts Manager Learning is from Experience 12

13 Primary Job Functions Attention to detail Computer Systems Knowledge Manufacturer Processes Personnel Management Marketing & Merchandising Security Control #1 Function: Purchasing 13

14 Purchasing Manager Buying Smart and And Selling Smart Translates to Maximizing Profits $$$! 14

15 So, How s it Done? Four Primary Steps (Questions) 1. When to Stock? (The Primary Decision) 2. What to Buy? (Next Major Decision) 3. How Much to Stock? (Purchasing Management) 4. When to Unload? (Obsolescence Control) 15

16 The Trick is Inspect What You Expect! (Track & Trend Performance) And Manage the Exceptions 16

17 Focus on Four Corner Stones System Set-ups Perpetual Inventory Posting Lost Sales Effective Special Order Process 17

18 System Set-Ups Phase-In: 2 months out of 12 with min of 3 pieces Phase-Out: 0 in 6 mos or less than 3 pieces in 12 Days of Supply: MIN/BRP 24 MAX/BSL 30 NS Test Retention: Months Minimum Order Value (ADP): $0.00 Maximum Months Supply: 2 Min. Ord. Qty Set to 1 (R&R): Y 18

19 PERPETUAL INVENTORIES 19

20 PERPETUAL INVENTORIES 4,000 Total stocked part numbers Fastest moving parts (considered later) Part numbers 4 Parts personnel 3 to count entire inventory every 120 days 24 Days in a month Fastest moving parts 4 Parts personnel 21 Days in a month 20

21 PERPETUAL INVENTORIES 4,000 Total stocked part numbers Fastest moving parts (considered later) Part numbers 4 Parts personnel 3 to count entire inventory every 120 days 24 Days in a month Fastest moving parts 4 Parts personnel 21 Days in a month 21

22 PERPETUAL INVENTORIES 4,000 Total stocked part numbers Fastest moving parts (considered later) 3,600 Part numbers 4 Parts personnel 3 to count entire inventory every 120 days 24 Days in a month Fastest moving parts 4 Parts personnel 21 Days in a month 22

23 PERPETUAL INVENTORIES 4,000 Total stocked part numbers Fastest moving parts (considered later) 3,600 Part numbers Parts personnel 3 to count entire inventory every 120 days 24 Days in a month Fastest moving parts 4 Parts personnel 21 Days in a month 23

24 PERPETUAL INVENTORIES 4,000 Total stocked part numbers Fastest moving parts (considered later) 3,600 Part numbers Parts personnel to count entire inventory every 120 days 21 Days in a month Fastest moving parts 4 Parts personnel 21 Days in a month 24

25 PERPETUAL INVENTORIES 4,000 Total stocked part numbers Fastest moving parts (considered later) 3,600 Part numbers Parts personnel to count entire inventory every 120 days Days in a month Fastest moving parts 4 Parts personnel 21 Days in a month 25

26 PERPETUAL INVENTORIES 4,000 Total stocked part numbers Fastest moving parts (considered later) 3,600 Part numbers Parts personnel to count entire inventory every 120 days Days in a month 400 Fastest moving parts 4 Parts personnel 21 Days in a month 26

27 PERPETUAL INVENTORIES 4,000 Total stocked part numbers Fastest moving parts (considered later) 3,600 Part numbers Parts personnel to count entire inventory every 120 days Days in a month 400 Fastest moving parts Parts personnel 21 Days in a month 27

28 PERPETUAL INVENTORIES 4,000 Total stocked part numbers Fastest moving parts (considered later) 3,600 Part numbers Parts personnel to count entire inventory every 120 days Days in a month 400 Fastest moving parts Parts personnel 5 21 Days in a month 28

29 PERPETUAL INVENTORIES 4,000 Total stocked part numbers 400 Fastest moving parts (considered later) 3,600 Part numbers Parts personnel to count entire inventory every 120 days Days in a month 400 Fastest moving parts Parts personnel 5 21 Days in a month 16 Part # s 29

30 PERPETUAL INVENTORIES Cost: 15 minutes of employee time, per day, each. BENEFITS: Daily on-hand accuracy. Stock orders and report accuracy. Closer monitoring of fraud should it occur. 30

31 Lost Sales What is a Lost Sale? Any request for or inquiry about a part that: We did not have in stock. And The customer refused to special order. - Or - If part was special ordered and never picked up, log a lost sale when returned. 31

32 LOST SALES You can not hurt the inventory by posting too many You can only hurt the inventory by not posting enough 32

33 Analysis of Lost Sales New Model Part X X X X

34 Analysis of Lost Sales New Model Part X X X X

35 Analysis of Lost Sales New Model Part X X X X Phase-in = 3 in 12 Months 12 months = 365 Days Max Days Sply = = 1 35

36 Analysis of Lost Sales New Model Part X X X X Phase-in = 3 in 12 Months 12 moths = 365 Days Max Days Sply = = 1 36

37 Analysis of Lost Sales New Model Part X X X X Phase-in = 3 in 12 Months 12 moths = 365 Days Max Days Sply = = 1 37

38 The Lost Sale Rule! You either Sell the part Order the part OR Post a Lost Sale 38

39 Special Order Process What are the KEY Elements of an effective special order process? 39

40 Elements of an Effective Special Order Process Appointment established before part is ordered Service Manager approves all expedited special orders Advisor advised immediately of order disposition Parts ages special order receipts notifies Service Manager one week prior to return Parts retains special order if appointment is rescheduled Parts returns to supplier if appoint not rescheduled 40

41 Parts in the CSI Cycle High Availability means more productive technicians More billable labor Customers are better satisfied Customers return to spend more money 41

42 Dealer Expectations ROI Inventory Protection Gross Profit % Low Inventory No Frozen Capital Profits! 42

43 Customer Parts Expectations Every Part Available Off-The-Shelf Immediate Local Purchases FedEx All Overnight Orders Very Inexpensive 43

44 $ALE$ PROFIT$ The Dilemmas

45 Inventory Management Goals Stock parts that sell Don t overstock Buy at the best price 85%+ fill rate from stock 45

46 Tracking & Trending Performance It s time to Inspect What You Expect! What should you track & trend? 46

47 ROI Parts Indicators 17 Indicators to Track and Trend Parts Department Performance 47

48 ROI Indicator #1 Active/Normal Inventory $ s/b 60-75% of Inventory $ 48

49 Days of Supply ROI Indicator #2 How many days would it take to sell the value of the inventory? Months of supply = Inv value / Avg. month cost of sales Days of supply = Months of supply X 30 49

50 ROI Indicator #3 Frozen Capital (7-12 MNS X 65%) X 2 plus Absolute Obso.* *(ADP Plus New Parts No-Sale > 5%) Guide: < 20% 50

51 ROI Indicator #4 Selling Days of Supply Indicator of quality of inventory (Inv. Frozen Capital)/Avg. COS) X 30 Note: Frozen Capital is: (7-12 MNS X 65%) X 2 plus Absolute Obso.* *(ADP Plus New Parts No-Sale > 5%) Guide: Days 51

52 ROI Indicator #5 Gross Profit Margin Guide TOTAL 28-35% RO Mechanical 40-44% Counter Retail 40-44% Wholesale 20-24% Internal 25-30% Warranty 25-30% (cost +40%=28.6%) Body Shop 35-40% 52

53 Pricing & Profit Margins List Escalators Cost Plus Matrix But be careful! 53

54 ROI Indicator #6 Inventory Variance The Difference Between the F/S and ICS Inventory Value Guide: < 2% (Reconciled) 54

55 Monthly Parts Inventory Reconciliation MONTH OF 2012 ACCOUNTING GENERAL LEDGER $ Month-End Inventory Report $ Cores in stock (New) $ Cores in stock (Used) $ Claims $ Monthly Returns $ Core Returns $ 55

56 Month-End Work in Process R.O. Customer Pay $ Work in Process Warranty $ Work in Process Internal $ Work in Process Retail/Wholesale $ TOTAL ADJUSTED INVENTORY VALUE $ 56

57 Month-End MFG Packing Slips (plus) $ Misc. Vendors Purchases (plus) $ Prepaid Special Orders (Not Received) (plus) $ Parts Invoiced (Not Received) (minus) $ Appreciation/Depreciation $ TOTAL $ INVENTORY DIFFERENCE $ 57

58 Variance Review Root Causes WIP Database Issues Parts NOT in Database Security Issues Pricing Issues Inaccurate Paperwork Parts Accounting 58

59 The primary cause of shortages is poor paper flow. 59

60 Month-End Clean Up Negative On Hand Items Correct All No Cost Items With OH Take a Dirty Core Inventory Ensure All Paperwork Is Up to Date Ensure Work In Process Is Verified Ensure All Invoices Are Closed 60

61 Daily Review -Credits & Returns -Open Invoices -Voided Tickets -Parts Accounting -Invoice Approval -Overrides 61

62 ROI Indicator #7 Lost Sales What is a Lost Sale? The Lost Sale Rule (Sell it, Order it or Post it!) Guide: 2-3 PN/Counter Person/Day 62

63 ROI Indicator #8 Total Non-Stock PN (%) Guide: 65%+ 63

64 ROI Indicator #9 NS/Special Order Parts On-Hand ($) - Special Order Controls - Return Policies - Ordering Habits Guide: < 5% 64

65 ROI Indicator #10 Off-The-Shelf Fill Rate ($/PN/PCS) What % of customer demand was filled from Off-The-Shelf from your own stock? sales (customer & emergency receipts) (Sales + lost sales) (Code Orders Properly!) Guide: > 85% 65

66 ROI Indicator #11 Parts No-Sale > 12 Months (%$) Absolute Obsolescence! Guide: < 5% - System Set-ups - Special Order Controls - Ordering Habits What can you do with it??? 66

67 Visible Holding Expenses Interest on capital investment Space expense Inventory control system expense Physical inventory costs (annual/perpetual) Insurance Personnel Taxes on inventory worth Utilities 67

68 Invisible Holding Expenses Loss of Gross (low true turns) Loss of Obsolescence Reserve Loss of Order Discount Increased Costs In Obtaining Parts 68

69 ROI Indicator #12 Parts No-Sale 7-12 Months (%$) The Pipeline! - 2 types of parts here: 1) Seasonal or New Model Parts 2) Obsolete Parts Guide: < 8-15% 69

70 Ideal Aging Analysis 0 to 3 4 to 6 7 to 9 10 to % 20-30% 8-15% < 5% 70

71 ROI Indicator #13 Productivity (COS) Guide: $28K-$32K (Based on 4+ employees) Note: Personnel Expense Guide: 40-45% (G.P.) 71

72 ROI Indicator #14 ROI (Return On Investment) (Net Profit X 12)/Inventory Value Guide: % Note: Net Profit Guide: 8-15% (G.P.) 72

73 ROI Indicator #15 Stock Order for Stock ($) What portion of parts purchases were made the most economical way..on a stock order? Guide: 80%+ Total Receipts (Cust. & Emrg. Receipts) Total Receipts 73

74 ROI Indicator #16 Stock Order for Stock (Pieces) An Excellent Fill Rate Indicator! Guide: 90%+ Total Receipts (Cust. & Emerg. Receipts) Total Receipts 74

75 ROI Indicator #17 True Turn Indicates Quality of YOUR Inventory! Gross Turn X Stock Order Performance Note: Gross Turn = (Avg. COS X 12)/Inventory Value Guide:

76 ROI Key-6 Indicators Frozen Capital Guide: < 20% of investment Use of Lost Sale Posting Minimum 2 per person per day NS/Special Order Parts OH Guide < 5% of investment 76

77 ROI Key-6 Indicators Off-The-Shelf Fill Rate Guide: 85%+ (Pieces) Stock Order for Stock (Pieces) Guide: 90%+ ROI (Return On Investment) % of inventory investment 77

78 Month-End Manager Meeting Parts Manager Summary Reconciliation Review of Performance Trend Analysis 78

79 Managing the Parts Manager Inspect What You Expect! 79

80 THE PLAN: FOR YOUR PARTS MANAGER TO USE EFFECTIVE OPERATIONAL MANAGEMENT PROCESSES AND PROCEDURES 80

81 Focus on the Basics FIRST! The 4 Corner Stones : - System Set-ups - Perpetual Inventory - Posting Lost Sales - Effective Spec. Order Process 81

82 If you do, YOU will have An efficient profitable Parts Department with a high fill rate which makes. An Efficient Service Department that satisfies Customers and makes a profit.. And satisfies service customers who are more likely to buy vehicles from you. 82

83 Questions??????? 83

84 MANAGING PARTS PROFIT FOR EXECUTIVE MANAGEMENT (The keys to Managing the Parts Manager) Richard Owen Fixed Operations Specialist THANK YOU FOR ATTENDING