Issue Date: Parts Manager June 15, 2010, Posted On: 6/23/2010
Parts Manager Case Study How do you set up a parts system for a new point with no sales history? Here's a situation in which many parts managers may find themselves embroiled: Chrysler terminates 789 franchise points. But the points aren't really terminated. In most cases they are awarded to other Chrysler dealers in the market area. The situation is that you are the parts manager with the dealership that is on the receiving end of the new point. That's the good news. The bad news is that the terminated dealer feels that he has been robbed by Chrysler and your dealer has taken ownership of the stolen property. That's a little harsh, but just a little. The old dealer is in no mood to cooperate with the transfer of the franchise and you, as the parts manager, find yourself in possession of a motley assortment of the residual parts inventory and no sales history, at least nothing worthy of the name. Where do you start?
That's the situation in which our case study parts manager finds himself. He has little to no sales history behind the $260,000 in inventory that he has just received. The dealer's DMS tracks phase-in criteria by defined time periods, and sales required to trigger phase in.
Our case study manager wants to pursue an aggressive phase-in criteria like: 2 in 1 (2 demands for the part in one month) and then edit the suggested stock order. But that still means waiting for 30 days before anything starts to phase in. Would he be better off setting the time period at one week? That is, 1 demand in 7 days would trigger phase-in. Then the manager would edit the resulting stock order? Then increase the time period by 7 days every week until they get up to a 30-day history. The dealership is on the DealerTrack DMS, although that is not really the issue.
Ask the experts
We checked with two of our parts experts, Chuck Hartlé and Gary Naples, to see what they would recommend.
Chuck Hartlé (www.partsedge.com): "I like the idea of having 7-day periods anyway. This means you track demand and sales in weekly buckets, instead of monthly buckets. ADP's new Drive also has this option, where you can define the time into days or months.
"There is a distinct advantage to tracking your demand this way. It gives you the ability to have phase-in guides that react quicker to demand.
"I have been experimenting with a couple of ADP Drive clients on this. We have started with 2 demands in 12 periods, or 2 sales in 3 months. Even while we are used to the 3 in 12 (3 demands in 12 months) standard, here it means that with 2 demands in two different weeks over a 12-week period, the part goes on phase in.
"I do want to point out that once you hit this standard (very liberal or loose), make sure to create a couple of new source groups to continually track the history. In short, start with 2-in-12; then have a 3-in-12; then a 4-in-12; and even a 5-in-12 criteria. If it meets the first demand and you don't want to stock the part, move it to the next group to see if you get more demand, and so on.
"The worst thing you can do is have a liberal phase in such as 2 sales in 12 weeks, have it phase in, but still not stock it and then flag it never to stock. That would defeat the purpose of the DMS by not letting the system do its job."
Gary Naples (www.garynaples.blogspot.com): "I would start with and stay with the 7-day period and track demand in weekly buckets, period. It gives you more options in the phase-in and phase-out game, as these are just mathematical equations.
"I see two issues: (1) the previous dealer's parts inventory; (2) phase-in of new parts. Let's keep this generalized.
"First the previous dealer's parts inventory: I'm assuming here that 'old' means before the franchise transfer. Can you get a top 500 listing of the fastest selling parts for your zone or district from the manufacturer? With this list you can at least compare your current inventory with what they have movement on. Even though you don't have prior history for your current inventory this will at least tell you what products have the highest probability of selling.
"As for setting phase-in, my experience is that getting too aggressive can cause unintended obsolescence, and not being aggressive enough can cause missed stocking opportunities. A reasonably aggressive approach will be 2 (7-day) test periods with demand in 180 days. From there, the parts manager should have the option of automatically phasing in the part or excluding it from being evaluated for phase-in (a manual approach).
"Unfortunately, the last thing you want is not to phase a part into inventory if it is selling. Another approach that you might be able to implement is a method of conducting additional phase-in testing. Using an unused range of stocking group numbers, then set up at least two additional test groups for phase-in. For example, if the part qualifies for phase-in at the most aggressive setting (e.g., two 7-day test periods with demand in 180 days) you make the decision to stock the part or not. If not, move to another test stocking group with higher demand (e.g., three 7-day test periods with demand in 270 days). This method allows for phase-in of parts with emerging demand that you may want to stock and additional testing for those parts you may not want to stock. This method works well with most of the DMS."