July '19

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138 • RV PRO • July 2019 rv-pro.com B U S I N E S S you can use to evaluate your parts and accessories inventories or that you can use to develop a set of objectives that are appropriate to your operations. • Aging – as mentioned in the definition, most DMS can establish aging brackets for your parts and accessories inventory contents based on date last sold. Brackets are usually in three- month increments up to one year and then 12-plus months. So, for example: A = recent 0-3 months; B = 4-6 months ago; C = 7-9 months previous; D = 10-12 months; E = 12+ months with no sales demand. (Suggested guidelines for these aging brackets based on percentages of your inventory which are invested are: A = 50 percent; B = 20 percent; C = 15 percent; D = 10 percent; E = 5 percent or less. • Gross Turn – the suggested levels for this IPF are different for parts and for accessories. They are: parts = 8-plus turns per year; accessories = 5-7 turns per year (therefore, you should determine if a category can be classified as containing parts or containing accessories so that you can effectively evaluate its performance). • Level Of Service – you should be able to fill 80 to 92 percent of your customer requests from your stocked inventories of parts and accessories. Less than 80 percent indicates that you are not effectively anticipating your customers' need/ requests while more than 92 percent usually indicates that you are carrying more inventory than is needed and will negatively impact your gross turns. • Lost Sales – these should represent 2 to 4 percent of unique part numbers currently being tracked in your DMS database. Fewer than 2 percent indicates either an unnecessarily large inventory investment or that lost sales are not being recorded; greater than 4 percent usually indicates that your inventory is not responsive to your customers' needs/requests. • Minus On-Hand – should represent less than 1 percent of your total part numbers and preferably 0 percent. Any value greater than 1 percent indicates a poorly controlled inventory, the value of which is not being accurately reported and could be a concern in the event of an audit. This situation often indicates problems with the receiving processes. • No Bin Location – especially for stocked items, the quantity of part numbers with no bin location should be zero. In my dealership parts department, every item controlled in the DMS database had a bin location assigned – even if it was a non- stocked item. • Non-Stock items – should represent less than 10 percent of your inventory investment, yet account for more than 30 percent of the part numbers controlled in the DMS database. These suggested ranges indicate that your parts manager is tracking the demand of many part numbers so that she can decide to stock them if demand justifies that decision yet she has a minimum investment in these type of items. • Zero Cost or Price – every item in your DMS database should have positive values for each of these two factors. If your parts manager receives any "free" items, he should receive each at full replacement value and report the "savings" to the accounting manager as earned income, which will impact the net profit of the department for the month in which these items were received. Having defined and provided a rea- sonably achievable goal for each of these eight essential inventory performance factors, we next identify some reporting cycles for them. How Frequently Should You Evaluate? The evaluation cycle for these eight IPF varies. Several of these eight IPF should be evaluated daily, or at the least weekly. These include: minus on-hand, no bin location, and zero cost or price. The rationale for this evaluation cycle is that these three factors look at unique part numbers. If you evaluate them daily or at least weekly, the likelihood that you will have more than one page of part numbers for each IPF is minimal. If your exception reports of these factors exceed one page, your parts manager will most likely not have time to research and correct (if necessary) each item. The remaining five IPF should be evaluated monthly because they con- cern the overall performance of the parts and accessories inventories. If the per- formance of any of these IPF is less than expected, then your parts manager would generate reports to identify possible cul- prits that are negatively impacting the inventory performance. Are You Celebrating? Having evaluated your parts and accessories inventory performance, are you celebrating? If yes, congratulations! If not, schedule a meeting with your parts and accessories manager to determine why the inventories are not performing to your expectations and to develop plans to improve that performance.

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