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Transcript of GM Delealer Develoment Parts
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DEALER
DEVELOPMENT
General Motors Dealer Development Systems
PARTS EXCELLENCE
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PA RTS EXC E L L E N C E
Reference Library
This reference library is to be used in conjunction with and is complementary tothe Service and parts Excellence Standards Manual. Essentially this library is acollection of Dealership management and operating ideas gathered world-wide.
If, after reviewing a specific standard you have areas in your Dealershiporganisation that fall into the “needs improvement” category, then there will beideas in this library that may help you solve your problems.
While the reference libraries contain hundreds of good ideas, it should never beassumed that the ideas and examples presented are the only or desired means of solving your problem. You may have some better ideas to achieve a desiredoperating standard. This reference library provides “How to make it happen”guidance.
The contents of this reference library contain the Parts Excellence area of:
DEALER DEVELOPMENT
©2001 General Motors Middle East Operations
This publication is copyright. Other than for the purposes and subject to theconditions prescribed under the Copyright Act no part of it may be
reproduced by any means without prior written permission. Enquiries shouldbe addressed to General Motors Middle East.
General Motors Dealer Development Systems
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DEALER DEV E LO P M E N T
i
Preface
PARTS EXCELLENCE –
A LONG-TERM APPROACH TO TOTAL
CUSTOMER SATISFACTION
Parts Excellence, a Dealer development system, is designed to organise your PartsDepartment into seven functional areas that are discussed as separate Parts Excellence modules. The seven modules of Parts Excellence are:• Dealer Development• Parts and Document Flow• Inventory Analysis• Purchase Planning• Personnel Development• Facilities Development• Market Development
Each module includes:• A 4-page Certification Report• Evaluators• A Dealer Action Guide (the main text)• Dealer Decision Grids
THE CERTIFICATION REPORT
The Certification Report is the way a Dealership’s progress on the Module canbe reviewed. The Report is also the way a Dealership is certified as meeting therequired performance level for a Module.
The Certification Report includes:
• (page 1) Dealer name and address, review and/or certification status,plant representative and Dealer representative. A copy of the completeddocument – whether for review or certification – must be forwarded to
local management as well as Detroit management. This information canalso assist in communicating those areas requiring additional focus in orderto achieve total customer satisfaction
• (page 2) A summary of Evaluators, in graph form, by each standard area of performance on which a Dealership will be measured. The document, if kept up to date, can provide a quick and accurate summary of where theDealership is positioned, at any time, with regard to certification
• (pages 3 and 4) The means for reviewing Dealership performance in thestandard areas to be measured– the principal areas that will be measured are shown under the column
titled “Section”
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PA RTS EXC E L L E N C E
Preface
– Each principal area is comprised of specific standards that must bemaintained by the Dealership. These are indicated under the column of
“Qualifiers”
– Each specific standard, or qualifier is comprised of the evaluators used tomeasure Dealership performance for that specific standard. Since theevaluators require action by the Dealer, they are listed under thenotation “Dealer Action”
– Please note that each evaluator is assigned a point value in order to avoidarbitrary measurement. A Dealer must achieve a minimum of 80% of the Module’s total point value in order to achieve cert ification
– To make the Certification Review form most useful, several columnshave been included to the right of the point value so that the Review canbe used as a check sheet for determining areas that require attention
• Certification in a Module requires achieving 80% of the Module’s totalpossible points (page 4) as well as 80% of each section’s possible point value
(page 2)
THE EVALUATORSA page of Evaluators will be found at the beginning of each section in theModule. These are duplicated on pages 3 through 4 of the Certificationdocument and indicate both the Qualifier and the Dealer Action to bemeasured.
THE DEALER ACTION GUIDE (Main Text)The Dealer Action Guide serves as reference for developing Dealer action plansthat fulfil the measurement criteria of each Module. The ideas, approaches andtechniques provided in the Guide are suggestions to help augment your thinkingregarding improvements to be made.
Carefully read the Qualifiers and Dealer Actions (evaluators) as well as the textinformation in the Guide to clearly understand the intent of the standard areas.
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DEALER DEV E LO P M E N T
You can then decide if it feasible and practical to use the suggestions in theDealer Action Guide to bring your Dealership up to Parts Excellence standards.You should find that many of the Guide’s suggestions offer practical applicationin your Dealership. If you choose an alternate approach for improving thesituation it must be approved and documented by the Parts Excellence representative.
Do not think you have to limit your use of this Module to the Evaluatorsmarked “Quali fy By” or “Will Not Quali fy”. There is always room for
improvement even in the best organisation. Review how you now run your partsoperation and compare it to the way the material in the Module relates to thesemethods. You may find some new suggestions or you may be able to modify
some of the suggestions to improve your already successful business.
DEALER DECISION GRIDSIn addition to general text material there are also Decision Grids which providespecific suggestions to help organise and enhance a Dealership’s approach tosolving problems and making changes.
APPROACH
It is suggested that you approach the materials in all Modules in an orderlymanner which consists of:
This module has been developed by Mike Nicholas, Inc., Gresham, Oregon, incooperation with Asian Parts & Accessories Operations, GMC.
R. J. KagerL. J. Sorchevich
Detroit
iii
Preface
1 2 3 4 5READ REVIEW ANALYSE CHOOSE IMPLEMENT Module Forms Evaluators Alternatives Suggestions
• Contents • Operating • Standards • Grid • Specifics• Justification • Assessment • Potential • Decide • Monitor
Outcome
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DEALER DEV E LO P M E N T
TITLE PAGE
Preface i-iiiTable of Contents i ii i-iv
CERTIFICATION• Retailer Certification Review – Module No.1 1-4
DEALER DEVELOPMENT MODULE• Introduction 5• Programme Launch 7
• Decision Grid 8
BASIC PERCEPTIONS• Evaluators 10• The Dealership 10• Parts Manager 12• Key Requirements 17• Decision Grid 18
THE PARTS DEPARTMENT• Evaluators 19• Dealer Role 20
• Business Perspective 24• Operating Methods 30• Decision Grid 37
THE PARTSTRANSACTION• Evaluators 41• Demand 42• Control Forms 49• Decision Grid 61• Analysis Forms 62• Decision Grid 66• Planning 69
• Decision Grid 73
DEPARTMENT MANAGEMENT• Evaluators 75• Facilities 76• Facility Checklist 79• Employees 84• Job Descriptions 86
CUSTOMER SATISFACTION• Evaluators 93• Approach 94• Requirements 96• Decision Grid 101
Module One - Table of Contents
iv
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TITLE PAGE
PROFIT CENTRE BASICS• Evaluators 105• General Characteristics 106• Advantages – Benefits 111• Increasing Profitability 114• Decision Grid 122
WORKING TOGETHER• Evaluators 127• Conflicts 128• Interdepartmental Cooperation 131• Decision Grid 140• Interdependence 143• Retailer Involvement 146• Decision Grid 150
PA RTS EXC E L L E N C E
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Module One - Table of Contents
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DEALER DEV E LO P M E N T
5
Dealer Development Module- Introduction
This module provides both the rationale and method for leading the PartsDepartment from the Dealer’s perspective. I t cannot and should not attempt toremake the retailer into a parts management expert. Rather it establishes whatthe retailer can do to accurately understand and assess Parts Departmentoperations so that the performance is optimal. It establishes a level of commitment to the Parts Operation which is essential to complete Modules 2
through 7.
APPROACH TO CONTENTSThe Retailer should approach the Parts Department (through the materialsupplied in this Module) in five steps:
These five steps comprise Retailer Development in a system for achieving Parts Excellence. The contents of this Module lead the Retailer through a logicalrealisation of what the Parts Department is, how it operates and how its
achievements can be assessed and improved.
MODULE ORGANISATION
Since numerous individuals, each having a specific interest, may utilise thismodule for their own requirements, the five steps discussed above are notstructured in the the text from one to five. The structure and intent of each is as
follows:
• IMPLEMENT : A dealership Certification Review for the Module isfound immediately following the Table of Contents. It is followed by aCertification Review Form. These forms are a measure of the Dealership’simplementation of actions suggested in the Module and, properly updated,serve as a quick review of each dealership’s progress toward certification in
the Module
1 READ
MODULE
• Contents
• Justification
2 REVIEW
FORMS
• Operating
• Assessment
3 ANALYSE
EVALUATORS
• Standards
• Potential
4 CHOOSE
ALTERNATIVES
• Grid
• Decide
5 IMPLEMENT
SUGGESTIONS
• Specifics
• Monitor Outcome
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PA RTS EXC E L L E N C E
• ANALYSE: Evaluators for the Module's individual content provide aquick review of the material to be covered. They also set the performancestandards by which the Parts Department will be measured for modulecertification. For these reasons, they are placed at the beginning of eachsection. In setting the performance standards, they describe a logical,complete approach toward departmental efficiency. This focuses the
dealership’s efforts
• READ: Background information is the bulk of the text in this Module. Itexplains various Parts Department areas or operations and justifies why suchknowledge is important. It increases the retailer’s understanding
• REVIEW: Key operating and assessment forms are briefly described andgiven as examples. Operating forms are those documents used in theDepartment’s daily activities to make operations orderly and accountable. Inaddition, analysis forms are also provided. These are periodic documentswhich collect data and provide management tools for assessing ormonitoring the results of Parts Department activities. This improves the
retailer’s control
• CHOOSE: Decision Grids provide specific suggestions to help organisethe retailer’s approach to solving problems and making changes
Dealer Development Module- Introduction
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To emphasise the introduction of Parts Excellence as a Dealership commitment,the Dealer should schedule and announce an introductory meeting and thenfollow-up with regular meetings at least every other month to report and receiveinformation on progress.
Prepare a meeting checklist prior to the initial meeting that includes :
• Meeting date
• Reviewing the Dealership’s intent (or progress, once Parts Excellence has been
initiated)• Reviewing customer satisfaction record (or talk about beginning one as an
opening element to Parts Excellence )
• Alerting managers prior to the meeting that customer satisfaction will betalked about
• Selecting a meeting place that is both comfortable and convenient.
• Planning to have Parts Excellence recognition plaques with any modulecertification bars that the Dealership has earned or wants to earn displayed atthe meeting either as the real objects earned or as photographs of those to beearned
• Reviewing arrangements and rehearsing your comments
• Letting others in the Dealership know if they are expected to participate and,if they are to present, what their topics are
• Planning to offer an award for the best suggestion on how to improvecustomer or profit satisfaction. Use this as a discussion starter
• Preparing a meeting guide with :– Opening remarks (we are here as a team, we are moving in the right
direction, Parts Excellence as a resource to make use of, it will take timeand will power, our goal is total customer satisfaction, we are open tosuggestions, etc.)
– Parts improvement suggestion contest
– Conclude meeting by re-emphasising customer satisfaction, productexcellence, operational excellence and the importance of people to makeit a reality
Dealer Development Module- Programme Launch
DEALER DEV E LO P M E N T
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IMPROVING PARTS MARKETING
EXPECTATION (WHO)
PROMOTE APOSITIVEEMPLOYEEATTITUDE
EXHIBIT SKILLS,TECHNOLOGIESINVENTORYCAPACITY
MAINTAIN HIGHHOUSEKEEPINGSTANDARDS
DEMONSTRATEEFFICIENTOPERATIONS
DEVELOP MENU
PRICING ANDCOMPETITIVEATTITUDE
MAINTAINCUSTOMERFOLLOW-UP
8
PA RTS EXC E L L E N C E
Dealer Development Module- Decision Grid
RESPONSE (WHAT)
• Indicate a sincere desire to help• Provide att ractive uniforms• Expect excellent personal grooming and
hygiene
• Provide a positive, clean, workingatmosphere
• Display awards, plaques, recognition letters• Inspect Parts facility for cleanliness,
organisation• Encourage a display quality everywhere in
the Dealership
• Customer contact areas kept spotlessly clean• Dusted, straightened inventory storage• Clean, clear signs, posters, banners etc.• Encourage fastidious, continuous cleaning
during working hours
• Expect rapid, professional phone callhandling
• Require quick counter service, no waiting foreither technicians or outside customers
• Use computer, microfiche and otherautomated techniques to improve deliveryservice
• Expedite all transactions whenever possible
• Package prices for parts/labour, part icularly
maintenance and highly competitive servicetasks• Promote an image of competitive prices
through specials, sales, mark downs,availability, fast service
• Inform Service Department of prices forfrequently requested parts so that customergets firm quotes quickly
• Assign individuals to notify customer whenspecial orders arrive
• Develop formal, documented, notificationmethods
• Emphasise importance of delivery (andcustomer claiming)
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DEALER DEV E LO P M E N T
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Basic Perceptions - Evaluators
QUALIFIER DEALER ACTION VALUE
THE DEALERSHIP • Dealership has a Parts Department Facili ty 10
• Shipping and Receiving areas 4• Parts Display Area 4• Convenient customer parking 4• Retail/Wholesale counter space 4
• Separate, exclusive, parts storage area 6
PARTS MANAGER • Full time Parts Manager 10• Manager has executive status 4• Retailer personally involved with Parts
Department Operations 4• Retailer meets regularly with Parts Manager 4• Assigned, exclusive Parts Department staff 6
KEY REQUIREMENTS • Parts Manager included in Dealershipmanagement meetings 10
• Inventory control method or system 4• Carry (stock) inventory 6• Parts manager controls Department
merchandising budget 4• Expected to contribute to Dealership profits 4• Regularly develop goals and objectives 4• Identification and direction signage 4• Expected to cooperate with other departments 4
Assessment Score (100 points possible)Certification requires a score of 80 or above
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PA RTS EXC E L L E N C E
Franchised automobile and truck Dealers (Owners, operators, or GeneralManagers of establishments which sell, service and provide factory parts or vehicleowners) are a unique group of retailers. In much of the world they represent amajor economic force that is unrecognised simply because the Dealer is usually anindependent business person operating within a specified region. And while theDealership may be considered a franchise – having close ties with specific vehiclemanufacturers and relying on public recognition of those brands to help generatesales – usually the dealership’s operations reflect the individual who owns and
controls it.This unconscious link between the Dealer as a person and the Dealership as anestablishment is so strong that the term “Dealer” often means both, and assumesthat the Dealership’s physical expression and operating behaviour reflect itsowner.
Often, this is true. Many dealerships are family-run, with the Dealer’s nameprominently displayed along with the manufacturer’s name. The Dealer takesgreat pride in the family business. Each Dealer, along with thousands of othersaround the world, purchases vehicles from a manufacturer and offers them forresale. Thus, while the Dealer may technically be the final phase in thedistribution process, few consider themselves as simply an extension of themanufacturer. Instead, they are independent enterprises with essentially totalcontrol over their operations and business potential.
Basic Perceptions - The Dealership
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In the past, when there were fewer vehicle competitors, when low fuel pricesmade transportation inexpensive, when the demand for new vehicles was highand when competition was not as fierce, dealerships thrived almost exclusivelyon the profits of new and used vehicle sales. New Dealers were usually developedfrom successful salespeople. They learned and practised the business from a salesperspective; rewarded with instant gratification of closing a sale, impatient withabstract numbers, interested in people rather than systems and procedures.When they became Dealers themselves, these personality traits tended to
dominate operating characteristics.Thus the Dealership’s focus has almost always been on vehicle sales. From thepoint of view of fixed operations, and particularly the Parts Department, thiscauses problems. Since typical automobile dealers built a career out of vehiclesales, most have little or no direct experience with parts operations. This causesconfusion not only between Dealers and their Parts Departments, but amongother departments as well.
In addition, Dealers have had little incentive or reason for concentrating on anyportion of their business other than vehicle sales. Losses in other areas could beoffset by vehicle sales profits. However, as competition increased – not only fromother Dealers, other brands and a volatile global economy, but also from anexpanding base of aftermarket services – Dealers find themselves in different,and often difficult times.
Basic Perceptions - The Dealership
DEALER DEV E LO P M E N T
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PA RTS EXC E L L E N C E
Parts Managers generally receive very little formal training. Many entered theirmanagement position without proper experience, understanding or resources.They may have learned from a previous manager, or perhaps they were hired awayfrom a competitor or an aftermarket supplier. In any case, Parts Managers seldomhave a complete, accurate, operating procedure and philosophy. They learned bymaking mistakes. Even among superior Parts Managers, operating errors remainundetected and uncorrected simply because no formal, thorough approach to allaspects of the Parts Department has ever been considered. In some dealerships the
Parts Manager is little more than an ordering clerk, collecting the requests of technicians, retail customers, wholesale customers and the dealer.
Perhaps the most significant reason for developing Parts Excellence is to provide aknowledgeable, proven, complete operating formula for Parts Departmenteffectiveness based upon strong management from a knowledgeable PartsManager. Parts Excellence is the response to an industry-wide need for trainingthat helps Parts Managers approach their Departments with wisdom andaccuracy. For, unlike the Service Department which sells and resells theknowledge and skills of its technicians every day, the Parts Department’s businessis totally dependent on two things which must come from outside the Dealership:parts and customers.
Only with a systematic approach, and a Parts Manager who can activate andorchestrate that approach, can the Department effectively predict and respond tocustomer demands. Without a system, the Parts Manager is forced to makedecisions based on limited experience, incomplete data and intuition. The resultsare seldom excellent and are usually expensive, time consuming and wasteful.
Basic Perceptions - Parts Manager
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DEALER DEV E LO P M E N T
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Basic Perceptions - Parts Manager
MANAGEMENT RESPONSIBILITIES
Use the worksheet to list five responsibilities which you think are the mostimportant. For the Dealer this means to list those things that are considered mostimportant for the Parts Manager to manage. For the Parts Manager, this meansto list the five most important things that it appears the Dealer wants managed.Dealer and Parts Manager should complete their lists separately and privately,then compare lists.
Do your expectations and priorities match?Is the Parts Manager concentratingon what the Dealer expects?If the lists don’t match, both parties should discussthem thoughtfully and thoroughly. Both should understand what is expected,required and needed. Reach agreement. Review what is discussed periodically tomake sure both Dealer and Parts Manager are still in accord, especially whenthere is a change in market conditions, the Dealership or the Parts Department.
The Parts Manager is responsible for managing:
1. ______________________________________________________________
2. ______________________________________________________________
3. ______________________________________________________________
4. ______________________________________________________________
5. ______________________________________________________________
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PA RTS EXC E L L E N C E
It is vital that Dealers and Parts Managers understand and agree upon what eachexpects of the other. The Manager is responsible for Department operations andoutcomes. (The term “Manager” is used to reflect the title of the person assignedthe tasks of administering the Department. This person might be called the PartsDepartment Director, Controller, Fixed Operations Vice President, etc.)
The Parts Manager should be held accountable and expected to achieve specific,understood objectives. However, authority must accompany this responsibility.The Parts Manager is given authority by the Dealer to run the Departmentwithout interference as long as objectives (customer satisfaction, financial,operational and behavioural) are met. A Parts Manager who has responsibility butno authority is severely limited in the capacity to perform effectively. Frustrationwill result.
In order to help the Parts Manger achieve desired results without undueinterference and conflict, the Dealer must be able to :
• Stress customer satisfaction
• Ask the right questions
• Define expectations of personnel
• Determine and assess profit expectations
• Establish and measure operating standards
• Monitor Department efficiency
• Realise reductions in Department waste, loss and unproductive time
The Dealer approaches these tasks from a leadership position. The Dealer leadsthe entire establishment, providing direction, examples, standards and goals. TheParts Manager runs the Department, providing support to the Dealer’s direction,translating goals and standards into operating objectives and remaining accessibleto Department employees for assessment, assistance and problem solving.
Basic Perceptions - Parts Manager
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DEALER DEV E LO P M E N T
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Basic Perceptions - Parts Manager
The Parts Manager DOES:
• Stress customer satisfaction
• Supervise quality of work done
• Assign tasks to individuals
• Adequately train personnel to do
tasks assigned
• Monitor results
• Specify how results are evaluated
• Solicit and use suggestions
• Encourage constant improvement
• Act as a team leader
• Require high quali ty work
• Help people reach career goals
• Provide constant reinforcement
• Expect professionalism
• Closely monitor security
• Privately inform someone of errors• Publicly acknowledge good work
• Expect superior results
• Include all good and reasonable
suggestions
• Lead and direct
The Parts Manger DOES NOT:
• Place profit ahead of customer
satisfaction
• Perform tasks assigned to others
• Allow individuals to choose tasks
• Assign tasks to personnel who are
unable to do an assignment
• Over monitor task as it proceeds
• Generalise on expected outcomes
• Dictate all phases of operation
• Change expectations unilaterally
• Order people to do things
• Use authority for intimidation
• Censor achievement oriented
employees
• Expect work to be its own incentive
• Dehumanise work environment• Show distrust of employees
• Criticise someone in the presence of
others
• Show favouritism
• Tolerate inferior performance
• Fear to change
• Stand apart from others
MANAGING THE PARTS DEPARTMENT
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PA RTS EXC E L L E N C E
The Dealer guides the Parts Department through a full-time, knowledgeablededicated Manager. The Parts Manager should be:
• Recognised as an executive in the organisation with the rights andprivileges given to other department managers
• Included in management meetings, in planning sessions, in goal settingactivities and in the flow of information and discussion relative toDealership affairs
• Provided with a competent staff of parts personnel devoted exclusively toParts Department operations
• Granted an operating space and methods to perform all ordinaryDepartmental asks of receiving, allocating, selling, controlling transactionsand monitoring practices and results
• Supplied with elements necessary for meeting customer needs such ascounter space, waiting area, customer parking, directional signs, partsdisplays and merchandising budget
• Required to produce (and given the mechanisms for producing)
Departmental profits• Supported adequately to maintain high levels of customer satisfaction
through sufficient parts availability
Basic Perceptions - Parts Manager
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Parts Excellence is not possible unless the Dealership is committed to having thenecessary departmental, physical, monetary and operating essentials. I t beginswith the Dealer who encourages and rewards the Parts Department for satisfyingcustomers and generating profits. To do this, the Dealer must be intimatelyinvolved with the Parts Manager and the Department.
The personally involved Dealer can benefit Parts Department operations inmany ways. Dealer involvement helps to :
• Provide guidance based on the Dealer’s professional experience• Build the status of the Parts Manager and Parts Department
• Allow close monitoring of the Department’s emphasis on customersatisfaction
• Recognise problems quickly and suggest appropriate alternatives
Basic Perceptions - Key Requirements
DEALER DEV E LO P M E N T
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PA RTS EXC E L L E N C E
Basic Perceptions - Decision Grid
GETTING INVOLVED
EXPECTATION RESPONSE
• Personal involvement with Departmentoperations– Working understanding of basic
Department functions
– Recognise Department’s importance inDealership’s overall profitability andcustomer retention (customer satisfaction)
• Hold regular meetings with Parts Manager– Encourage free and open exchange of
ideas– Develop reasonable, agreed upon
objectives to reach customer satisfactionand profit goals
– Hold meetings at least monthly, preferablyweekly
– Show an atti tude of trust and confidence inParts Manager’s decisions – back up thosedecisions and discuss any reservations withthe Manager
– Avoid conflicts, edicts and underminingthe Manager’s authority over theDepartment
• Include Parts Manager in Dealershipplanning meetings– Solicit Manager’s ideas for merchandising,
marketing, promotions, new marketprospects, operational improvements,
potential competitive pressure or changesin competitor mix
– Develop an expectation among alldepartments for cooperation andunderstanding
• Provide capital to support parts andaccessories purchases of adequate inventory
DEALER ISCOMMITTED TOUNDERSTANDINGAND GETTING
INVOLVED WITH THEPARTS DEPARTMENT
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DEALER DEV E LO P M E N T
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The Parts Department - Evaluators
QUALIFIER DEALER ACTION VALUE
Assessment Score (100 points possible)Certification requires a score of 80 or above
• Familiar with basic Parts Departmentoperations 2
• Establish Parts Manager’s responsibilities 10• Solicit Department suggest ions 2• View Parts Department as a business 10• Provide consistent, predictable
leadership 8• Set objectives based upon quantitativerather than subjective criteria 7
• Recognise inventory investmentnecessary to satisfy the greatmajority of customers 7
• Parts Manager granted Departmentalauthority 8
• Manager’s goals prepared in writing 7• Financial accountability and
information utilised 2• Develop formal, documented daily
operating methods 8• Parts and supplies purchasing
centralised in the Parts Department 2• Util ise controls to verify operational
integrity 2
• Parts Manager analyses return oninvestment 7
• Activities implemented meet realisticstandards 2
• Parts Manager controls theDepartment’s daily work 7
• Agreed upon goals are met 7• All activities are documented 2
DEALER ROLE
BUSINESSPERSPECTIVE
OPERATINGMETHODS
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FUNCTIONS
The Parts Department is responsible for:
• Proper inventory planning
• Accurate parts, accessories and supplies ordering
• Precise receiving, stocking and delivery procedures
• Sufficient security and safety
• Maximum use of existing facilities• Housekeeping
• Wise investment of the Dealership’s available capital
The benefits of applying Parts Excellence to Dealership operations are quantitative– resulting in measurable increases in business potential. These measurementsinvolve all aspects of Parts Department activities:
• Customer satisfaction
• Profitabil ity (Return On Investment)
• Systems efficiency
• Procedural proficiency
• Consistently applied controls
• Established standards
• Recognise and address changes in trends
Each of these areas requires the Dealer’s direct involvement. Performanceexpectations should be discussed, agreed upon and written so that Parts Managersknow what is to be expected of them and Dealers know what goals are to be met.The Dealer provides the leadership. The Parts Manager activates it through
efficient management.
The Parts Department - Dealer Role
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The Parts Department (and, perhaps less frequently the Service Department) isconsidered by some Dealers, at best, as an unprofitable customer support area,and, at worst, as a capital draining expense that exists because it is a franchise
requirement.
PROFITABILITY
Many Dealers have realised the optimum profit and growth their PartsDepartment could yield. In some cases Dealers are unfamiliar with essential Parts
Department systems and operations. Thus the Department appears complex,difficult to understand, often uncontrolled and in constant crisis.
The Parts inventory is a major investment in the Dealership. It influences theDealer’s overall capacity to respond to change, compete effectively, and realiseprofits at the same time. Dealers themselves, usually unaware of the details of Parts Department operations, can feel vulnerable to a system they do notunderstand.
Some simply ignore the Department leaving it to their Parts Manager to runindiscriminately or without executive control. Others may get involved bygetting upset or impatient, and worsen already difficult problems. Still others
may attempt to use their sales experience as a method for developing or definingParts Department operating structures. In all cases the results are usuallydisappointing and sometimes disastrous.
The Parts Department - Dealer Role
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PA RTS EXC E L L E N C E
BUSINESS STRENGTHThe Dealer should clearly state to the Parts Manager that customer satisfaction isan important goal of all Dealership departments. Further, the Dealer shouldpersonally reaffirm with the Parts Manager that every attempt should be made toprovide more parts and accessories, to increase the number of customers demandsfulfilled and to emphasise sales as an important planning element.
The Parts Manager is responsible for increasing parts and accessories sales. The
Dealer actively supports this, and confirms it by making it clear that:• Handling only the business that comes to the Department is not
sufficient to accomplish aggressive sales growth goals
• Any reduction in the Service Department’s traffic or capacity will make itmore difficult for added parts sales, and therefore the Service Departmentshould be given consistent attention and Parts Department support
• A strong Service Department provides a continuous source of parts andaccessories business
• Even if the Parts Department is operating at peak efficiency and does nothave sufficient capital to expand, the Parts Manager should annually
submit ideas so that plans are prepared when expansion can occur• Any reduction in customer satisfaction directly affects the Dealership’s
reputation and makes it more difficult to sell vehicles
The quality and capability of the Parts Department affects the entire Dealership.Fixed Operations (Parts and Service) are extremely important in maintainingcustomer loyalty. In fact, customer satisfaction after the sale plays a major role inkeeping customers for future sales. Parts and Service excellence often determines
the Dealership’s capacity to compete and remain successful.
The Parts Department - Dealer Role
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CUSTOMER LOYALTY A positive experience with the Parts Department helps customers to:
• Consider the Dealership for all their parts needs
• Consider the Dealership for service
• Consider the Dealership first for their next vehicle purchase
• Recommend the Dealership to friends, relatives, neighbours and businessassociates
Remember: A single bad experience jeopardises the relationship that existsbetween the customer and the Dealership. Every contact with the customer is anopportunity to build that relationship or damage it. Excellence in service tocustomers is vital to the Dealership’s future potential.
The Parts Department - Dealer Role
DEALER DEV E LO P M E N T
POTENTIALCUSTOMER
POTENTIALCUSTOMER
POTENTIALCUSTOMER
VEHICLE SOLD BY
YOUR DEALERSHIP
CUSTOMER’S EXPERIENCEWITH PARTS AND SERVICE
RETURNINGCUSTOMER
SATISFIEDCUSTOMER
DISSATISFIEDCUSTOMER
VEHICLE SOLD
BY COMPETITOR
CUSTOMER LOYALTY
“POOR” “GOOD”
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BUSINESS ELEMENTSThe Parts Department must be approached as a separate business. Properlymanaged Parts Departments already contain all the elements necessary to conductaffairs in this manner including:
• Inventory
• Capital investments
• Sales
• Public relations
• Planning and forecasting
• Facilities
• Specific procedures and work activities
• Maintenance and housekeeping
• Merchandising and advertising
• Security
• Worker safety programme
• Shipping and receiving
• Accounts payable and receivable• Personnel
• Training
• Administration and payroll
All decisions made by the Parts Manager occur within this business setting. Themajority of these decisions have nothing to do with Parts – financialconsiderations are what direct operations. To pay expenses, purchase stock andrespond to customers, the Parts Department must first pay for itself, as does anybusiness.
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CUSTOMER ORIENTATION
Inventory should be considered as money; parts are currency; not simply items.Generally, only profitable items should be stocked. To accomplish its business,the Department is responsible for:
• Providing requested parts and accessories
• Delivering them at the appropriate time
• Having them available in correct quantities
• Offering them at an acceptable price
• Realising a reasonable profit
• Directing all operations with adequate controls
The Parts Department’s operating methods are business oriented. They alsoreflect the expectations and personality of the Dealer. But business methods area mechanism, not a conscience. They can help orchestrate operations to bestserve customers and attain profits only if the Dealership makes the commitmenttowards clarifying, formalising and supporting those operational standards.
The Dealership that concerns itself only with profits will reduce its customer
base. The Dealership that concerns itself only with customers without knowingwhat its operations cost, may spend itself into bankruptcy. The Dealer has aresponsibility to maintain a profitable business in order to continue to servecustomers who depend upon the facilities for parts, service and new or usedvehicles. Thus, reasonable profits are also ultimately in the customer’s interest.
The Parts Department- Business Perspective
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MEASUREMENTSThe Retailer reviews and adjusts Parts Department activities from a businessperspective, and for good reason – as long as the Department is meeting profitobjectives and satisfying the great majority of customers, it is succeeding well. TheParts Department itself needs to control and organise information about itsactivities. Numerous analysis forms keep the Parts Manager aware. These includereports on:
• Expenses, gross and net profits• Inventory
• Sales to all customers
• Lost sales
• Special orders
• Back orders and arriving shipments
• Parts sales per repair order trends
• Parts to labour sales ratio trends
• Employee productivity trends
• Overdue accounts
These detailed, comprehensive measurements allow the Parts Manager to more
clearly picture the future based upon accurate data.
ACCOUNTINGPrecise and accurate figures must be kept current based upon the FinancialStatement. Business management – the routine accountability, control and fiscalassessment of operations – is useful only when the information is accurate,understandable and utilised to set future objectives. Perhaps the greatestdifference between the Parts Department as a business organisation and the PartsDepartment merely as a supply source is that the business (and profit) orientedParts Department monitors its affairs from a financial perspective. This does notmean that its progress is decided by the Financial Statement alone, but thatbusiness health and prospects are measured first, by firm financial data.
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FINANCIAL STATEMENT Accuracy is central to business success. The Parts Department views its activities,opportunities and challenges from a profi t making perspective. The key resourcefor this review is the Financial Statement. Parts Department accounts (whichshould be on the Financial Statement) help the Parts Manager monitor trends,predict future needs and detect problems early. The most common accounts are:
• Parts and Accessories Warranty Claims usually made to the factory for
parts and accessories used on Warranty covered service work• Parts and Accessories Internal which includes a proportion of those items
sold through the Service Department and Body Shop. This account alsocovers those parts and accessories for used car and truck reconditioning andin maintaining Dealership vehicles (excluding warranty) as well asaccessories sold to the NewVehicle Department
• Parts and Accessories Counter Retail which are sold at retail prices to acustomer who is usually the user
• Parts and Accessories Wholesale which are sold to customers belowthe retail prices, usually for resale to their customers
• Inventory Adjustments which may be necessary to remove obsolete and
discontinued items from the documented inventory and to compensate forprice changes
• Petrol, Oil and Grease, Paint and Body Shop Materials, Miscellaneousand Non-Automotive Merchandise and other Franchises are also givenseparate listings
• Allowance for Doubtful Accounts which provides for possible losses fromcredit sales that do not pay
• Salaries, Supervision which indicate compensation for the Parts Manageror Department Director and other supervisory personnel
• Salaries, Clerical which indicate compensation for employees, some of
whom may be part-time or shared among departments
The Parts Department- Business Perspective
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• Other Salaries and Wages which indicate compensation for PartsDepartment employees such as counter people, drivers, etc.
• Company Vehicle Expense for operating and maintaining PartsDepartment Vehicles
• Other Supplies including light bulbs, rags, solvents, cleaning andwashroom supplies, etc.
• Policy Works Parts and Service for the internal selling price of parts
which are not charged to a customer or the manufacturer
• Outside Services including data processing, security, rubbish removal,inventory services, etc. which are shared among departments
• Training expense for tuition, films and materials, meals, lodging andtransportation while Parts employees attend schools
• Depreciation of equipment as a monthly provision for the routinedevaluing of furniture, fixtures and parts and accessories equipment
The Financial Statement is, understandably, a sensitive and private document. Itsinformation is privileged and personal. If a Dealer cannot allow full disclosure tomanagers, a compromise should be found in which appropriate portions are
provided so that managers have all the details they need in order to assess theproductivity of their departments. Without this information, the Dealer isessentially not giving the Parts Manager the authority to take command of theDepartment’s affairs.
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GOAL SETTING
Goal setting should address not only immediate situations, but also long-termplanning. In a continually expanding and changing market the Dealership mustbe prepared to simultaneously expand and alter its operations to consistentlyreach its potential. In markets affected by government price controls, importcontrols, explosive inflation, severe shortages or any supply/demand ratio that isseverely unbalanced, the Dealership must take time to consider long-term plans.
A simplified goal setting method (such as expecting a specific percentage increaseyear after year) may not be appropriate. Consider all the variables in the market– special circumstances, changing Dealership needs or capacities, added ordifferent competition, etc. – so that goals wisely reflect expected possibilities, not just blindly increased sales growth.
In those Dealerships with strong Service Department operations, use theexpectations defined by the service market to help determine parts sales goals.
The Parts Department- Business Perspective
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RETURN ON INVESTMENT To further assess the Parts Department’s minimum requirements for profitability,the Parts Manager should analyse Return On Investment.
The chart on the opposite page shows an appraisal formula which can be appliedto Parts Department operations. All the figures contribute to a basic standard –the Return On Investment.
• In the upper bracket, determine total working capital, plus permanent
investment. Divide this total investment into total parts sales todetermine gross turnover – an approximate (and certainly not exact)estimate of the number of times the total inventory investment sold inone year. (Note: this is gross turns, not accounting for which partnumbers are selling how often, nor whether parts and accessoriespurchasing is occurring in the most cost effective manner)
• In the lower bracket, the total cost of sales is subtracted from total salesto provide net profits. Net profit divided by total sales yields net profit asa percentage of sales
• Percent Return On Investment is calculated by multiplying the turnover
figure by net profit as a percent of salesThese generate approximations. Use them as a starting point for setting areasonable Parts Department standard. It should be emphasised that properconclusions can only be drawn when calculations include scheduled (stock) orderefficiency and exact attribution of costs. The Dealer and Manager can use thecalculations presented here until more accurate methods are introduced and
applied in subsequent modules.
The Parts Department- Operating Methods
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31
The Parts Department - Operating Methods
PartsInventories
+AccountsReceivable
+Currency
Working Capital+
Permanent
Investment
Sales
÷Total Investment
InvestmentTurnover
Cost of Parts
+Wages, Salaries& Commissions
+Freight &Delivery
+Administration,
Other Expensesexcluding taxes
Sales_
Ultimate Costof Sales
Net Profit÷
Sales
Net Profitas % of Sales
X=Basic % ROI
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STANDARDSThere is a saying, “When there is no specific destination, any path will lead to it.”An operating plan is essential to efficient, predictable Department results. Theadvice and knowledge compiled in Parts Excellence contains standards relative toall aspects of Parts Department operations. It is tested, practical information.However, each Dealership must independently determine its own approach to thestandards generally presented.
Regardless of what information and elements the Dealership implements in itsown system for Parts Excellence, the determination must meet realistic standards.These standards imply that Dealer activities relative to its Parts Department (andall departments for that matter) must be:
• Quantitative (mathematically determined if at all possible)
• Measurable (comparable numerically to other plans or options so thatresults are factual and narrowly interpreted)
• Specific (precise and objective, rather than general or subjective)
• Realistic (attainable, moderate, honest, achievable in the context of current Dealership possibilities and motivation)
• Understandable (simple to implement, assess and communicate, as wellas acceptable and motivating)
• Reviewable (flexible, capable of change, periodically examined so thatadjustments can be made and modifications are understandable)
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CONTROLSStandardised operations undergo continuous checks and balances or controls.These controls are specific devices that ensure procedures are properlyimplemented in order to reach departmental objectives.
Controls become the final link to complete, working operations. Controlsprovide for reassessment, security and confirmation. They need not be dictatorialtests which judge or confront individuals. Instead, controls can be used as
specific points which measure how well procedures are working, and howuniformly and accurately those procedures are performed.
In many cases simple documentation (sign-out forms, requisitions, etc.) thatrequire an individual’s signature or some other non-confronting method of overseeing will keep procedures in order and personnel performing optimally.
Taken together, procedures and controls help assure that system expectations aremet and that Departmental profitability and customer satisfaction goals areachieved.
The Parts Department- Operating Methods
DEALER DEV E LO P M E N T
Systems Procedures Controls
…for defining overall …for organising formal, …for reassessment, securitystandards and expectat ions consistent methods and confirmation of operat ion
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The Parts Department is essential to the Dealership’s ability to satisfy customersand have it continue as their business preference. The Dealer’s personalinvolvement helps assure that all employees are aware of and adhere to good
business practices.
WARRANTY GUIDELINESAll Parts Department operations occur within the context of fair and forthrighttreatment. As a general operating rule, Parts Department personnel should be:
• Disclosing to the customer the fact that parts and accessories not marketedby General Motors or an affiliated company are not included in GMfurnished warranties
• Advising the customer that a vehicle which is altered, adapted or modifiedin order to install parts and accessories ordered and not marketed byGeneral Motors will void the otherwise applicable warranty
It is also essential that the standards established for daily business include theelements necessary for proper and complete operating behaviour. This includes aDepartment which has:
• Authority over its requirement
• Responsibility for its results
• Communications that are open and frequent
• Documentation that parallels and tracks parts flow
• Processes that organise transactions and handling methods
AUTHORITY The Parts Manager controls the Department’s daily work. The Parts Departmentshould be the central parts and supplies purchasing agent for the Dealership,making all purchases, canvassing all departments for prospective needs, organisingall supply requisitions, soliciting quotes, approving transactions, receiving all
shipments, etc. The Department does not have authority over the requirementsof others, nor can it operate outside what the Dealer considers the Dealership’sbest interests. The Parts Department exercises authority in the interests of theentire Dealership, not simply to benefit itself if that puts the Dealership’s welfareat risk.
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RESPONSIBILITIES
The head of the parts Department must also achieve agreed upon goals.Certainly the Parts Manager should be given every opportunity to succeed byhaving proper training, sufficient resources (financial, physical, human) andachievable (but not necessarily easy) goals. The manner in which theDepartment is run should properly be in the hands of the Parts Manager. Bybeing granted this operating flexibility, the Manager is also agreeing to beresponsible for meeting Dealer expectations. One cannot be in charge of the
Department and not be responsible also for what it must accomplish.
COMMUNICATIONS
Communication systems must be created and utilised to circulate information.Business organisations cannot rely on verbal orders, unspecific suggestions orunresolved discussions to conduct its affairs. Communication must be precise,and in writing.
Communication is an exchange of information. The Parts Department, as arecognised entity within the Dealership, becomes a source of expertise andopinion that is solicited and acknowledged. The Dealer can activate the
Department and its business prospects by developing a meeting routine in whichdepartment managers discuss and resolve problems, plan together and in generalbecome more familiar with and understanding of each other’s needs.
The Parts Manager must have sufficient information and direction to respond asa true member of the Dealership’s management team. Authority andresponsibility are meaningless unless the manager is fully informed and isincluded in planning sessions among department heads.
The Parts Department- Operating Methods
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DOCUMENTATIONDocumentation is a central, formalising feature of the efficiently controlled PartsDepartment. All activities within and between departments are accompanied bya complete documented history. For the Parts Department this is most criticalsince the only practical way in which it can make proper business decisions andprotect itself from loss is by paralleling every part, accessory and unfulfilledcustomer demand with a written record. The Dealer must have a PartsDepartment that rigorously documents all transactions and resolves the status of any missing documents.
Documentation is particularly critical where the forms themselves representmoney. These money controlling documents – repair orders, parts requisitions,sales receipts, credit invoices, counter tickets and purchase orders – must be
carefully monitored.
PROCESSESThese are precise, written, handling methods for both the parts and theirparalleling documentation. These are specific, interrelated rules or routines thatensure the Department utilises personnel most efficiently and functions with
appropriate security. A complete discussion of these processes is the subject of Modules 2 through 5.
These operating routines are designed so that the Department has adequatecontrol over all parts, accessories, materials and supplies throughout thetransaction from supplier to final user. Included with the ordinary operatingroutines are a series of controls which help assure that processes are complete and
accurate.
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The Parts Department - Decision Grid
MANAGING OBJECTIVELY
EXPECTATION RESPONSE
• Wherever possible, analysis of operationsshould be:– Quantitative– Measurable
– Specific– Realistic– Understandable– Reviewable
• Operations are standardised and undergocontinuous checks and balances
• Parts Manager is routinely provided withinformation concerning the Dealership’sfocus and direction
• Parts Manager and Parts Department areregularly included in communications and
management information• Parts Department is granted:
– Authority over requirements– Responsibility for results– Open, frequent communications– Full documentation of parts flow
• Signatures are required for dissemination ofcritical documents such as Repair Orders,Counter Tickets and other receipts whichrepresent money
• Critical documents have a written, formalprocedure for tracking and verification
• Procedures for tracking and verifying criticaldocuments are rigorously followed
• Employees are taught to be concerned aboutdocument flow and procedural integrity
• Employees are taught to take pride infollowing procedures strictly, in filling outforms completely and legibly and inattending to detail to reduce errors
EXPECTATIONSARE SETACCORDING TOOBJECTIVE
RATHER THANSUBJECTIVESTANDARDS
OBJECTIVES ANDMETHODS ARE UNDERCONSTANT CONTROL
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The Parts Department - Decision Grid
MAINTAINING A BUSINESS PERSPECTIVE
EXPECTATION RESPONSE
• Department controls its inventory, sales,marketing (promotions that are not relatedto the efforts of departments such asService), facilities and personnel
• Full-time Parts Manager dedicated to PartsDepartment
• Separate parts storage area completelyenclosed with full height walls and lockableentrances
• Exclusive areas utilised for shipping andreceiving parts and accessories
• Specific counters for retail and wholesalecustomer transactions
• Parts displays prepared and maintained
within Dealership proper• Personnel assigned exclusively to Parts
Department and under the control of itsManager
• A separate parts merchandising budget iscontrolled and administered by the PartsManager
• Parts transactions occur within formalisedcontrols:– Inventory control system utilised (pad,
card or computer)– Dealer and Parts Manager support and
improve efforts to devise and maintainprocedures, routines and parallelingdocumentation that track each sale
• Parts Department location is indicated withsigns that lead customers through thepremises and from other departments
PARTS DEPARTMENTIS VIEWED AS ASEPARATE BUSINESSENTITY
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The Parts Department - Decision Grid
MAINTAINING A BUSINESS PERSPECTIVE
EXPECTATION RESPONSE
• Parts Manager has authority overDepartment operations
• Parts Manager is held responsible for resultsand helps plan and set objectives
• Customer satisfaction and profitconsiderations are balanced with each otherwhenever management or operatingdecisions are made
• Dealer to hold regular meetings with:-Parts Manager and managers from otherdepartments. Dealer meets with staff ofdifferent departments at least twice per year,Dealer has all employee gatherings
• Financial information (sales, cost of sales,expenses) is separated into accounts for each
department, particularly dividing fiscalreporting for Parts, Service and Vehicle Sales
• Operating routines are diagrammed,formalised and reflected in written jobdescriptions
• Repair Orders, Customer Demands• Purchase Orders• Counter Tickets/Sales Receipts
• Written policies for issuing, preparing, andaccounting for crit ical documents
• Policies prepared and published concerningbusiness practices including warrantydisclaimers, concern for the customer,quality replacement parts, fairness,competitiveness, etc., which the Dealerdetermines are appropriate to signal thedaily operating philosophy of the Dealershipand its Parts Department
OPERATINGMETHODS ENCOURAGEA BUSINESS PERSPECTIVE
CRITICAL DOCUMENTSARE USED TO RECORDEVERYTRANSACTIONNO EXCEPTIONS
DOCUMENT HANDLINGMETHODS ARE
FORMALISED
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TH IS PAGE INTENTIONALLY LEFT BLANK
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The Parts Transaction - Evaluators
QUALIFIER DEALER ACTION VALUE
Assessment Score (100 points possible)Certification requires a score of 80 or above
• Parts Department is assigned to monitor allpurchasing (parts, accessories, supplies) 10
• Scheduled stock orders are used 5• All departments surveyed to determine
future demand 4• Lost Sales Record maintained 4• Dealer routinely reviews Parts Department
Purchasing methods 4
• Department operat ions are uniform 5• Parts Department utilises basic
business control forms (Purchase Orders,Repair Orders, Counter Tickets,Customer Demand) 10
• Authorisation Stamp utilised 4• Forms issued and recorded sequentially 4• Dealer emphasises importance of
documentation 4• Dealer has list/description of all reports
available to Parts Manager 4
• Parts Department uses essential Analysisforms (SAR and Trend Report) 10
• Financial information routinely madeavailable to Parts Manager 5
• Parts Manager has access to FinancialStatement 4
• Parts Manager makes business decisionsbased on Return On Investment 4
• Department and Dealer recognise theimportance of systematic operations 10
• Dealer expects Parts Department to have aplanned approach to goals 4
• Dealer regularly reviews Parts Departmentoperating plans and performance 5
DEMAND
CONTROL
ANALYSIS
PLANNING
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Comprehensive procedures depict the complete cycle of the part as it passesthrough the Parts Department. This is called the Parts Transaction and representsthe flow of a part or accessory as it move from the manufacturer through theDealership to the user.
Procedures do not eliminate the need for effective people, but they can helppeople work more effectively. People exit from the operational stream in differentways (such as by leaving the Dealership, leaving the Department, gettingpromoted or changing jobs). But with procedures, the Department maintainsintegrity and productivity during transitions or when inexperienced personnel join the organisation. When the Department is run procedurally, the PartsManager and Department personnel can manage the exceptions, rather than reactconstantly to crisis.
It is the responsibility of the Parts Manager or a designate to thoroughlyunderstand and use Parts Transaction procedures. However, the Dealer should befamiliar with the basics.
The Parts Department acquires all parts, accessories (and perhaps supplies) inthree different ways:
• Scheduled stock orders
• Interim orders to fulfil unexpected customer demand
• Immediate orders
These three ordering methods differ based upon how critical the need for the partis. Scheduled stock orders are usually used for the more predictable, less hurriedrequests such as inventory restocking. Interim orders are used for unexpectedcustomer requests and to replenish stock due to unusual demand. Immediateorders are used when the need is critical because the vehicle is inoperable or unsafeto drive until repaired.
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Each of the three ordering methods vary in their handling. Yet every partsrequest must go through the Parts Transaction cycle that consists of:
• Ordering (procurement)
• Receiving (delivered to Dealership)
• Allocating (or stocking)
• Selling (customer receives)
• Inventory control (record system)
• Inventory management (analysis)
• Purchase planning (source selection)
These are essentially chronological steps, which occur from the moment a partis required until that part has been accounted for in inventory (both whenreceived and when sold). The Parts Transaction is essentially an operating cycle– a continuous flow of parts from the manufacturer through the PartsDepartment to the customer. But it begins each time a customer requests a part.
The Parts Transaction - Demand
DEALER DEV E LO P M E N T
1 SCHEDULED
2 INTERIM
3 IMMEDIATE(WIP)
ORDER RECEI VE ALLOC ATE/SELL IN VENTORY PLAN PURCH ASES
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The Parts Transaction - Demand
CUSTOMERDEMAND
AVAILABLE
SALE
SCHEDULED
INTERIM
IMMEDIATE
LOST SALE
NOT ORDERED
ORDERED
NOT AVAILABLE
The moment a customer makes a request the Parts Department is doingbusiness. Thus the customer's “demand” is considered the starting point forevery Parts Transaction.
It is at this point that the Parts Department's ability to satisfy demanddetermines the relative success, profitability and customer satisfaction that isachieved:
• If the part is available from inventory (i.e. purchased in anticipation of asale), the Parts Department usually captures the greatest potential profit
• If the part is not available from stock but can be obtained from someoneelse's inventory (another Dealer, the manufacturer, the distributor), the PartsDepartment is fulfilling the demand and thus satisfying the customer, butmost likely at reduced profitability
• If the part is not available and either cannot be obtained or the customerwill not wait for the Parts Department to acquire the part, the sale is lost
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ROUTINES
The Parts Department is a complex array of routines which must synchronise.Each step in the operating cycle (order, receive, allocate, sell, inventory control,inventory management, plan purchases) contains its own set of subroutines. Theresult is a managed approach to customer expectations that improves theDepartment’s capacity to predict future demand, and thus make anticipatoryscheduled stock purchases at lower total cost while satisfying more customers.
The Parts Department’s ability to predict demand must be:• Accurate
• Quantitative
• Systematic
• Complete
DATA SOURCES
Four data sources help develop predictable demand:
• Customer demands fulfilled (either delivered from inventory stock or
other sources)
• Customer demands unfulfilled (tracked through a record of lost sales)
• Manufacturer stocking suggestions and Dealership expertise for the parts
and accessories historically required for the local trade base
• Tested expectations relative to changing conditions perceived in the local
trade base
Procedures and forms – installed in the Parts Department’s daily operating
method – are sources for the data.
The Parts Transaction - Demand
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Fulfilled customer demands are a matter of inventory control records. Inventorycontrol systems record sales, and add replenishments routinely. Accuracy is vitalso that inventory records duplicate actual shelf counts. When these records areprecise, the Department has an excellent source from which to predict future sales
based upon demand and current stock levels.
LOST SALESUnfulfilled customer demands (lost sales) should be recorded whenever a
customer’s request cannot be met, either because the part/accessory is unavailable(back ordered, unobtainable from any source) or because the customer chooses togo to another supply source. Every Lost Sale should be carefully reviewed since itrepresents not only lost business, but a potentially lost customer for futurebusiness. The Parts Department should use the Lost Sale record to:
• Train counter persons and other customer contact people how toaccurately document what the customer requires even when the PartsDepartment cannot supply it
• Closely examine each Lost Sale for possible future stocking
The Lost Sale record can also be used to:
• Track demands which may predict changing trends and expose the needto stock emerging demand items
• Confirm specific deliverability conditions – using the record as anunbiased basis for interdepartmental discussions concerning why certainitems are not stocked (or should be stocked)
• Generate reports from inventory control that substantiate why an itemwas not available and what the recent sales demand has been
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The Parts Transaction - Demand
LOST SALES
Date Part Number/Description/Year ReportedBy
Cause* Demand(last1/2 year)
*Cause: O/S (out of stock) B/O (back ordered) P/D (part discontinued) P (price) N/M (new model)N/S (not stocked) O/M (other make)
© 1986, Bill Marcus Incorporated
INVENTORY CONTROL
SAMPLE
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Manufacturers and other suppliers often suggest quantities of specific parts andaccessories the Parts Department should have. The suggestions are based onstatistical averages and cannot account for differences in markets and areas. TheDealership can use these suggested quantities as a guide. However, i t must decidefor itself if more or fewer of each item is appropriate (based upon historical needsfor similar items and on the Parts Manager’s judgement concerning the normalsales of each item). For those parts and accessories that are new and have no priorequivalent, the Parts Department should set up testing criteria to determine its
own sales volume expectations, and then purchase accordingly.Tested parts sales provide the most accurate and reliable prediction of future need.Only parts and accessories which have passed the stocking test should bepurchased for inventory. Do not rely on intuition. Test for demand, and thenpurchase for inventory quickly when an item meets the test criteria.
The Parts Department maintains and records its routines through a series of control forms. This documentation tracks demand and its fulfilment. Much of this occurs during inventory control – where inventory stock and special ordersales are accounted. All remaining demand should be contained in the Lost Salerecord.
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The Parts Department cannot operate efficiently or securely without basicbusiness forms. The content and design of these forms may vary depending uponthe Dealership’s requirements and operating methods. Successful PartsDepartments employ specific forms during each phase of the Parts Transactionto record, track and use as source documents for future purchase planning. Vitalforms include:
• Purchase Orders
• Scheduled and Interim Orders
• Immediate Orders
• Counter Tickets
• Customer Demands
In addition, an Authorisation Stamp can be used to verify and track themovement of each part and accessory as it travels through the Parts Department.Samples and discussions concerning each of these control forms (PurchaseOrder, Repair Order, Counter Ticket and Customer Demand and AuthorisationStamp) are presented on the next pages.
The Parts Transaction - Control Forms
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THE PURCHASE ORDER The Purchase Order (PO) can be used to:
• Check accounts payable
• Relate parts purchases to appropriate Repair Orders, Customer Demandsor Counter Tickets
• Review purchases as a method for controlling operations and expenses
CONTENTSThe PO should contain the following information (sample on facing page):
• Name and address of supplier
• Quantity (specific and verifiable)
• Specification of item or service purchased
• Purchase terms (price quoted, when and how payment is to occur foritems received)
• Repair Order number, Counter Ticket number or customer name if purchase is charged to a specific transaction
• Signature of person with the authority to make the purchase
CONTROLSThe PO serves as a method for reviewing and control ling purchases. I t is a criticaldocument that must be rigidly monitored:
• Pre-numbered and used sequentially
• One authorised person (plus alternate if the first person is not available)to request parts/accessories or supplies
• One PO book or pad used throughout the Dealership for all non GM oroutside purchases. (Each department should not have its own PO book)
• Prepared without mistakes. If an error is made in filling out the PO itshould be marked “VOID” and sent to the Accounting Office
• Reviewed periodically and randomly by matching PO with CounterTickets or Repair Orders ascribed to it to assure that purchases are indeedreaching the customer attributed to the purchase
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DEALER DEV E LO P M E N T
The Parts Transaction - Control Forms
PURCHASE ORDER #123456
Quantity Part Number Description GM# (if applicable) Price Terms
TOTAL
RO#
CT#
CustomerName:
Ordered by:
Dealership Logo, Address, Telephone
SUPPLIER
SAMPLE
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CUSTOMER ORDER The Parts Department must have a record of the actual parts and accessoriesordered. The Purchase Order acts as both an authorisation for purchase from anoutside source and as a record of the order itself. The Customer Order form isused to maintain a record of GM orders. I t is also used to notify the customer
when the part arrives.
CONTENTS
A summary of information required for the Customer Order is:• Dates request was made and order was submitted
• Ordering method used
• Date to return if unclaimed
• Employee placing order
• Department manager’s authorising signature
• Customer information (name, address, telephone number)
• Quantity, description and part number
• Counter Ticket or Repair Order assignment
• Vehicle Identification Number (VIN)
• Vehicle information (year, make, model, mileage)
• Customer deposit verification and notification
• Inventory control sign off
CONTROLSFor effective ordering:
• Managers only should approve this order so that duplication does notoccur
• Employee making request (or manager or someone assigned the task) isresponsible for contacting the customer when the order arrives
• The originating department is responsible for any penalties incurred if the requested part is unclaimed
• All parts and accessories are entered into inventory
• Pre-numbered, used sequentially
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DEALER DEV E LO P M E N T
CUSTOMER ORDER #123456
Date Requested Return By
Date Ordered GM: Scheduled Immediate
Non-GM: Name
Requested By (notify when part arrives)
Authorised By (Department Manager)
Repair Order or Vehicle Identification Number Vehicle Make/Model Year MileageCounter Ticket Number
Quantity Code/Part# Description
CUSTOMER: CUSTOMER NOTIFIED:
Name
Address Card Date
Telephone Date
Telephone DEPOSIT AMOUNT
INVENTORY CONTROL: By Date© 1984, Bill MarcusInc.
SAMPLE
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THE REPAIR ORDER Repair Orders provide many functions:
• Assures that payment is made for all parts and labour
• Technician's work order
• Often used as a purchase authorisation for parts
• Customer receipt which details everything billed
• Confirms warranty work
• Provides legal evidence in case of disputes
• Generates information and acts as a data source to guide Parts Departmentoperations (in those Dealerships where the RO is jointly used by Serviceand Parts)
CONTENTSIndividual Dealerships usually design one to precisely fit their operating style.Some prefer Work Order to Repair Order as they feel the word “repair” impliesthat something is wrong when the work may be maintenance or preventativerepair. Some Parts Departments use a separate requisition ticket and never see theService Department ’s Repair Order. In any case, Repair Orders are important to
smooth running operations. (A sample is provided on the facing page).
CONTROLSThe Repair Order is a critical document, therefore it must be carefully controlled.Procedures such as the following should be rigorously maintained:
• Pre-numbered and used sequentially
• Issue and account for all RO’s by number using an RO check off sheet(with numbers to match sequences of RO’s issued for use)
• Any missing RO’s should only be open Work Orders
• Have a standardised processing procedure so that all RO’s are routinelytracked
• Account for internal RO’s so that each one is appropriately charged tothe correct Dealership account
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DEALER DEV E LO P M E N T
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SAMPLE REPAIR ORDER/WORK ORDER
Repair O rder – Invoice copy
Date Vehicle Identification Number Engine Number Odometer Make – Series Year Registered NumberREPAIR/WORK ORDER 100001
I hereby authoriset he repair work herein after set forth t o be donealong
with necessary material and agree that you arenot responsible for lossor
damaget o vehicle or arti clesleft in vehicle in caseof fi re, theft or othercausesbeyond your control or for any delayscaused by undeliverable parts
or delaysi n partsshipmentsby t hesupplier of tr ansporter. I grant you andyour employeespermission to operate vehicle herein described on streets for
testing and inspection purposes. An express mechanic’s lien is hereby
acknowledged on abovevehi cle to secure repair amount.
TERMS STRICTLY CASH wi thout arrangement
Cash
Change
Internal
Authorised by
Customer Signature
Name
Address
Dealership IdentificationName, address, t elephone and logo
Delivery Date Written by
Phone when ready Operation Labour
LubricateChange Oi lChange Filter CartridgeBalance WheelsFront End AlignmentFree ServiceRotate TyresRepair Shocks– FrontRepair Shocks– RearTune-up
Yes NoResidential Phone
BusinessPhone
Transaction Number
TIME PROMISEDAM PM
Estimate
Cost Qt y. Part N umber – Descri pt ion Sal e
TOTAL PARTS
Sublet Repairs
Qty. PO No. Company Name
TOTAL SUBLET REPAIRS
Litres– Petrol
Litres– Oil
Grease
Repair Information – Labour Instructions
1
2
3
4
5
6
WARRANTY CLAIMS INTERNAL CUSTOMER PAY
Cost Account Number Sale Cost Account Number Sale Item Cost Account Number Sale
Labour –Mech.Labour –Body
Sublet –Mech.
Sublet –BodyParts–Mech.
Parts–Body
Paint –materials
Petrol, oil,grease
Tyres
Misc.
TOTAL TOTAL TOTAL
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THE COUNTER TICKET Counter Tickets (or other invoices produced as a receipt for retail or wholesalecustomers, or internal employees making parts purchases without service) are also
vital to the accuracy and security of operations.
CONTENTSThere are many different forms of counter tickets. However all should have thefollowing information:
• Customer name, address, telephone number and account number if applicable
• Date of sale
• Quantity, description and part number
• Dealer cost and selling price (costs may be coded or obscured in some wayfor privacy)
• Any required levies or taxes
• Totalled sale
• Payment method and terms
• In addition, the form should be personalised with name, location and
telephone number of the Dealership
CONTROLSAs with other critical documents, Counter Tickets must be rigidly controlledsince they represent money:
• Pre-numbered and issued sequentially
• Issued in batches to individuals and used in numerical order
• Entries complete and error free
• Tracked and traced so that all issued Counter Tickets are routinelyaccounted for
• Customer copy must accompany any refunds as proof of purchase
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DEALER DEV E LO P M E N T
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SAMPLE
COUNTER TICKET
Name Date 20
Address Customer PO No.
Phone No.
Cash Charge Returns Retail Wholesale Salesperson
Cost Quantity Part Number Description List Net Amount
Counter Ticket Number 10001
DealershipName and address
AccountRetail
Wholesale
Internal
Petrol, oil, grease
Tyres
TOTAL
Cash Sale
Charge Sale
Policy Adjustment
Tax
Cost Acct No Amount
NO REFUNDS WITHOUT THIS INVOICE
Received by Cash Amount Received
Counter Ticket/ Invoice – customer copy
Counter Ticket
Distribution:Original – officeSecond – customerThird – inventory control
Fourth – locked in dispensing machine drawer asback-up copy if machine dispensed
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THE CUSTOMER DEMANDThe Customer Demand form is a central element to Parts Transaction control. Aform should be completed for every request whether the part is in stock or not,whether the part is ordered or not, and whether the customer purchases or not.Thus the completed Customer Demand form becomes a fundamental data
resource and operating document.
CONTENTS
Information contained in the form should include:• Name and/or account number of customer
• Reference Counter Ticket or Repair Order number if requestedpart/accessory is for service (this also becomes the Parts Department’srecord of the transaction) or Purchase Order number if provided to aretail or wholesale customer
• Vehicle information (make, model, year)
• Technician’s name or number of the parts request is made by the ServiceDepartment
• Affirmation of posting transaction to inventory control
• Part number and description• Fulfilment status (quantity requested, on hand, picked or not available to
meet demand)
• Affirmation that invoice and Customer Order form or Purchase Order has
been written for unavailable parts, and posting of Lost Sale
CONTROLSWhile the Demand form does not represent money, it does provide the datanecessary to track both requests and trends for future sales. Thus it is quitesignificant to the Parts Department’s ability to predict future needs and purchaseaccordingly. Certainly any check in the lost sale column should be tabulated for
the Lost Sale record and scrutinised.
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DEALER DEV E LO P M E N T
SAMPLE
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V EHICLE
CUSTOMER DEMAND(Requisition Slip and Pick List)
Customer Account #
Make Purchase Order #
Model Counter Ticket/Repair Order #
Year Inventory Control
Technician's Name/# (if for Service)
QUANTITY
Description Quantity Part Number Bin On Pick N/A Invoice Order LostRequested Loc. Hand Sale
© 1985, Bill Marcus Inc.
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THE AUTHORISATION STAMPAn Authorisation Stamp is central to controlling the documentation of parts andaccessories received by the Dealership. It is a rubber stamp that is used on all partsand accessories payables. The information required on the stamp help track itemsas they transfer from the