How to Plan for Parts Department Success in 2013 - DealersEdge

How to Plan for Parts DepartmentSuccess in 2013withMike Nicholes, PresidentNicholes Capital ManagementModerated byMike Bowers, Executive Editor at DealersEdge

Mike Nicholes, President of Nicholes Capital ManagementMike Nicholes, was the founder of Mike Nicholes, Inc., has earned internationalrecognition as a consultant and seminar speaker. He has conducted hundreds ofseminars during the past 35 years for more than 42 major vehicle manufacturers. Inaddition, Mike has functioned as an in-dealership consultant/trainer (in a seminarmode) to over 10,000 automobile, truck, agricultural, and construction equipmentdealerships and distributorships. He has been directly involved in fixed operationsconsulting and training for over 35 years. During his career as a consultant, Mike worked with manydealers, and manufacturers, specifically Saturn Corporation during the design phase of the company,to implement the parts management concept "Beyond EOQ", or source by movement, resulting ingreatly improved fill-off-the-shelf to the technicians without a significant increase in inventoryinvestment. In addition, he has researched and assisted many manufacturers as a subject matterexpert in the area of daily stock order implementation.He has hosted a television show called Parts and Profits for the cable network Automotive SatelliteTelevision Network (ASTN), and is in demand as a '20 Group' speaker. He is also has been a frequentworkshop speaker at the National Automobile Dealers Association (NADA) and American TruckDealers Association (ATD) annual conventions. Mike is the author of several publications and articleson inventory management including 8th Edition Inventory Management, Inventory Management forDaily Stock Orders, and 3rd Edition Advanced Inventory Management used in his past seminars. In1994 Mike Nicholes Inc was acquired by a major DMS system. That relationship dissolved in 2004with Mike starting Nicholes Capital Management LLC to pursue a course on non-endorsing, neutralinventory management training and consulting. Mike has been an active guest lecturer for theEntrepreneurial Lecture Series at Brigham Young University in Provo, UT. Mike and his wife Lynnereside in Portland, OR.

Parts Department BusinessPlanning for 2013…ARE YOU READY?DealersEdge WebinarDecember 13, 2012

The Parts Department…a Business within a Business

The Parts Department…a Business within a BusinessWhat are the main goalsfor my business?

“He who fails to plan, plans to fail”Bad Planning on your part does notconstitute an Emergency on my PartDon’t stomp out fires; prevent FiresPlanning is bringing the future into thepresent so that you can doSomething about it now.

3 Problems to Overcome:• 1. There is no Time to write or design a plan• 2. I don’t know what to put down on paper• 3. I am not sure what measurements shouldapply to my plan and it’s execution; getting itdone and done right.

Biggest Problem with “Future”Planning? …too many good ideassit stagnant; never happen.

What should I include in a goodBusiness Plan?What should I exclude in a goodBusiness Plan?

Plan the Future by Knowing the Past• 1. Where have I been (measurements) for thepast year?• 2. Where am I now at the beginning of thenew year?• 3. Where do I want to be at the ending of thisnew year?• 4. Don’t add things that cannot be measured.

The Mission Statement:Overall, when the Year is donewhat do I want to haveAccomplishedin the Parts Department?

4 Critical Steps:1. A “one line” description of theoverall objective.2. How do/did I build the model; pastperformance to Future Goals3. What conditions could preventaccomplishing the goals; market,people, etc.4. Why am I, the parts manager, thebest qualified to direct the partsdepartment?

Measurements:When we deal in generalities we will neversucceed. When we deal in specifics we willseldom fail. Where performance is measuredperformance improves; and whereperformance is measured and reported, therate of improvement accelerates!Thomas Monson

MONTHDEALERSHIPDATEThis checklist is not copyrighted.It is in the public domain and maybe used at will.www.partsconsulting.comPARTS DEPARTMENT MONTHLY EVALUATION CHECKLIST (v.2012)1. PART NUMBERSCONTROLLED2. TOTAL CONTROLLEDINVENTORY $19. EXCESS STOCK $ / %20. TRUE EXCESS STOCK $ / %LINE 19 MINUS LINE 21 = TRUE EXCESS STOCK3. RECONCILED INVENTORY 21. PARTS > 6 MONTHSNO SALES $(Technical Obsolescence)4. NS PART NUMBERS # / % 22. ALL PARTS > 6 MONTHSNO SALES %5. NON-STOCKDOLLAR VALUE $ / %6. GROSS SALES(Annualized) $7. GROSS PROFIT(Annualized) $8. COST-OF-SALES(Annualized) $9. GROSS PROFITMARGIN %10. INVENTORY F/S $(Actual Cash Value Inventory from the General Ledger)23. PARTS > 12 MONTHSNO SALES $(Absolute Obsolescence)24. PARTS > 12 MONTHSNO SALE %25. NEW PARTSNO SALE $(No Movement New) %26. TOTAL DEMAND (Pieces)27. EMERGENCY PURCHASES+CUSTOMER ORDERS (Pieces)28. LOST SALES (Pieces)11. LIFO RESERVE, IF USED $ 29. FILLED FROM STOCK RATIO %Calculated with ‘pieces’12. GROSS TURN RATIO(COS ÷ INV.)30. MONTHS/DAYS OF SUPPLY(F/S INV. ÷ AVG. MO. COS)13. PURCHASE EFFICIENCY (Factory Stock Orders)(Annualized) $14. PURCHASE EFFICIENCY (Other Sources For Stock)(Annualized) $15. PURCHASE EFFICIENCY (Optional, Other Factory)(Annualized) $31.32. NET PROFIT (% of Sales)PARTS DEPARTMENT %33. PERSONNEL EXPENSE(PERS EXP ÷ GP) %16. TOTAL EFFICIENT (Total Lines: 13 thru 15)PURCHASES $17. PURCHASE EFFICIENCY (TEP $ ÷ COS$) TOTALEFFICIENT PURCHASES FOR STOCK18. TRUE TURN(TEP % x GROSS TURN)%34. PRODUCTIVITY(Pieces/Employee/Month)(Dollars/Employee/Month) $35. ABSORPTION RATE = %[GP Parts, Service & Body (YTD)(YTD) Total Dealer Fixed Overhead Expense]36. SERVICE PROFICIENCY___________ %You may copy this checklist as necessaryChecklist and key are free; at www.partsconsulting.com

Benchmark MeasurementsItems shown in Red Circles on the Checklisttell the Dealer “what is really going on inthe Parts Department”. Too many rely on acouple of nebulous measurements on thefinancial statement.

…along the Way towards the Goal;If there are problems:Fix Them!

Fixing Problems:A Time Line

Existing ProblemsNot Qualified norQuantifiedFixing Problems:A Time Line

Existing ProblemsNot Qualified norQuantifiedFixing Problems:A Time LineBase Correction Point

Fixing Problems:A Time LineExisting ProblemsNot Qualified norQuantifiedIdentify MeasurementParameters: How much& How WellBase Correction Point

Fixing Problems:A Time LineExisting ProblemsNot Qualified norQuantifiedIdentify MeasurementParameters: How much& How WellRepetitionBase Correction PointFix ProgramsFix ProceduresFix Policies

Fixing Problems:A Time LineExisting ProblemsNot Qualified norQuantifiedIdentify MeasurementParameters: How much& How WellRepetitionMaintain correctedPolicies & ProceduresBase Correction PointFix ProgramsFix ProceduresFix Policies

Fixing Problems:A Time LineExisting ProblemsNot Qualified norQuantifiedIdentify MeasurementParameters: How much& How WellRepetitionMaintain correctedPolicies & ProceduresBase Correction PointFix ProgramsFix ProceduresFix PoliciesProblem or situationIs now fixed or repaired

Continual Analysis• Management of the Asset: “Moving theneedle”• Guidelines and goals; real and unreal• Monthly Checklists• Trend Analysis

Remember in Parts⎯It’s not the MONTH that is most importantIt’s the TREND that is most important

Remember in Parts⎯It’s not the MONTH that is most importantIt’s the TREND that is most importantSome Trends should be going “UP”!

Remember in Parts⎯It’s not the MONTH that is most importantIt’s the TREND that is most importantSome Trends Should be Going “Down”!

Remember in Parts⎯It’s not the MONTH that is most importantIt’s the TREND that is most importantSome Trends Should be “Flat”!

Dealer and Parts Manager shouldmeet together monthly to reviewprogress toward the goals.The Parts Manager can solicit helpand assistance from the Dealer toreach the goals.

Help is usually only a question postedon the Forums, or assistance fromProfessionals who are trained andskilled in assisting Managers attaintheir goals.Many of these can be found withinthe Dealerships themselves

Questions?Now’s The Time

Contact InformationMike Nicholes Capital Management Inc.9721 SE Clatsop St, Portland, OR 97266Phone: 503-788-9972Fax: 503-788-9974Email: Mike.Nicholes@gmail.comwww.partsconsulting.com

Thanks forComing -Watch OutFor theCrazies!