The Real Impact of Factory Auto Stock ... - DealersEdge

10/20/2011Manufacturer Inventories IncludedIn the Phase In StudyASR (Automatic Stock Replenishment)Programs72 Inventories from 12 Manufacturer MakesAcuraBMWChryslerFord /LincolnGeneral MotorsHondaHyundaiKiaMazdaNissanToyotaVolkswagenManufacturers with ASR ProgramBMWChryslerGeneral MotorsPorscheThe following criteria’s non longer matter in anASR Controlled Program:Phase In CriteriaPhase Out CriteriaDays Supply SettingsThese settings are now controlled by the manufacturer at theindividual part number level.MSR(Manufacturer Suggested Replenishment )ProgramsManufacturers with MSR ProgramsFord (New DPA)HyundaiKiaThe following criteria’s are suggested by theManufacturer and some discounts, allowances, andreturn privileges are determined by Dealershipcompliance!Phase In CriteriaPhase Out CriteriaDays Supply SettingsThese settings are controlled at the dealer level by themanufacturer suggested settings.Five Major Categories that AllParts Inventory Fall Into Productive Inventory The parts selling and active based on the criteria’s (phase-in, phase-out,days supply settings) set up in your computer system. Special Order Inventory Parts on the shelf, ordered for a specific customer, awaiting return tocomplete repairs. Forced Stock Inventory These are the parts on your shelf that were either returned from wholesalecustomers, over-ordered by technicians, customers failing to return forrepairs, or order error. Obsolete InventoryParts that have aged over 12 months in sales and receipts. Non Stock Inventory Parts with no value, added to the system with some sort of demand, whicheither need more demand to qualify for stocking or lack of demand to dropoff the system.2

10/20/2011ASR Inventory With Low SalesVolumeRIM versus AROASR Low Volume Sales Part Number Average (0; 1; 2 Years Sale)ASR Part Number Population and Inventory Value ComparisonLT3%$$$ASR Statistics21.1460.0050.0053.9553.64INV%$$$58.32ASR40.0030.0029.0731.41CHGMASR%%%%19.5120.0010.009.5710.745.076.560 10 20 30 40 50 60 INV% = The dollar % of Total “Controlled” Inventory Value. LT3% = The dollar % of Controlled Part Numbers with Less than 3 Sales in 12 months.ASR% = Part Number Population % of Low Volume Sales Controlled Parts0.00PROD% EXS% FORCED% OBS% ARO wins in all the categories, by far, with the exception of Excess Inventory Remember, Excess Inventory stocking levels are set by the manufacturerSlang Used for the “Less than 3 sales Category”; “One Hit Wonders”ASR Statistical ConclusionWhat does it all Mean?Recent Survey ofGM & Chrysler ManagersPre Conceived Thoughts About ASR’s ASR Programs promote more width (breadth) into partsinventories. (True) ASR Programs promote more idle inventory, with lessreturn allowance earned, all in the name of “guaranteed”inventory. (True) ASR Programs raise the holding costs of inventory valuefor an extended period of time. (True)Three Questions Asked (18 Responded… 13 GM… 5 Chrysler Managers)Question YES NOHas your ASR Program helped save time in your day to day operations? 33% 66%Has your ASR Program increased your obsolete inventory 55% 45%Would you rather have control back of your own inventory? 39% 61%There seems to be a bit of a contrast here:It is not saving the average parts manager any time in their day to dayoperations and it is creating more obsolete inventory for them, but mostseem to like having the Manufacturer helping control the inventory! ASR Programs reduce return allowance as they put theright parts in stock and guarantee them. (False)4

10/20/2011The Active Parts Making GrossThe Phase In ProcessWhat Percent of Parts and Value are Active by ManufacturerACTIVE DOLLAR %What “Is” the right Phase In Criteria?6052.64 52.37 51.06 46.5943.1 42.92 41.96 41.93 39.5129.07 24.9417.224020DOLLAR PROD%0TO VW CH BMW HP AC KI NI FO GM HY MZ3020100ACTIVE PNP PCT%18.46 23.21 19.97 21.0116.22 16.2112.214.3710.7 12.26 16.73 8.17TO VW CH BMW HP AC KI NI FO GM HY MZACT PCT%What is a “Phase In” Criteria?Show me a“Phase In” Example!The Phase-In Criteria is a“Mathematical Calculation”;Sales in a defined Period (Week, Month, Quarter)within the defined Time Guideline.It is not the number of sales within thedefined Time Guideline!Parts that Will Phase InJAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC YRSL0 0 1 0 0 0 0 0 1 1 0 0 3JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC YRSL0 0 0 0 0 0 1 3 1 0 0 0 5Parts that Won’t Phase InJAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC YRSL0 0 0 0 0 0 0 0 1 1 0 0 2JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC YRSLIdeal reporting option would beto reconcile the2253Special order report with this6910 report monthly.0 0 0 0 0 0 0 0 10 5 Ideal reporting 0 option 0 would 15beto reconcile the2253JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC YRSLSpecial order report with this6910 report monthly.0 0 0 0 0 0 0 0 50 100 0 0 1506

10/20/2011The “Only” ExceptionERA Program 2323 / Option 5 / Number 2New Settings with DMSVendors.. Define your ownperiod!DealerTrack / ArkonaADP Drive ProgramThis setting in ERA is a “early phase-in” option thatallows you to override the “X months sales in X months time”as shown in Option 1 above.Example:Have been in Inventory 6 monthswith an average demand of .50 per month = (3.00)means that if the sales demand has had a month or two with several sales;It will override Option 1The Non Stock Part NumberPopulation“Another” Level…What Percent of Inventory “does not” Meet Phase In?NS Part Number Population %90 80.63 80.37 79.30 77.36 76.58 75.93 75.028073.3770.76 68.39 66.19 66.13706050NS PNP %403020100MZ TO GM FO AC HY HP NI VW CH BMW KI74.11% Of All Parts Never meet a “3 in X” Phase In CriteriaParts that Qualified, but were turned at Phase In Point"NS" 2ND LEVEL PHASE IN PCT%39.714035302523.13 22.972017.57 17.33 15.83 NS 2ND PCT%14.141513.24 11.45108.0052.33 1.300AC HP FO CH VW NI GM TO MZ HY KI BMW7

10/20/2011Your Most Precious Asset forInventory ControlYour “Demand” or “Sales History “Taking Advantage of thatPrecious AssetMultiple Level Phase In ProcessSource / Group Phase In Guide Comments100 3 in 9 Default (82% chance of selling)101 4 in 9 88% chance of selling102 5 in 9 90% chance of selling103 6 in 9 94% chance of selling104 7 in 9 98% chance of selling105 99 in 9 Never Stock SourceSample Chart Based on Guides AbovePHASE IN GUIDE JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC YRSL3 IN 9 1 1 1 0 0 0 0 0 0 0 0 0 34 IN 9 1 1 1 1 0 0 0 0 0 0 0 0 45 IN 9 1 1 1 1 1 0 0 0 0 0 0 0 56 IN 9 1 1 1 1 1 1 0 0 0 0 0 0 67 IN 9 1 1 1 1 1 1 1 0 0 0 0 0 7Building Width Into theInventoryMeasuring PerformanceRelaxed Phase In CriteriaSource / Group Phase In Guide100 2 in 9101 3 in 9102 4 in 9103 5 in 9104 6 in 9105 99 in 9Relaxed Phase In CriteriaSource / Group Phase In Guide100 3 in 12101 4 in 12102 5 in 12103 6 in 12104 7 in 12105 99 in 9When the Active PNP Percentage Increases…..And Inventory ValueStays the same or goes down = “Breadth & Width”Recommendation:Never set up a Phase In Guide on Lessthan 8 months as the search range.Any less is just not enough time tocompletely test new part numbers!8

10/20/2011COMMENTConclusionsASR ProgramsYou can “Still have” control of your stocking perpetuation! Think seriously about keeping parts out of inventory until it hits your phase incriteria! Do the incentives and discounts offered from the Manufacturer to stock partsoutweigh the carrying costs? We, Parts Managers, tend to be too conservative with a single phase in guide! Consider using a more relaxed phase in table as suggested in this presentation. Breadth and Width are a good thing and can: Increase ROI Increase “Off the Shelf” performance Increase both Service and Parts ProfitsThankYou!9820 Willow Creek Road Suite 420San Diego, CA. 92131www.partsedge.com9