Four Steps to Help Control Parts Cash Flow

Controlling a dealership’s cash flow is an important issue for the parts department. One of the easiest components to manage is special-order parts (SOPs). If you are like most parts managers, the task of handling SOPs is a difficult one at best. At times, I am sure you are the only one who appears to be concerned about it in your dealership. There’s almost a free-for-all with ordering SOPs, and little is done in the way of processes to control it.

Most processes fail because there is a disconnect in understanding the reasoning involved. What is perceived as a process for the parts personnel is considered a burden by the service advisors. Service advisors don’t take the time to understand why the process is in place because it doesn’t directly affect them. Probably the most difficult of tasks is to get all affected parties in agreement as to how SOPs should be handled. In the end, it is the parts manager’s job to control and manage SOPs.

If the SOP process is not controlled adequately, there will be an abundance of obsolescence and a significant amount of cash sitting on the shelf. Although the return process varies from factory to factory, it’s generally true that the obsolete SOPs are non-returnable. This costly failure in process management is the reason most parts managers lose their jobs.

Below is a simple outline of a procedure to help manage and control the SOP process. Remember, this is an outline and the needs of each dealership will control the variations of this process.

1. Develop a bin system organized by week and advisor, as illustrated in the diagram below. Have a separate row of bins for each week of the month and a separate row of bins for each advisor. Label them accordingly.

 2. When a SOP order is placed, put that order into the appropriate bin based on week and service advisor. As the weeks progress, you will have multiple orders organized by service advisor and week. At a glance, anyone can see who ordered the SOP and in what week it was ordered. Then, as the month progresses, the parts department can tell the advisor that there is an SOP in week one that has not been picked up.

3. The control and utilization of the bin process lies entirely with the parts manager. The parts manager should monitor SOPs and the scheduling process weekly.

4. There should be a hard-line date designated by the parts manager for returning unused SOPs. For example, if an SOP is not repaired/replaced within an 18- to 20-day period, the SOP is returned to the factory. Exceptions should be at the discretion of the parts manager and not the service manager. Service managers will always err on the side of the advisor and want to hold out as long as possible. The burden of aged parts and SOPs lies with the parts manager, so the parts department should always make decisions on the return of SOPs.

The parts manager will need close communication with the appointment setter, the service advisors and most importantly, the service manager. Each service advisor is responsible for their SOPs and the scheduling of the appropriate replacement/repair of their SOPs.

In the weekly or bi-weekly management meeting report, the parts manager should have to report on the status of all SOPs. The report should include aging for both warranty- and non-warranty-related SOPs, the status of SOP appointments, and the return process.

This is a simple process which allows the dealership to monitor service advisors and SOPs. It does not become a cure-all and like any process requires diligence and communication. The most important tool to help control and manage SOPs is simply to have a fixed process that is monitored daily, weekly and monthly. Good luck with your special order parts and remember to review it often so that it doesn’t become too big to manage.

Vol. 8, Issue 8