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Parts Department Indicators (Part 2)

In this article we will analyze an indicator that shows the dealership’s performance in the Parts Department based on customer demand.

The Fill Rate compares the parts demanded by customers against available inventory. For example, if a customer orders 10 parts and we can only deliver 6, the fill rate for that customer and for that sale is 60%.

This 60% may mean the following:

  • Only 6 were delivered because there wasn’t enough inventory: Stock shortage.
  • The dealer offered the customer only 6 parts but the system indicated that there were: Organizational issues or lack of parts traceability.
  • The customer only wanted 6 because the price was too high.

In a case like this, the parts staff might offer to order the 4 remaining parts from the supplier in order to avoid a lost sale, which is one of the reasons dealers can suffer an increase in emergency parts purchases. However, it would be a lost sale if the customer doesn’t accept.

Bear in mind: If the customer orders several of the same part and we can only satisfy part of the order, some OEMs consider this a 0% Fill Rate.

The Fill Rate also affects other indicators, but the real question is: how do we improve it?

The answer is by making scheduled purchases, which is accomplished by:

Order suggestions: What are the risks of making purchases based solely on intuition? The possibilities involve purchasing parts that won’t sell, overstocking, etc. A good idea is to make scheduled purchases based on the Order Suggestion feature of your DMS system; this report uses statistical data analysis of recurring stock movements and other variables, and suggests an order for the Parts Manager to help the dealer always have an ideal stock. This helps the dealership avoid two critical situations that can hurt finances: stock shortages and overstocking.

Stock control: A recommended practice is performing regular inventory check-ups to detect parts with low turnover and calculate the obsolescence rate, as well as perform periodic inventory counts. These tasks help the Parts Manager keep track of the various warehouses and make strategic decisions.

Keeping tabs on the Fill Rate and working continuously to improve it will increase the profitability of the Parts Department, build customer loyalty, and lower emergency purchases. The secret to success is getting into the habit of measuring, interpreting, establishing goals, and implementing improvements.