How to Purchase Profitably

Does the parts department have a recorded purchasing process that covers all facets of parts purchasing?

This provides a written record that is easily communicated to employees. This also facilitates ordering and purchasing should employees unfamiliar with the process have to make purchases.

Does the parts manager understand all of the corresponding original- equipment manufacturer's ordering policies and procedures, and where to find specific ordering information for the equipment?

Believe it or not, many parts managers are not completely familiar with the entire specific manufacturer ordering information or processes.

Does the parts manager know all ordering due dates and how to take full advantage of them?

Missed due dates can increase acquisition costs and delay shipments.

Are ordering and purchasing responsibilities centralized?

Typically, the parts manager assumes the ordering and purchasing. Depending on the operation, it may become necessary to involve other staff members. They must completely understand the process and procedures.

Are strict procedures followed to reduce or eliminate potential for fraud?

Is there a recorded process for expediting parts for inoperative vehicles in the shop?

All parts employees must be aware of this. A good process includes follow-up on the status of each order until delivery and installation.

Does the dealership have a recorded special-order policy and process?

Unwanted special orders are instant obsolescence. Safeguards should include prepay for non-warranty special-order parts; prompt contact of customers when the order is received; daily review of special-order parts; and regular review of manufacturer return opportunities.

If the dealership has a body shop, does an assigned parts employee coordinate orders with the body shop manager?

This aids productivity and elimination of potential order discrepancies.

Are seasonal parts and parts for service specials coordinated with the service department for full optimization of profits?

Too often, purchasing opportunities are lost because the parts and service departments are on different pages.

Is the purchasing process analyzed on a regular basis to determine effectiveness?

This identifies areas for improvement.

Are all parts purchased from other dealers recorded at dealer cost regardless of purchase price, in order to maintain accurate inventory accounting?

This deters manipulation of price at the point of sale and keeps accounting accurate. Differences should be assigned to an inventory adjustment account. Otherwise, it distorts the purchase process.

Is there a strict purchase order process for outside purchases?

If not, this can result in purchase discrepancies or fraud.

Did the parts manager approve any outside purchases made for stock?

He or she should be the only person making purchase decisions, unless otherwise delegated to a qualified employee.

Are all outside invoices compared against their purchase orders prior to approval to verify that all parts were received as ordered, and that prices charged are as originally quoted?

Are all invoices from the OEM checked against the respective packing slips before they are sent to accounting for payment?