My Formula for Success

The quality of feedback is important if you use a measurement to provide feedback for evaluating operational effectiveness of the parts department.

Yet there is only one place this measurement really matters, in the service department. The success of a dealership is won or lost there.

If the parts department can't efficiently and quickly supply the service department, then the service department will surely fail in its mission.

Provide poor or substandard repair service, and chances are the customer won't make a repeat vehicle purchase at the dealership.

So when measuring so-called off-the-shelf fill rate, the focus should be on the result of the available fill rate (in this case the service department's ability to complete repairs of vehicles needing parts the same day) rather than simply on a percentage of the parts department's ability to supply parts.

After all, we want the measurement to tell us how good a job the parts department is doing in helping the service department meet or exceed the repair needs of its customers.

With that in mind I offer this method for measuring off-the-shelf fill rate (however I call it “Shelved Inventory Availability”):

Shelved Inventory Availability = R_d - (R_n + R_e + R_c + R_o + R_i)/R_d - (R_n + R_c)

R_d = Total repairs for selected period (day, week) dispatched in shop

R_n = Dispatched repairs for selected period not needing parts

R_e = Dispatched repairs for selected period completed with parts obtained via emergency purchase

R_c = Dispatched carry-over repairs for the selected period

R_o = Dispatched repairs for selected period using special order parts

R_i = Incomplete dispatched repairs for the period due to parts unavailability

Using the formula, the parts manager measures the fill rate daily or weekly, whichever is easier, over a set time. I suggest a six-month minimum. Then the average result is used to establish a guide for that specific dealership. This way it's exclusive to the peculiarities and individualities of the dealership and its supplier(s).

No two dealerships operate the same, and fill rates from manufacturers and suppliers vary. Accordingly, it is not possible to say an 80%-90% rate is acceptable to all.

Once the guideline is established, moving above it indicates improvement in off-the-shelf fill (Shelved Inventory Availability). Movement below it suggests potential inventory problems. The dealership can establish its own fill benchmark and assess its improvement, or lack of improvement, accordingly.

Here's an example of how the formula works:

On a given day 50 total repairs are dispatched. Ten repairs did not need parts, 3 repairs were completed through emergency acquisition of parts, 4 repairs were carryovers, 5 were completed via special order parts, and 4 were not completed due to parts unavailability.

50 - (10 + 3 + 4 + 5 + 4)/50 - (10 + 4) = 26/36 = .72 × 100 = 72% Shelved Inventory Availability

It's a straightforward way to quantify the quality of the parts department to service the service department. Remember the old business adage: That which can't be measured, can't be managed.

Gary Naples is a parts consultant to dealers and manufacturers. He's authored two books on parts management. He's at 570-824-1528/[email protected].