Accessories Parts Stock Verification
- Dealer Groups with multiple / widely spread locations, which limits management’s ability to monitor the day-to-day functioning of Parts Store at each location.
- Dealers riddled with high aged inventory (in comparison to peers) or with no means to monitor ageing.
- Dealers not confident of adherence to stacking / storage norms by their Parts department, and / or have not conducted a parts verification exercise for a long time.
- Dealers who have not defined / documented process for inventory management, and / or do not monitor adherence.
- Dealers with heavy workshop load and limited bandwidth of Parts team to handle requisitions flowing in from the Shop Floor.
- Dealers who have had a recent change in Parts Management team.
Why is inventory verification important
- Inventory (Parts & Accessories) is a critical asset of a dealer business; it is also vulnerable to theft, wastage, spoilage, expiry (paints) and obsolescence (with phasing out of models).
- Inventory is not a static asset; it keeps moving. Parts come in and move out with vehicles getting serviced; likewise, accessories come in and move out with new vehicles getting sold.
- Parts inventory is one of the dealerships’ biggest assets and is critical to smooth operations. Reconciling inventory helps identify problem areas for you to address as possible projects or new initiatives.
– You may discover there is a need for more training or a change in standard operating procedures.
– Maybe there is higher than average obsolescence or perhaps there are repeated discrepancies with special ordered parts.
- Physical stock not aligned with system stock impacts procurement planning; can result in abnormally high incidence of stock outs (PNA), slow vehicle turnarounds (low same-day deliveries) and high customer dissatisfaction and complaints.
Typical practices noted across workshops
In our experience of executing projects across dealerships, we have noticed following practices that carry a potential risk of creating inconsistencies in book and physical inventory:
- Not conducting physical verification when there is a change in Parts Manager, thus impairing ability to establish ownership for any shortages identified at a later date;
- Allowing technicians to enter the Parts Store to pick items instead of issuing by the Parts team. Technician can take a wrong item leading to discrepancy;
- Recording issuance on paper due to workload, with intent of update DMS at day-end; however, inadvertently omitting or making an error in updating issuance in DMS;
- Disorganised parts store with inventory thrown into a pile and items spilling into aisles and kept at multiple locations;
Typical approaches to get assurance around inventory
Perpetual Inventory
Pros
- Closure of operations is not required
- Extra staff is not required
- Discrepancies are promptly detected and corrective measures taken
Cons
- Generally done by the Store staff themselves thus creating a conflict of interest
- Tends to get de-prioritized at workshops with high load
Annual Verification
Pros
- Effective and can be done using staff which is independent of the Parts department
- Can be done wall-to-wall using blind count approach
Cons
- Can take several days if Parts Store is medium or large
- Additional staff is needed to complete the verification
- All discrepancies are detected only once
Typical aspects to be considered while planning verification
Staff performing the physical counts must be familiar with the parts & accessories being inventoried, but (to the extent possible) not directly associated with the inventory function.
- Dealers could do this is either by using a cross-functional team or getting an independent agency who understands the business and the items being inventoried.
Staff performing the physical counts should work in pairs whenever possible, one person counting, the other person recording the counts.
- Dealers could do this is by getting the cross-functional team to record and the Parts team to count. One can also bring in floor staff (technicians) to help with counting and an independent agency to oversee the counting process and to record the counts.
Physical counting should be done using preprinted list with zero counts, ie blind-count approach.
- This would require parts to be tagged, verification to be done wall-to-wall, and each area demarcated post verification, with all subsequent issues (till completion of verification) categorized by area.