Phase-In Tests That Work

The most profitable sale you can make is one from your stocked inventory. Not having the part in your inventory is telling an unhappy customer, Sorry, we'll have to order it. At this point, the customer either goes elsewhere or the dealership gets a less than favorable customer-service survey response to had the part in stock or vehicle fixed right the first time. Parts availability from stocked inventory

The most profitable sale you can make is one from your stocked inventory. Not having the part in your inventory is telling an unhappy customer, “Sorry, we'll have to order it.”

At this point, the customer either goes elsewhere or the dealership gets a less than favorable customer-service survey response to “had the part in stock” or “vehicle fixed right the first time.”

Parts availability from stocked inventory increases customer happiness and dealership profits.

But with more vehicle models to contend with and greater parts proliferation, relying on only a few sources and just one standard phase-in setting may not be a good strategy for boosting availability.

When you consider the parts commonly obtained locally as emergency purchases or ordered from the supplier as emergency orders, they are not the fast-moving maintenance items.

This leaves: 1.) parts of increasing demand that haven't yet satisfied your more conservative phase-in criteria and 2.) medium movers and slow-movers that may be advantageous to stock or at least consider.

A preferred phase-in strategy provides the parts manager with the ability to review potential stock parts sooner, while protecting against unwanted obsolescence.

So what's the strategy? Multiple phase-in test sources. The concept is not new and it's easy to implement.

Under the commonly used method for phase-in, as previously mentioned, one non-stock (NS status) test source is used. For example, the source might have phase-in criteria of three months of sale in a nine-month period or three months of sales in a 12-month period.

When the part meets the test criteria, it's phased in and ordered for stock on the next stock order. Although these standards will work, they don't address the circumstances where it may benefit the parts manager to bring a part in stock sooner or do more demand testing prior to stocking the part.

With multiple phase-in testing, you have greater ability to exercise control over phase-in decisions. The following is an example of how it works.

Typically, the parts manager can set up four test sources. It can be three or as many as six, but four seems to work best.

  • Set the first test source with a phase-in of two months sales in a nine-month period.
  • Set the second test source with a phase-in of three months sales in a nine-month period.
  • Set the third test source with a phase-in of four months sales in a nine-month period.
  • Set the fourth with a phase-in of five months sales in a nine-month period.

If the part meets the first setting, then the parts manager decides if it should be stocked.

If not, the manager changes the stocking status back to non-stock (NS) and moves it to the next test source of three months sales in the nine-month period. Now the system looks for additional demand.

Again, if the parts manager decides further demand testing is needed, the part is moved to the next test source and so on. A part that is selling four or five months out of a nine-month period is something you should probably be stocking.

However, in any stocking decision, the parts manager is really the final filter in spite of meeting the user-defined phase-in criteria.

There are other factors to take into consideration when phasing a part into stock. Among them:

  • Storage space limitations.
  • Part cost.
  • Number of months between last sale and previous sale.
  • Return eligibility.
  • Manufacturer stocking codes.

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].

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