There has been a conflict within several suppliers regarding stock orders. Should we offer daily stock orders? Should we allow stock orders weekly or some other frequency? Let’s examine the basics.
The lead time, the replenishment of an inventory, contains in it the time that exists between stock order cycles. If the stock orders happen daily there is no time added to the lead time. If the stock orders are placed once a week then the lead time is increased by three and a half days. Your inventory would also be higher by at least three and a half days of sales depending on the level of safety stock. So your turnover on parts inventory would be higher with daily stock orders that weekly stock orders.
That would provide the dealer with a higher return on capital employed. If we use the gross profit as the foundation and assume a gross profit of 30% we can then do a calculation on the return on capital employed.
If we look at an inventory that is three and a half days higher with a weekly stock order than daily and a further day and a half of safety stock we can calculate the difference. Assume that the inventory level is on average a 60 day supply of parts at order point. The increase in inventory levels with a weekly stock order versus a daily stock would be that 8.33% of inventory at order point. That is not an insignificant increase.
Daily stock orders are not a luxury for suppliers and dealers that do not pay it is a benefit in that the capital that would otherwise sit in a parts inventory is freed for other uses. The time is now.
Remembering Phyllis Diller
With credit to the AP
I once wore a peekaboo blouse. People would peek then they would boo
I never made Who’s Who but I’m featured in What’s That?
When I told Fang I was going to get my face lifted, he said, Who’d steal it?
You know you’re old when your walker has an airbag
I was the world’s ugliest baby. When I was born the doctor slapped everybody.
I became a stand-up comedienne because I had a sit-down husband.
They say housework can’t kill you… but why take a chance.
The time is now
Marketing Missiles v1.6
Why do your employees work for you? Three Harvard professors, Hesketh, Sasser and Schlesinger wrote a very definitive book called “The Service Profit Chain.” In it they posited that Employee Satisfaction and Loyalty delivered Service Value. That is the “thing” that customers “feel” when they do business with you. It is not about you or your business it is about the employees. This Service Value is what drives Customer Satisfaction and Loyalty and keeps them coming back. That is all you need to drive profit and growth. Have you got it?
Why don’t you ask the employees how they feel? It doesn’t take much to ask and you will be amazed what you can find out if only you listen. After all if your employees are not satsified and loyal then all the marketing in the world will not correct it. The time is now.
Forecasting in this “wierd” world
For a number of decades econometric forecasting has been conducted by a couple of men named Fanter. First there was Dick and then along came Andy. Cyclcast and Intercast are the two groups that conduct the economic analysis. Never a precise science and one that is constantly being second guessed Andy faces the winds of the markets with a calm model which can help dealers think about their circumstances more clearly. Never radical or flamboyant this Kansan provides good solid advice. The time is now.
Parts Pondering v1.7
Let’s review the basics truths about a parts business and how it should operate.
Ron’s Rules:-
And do all of these BEFORE you go home for the day. And do this every day.
Many parts businesses have lost their sense of urgency. The customer needs to believe deeply that the business that they have given to the dealer will be treated at an extremely high level of priority. If not the number one priority certainly very near to it.
This is a return to the basics of the business. Too often we overlook the basics. The time is now.
Friday Filosophy #25
Teachers open the door but you must walk through it yourself.
Chinese Proverb
Don’t cry because it’s over. Smile because it happened.
Dr. Seuss
A fall into a ditch makes you wiser.
Chinese Proverb
Service Statements v1.5
Telematics brings technology to our service business. For decades we have struggled with a declining market share of labor on construction, mining, forestry and light industrial equipment. In my experience this started accelerating in the early 1970’s. At the end of WWII most of the equipment manufacturers were specialists. There were tractor companies and loader companies, excavator companies and truck companies, etc… In the 1970’s several suppliers started offering more model families to customers to provide a one source option to them. This put incredible pressure on the dealers to keep up. They had to cope with new tooling requirements and personnel skills to name two major elements. They also had to deal with warranty failures.
The typical response from the dealers with this increase in warranty labor was to drop something of less importance. The first thing to go was maintenance. This thinking persists even today in the minds of many Service Managers. Maintenance is less important than a repair. Well a lot of customers believed in maintaining their equipment to manage equipment operating costs. They were right then and they continue to be right. So what did they do? They hired one of the mechanics from the equipment dealer to do their maintenance work. This then morphed into non-technical work as well. This took us down the slippery slope of ever declining market share in labor. This also led to .lower market share of parts as the customer mechanics didn’t have the same loyalty to the OEM brands.
Now arriving on the scene are telematics and computer diagnostics. We will know with either GPS connections of cellular signals where every machine is on the planet. AND we will know the condition of machines and components based on where the telematics are installed. We can determine if an air filter is plugged, or an engine is overheating, or if a machine is idling. This is significant. We can monitor the health of the machine for the customer form our “Telematics Technical Command Post.” This TTC will be like mission control for NASA. We can have alerts when predetermined conditions exist that would initiate a call to the customer. We will have the TTC manned by skilled technical personnel. We can sell this service to our customers as a tool to allow them to reduce their owning and operating costs and preserve their equipment residual values. Shouldn’t we get going on this now? After all those are two of the main reasons for our existence in this Industry; Reduce Owning and Operating Costs and Preserving the Residual Value. The time is now.
Marketing Missiles v1.5
Why do your customers buy from you? What makes your customers loyal to you? Without the answers to these two simple questions you really don’t know how to either grow your business or protect it.
What is it that makes your customers buy from you?
Everything you sell in your parts business is available from someone else and in all likelihood at a lower price. Of course you will say it isn’t the same quality but who are you kidding. Not the customers. They know that everything is made by someone and that those somebodies will sell through other channels.
Is it your special sales campaigns? You know the buy a dozen get one free deals? Or is it because your parts people or your service management gives them discounts? Discounts are like cocaine – it might be a good high but coming down is terrible. Try cutting a customer off from the discounts that have become used to and watch them buy somewhere else.
You need to pay serious attention to this question. Why do your customers buy from you? You might want to ask because until you know you will be subject to the whims of your customers for your business success. Don‘t forget you have to do more of what it is they like and less of what they don’t like. The time is now.
Management Musing v1.6
What happened to the days of mentoring new employees? Have you mentored anyone? How about career development? How about being a model for your team? Somehow we seem to have strayed from what works.
Management is a privilege. It is also a burden. As a manager you have the opportunity to make a difference in people’s lives. To help them realize their potential. That is not a light load to carry. Leadership is not a characteristic that is present in all managers; some are purely functionaries from the French School of Governance. Nearly every politician in France came through the same higher education. Perhaps that explains a lot of how their government and businesses work. In America there is much more diversity in educational and cultural backgrounds.
Trust is one of the other hallmarks of a good leader and good manager. Lou Holtz had three things that were important to him.
And he had additional thoughts for us.
There is a large body of books that can give us good insight. One of them to is “My Years with General Motors” by Alfred Sloan. He was probably the best business manager in the 20th Century. I wonder what he would think of the current management. It seems we have lost our way pushing more for short term gain and self-interest that the health of the work force and long term thinking. The time is now.
Friday Filosophy #24
Life may not be the party we hoped for, but while we are here we should dance.
Anonymous
A goal without a plan is just a wish.
Anonymous
It is best to rise from life as from a banquet, neither thirsty nor drunken.
Aristotle
Parts Pondering v1.6
There has been a conflict within several suppliers regarding stock orders. Should we offer daily stock orders? Should we allow stock orders weekly or some other frequency? Let’s examine the basics.
The lead time, the replenishment of an inventory, contains in it the time that exists between stock order cycles. If the stock orders happen daily there is no time added to the lead time. If the stock orders are placed once a week then the lead time is increased by three and a half days. Your inventory would also be higher by at least three and a half days of sales depending on the level of safety stock. So your turnover on parts inventory would be higher with daily stock orders that weekly stock orders.
That would provide the dealer with a higher return on capital employed. If we use the gross profit as the foundation and assume a gross profit of 30% we can then do a calculation on the return on capital employed.
If we look at an inventory that is three and a half days higher with a weekly stock order than daily and a further day and a half of safety stock we can calculate the difference. Assume that the inventory level is on average a 60 day supply of parts at order point. The increase in inventory levels with a weekly stock order versus a daily stock would be that 8.33% of inventory at order point. That is not an insignificant increase.
Daily stock orders are not a luxury for suppliers and dealers that do not pay it is a benefit in that the capital that would otherwise sit in a parts inventory is freed for other uses. The time is now.