We have four webinars offered in October.
October 15th
Tele-Selling and Basic Inventory Control
October 16th
Warehousing and Pricing
You can check out the content and register directly on our website at www.rjslee.com under the learning tab.
The time is now.
I will assume that you have the correct number of skilled people in your parts department, now we need to look into what it is that they do. This is about much more than the parts order processing factory isn’t it? It is about more than answering telephones and greeting customers who come into your store. It is more than managing the instore merchandising displays. It is much more than inventory management and warehousing. Isn’t it?
It is about selling too I think. Don’t you? So how well trained are your parts personnel on selling? Do they have selling skills? Have they had sales skills training? Do you have product knowledge? How well versed are they on your competition? How well do they overcome objections? Can they close a deal? I hope so as it is in their hands that your success will come.
Many dealers know and give lip service to training. Don’t fall for that. Or said more bluntly don’t go there. You need to have monthly meetings with your parts personnel. You need to review product knowledge, review processes and talk about matters of interest at the moment. You need to do this regularly. Do you?
Oh I know it is work. It is supposed to be which is why work is a four letter word.
Have your supplier’s representatives attend the meetings. Go further and have them contribute to it either with news or a training session. Organize the meeting so that it is never longer than ninety minutes. The employees need to have a clear understanding about the commitment they are making and not have you run over all the time. This will build a team of talented people who will understand that you are making and investment in their future and they will contribute to your future as well. The time is now.
The last time we met we talked about being in a rut. I believe it. The problem is that you do too.
Shopping is not a “male” thing. I tease that we are missing a DNA strand or something. We typically know what we are looking for or what we want or need, go to a store, look for it, find it, and then go the cash register and buy it – short and sweet and easy. Right?
Well then stores started cutting back on their support staff, the sales people on the floor, perhaps even the number of check out cash registers. Just as you did starting in the 1980’s when interest rates skyrocketed and Paul Volker was trying to kill inflation. All of the sudden the sale per employee metric became religious. It got a following. Oh I know I support standards of performance and one of the key performance indicators in a parts department is the standard of performance. However, there are many nuances to the number.
The variables sometimes are overlooked – like the average dollar value of the transaction, the weight of the parts, the number of pieces sold per part number, the time of year, and the pay package of the parts employee.
The standard that the AED, Associated Equipment Distributors, publishes is $600,000/employee/year. That today is still a pretty good standard as an average result. But we have to be careful of the usual suspects. A man drowned in a river of average depth of one foot. The $600,000 is based on a pay package of $42,000/year. Is that the average salary, commission and benefit package cost for an employee in your parts department? I don’t even need to go further. In some parts of the country this might still be in the right range but you need to do the arithmetic.
The same “male” genetic defect exists in our customers. They don’t like to be kept waiting for you to answer the telephone, or to acknowledge their presence when they walk into your store, or to wait while you go find the part in the warehouse. They want good service. So I acknowledge that good service is a person thing and that what is good for one person is not necessarily good for someone else. That is what makes customer service so difficult. It is the gap between the expectations that the customer has and the perception of what they got. That can only be satisfied by talented, caring, empathetic and skilled people in the correct number on the job. How do you stand up? The time is now.
The parts business is in a rut. We have been doing the same thing for decades now. Isn’t it time to put a fresh face on the parts business and offer customers improved service and convenience?
Start with the tired counter. The stand-up counter has been dead for a long, long time. Some of you just don’t recognize that. Put in a sit down work area. Make it pleasing for your customers AND your employees. Do any of you remember why it is that we have a high stand up counter? Well it is for all of those books we used to have to have as parts catalogues and service manuals. They are now gone the way of the dinosaurs for most significant suppliers.
Move to a self service station in your instore merchandising area. Allow the customers the convenience to price items and place orders themselves. Think of the gas station. They have completely redone their business with their self-service gas pumps and the “service” station. This is not your grandfather’s gas station.
Move to strip malls that are more convenient for your customers. Put is a small fast moving item, supply items, convenience items inventory. Operate like a “NAPA” store. The closer you are to the customer work site the more convenient you are. You might even consider putting a trailer on the customer work site. Make it convenient for them. Make it easy.
Move to the internet. The customer has been purchasing things on the internet now for a few decades. They look for information. They check out different suppliers. They check prices. Are you in the game? You will be left behind if you don’t get in the game.
You are in the retail business in the parts business. I wouldn’t know that from walking into many of your stores. You will both adapt and participate in the market or you will be left behind. The time is now.
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.
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.
For some time now there has been a new channel to consider for specific parts in the parts business. Let me introduce you to the Kiosk. Walk through most airports today and you will find kiosks selling electronics and items such as vitamins and other related health items.
Now let’s look at our parts business. What is it that our customers would like to have access to from you that needs controls, accounting reporting and inventory? On the job site it might be supplies or safety items. In their shops it might be general job supplies, liquid gasket, etc. They need to have an inventory accessible to their personnel both on job sites and in their shops, perhaps even in their field type vehicles. It is like buying a candy bar or a package of gum. Push the number to access the product then put in a job card and employee card to assign the accounting distribution and off you go. On general job sites select the product and swipe your credit card to obtain the product. There are limitless possibilities. Isn’t it time to start leading with new products and channels such as this? The time is now.
When the customer hangs up the phone, or walks out of your door, after placing an order, do they have a feeling that you have everything under control and will do your utmost to satisfy their needs? How do earn the loyalty of your customers?
This is an interesting question to pose isn’t it? The best in the Industry has a market capture rate of less than 40% of their parts business. That is the parts are required to keep their brand of equipment running with proper maintenance and repairs.
That means we have lost 60% of the parts business. How did that happen? Don’t we care about the parts business or about the parts that the customer purchases? Why is it that so many dealers seem to be so complacent about their parts business? They are complacent too. Are you?
Sitting back waiting for the phone to ring; Putting the backorders into the supplier provided emergency network without doing any expediting. How did we let ourselves get to this place? We are not any different than the next competitor. We have settled for substandard performance and now it is like we are doing the best we can do. We have undergone the drip, drip, of water torture and without knowing it we are happy with where we are now. I can’t believe this is true but the evidence is all around us.
Have you heard the story of the frog that was put in a pot of warm water on the top of the stove and then the heat was turned on? Well the water got warmer and warmer and the frog felt like he was in a bath and slowly but surely his energy drained out of him. By the time the water was boiling and he needed to get out of the water it was too late and he died. That is where we are heading without any action.
Contrast that where a frog was dropped into a pot of boiling water on the stove top. He jumped out instantly, perhaps he got burned but he lived another day. Which frog are you? The time is now.
I mentioned in the Management Musings blog a terrific book by Simon Sinek called “Start With Why” which is on TED.com as a short presentation which should interest each of you. He posits that your customers by from you not because of what you do or even how you do it but rather why you do it.
The “What” you do is supply parts. The “How” you do it is with skilled personnel and inventories and systems and other specialized tools. But the why you do it is what will keep them coming back to you time after time.
I want you to consider the “Why” as the sense of urgency you have to find the part for the customer, provide it out of your inventory quickly and conveniently and if you don’t have the parts they require you will work tirelessly to find the part for the customer on the same day that they ordered it. That is why the customer comes back to you – or not.
I am afraid that over the years we have not found the parts we didn’t have in stock fast enough or consistently enough and that is why the customer has gone shopping to find parts from other sources. We need to fix this. We need to convey to the customer both in discussions and in action that we will find the parts that they require on the same day that they request them. Notice I didn’t say that we would supply all the parts the same day. I said that we would find where the part is available when we don’t have it and then we will let the customer know and allow them to make the decision about what they want us to do. Consistently performing to this standard we will improve customer satisfaction, customer retention and employee satisfaction as well. The time is now.
Last week we talked about the Equipment Parts Store – EPS. These stores were going to be modeled after the NAPA stores. They would have a pleasant instore merchandising area, a customer meet and greet area, a self-service kiosk for customers to surf the internet and place orders, a small warehouse area with fast moving common parts, a hose making operation, a small clothing and accessories area, and area with safety and environmental (green) products, everything to make a convenient and pleasant shopping experience available for the customer. The locations would be selected strategically so that they were in a good location relative to customer offices, shops and jobs.
Further in the parts business we should begin a hardware supply item service to the customers with a delivery box truck and an employee who is a sales trainee. Many of the dealers across the country use these services themselves. I find this quite astounding as in the parts department most of these items are already carried in inventory. The parts department should be in this business themselves. If an outside company can perform this function economically I don’t understand how the dealer is unable to do the same.
Then there are self-serve kiosks for select items in mini malls and other significant spots. These can be controlled by your business system and issue parts and supplies to a customer account or credit card. Have you seen these types of kiosks? They are a wonderful addition to the self-serve world we are in today.
Finally there is the option of putting inventory right on a job site. Have a mobile parts store in a 20’ container with the facility to serve a specific job. Staff it with skilled personnel and serve the customers. That would make a difference. This is about a partnership between customers and dealers that is intended to help the customer make money on their jobs while becoming more significant in the eyes of the customer in their business.
This is part of the Service-Dominant marketing we talked about in our most recent Marketing Missile. The time is now.