The obsolescence domino effect

Every parts operation deals with obsolescence, and while there any many great strategies for discarding already accumulated obsolescence, there’s no cure quite like prevention. Even now, there are parts in your inventory that don’t meet stocking criteria and are almost certain to shift to obsolescence. Without the right stocking settings and a consistent strategy to get rid of parts before they affect your obsolescence rate, these parts quickly accumulate and cost you much more than profit taking up precious stocking space and creating an unmanageable situation for parts managers. Here are the steps you can take to prevent the obsolescence domino effect and improve your overall inventory health. 

Breaking it down

As with most inventory issues, the first step to making shifts in strategies is to get a clear picture of how much obsolescence you’re dealing with and what the main sources are. For many operations, this may be much more work than running a few simple reports. For some operations, a physical inventory will be needed to match up the books to the shelves. Others may have accurate inventory but will need to dig deeper into their current idle and forced stock to identify the root source. While demand is always changing, you should have automatic settings in place that immediately flag, adapt stocking criteria, and discard inventory headed for the obsolescence bin. To learn more about the categories of obsolescence and how to find your excess, forced and technical obsolescence stock, click here.  Special orders can also be a big source of obsolescence with poor follow-up resulting in unresolved repairs.

Creating prevention systems

Once you’ve identified the main sources of idle, forced, and excess stock in your inventory, it’s time to make a plan for prevention. By staying in a proactive prevention mindset, you can interrupt the domino effect and create a consistently healthier inventory. If you’ve found most of your obsolescence is coming from over-ordering, create a system that tracks which technicians are over-ordering and returning the most part by simply putting the technician number in an unused field on the computer, such as BIN2, COMMENT, or OTHER fields. If special orders are a big contributor, consider building a compensation plan based on customer returns for special order parts and utilize your BDC or hire a Special Order clerk that is totally responsible for ensuring customers return for special-ordered repairs. If your manufacturer program is forcing parts into your inventory that do not sell and aren’t warranted, find the balance between remaining compliant while also denying stocking suggestions for parts that don’t sell. In some cases, dealerships can become storage facilities for manufacturer parts that aren’t in high demand- don’t let this happen to you. 

Prevention, prevention, prevention

Now we’re not saying it will be easy to get there, but getting ahead of obsolescence is the key to unlimited expansion in your parts department. Obsolescence that sits at 18% or higher and keeps coming back is a major red flag- your goal should be 0% (we’ve seen it!). Parts with no sale or no receipt in 7 months have a 95% chance of becoming obsolete with that number increasing exponentially as the months go on. If 30%-50% of your inventory is headed towards obsolescence, precious shelf space and capital is being wasted. 

PartsEdge has helped countless dealerships reduce, predict, and offset their obsolete inventory through our custom matrixes and daily optimizations for over 20 years.  Our powerful monthly parts inventory optimization tool was designed by a Parts Manager and a DMS specialist who witnessed the gap between the demands on Parts Managers and the lack of resources to get everything done. PartsEdge saves Parts Managers hundreds of hours each year by taking all the guesswork out of DMS management and sourcing setup and optimization allowing them to focus on creating a successful operation.  As a result, our clients see an average  20% drop in total inventory, 15% less idle inventory, a 50% increase in ROI, and a 20% increase in parts sales. If you’re ready to put our parts power tool to work, send us a message! Our testimonials speak for themselves. 

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Hydrogen Vehicles | The Future of the Industry

Hydrogen cars have certainly entered the chat in discussions online and off across the industry. But with only about 15,000 total cars on the road and all of them located in California, it’s too soon to say if they will be a viable competitor to other renewable energy vehicle options. Research and markets predict the global hydrogen fuel cell vehicle market to reach US $8,535.23 Million by 2027. For comparison, the market size was US $740.1 Million in 2021. Today we explore just what hydrogen cars are, the pros and cons of ownership, and our thoughts on the likeliness of them taking any major market share in the future. 

What is a hydrogen vehicle? 

Hydrogen cars (called fuel cell vehicles) are electric vehicles that derive energy to power an electric motor. A box with a fuel-cell stack is fed a combination of hydrogen with comes from a tank and the oxygen from air resulting in electricity via a chemical reaction. Whereas an electric or EV vehicle recharges as designated stations, hydrogen vehicles refuel their battery quickly using the onboard fuel supply. 

The pros

Like their electric and EV cousins, fuel cell vehicles are climate-friendly utilizing an infinitely renewable substance and with zero emissions. Unlike EVs which can take around 40 hours to recharge, the fuel cell system can fully refuel in just about five minutes, making it more similar to combustion engine vehicles in terms of fueling. In addition to that, the vehicles include regenerative braking which recaptures wasted energy as it slows down. Hydrogen cars have also evolved to be quite safe with tanks strong enough to withstand even the most catastrophic accidents. 

The cons

One of the biggest pitfalls of hydrogen vehicle ownership is a serious lack of infrastructure for refueling. Stations that offer hydrogen fueling are quite few and far between and the lack of supply chain infrastructure has resulted in shortages of hydrogen on more than one occasion. Toyota even refunded lease payments in 2019 for drivers unable to use their vehicles due to one such shortage. Another pitfall is cost. According to the California Hydrogen Counsel, “Currently, a kg of hydrogen costs between $10 and $17 at California hydrogen stations, which equals about $5 to $8.50 per gallon of gasoline, however, manufacturers include free hydrogen fuel for several years when selling FCEVs.” Still, when fuel incentives run out, owners are on their own with fuel that costs twice as much as gasoline. 

Our prediction

With a growing global awareness of the finite nature of crude oil and the pressure of climate change, all renewable energy alternatives have a fair shot at gaining a large portion of the market. Hydrogen vehicles have a good chance of becoming more accessible and commonplace, but until they get the cost and infrastructure sorted EV and electric seem to out-entice buyers looking to transition away from combustion cars. 

What’s your take on Hydrogen cars? Leave a comment below!

We’ve created an extensive library of free e-books, DMS education, parts inventory education, and more editions of this series exploring industry trends and helping you prepare for the future of the industry.

Thoughts, questions, or opinions? Get in touch!

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The importance of parts education

While our main offering is a parts inventory management and optimization tool, one of our other core missions is to provide free helpful, accessible,  and ongoing parts education to all operations and individuals in our business. After working within the parts departments of dealerships across the country for over 20 years, we’ve witnessed an unbelievable lack of parts education- especially online. With an industry as ever-changing as ours, ongoing education is crucial to the health, wealth, and long-term success of your parts department not to mention overall dealership health. We often see parts and service overlooked by upper management, but it’s important to remember the parts department is responsible for just about 50% of overall dealership profits.  Not only that, as times get tougher economically, customers are holding on to vehicles longer than ever creating a higher-than-ever demand for ongoing maintenance and repairs. Here’s why parts education is crucial for your dealership and how to implement a plan for consistent learning and growth. 

Times They Are (always) A-Changin’

In a recent poll we conducted on LinkedIn it was good to see that 80% of respondees said they invest in parts training monthly, but unfortunately, 20% said only yearly or every few years. As is the case with most things, effective parts management is constantly faced with unexpected shifts in staffing, dealership policies, inventory management software, and larger market region and global market changes – just to name a few. In our opinion, monthly parts education is a MUST for staying ahead of the time and remaining on a proactive instead of a reactive course in your parts department. 

Strength in perspective

One of the avenues of parts education that can be most impactful is training and/or support groups that allow folks to learn from each other’s experiences and discuss challenges together. The ability to brainstorm with colleagues and gain larger market insight and inspiration can be extremely impactful, motivating, and productive in continuing to pursue the healthiest possible inventory and operation. Speaking of groups, after our recent 7 week workshop, attendees expressed an interest in creating a digital meeting space to brainstorm opportunities and challenges in the business together. Enter: The Parts People Meetup! Launching November 17th 2022,  we welcome everyone at the dealership to join and get to know your peers and parts department a little better. Reserve your free spot here. 

Training vs ongoing support

While one-time workshops and training are a great way to stay up to date on best practices and industry changes, it can sometimes be tough to implement what can feel like a firehose of information in the day-to-day operation. That’s why we recommend operations find a resource for ongoing support for real-life issues and questions that arise in their departments. Whether it’s a colleague or a service like PartsEdge, find a way to give your parts departments the balance of training and on-demand support.  

With PartsEdge you get access to on-demand expert part support every day. We help our clients with questions, run reports, and so much more. We have helped countless dealerships improve their parts expertise and inventory health through daily optimizations and support and custom matrixes.  Our powerful monthly parts inventory optimization tool was designed by a Parts Manager and a DMS specialist who witnessed the gap between the demands on Parts Managers and the lack of resources to get everything done. PartsEdge saves Parts Managers hundreds of hours each year by taking all the guesswork out of DMS management and sourcing setup and optimization allowing them to focus on creating a successful operation.  As a result, our clients see an average  20% drop in total inventory, 15% less idle inventory, a 50% increase in ROI, and a 20% increase in parts sales. If you’re ready to put our parts powertool to work, send us a message! Our testimonials speak for themselves.

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How to improve your fill rate 

Successful parts Inventory management is a delicate balance of having all the parts you need without overstocking and holding onto obsolete parts. Your fill rate can be a fantastic indicator of whether your inventory has enough width in the right areas to support a high-functioning, fast-moving operation. In today’s economy of immediacy, having the right parts right away can establish strong customer relationships and result in consistent, loyal business.  Online part sales have become a viable and helpful revenue stream which has only increased the importance of accurate inventory forecasting for parts inventories. Here’s how you can improve your fill rate.

Finding your fill rate

Finding your fill rate can be tricky as there are many ways to manipulate the number depending on how you receipt parts into your system. For example, if you have a large wholesale operation and do lots of work within warranty, you’re likely to have a much lower fill rate than a small dealership that does very little wholesale, little warranty, and lots of maintenance work. A better way to get a sense of how often you have the parts you need would be through calculating the off-the-shelf level of performance or job fill. 

Making an impact

Inventory settings will always be changing as the demand changes and evolves, but getting a handle on your fill rate starts with phase-in and phase-out criteria.  Find the balance between setting phase-in criteria that defends against parts you don’t need without hurting your fill rate and necessary inventory breadth. Fulfilling true demand, no matter where it comes from should be the objective of any changes you make to these settings. Other levers that can influence and reveal fill rate factors are days supply settings,  the excess inventory report, and how your department tracks true demand. We recommend a 90-95% fill rate long-term goal for high off-the-shelf levels of service to your customers.

PartsEdge has helped countless dealerships increase their fill rate through custom matrixes and daily optimizations.  Our powerful monthly parts inventory optimization tool was designed by a Parts Manager and a DMS specialist who witnessed the gap between the demands on Parts Managers and the lack of resources to get everything done. PartsEdge saves Parts Managers hundreds of hours each year by taking all the guesswork out of DMS management and sourcing setup and optimization allowing them to focus on creating a successful operation.  As a result, our clients see an average  20% drop in total inventory, 15% less idle inventory, a 50% increase in ROI, and a 20% increase in parts sales. If you’re ready to put our parts powertool to work, send us a message! Our testimonials speak for themselves. 

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