To improvise on a verse from a Bob Dylan song, “the times they are a-challenging.” For many businesses, these times are challenging from both an economic and a staffing aspect. Economically, it is important for businesses to efficiently manage their parts and accessories inventories so just enough of the right stuff is available for sale and none of the unnecessary goods are on hand. From the standpoint of staffing levels, “help wanted” signs are prevalent, which indicates that businesses might not have enough personnel to process the varied tasks that are required to operate effectively.
Perhaps you are asking how these challenges might impact your efforts to achieve an accurate inventory – and why an accurate inventory is important to your efforts to operate a profitable inventory? Read on to learn some answers to these questions.
WHY is an accurate parts and accessories inventory important to your profitable operations?
One reason is that an accurate inventory could optimize the efficiency of your transactions. If your parts associates can confidently quote a price and the availability for a requested item without having to physically confirm that the item exists in the requested quantity, and in the bin location that is recorded in the computer database, then the transaction processing time is reduced. If the transaction processing time can be reduced, then the opportunity to increase the quantity of transactions that can be processed by your parts associates increases. If the quantity of transactions that can be processed increases, then perhaps you can operate with your current staff and not have to recruit and hire additional personnel. Therefore, if you minimize or eliminate the need for additional staff, then the recruitment and training costs related to the hiring process are reduced or eliminated.
A related benefit to increased inventory accuracy is the opportunity to improve your customer service. This can be done for your internal customers who are the service technicians and the RV sales associates who act as proxies for your external customers – the owners and renters of the RVs. If you can improve your customer service, then the opportunity exists to increase your customer base. And, by increasing your customer base, you could experience additional profits because you are operating more efficiently.
HOW can you achieve a greater percentage of inventory accuracy?
I suggest that you consider implementing perpetual cycle counts of your parts and accessories inventory. These perpetual cycle counts could be based on the velocity of movement of the parts and accessories. Those goods that have the highest volume of sales would be cycle counted most frequently; the slow-moving inventory items would be counted less frequently. To achieve these perpetual counts as efficiently as possible, I also suggest incorporating these cycle counts with other processes that are routinely performed.
One example of this 2-for-1 approach to cycle counting would be the stock order perpetual. Assuming that some of your parts and accessories items are replenished on a recurring basis, I suggest that you count 10% to 20% of the stocked items on each replenishment order. Since these items are those that are frequently requested, you would be cycle counting many of your high sales velocity goods often.
The price and availability perpetual could verify the on-hand quantity of both the high-velocity and the slow-moving items. When a parts associate processes a transaction for any item with a computer-reported on-hand quantity of less than five, she could count the actual quantity when she retrieves the requested item. My experience within the parts industry is that most parts associates are already doing this quantity check as part of their retrieval routine. You merely have to include a process for the parts associates to report any apparent count discrepancy to the parts manager so that each discrepancy can be researched, verified and adjusted if needed.
For slow-moving inventory, I suggest the phase-out perpetual. This process would require generating a report of items with no demand in a specified period and with zero on-hand reported quantity. I suggest that this period of inactivity could be as short as 12 months but could be for a longer period. The period that you use would be determined by the percentage of slow-moving inventory currently in your system. The larger the percentage of slow-moving inventory, the greater the number of months of inactivity that could be used. After generating the inactivity report, you assign one or more parts associates the task of verifying the actual quantity of each of the items listed in the report and reporting the findings to the parts manager for adjustment if the actual on-hand count is positive and elimination if the verified count is zero. This perpetual could be performed during any times that the parts associates are not assisting customers because these goods are not active.
WHO should process these efficient perpetual inventories?
Depending on the type of perpetual cycle count, it could be any of the parts personnel. In the case of the three perpetuals mentioned, these positions could be:
- Stock order perpetual: parts manager or anyone who would be involved in the generation and transmission of a stock replenishment order
- Price and availability perpetual: would normally be processed by parts associates as part of their sales transactions
- Phase-out perpetual: could be assigned to any parts sales associates, to the shipping/receiving agent, or to any administrative person who has time available to assist in the inventory accuracy routines
WHAT are you waiting for?
As noted in the first paragraph of this column, the times they are a-challenging. You could lament those challenges and do nothing because you are comfortable with the performance of your parts and accessories inventories. Or, you could decide that you want to improve that performance in order to meet those challenges of staffing levels and customer service.
To quote the native Oklahoman Will Rogers: “Even if you’re on the right track, you’ll still get run over if you just sit there.”
Are you up for the challenge?