For distributors, it’s rewarding to feel that you have everything the customer needs. The reality is that sometimes when a customer calls or stops by the store, the part they need is not always available to finish the repair.
Especially challenged are aftermarket distributors who sell to repair shops. More and more shops may find themselves gravitating toward the OE-channel than in the past, but sometimes lost parts sales to the OE-channel can simply be because parts are not correctly listed in aftermarket catalogs.
Phill Porpora of Lee Auto Parts readily sees the lost parts challenge within his stores, located in the suburban Chicago metro area. “At our company we strive to be the ‘first call’ from our wholesale customers,” explains Porpora, who is also an Aftermarket Business Editorial Advisory Board member. “I say our goal is to be ‘the only call.’ When a shop calls his first supplier and is told that they do not have the part, we are forcing that customer to try elsewhere. That puts our entire relationship in jeopardy. What if the second call supplier does a good job getting him the right part at a competitive price in a timely fashion? If this happens a few times, that second call supplier could ultimately become the first call.”
Porpora believes that communication with the repair shop could avoid the above scenario and a lot of lost time for the repair shops.
Independents must remove the static
Skip Potter, executive director of the Chesapeake Automotive Business Association (CABA), says the independence of the automotive aftermarket has sometimes made communication difficult. “Historically, there has likely been more complaining than communicating between channel partners,” he wryly observes. “Independence, privacy, insecurity and a lack of simple process have done as much to prevent healthy communication up and down the channel as technology has done to encourage it.”
Potter further states, “It takes culture and systems to make communications effective and it doesn’t seem to matter if a company is big, small, vertically integrated or independent. There are successes and failures among them all.”
A former vice president for the Automotive Aftermarket Industry Association (AAIA), Potter assisted in the development of the Jobber Success Series to help aftermarket distributors know their marketplace and adopt better practices to address issues such as lost parts sales. Potter believes the industry is fortunate to have many new technology systems available to allow for the efficient communication of data. He says CABA’s role is to help locally owned independent distributors understand the opportunity. “Then it is up to them to fix the culture.”
Communication is the key element in making sure that lost parts sales information successfully moves from the counterperson all the way to the buyer who acquires the parts. Retailers and jobbers have many different manual and automated systems within their stores to ensure that process takes place. In addition, most have data and technology to make sure part demand forecasts are as accurate as possible.
Keeping the lines open
Information provided through old-fashioned paper and by picking up the phone can sometimes still be the best method to communicate lost parts sales information. Dick Fairbanks, president of Orleans Auto Supply in Hyannis, Mass., says that with his internal systems, all four of his stores have the ability to check on parts availability. When it comes to lost sales information, he still has his counterpeople put on paper suggested inventory additions.
How much business does Fairbanks lose because they don’t have something in stock or can’t secure it in time?
“I have a reasonable size inventory for a distributor of my size,” explains Fairbanks, another Aftermarket Business Editorial Advisory Board member. “It wouldn’t surprise me if we lost 15 to 20 percent of volume because we don’t have the part or the customer can’t wait for us to get it for them.”
Fairbanks always has his store personnel ask the customer if a part can be ordered for them. “If it is a scheduled job, they may be able to wait,” he elaborates. “If they hang up right away, it usually means they are not sure if they are going to get the job or not, or they are going to go look somewhere else to see if they have it in stock.”
Eric Prevatte, owner of Prevatte Auto Supply in Lumberton, N.C., operates a WD with four retail outlets. His business is 65 percent wholesale to 35 percent retail but says it would be closer to 50/50 if you factor that he is a Motorcraft distributor that sells a lot of parts to Ford dealers.
His internal computer system displays the image of the part on the screen for any associate who accesses the system. Plus, they have multi-store accessibility to see what’s available in real-time.
For regularly stocked parts, Prevatte estimates that less than 5 percent of the calls he receives fall into lost parts sales. Of those that do, Prevatte’s computer system keeps track of lost sales along with inter-store transfers — though he admits that his counterpeople provide a “ton of input” to the lost parts equation.
A keystroke away
Hedahls Parts Plus is a regional player in four upper Midwest states. Based in Bismarck, N.D., Hedahls is a third-generation family business that is run by president Dick Hedahl. With 22 auto parts stores, Hedahls has many contacts with customers and many potential opportunities for lost parts sales.
A counterman at Hedahls can look internally at the inventory in all stores to determine if a part is available. “It is live inventory, and with one keystroke the part can be selected,” says Hedahl. Since Hedahls is part of Uni-Select, a counterperson has the ability to check Uni-Select’s inventory. “The counterman controls everything. They can hit the button and the part will be on the dock at 8 a.m. the next morning.”
Hedahl says that since his operations are in a small, rural area, if his company can’t secure the part a technician needs in a reasonable amount of time then the part probably doesn’t exist in the area. “If we don’t have it, nobody else probably does,” he explains. He says it is rare that his company is not able to secure the part overnight.
Like Orleans Auto Supply, Hedahls has internal reporting systems for reporting a lost sale. This can be done either through the computer, or by communicating directly with the buyer.
“If it is a direct report from the counterman, then the buyer takes it pretty serious,” comments Hedahl. “The counterman will say to the buyer: ‘We should have this part.’”
With over 20 years of experience with Strauss Discount Auto, John Olsakovsky is well versed in the company’s attempt to get lost sales from its stores and the entire communication process. As Strauss’ merchandise manager responsible for parts, Olsakovsky says Strauss works hard to avoid turning down any business through lost sales.
Internally, Strauss counterpeople do not have the ability to look up parts among its 100 stores. Olsakovsky says associates must rely on the “good old fashioned phone call.”
Olsakovsky says Strauss works with WDs and local suppliers to locate parts for customers. “Being in metro areas like New York, New Jersey and Philadelphia, it is usually not difficult to track down a part,” he explains. Even though it could take as little as an hour to find and receive the part, he says some customers are not willing to wait.
Most lost parts sales are communicated to Olsakovsky via a homegrown computer system. But he says when he gets a call from an associate, it’s usually something urgent and could be an up-and-coming part number that they need to stock.
Porpora of Lee Auto Parts tries to teach his store personnel to work hard with loyal customers who always try to buy parts from their store, especially if the associate finds a situation where they can’t internally locate the part.
He tells his store personnel to “ask (the repair shop) if they would like you to try to find it locally or if they have time for you to get it from our warehouse.” Sometimes they have time and will wait, and sometimes you might have to buy it from the competition. “I would rather buy it from the competition myself than send a good customer to them,” says Porpora.
Forecasting: Art or science?
Auto parts retailers and distributors know that their biggest asset is inventory. This is true from both a financial and a customer service perspective. As Hedahl readily acknowledges, it is also “our biggest challenge.”
When asked if buying parts has become more scientific, Hedahl says the process has “come 100 miles in the last five years.”
Hedahl adds that his company uses everything available to forecast demand, but ultimately “the buyer determines what should be on the shelf.” They rely primarily on data from Uni-Select, which comes out every week with a recommended program to carry.
Fairbanks is currently using Activant PartExpert, R. L. Polk data (“sliced the way we want it”), and “any quality data from manufacturers” to determine parts demand. He characterizes his efforts as “more art than science.” He says it is an issue with no real bull’s eye.
“We try to inventory what sells,” he explains, “but with so many SKUs it is tricky to find the threshold of where we should have the stock on-hand or not.
“We really don’t have any forecasting tools at all; it really has to be a sniff at demand from our customers. You really can’t forecast it.”
A day in which there is more science to forecasting parts demand is something Fairbanks can envision. He comments, “I’m sure most of the major players do have the tools and are getting more precise at this.”
He believes manufacturers could provide access to better failure rate predictability.
“This really belongs back in the lap of the manufacturer. They are concerned about returns, but few offer excellent data or make it available so we have a better idea of what to stock,” Fairbanks laments. “If we had this type of information we would be more likely to have the right parts in stock and lower the amount of returns that come back to them.”
Rising star or fading comet?
Prevatte relies upon his Activant computer system to assist in making buying decisions.
“We use it to check item coverage and prices, evaluate special orders and look at new parts to see if they fit our market,” he explains. He says it has helped his company be more efficient in stocking inventory because it puts all the information at their fingertips.
Using movement codes and closely monitoring them, Prevatte says it comes down to a simple question about certain part numbers: “Is it a rising star or a fading comet?”
At Strauss Discount Auto, Olsakovsky says he has been able to use data from many different sources, like Polk and NPD, to set inventory and forecast demand. But more importantly, he says, “We take into consideration the vehicles and customers coming into their stores when setting a demand forecast.”
Olsakovsky heavily weighs the information from the stores, especially when an associate makes a statement like: “We are seeing a lot of demand for this item.” Except for differences in volume, he says since most of their stores are in similar urban markets, they stock Strauss stores with very similar inventories.
In his 20 years at Strauss, Olsakovsky says he has seen greater strides forward in the data available to forecast demand.
With more information, though, you can almost hit “information overload” and “paralysis by analysis.” He believes there is something to be said for “gut feel” and years of industry experience. In the end, you need to look at all the data available, he adds, but also rely upon industry knowledge and “street smarts.”
Data needed to track demand
Mike Gingell of R. L. Polk confesses that he is not an expert in retail store management. Gingell, an Aftermarket Business Editorial Advisory Board member, sees two key areas that affect lost parts sales: stocking guides and data standardization.
First, he believes aftermarket distributors have to decide whether they will follow a standard stocking guide of setting the inventory the same way at each store regardless of demographics, geographic markets, etc., or whether the company will opt for a custom stocking guide that accounts for these variables. “Which philosophy you adopt can impact your inventory turns and out-of-stock items.”
Second, Gingell sees the growing importance of data standardization among trading partners. He says it comes down to whether a retailer, WD or jobber is able to talk effectively back and forth with the manufacturer.
“Sometimes you see people put in duplicate part orders under different part numbers,” explains Gingell. With part number proliferation and outdated catalogs, Gingell says the challenge is there. “What you find is sometimes companies are ordering the same part under a different part number, which is obviously a concern.”
He says Polk’s data gives people “the ability to do a better job of anticipating demand. When you start looking at registration data, what that tells you is somebody is paying to register a vehicle at a specific household within a geographic area.” This information, says Gingell, establishes your base demand.
He says using the data geographically is important. He cites an example of spark plugs and the inherent differences between the next door zip codes of Phoenix and Scottsdale, Ariz. “For instance, if you look at spark plugs for a Mercedes, there’s going to be higher propensity for demand in Scottsdale than what there is in the Phoenix market,” Gingell illustrates. “So if you are stocking the same quantities of spark plugs in both stores, either you are going to have too many sitting on the shelves in Phoenix or not enough in Scottsdale.”
Gingell believes the overwhelming majority of aftermarket companies are becoming more scientific in the way they manage their inventory. “As retail outlets and distributors get larger through consolidation, the ability to utilize information is going to get even more critical because the amount of inventory that they are trying to manage grows and grows.
“A lot of times our data is just one little piece,” admits Gingell. “Our data combined with OE part number information, sales data and replacement rates really gets you into demand planning. Once you get into the demand planning by geographic area, that’s how you start figuring out where the opportunities are and where your potential problems are.”
Technology is important, and Porpora of Lee Auto Parts uses all that is available. But, he believes, holding monthly meetings with his wholesale customers is just as critical. “It really helps me understand their world better, while giving them a better appreciation of what we as parts distributors are faced with.”
Porpora stresses that it’s all about communication. “I like to tell customers that ‘I never take too long to deliver an auto part, they just didn’t order it on time.’ They laugh, but I think they get the message.”
Working with your wholesale customers
Phill Porpora of Lee Auto Parts in Des Plaines, Ill., holds monthly meetings with his shop customers to help create more efficiencies. He explains that a three-bay shop could have five cars to work on. “They pull in three cars and begin diagnosis. Then they begin the teardown and order the parts. Well, what if we don’t have the parts in stock for one or two of those vehicles?” The shop’s bays are being tied up while Lee Auto looks for parts, or worse, another distributor is called.
“At that same time, I had the parts in stock for the other two cars that they elected to leave on their lot. Had they fixed them first, we would have had the time to retrieve the parts for the other vehicles while they fixed the first three cars.”
Porpora explains that communication between the repair shop and parts supplier could raise bay productivity and increase parts store sales. “I ask my shops to check out all their vehicles in the morning. Then based on what parts they look like will be needed, check our store’s inventory, then, based on parts availability, work on those cars first.”
