Quote:
Originally Posted by phazeone
I don't worry about naturally occurring "phase out" or obsolescence. I do worry about unsold special orders and returns. When I first arrived at this dealership they were having difficulty keeping the obsolescence under 10%. The first thing I did was to offer a spiff to our appointment coordinators and our ASM's if they would keep their unsold SOR's to fewer than 5%. We later reduced that to fewer than 3%. This prompted a quick reduction in unsold aging warranty parts. We then instituted a policy that required prepayment of any non-warranty special orders. We do make exceptions for customers with a track record of 10 or more visits to the store. We also make exceptions for special customer satisfaction issues. The next policy was a 45 day hold policy. We will hold special orders for 45 days before they are eligible for return or sale. We have a monthly return allowance to the manufacturer. For the next several months we ran reports on unsold special orders that were 45 days or older. This report would include returns both internal and wholesale. From this report our returns were built. If our unsold special orders and our returns took up our entire return allowance so be it. If it did not, we would run our obsolescence report and pull the oldest parts from it for return. We watched our obsolescence grow to over 18% during the next couple of months. Due to the policies we installed, however, it was a short run of high obsolescence. While the naturally occurring obsolescence grew we knew these parts were much more likely to still enjoy an occasional sale where the unsold special orders and the returns had a very low likelihood of selling. We were betting on the future and it paid off. After 7 months our obsolescence was under 3%. After a year it was consistently at 1 to 1 1/2 percent. We had caught up with the curve. We still send back unsold orders and returns first and naturally occurring obsolescence second.
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phaseone - First post - Welcome to DealershipForum.
Thanks for sharing some great information. I loved the idea of paying the ASMs an incentive for making sure the SOP parts were installed.
I also like the mentality that if you're going to have aged inventory it may as well be parts that you actually have a chance of selling. Making a priority of getting rid of unsold SOP parts and returns makes a lot of sense.