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Take action to make a profit on stock parts

Sunday, December 23, 2018 - 09:00
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Income statements have many different sales and cost centers. Each sale and cost center deserve attention to ensure overall profitability of the business. One of the most difficult cost centers to turn a profit on is stock parts. Stock parts like nuts, bolts, clips and retainers can be a convenient life saver for an on-time delivery and can aid in alternative parts utilization. However, with convenience comes a price. The monthly expenditure on stock parts when left unchecked can quickly eclipse sales, leaving repairers in the red on stock parts. There are three actions shops can take to manage stock parts and achieve an acceptable level of profit from these tiny, but important, parts.

The first action requires the repairer, not the vendor, to periodically audit the stock parts inventory to check the for relevance, turn rate and discount. This is an important check to prevent the overstocking of quantities or part numbers. When auditing the stock parts, it is important to include the technicians for feedback on what parts are used or not used. This will help the shop identify both relevant and obsolete inventories. This feedback can also identify gaps in inventory for new stock parts that need adding. The next step in auditing the stock parts inventory is checking for turn rate, that is how fast the stock parts are selling by part number. This can be performed through vendor reports or simply by placing a colored sticker in a stock part’s bin every time a stock part is used. The later method also provides a nice visual cue to highlight the most frequently accessed inventory. Once turn rates have been established the final step is to analyze the vendor discount on each part for the top 10-20 part numbers. The discount needs to be analyzed by part number to verify that the discount is acceptable. Some vendors may provide lower discounts on faster moving products and deeper discounts on less common parts. Analysis may reveal that it may be more profitable to purchase some clips or retainers directly from the OEM. Findings from the audit should be reviewed with the vendor.

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