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Inventory management is an extremely important aspect of controlling and developing your business. In this column last month, I talked about changes in the supply chain and how you should respond going forward. Now we need to address some fundamentals.

Many of you will remember that I have some basic rules in operating a parts business.

• Find every part for every customer each day.
• Always ship all orders received today.
• Always transship all backorders received today.
• Put away all stock orders received today.

And do all of these items each day before you go home—pretty simple. But each of them is critical.

Let’s move from the bottom up.

Have Customers in Mind

Putting away all stock orders the day they are received will cause many of your problems. A stock order is normally a larger work unit than can be handled on the same day you receive it due to your staffing levels.

This has a two-sided answer. Too often the size of the stock order is, relatively speaking, too large compared to the business support levels you require. Today’s lead times and technology, though, have stock orders being received within days of placing them rather than weeks and months. In many cases, the inventory replenishment I advocate is to replace on a daily basis that which you have sold on that day.

They expect a sense of urgency and a high level of customer service from us.

There will be quantity and volume discounts obtained for some vendors, which would obviously influence the stock order values. But generally speaking, the stock order should be equal to a day’s volume of work.

This will lead us to a staffing level that is predicated on the volume of sales as well as the volume of receipts, enabling your parts department to be able to meet this requirement of putting away each stock order the day it is received.

Always transship all backorders the day they are received. I believe this is the most basic of all the four rules. It is an extremely high priority if I have placed an order for a customer as a result of our business not being able to meet their needs on the prime order. Not performing at this level means we have failed twice—once when we didn’t have everything that they wanted, and the second time when we were not able to ship the backorder on the day we received it.

Always ship all parts sold today...today. Again, this is fundamental and basic, but it needs to be said. Every customer who places a parts order with you today will expect to either pick up their order today or have you ship it today.

If that isn’t going to be the case, then we can schedule the shipping date with them for another date for their convenience. Otherwise, I would expect there to be a high sense of urgency to satisfy the customer and ship their order the same day as they placed the order.

Find It by Sunset

I want to get to the elephant in the room. Find every part that you don’t have in stock the same day that the customer placed the order. This will change the business-as-usual approach of a parts business.

Most of the vendors in the parts business have made the job of a distributor easy. Vendors have provided ordering systems that are extremely easy for the dealer. An interactive order entry system, a dynamic interactive availability check of the vendors’ inventories, as well as the availability of their dealers too. They have done a truly terrific job on making the work of the dealer less time consuming and more efficient.

However, that has contributed to the problem I want to address here. We have let vendors find the parts they don’t have on their timetable. That is what I want to change. I want to provide to the customer 100% assurance that we will find every part they need and we will find it the day they place the order with us.

Notice that I said we would “find” it. That doesn’t mean we will be able to provide it to the customer the same day. But we can have a dialogue with the customer relative to their urgency in obtaining the part and how much they are prepared to pay for the transportation and special handling that might be involved.

Earlier in my work life, I was at a company that withstood a three-month strike from a major supplier. The mission statement of the company I worked at was to find each part before sunset on the workday. We failed only once and many customers felt that our inventory performance was better during the strike than normal.

Keep the Score

That is what I want to concentrate on with our customers. Provide everything that they need as quickly as possible. They don’t expect us to have everything they need whenever they need it. But they do expect a sense of urgency and a high level of customer service from us. That can be provided by communicating with the customer on their order and giving them options of delivery for everything they want.

This is a change in outlook for the parts department. We should have a tangible and visible scoreboard in the parts department that reports the number of consecutive days we have been able to find everything that every customer wanted the same day they wanted it.

That is a record just as significant as an accident-free workplace in my book—having as a goal a year in which we found every part for every customer on the same day they wanted it.