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AED's
fourth annual Executive Forum, held Sept. 12 and 13 in Chicago,
focused on the future of independent distribution. To find
out what customers think about this topic, AED assembled a
panel of representatives from five large contracting firms
and asked them what they want from equipment dealers.
They weren't
shy.
One requires
three basic things:
- He
wants at least 85% of the parts he orders when he orders
them,
- He
wants at least 98% of his backorders supplied within 24
hours, and
- He'll
pay no more than 1% of parts value for freight in emergencies.
If you're
not delivering service equal to or better than this, it's
time to re-examine the dealership's inventory control rules
and operations.
First,
and most simply, dealerships must be able to supply all fast-moving
parts all of the time. Most don't. Over the past several years,
dealers have focused so much on increasing asset turnover
that they have backorders on fast-moving parts every week.
Yes, that's
right: every week. To operate at a reasonable turnover rate,
most dealerships have reduced their inventory of fast-moving
parts.
The problem
is that most dealerships have invested too much in parts that
don't meet the stocking criteria. Not only is this an extremely
inefficient use of capital, it also uses up a lot of warehouse
space. Dealerships that reduce non-producing inventory have
plenty of money to invest in providing fast-moving parts all
of the time.
To find
out where your company stands, run a descending calls report
on your inventory. Check out the inventory level and dollar
amount invested in parts that haven't sold in the past year
or sold only once. Exclude protective parts, but remember:
protective parts should not be used as an excuse for a high
level of non-productive inventory. They should represent no
more than 10% of productive inventory.
When you've
determined the percentage of parts that sold once or less
over the past year and how much the dealership has invested
in those parts, you'll understand what I'm saying. The standard
on slow-moving parts should be no more than 10% of the total
productive inventory.
Find out
from your parts manager what rules govern the dealership's
parts inventory. Get into the dirt and find out the facts.
Change the rules if they don't make sense.
With equipment
margins under more and more pressure, dealerships must increase
the portion of sales represented by the parts and service
departments. Customers are telling you what they require to
continue doing business with dealerships--or to return to
doing business with dealerships.
Contractors
choose parts suppliers based on how consistently those companies
provide parts on time. Shouldn't that be one of your strengths,
not one of your weaknesses?
Let's
get with the program and act instead of just talking and studying.
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Wanted:
Ideal Equipment Partner
At
AED's September forum on the future of independent distribution,
five contractors listed what they're looking from from
equipment and service providers.
- Guaranteed
uptime is more important than guaranteed costs:
Any Agoos of Hubbard Construction, which owns 3,500
pieces of equipment spread out over the southeastern
United States.
- Dealers
charge so much for parts that he takes routine service
work elsewhere: Bob Andrade of the Walsh Group,
which operates 1,200 pieces of equipment in 30 states.
- Customer
support agreements, total maintenance and repair agreements,
etc., are too generic to be cost-effective:
Greg Kittle of Ryan Construction, an excavation company
with 600 pieces of heavy equipment working east of
the Mississippi River.
- Why
does it take so long--45-90 days--to get an invoice
from a dealer? Pays within 45 days of receiving an
agree-upon invoice:
Bill Minor of Waste Management, with 7,000 pieces
of heavy equipment in North America.
- Don't
make me call the dealership to find out the status
of my repair or parts order:
call me instead: Dale Warner of C.J. Langenfelder,
2,700 pieces of equipment.
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