Fixed Ops Journal - October 2017 - 16

FIXED OPS JOURNAL

 Tighter OEM parts plans require dealers to think strategically

ALEX KWANTEN
foj@autonews.com

actory parts-stocking programs such
as Fiat Chrysler Automobiles' Automatic Replenishment Order system
greatly affect - and can complicate -
dealerships' efforts to manage their parts inventories.
So do similar programs operated by vendors
that serve other automakers. Dealers say such
programs require a strategic approach to inventory management, as well as careful monitoring.
The factory programs generally recommend
that dealers stock fast-moving parts, and
guarantee that dealers can return them if they
don't sell within a year.
They also allow for short-term returns of items
ordered in error, typically with restocking fees.
At the same time, return allowances on nonstock parts have shrunk to narrow bands.
FCA's program offers most dealerships a re-

turn allowance equal to 2 percent of the value
of nonstock or special order parts. Smaller
dealerships can get as much as 4 percent. A
decade ago, that allowance was 6.5 percent.
The allowance can take the form of a dealership returning unsold parts or collecting cash
to dispose of parts. To earn even that allowance, dealerships must comply with 90 percent of the automaker's stocking recommendations, up from 88 percent in 2015.
A spokesman for Mopar, FCA's parts operation, did not respond to a request for comment.
Randy Buyers, the parts director at Ontario
Chrysler in Mississaugua, Ontario, claims that
FCA bases its program on regional demand rather than the parts needs of individual dealerships.
"I spent a number of years at a dealership ...
trying to clean out inventory," Buyers says.
"When I moved, all the [parts] I was trying to
get rid of there were popular at my new location. What's popular 15 miles away may not be

popular where you are."
Joe McBeth, the parts director of Dallas
Dodge-Chrysler-Jeep-Ram, says he likes the
FCA program and relies on it to help manage
the dealership's $2.8 million worth of parts.
But he concedes the program can cause problems for smaller dealerships.
"At a dealer with only $100,000 in parts inventory," he says, "requiring they stock two
$4,000 transmissions is a big chunk. Smaller
dealers might struggle with keeping their inventory where their owners want it and being
in [factory] compliance."
McBeth notes that some dealerships need to
watch their parts inventories more closely.
"We buy [parts] from many sources, and we
sometimes see dealers selling parts that they
could return to Chrysler for full refunds.
"I wouldn't say it's the majority, but maybe
everybody needs a refresher lesson on how to
... pull out what's returnable," McBeth says. 

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OCTOBER 2017

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Table of Contents for the Digital Edition of Fixed Ops Journal - October 2017