Dealer Development Resources

20 Steps to Improve Off-Shelf Parts Fill Rate to the Service Department

Parts Fill Rate to the Service Department is one of your machinery dealership's most powerful Strategic Tools!

Effective operations management reduces the heartburn and frustration of "back orders" and moves the team out of reacting to random events that cause havoc on day-to-day operations. The first and most important proactive step to break out of the firefighting transaction mode is for the service and parts managers to work together to improve off-shelf parts fill rate to the Service Department.

Tools to Improve Off-Shelf Fill Rate to Service

1.    Begin by measuring off-shelf parts fill rate. Fill rate is the percent of repair order line items for parts that are filled 100%, immediately, out of stock, off the shelf. Partial line item fill is no fill in this calculation. Do it by manually testing four weeks of repair orders if your computer system can not do it. What is your score? If you are under 85%, you have a very serious problem.

2.   Track and monitor off-shelf fill rates for each of the whole goods models you sell. What current products are being under-supported with less than a 95% fill rate? Determine why?

3.   Each van/service vehicle should be set up as a warehouse to track sales and fill. If you don’t measure it, you can’t manage it.

4.    As part of its new product development process, each manufacturer creates a “mortality list” of parts that could fail during the early life of the product. By reviewing this list of spares, you can stock what will be needed. Are you stocking the "recommended stocking list" to support your primary line?

 5.  Service and Parts Managers meet daily to review the work schedule and pre-order parts as needed.

6.    Ask technicians to provide a list of the 100-120 items that should always be in stock.

7.    Ask field service technicians how you can help them to arrive at a job site with the right part  95% of the time. Set up each service van as a branch inventory to track sales and fill rate.

8.    Analyze backorders. What is the cause: inadequate restocking procedures for controlled  items, manufacturer stock-outs, customers with old equipment, customers with new models  you are not supporting?

9.    Create and maintain a "lost sales report" for non-controlled items that you do not stock.  Watch for and monitor changes in market demand, and new trends. Typically, if there are more than 3 calls in 6 months, the new item is added to the controlled inventory stock.

10.  Create and study a Parts Sales Ranking Report sorted by units of parts items sold. The top 20% represent about 80% of your dollar sales. You should strive for a 100% fill rate on the top 20% of high-volume parts. Why would you ever want to be out of stock of your best-selling items?

11.  Full utilize manufacturers' annual stock returns.

12. Purge old, obsolete inventory. Replace obsolete stock with fresh items that sell.

13.  Cycle count inventory. Check and maintain stock status accuracy.

14.  Ensure that all parts are properly billed out. Every part taken out of stock must be recorded.

15. Review and chart paperwork system and hard parts movement to eliminate “leakage” of parts from quantity control in your information system.

16.  Review Emergency Orders each week for Service. What were the options? Why not in stock?

17.  Develop management leadership to defend the integrity of the Stock Status Report. Ensure proper recording of returned, unused parts by field technicians.

18.  Even if the factory distribution center is out of stock, the astute Parts Manger has a replenishment strategy that includes five or six alternate sources including other dealers, used machine inventory, "will fitters" (non-OEM parts manufacturers), and, going directly to the production line or the vendor who supplies the part or component to the OEM manufacturer.

19.  Visit your top 20 service customers (ranked by dollar volume). Review their parts usage requirements. Develop a parts list you will support with a 100% fill rate. (100% is possible to achieve for a specific set or list of items.)

20.   Visit your top 20 parts customers (also ranked by dollar volume). These companies have in-company maintenance capabilities and purchase a significant volume of parts. Review their purchase orders, not your invoices. What are they requesting? Are you able to fill 90-92% or more of their requirements off the shelf?

A poor fill rate to the Service Department contributes to re-work, missed repair promised dates, and unhappy customers. With proper planning, Parts and Service Managers can make progress toward achieving a 98% off-shelf parts fill rate for service jobs on Strategic or Current Focus Products and provide premium service to Key Accounts.

I'd welcome your comments: walt@mcdonaldgroupinc.com