During the past 20 years, the outdoor equipment industry — which includes outdoor power equipment, lawn and garden equipment, light construction equipment, and landscape equipment — has gone through a dramatic transformation. With wholegoods margins slipping away year by year and customer demands increasing, today’s outdoor equipment dealer is required to find new ways to improve profitability while reducing time, labor and resource costs.
Every business owner understands that inefficiencies and waste are the two greatest destroyers of profit in a dealership, and, in today’s economic climate, neither can be tolerated if the business is to continue to grow and succeed. With little ability to control wholegoods margins, more and more outdoor equipment dealers are looking at how similar industries, such as automotive and agricultural equipment dealers, have leveraged their people and their space to produce greater profits through their parts and service departments.
One solution that dealerships are turning to is high-density storage solutions that use less space and make keeping track of inventory easier. By locating the highest-volume parts where they can be accessed easily and quickly, dealers can reduce transaction time and increase sales. For many dealers, replacing existing storage shelves with new high-density storage units allows them to reduce their parts department footprint by 50 percent, while increasing the number of parts stored.
Improve billing efficiency and customer satisfaction
Because of the intimate tie between the service and parts departments, any improvement in one will make an automatic positive impact on the other. For example, the better job the service department does of communicating the parts it needs for a specific repair, the less time it will take for the parts department to fill the order, reducing transaction time for parts and improving billing efficiency for service. The same holds true for walk-in customers. If the parts department can consolidate its parts into a tighter footprint and have more of the fastest-moving parts closer to the parts counter, it is easy to reduce the amount of time it takes to fill a customer’s order. It’s easy to reduce this transaction time by 40 percent, which improves customer satisfaction and reduces labor cost for the department.
Tips for organizational layout, inventory management, and storage
The key to increasing profitability of the parts and service department is getting a better handle on inventory and locating the inventory where it can be accessed easily and quickly.
One major update is the use of a high-density storage cabinet near the service counter, stocked with 100 to 200 of the fastest-moving parts, located within easy reach (two steps) of parts department personnel at each point of sale. The goal is to reduce the average transaction time to around four minutes, allowing both the service department and walk-in customers to be processed more quickly.
By keeping parts sold most frequently close to the transaction counter, you reduce foot traffic and movement. Time lost by having to go to the back room to find a part really adds up, increasing the average transaction time and resulting in lost customers and revenue. Storing these best sellers in high-density drawers also gives better inventory control by giving parts personnel a visual inventory.
To discover the fastest-moving parts, run a report from your business management system for the past 12 months that shows your parts sales by unit volume. From that report, remove your fuel line, starter rope and oil, and focus your attention on parts that you have sold eight or more of in the past 12 months. Those parts, filters, blades, plugs and belts are your fastest-moving parts and should be located as close to the parts counter as possible.
According to Bob Clements International, Inc., you might even consider duplicating your fast-moving parts at each checkout point on your parts counter. So, if you have two positions the customers can walk up to, you would want to have the same fast-moving parts in both locations. Again, your goal is to reduce your transaction time, lowering your labor cost and improving your ability to have happy, satisfied customers walk out of your dealership.
In addition to being stored next to the counter, how parts are organized within the cabinet is also key. The most efficient way to store parts is by type. Keep all your spark plugs together, as well as fuel filters, primer bulbs, pulleys, spindles and springs. Once the drawers and bins are labeled, anyone in the dealership can look at the part and locate it more easily by visually finding it among like parts.
As you begin the process of moving to high-density cabinets, it’s important to understand that you will still need some shelving. You are not going to want to store the bigger, bulkier items in a cabinet. A 5-inch cube or smaller is the optimum size to really take advantage of the power of high-density storage. Shelving is probably still the best option for storing tires, large air and oil filters, belts, blades and spindles.
Once you have determined what parts would be a good fit, think about how you would organize them. In most cases, you will identify each part with an exact location using an alpha-numeric system such as Cabinet A, Drawer 1, Row A, position 1. Using primer bulbs as an example, if you had five different primer bulbs, they might be stored in Cabinet A, Drawer 1, Row A, position 1, position 2, position 3, and so forth. They are all together, easy to find, and easy to inventory.
Better inventory control
Just as you close out your cash drawer at the end of each day to make sure it balances, it is important to inventory your fast-moving parts at least three times per year to make sure what your business management system says you have in inventory is actually there. By conducting a “rolling inventory” based upon the number of times a part turns each year, you can reduce the total time it takes to do an annual inventory and have a more accurate accounting of what you really have on hand. Using the high-density cabinets makes conducting an inventory check quick and efficient. You can assign a parts person the task of inventorying a drawer or a cabinet as the customer flow changes on an hour-to-hour basis.
In a dealership, you can go from 10 people in line and all the phones ringing to no one in the store in the span of an hour. By setting up a rolling inventory, you can take advantage of the labor you are paying for. Rather than have parts people standing around waiting for the next onslaught, they can inventory a drawer of fast-moving parts. It keeps your inventory accurate and utilizes your employees in a more effective and profitable way.
Lista Stacked Drawer and Shelf CabinetsModular storage — let’s get down to details
Purchasing the type of aforementioned high-density drawer storage is a significant investment. Dealerships will want to look long and hard at their particular circumstances to make sure they make the most of the new modular drawer storage solution.
Begin by doing a physical inventory, measuring the space available, and preparing layouts showing where all items will be placed. This should tell you how much existing storage is needed, and how much space can be gained.
The key to achieving success is to make sure the correct-size parts are stored in the correct-size drawers. Removing fixed shelves spaced 10 to 15 inches apart removes a considerable amount of air. One rule of thumb is that three to five sections of shelving (about 9-15 linear feet) can be condensed down to a single eye-level cabinet measuring about 28 inches by 28 inches. Another way of looking at it is that shelving 18 inches deep and 84 inches tall is underutilized and uses no more than 50 percent of its capacity, and sometimes as low as 30 percent. Using the complete cubic storage capacity of each drawer allows the parts department to store the correct parts in the correct drawers.
Keeping in mind that some parts are simply not conducive to storing in drawers, especially items that turn over too fast or are big and bulky, some shelving or a bulk rack is still necessary. But setting up a counter with the most popular parts stored in counter-level cabinets will free up a significant amount of space. Parts not sold frequently can be stored in a back corner, away from high-traffic areas. Not having to leave that front counter increases face time with internal and external customers, turning over transactions faster.
Lista Cabinets at Ahearn Equipment, Inc.Justifying storage investment — free up your floor space for more valuable activities
The discussion on getting rid of wasted space brings us to another important consideration — better control of inventory frees up space for more valuable activities.
High-density storage solutions are a significant investment, so how does the dealership justify the expense? Those hulking, gray, dusty storage shelves can be transformed into square footage that can be used for expanding the wholegoods displays on the selling floor, or for taking on new lines without needing additional storage space.
For example, Spencer, Mass.-based Ahearn Equipment, Inc. was running out of space to store parts for the ever-expanding product lines it was adding. The fast-growing dealership had tripled in size following a building expansion about five years earlier. The company offers a broad product line, with about 60-percent residential and 40-percent commercial. “We provide products from air freshener for your car to specialty excavators for contractors,” says Jeremy Ahearn, the dealership’s general manager.
Ahearn stored parts in hundreds of plastic bins on metal shelves and found there was a tremendous amount of space between the top of the shelf and the bin. “Bins were overflowing, and the parts were also getting very dirty,” said Ahearn. “Our facility is actually very clean, but I didn’t realize how much the parts were collecting dust and fading when they sat in the bins.”
Not wanting to add on again and incur the expenses of more bricks and mortar, Ahearn turned to Bob Clements International, Inc. to help them figure out a way to reduce their parts department footprint while still allowing them to expand the number of parts they could carry. “We found that our old plastic bin system was not efficient and organized enough,” Ahearn adds. “We frequently were losing parts that would fall out of the bins or were of odd sizes and would not fit well into the bins.”
Ahearn installed 14 cabinets made by Lista International. Since each dealership is different, Lista begins each project by conducting an inventory, at no additional charge, to get an idea of how many drawers are needed for the inventory carried, the best drawer sizes, and other storage needed for their particular inventory. Each of the cabinets at Ahearn has a variety of drawer sizes. “This product best suited us because we deal with a lot of different size parts, the majority of which are smaller than a basketball,” said Ahearn.
The way the dividers are designed enabled Ahearn to remove parts from their packaging and place the parts in a way that they can be easily found. “It’s manageable and aesthetically pleasing,” Ahearn said. “The parts department has reduced its footprint by 50 percent and an additional positive feature is that our parts no longer collect dust.”Ahearn now plans on staffing one less person in its parts department, making the return on investment only about six months.