If you had the chance to avoid even the smallest leaks in revenue, would you implement the necessary measures? The answer probably depends on the cost involved. But if the cost were minimal and the corrections simple, why not?
In this article we will analyze the way to turn lost parts sales revenue into profit by using Autologica features. Lost parts sales are commonplace in the dealership: the customer arrives with a request but leaves empty-handed. It is vital to record these events as lost sales, since they represent missed profit.
The causes for a lost sale are common to every dealer:
- Lack of inventory
- Product price
- Difficulty in finding the parts in the warehouse
- Customer’s insufficient credit limit
- Poor product quality
A Dealer Management System should provide management with reports that help them detect lost sales and their causes.
Let’s analyze the case of an actual dealer that turned this kind of revenue leak into a source of revenue.
Business Case: Reduction of more than 50% in lost sales
By recording all lost sales, this dealer learned that they had lost sales for almost 4 million dollars in the previous year. This led them to tackle the issue and try to improve their fill-rate.
(All figures in US Dollars)
Aiming to help the dealer revert this situation, Autologica consultants worked together with management to make changes in two important aspects: parts purchases and lost sales registration.
- Register every lost sale and its cause. In some cases, dealership employees may not be used to loading lost sales in the system. In other cases, they load the lost sales but not their causes. Dealers must train employees to record every lost sale together with its cause. This information will help management discover the weaknesses that are creating lost sales.
- Improve parts management. The main cause for lost sales was lack of inventory. The Parts Manager found they had high levels of inventory but not in the parts most requested by customers. Immobilized stock was increasing at the same rate as lost sales. The dealer needed to implement a process to help the Parts Manager order the parts that were going to sell.
Autologica consultants suggested that they use certain reports and reconsider their strategies when making orders to suppliers:
- Parts Order Suggestion. Autologica DMS, through statistical analysis of the dealerships parts history, helps the Parts Manager decide which parts to buy in order to have an inventory based on customer needs.
- Parts High-to-Low Reports. These reports answer the following types of questions: Which parts have high inventory but low sales? Which low-cost, high-inventory, low-demand parts should be targeted through promotions? Which customers have bought low-demand parts in the past? Which parts shouldn’t we purchase because they are in stock? Which parts should be declared obsolete?
Six months after implementing these practices, the dealer had reduced its lost sales by 50%.