Parts Department

We enable our clients to reduce costs, improve performance, and boost operational efficiency! Let’s mention a few departmental issues here:

Parts Margin – You buy the spare parts, and you have expenses to manage the parts on your shelf. You have personnel costs. You have building expenses or occupancy. You need to remember that Parts Inventory is trapped cash! And you authorized it. So what should be the return on your investment in parts inventory? It is required to have part gross profit to achieve net profit.

Productivity -In this department, you can measure several things. What is your off-the-shelf fill rate? What are the annual sales per person?

Freight Expense Recovery – There are freight costs to bring parts in, there are freight costs to ship parts out. We need to track these costs but also the billing that you do to off-set the expenses. When this reaches 100% of the costs in billing, we call that Full Recovery!

Turn Over & Obsolescence – In your industry, the high-profit companies have some expectations of parts inventory turnover. This is calculated by taking the rolling 12 months cost of goods in the parts department divided by the average parts inventory value. This could be between 2.5 to 6.5 or more. Each industry has a different level of stocking and turns. Some of this is also impacted by the level of Obsolescence (the amount of money that is invested in parts that have not moved in the last year).

These are some of the subjects we could be helping you with, in your parts department.

Contacting Us: If you would like to discuss how we can help, we will be pleased to talk to you, please call the number below, send us an email at george@wisewolfconsulting.com or use our Contact Form.