DEALER PARTS & ATTACHMENTS POLICY

DEALER PARTS & ATTACHMENTS POLICY

Contents

Purpose 3

Stock Levels 3

Stock Ordering 4

Parts Marketing 4

Warehousing 5

Stock Checks 5

Excess/Obsolete Stock 5-6

Obsolete Stock Provision 6

Removing Attachments from Machines 7

Key Performance Indicators (KPI’s) 7

a. Off the Shelf Availability 7

b. Stock Order Efficiency 7

c. Obsolete Stock 7

d. Parts Margin 7

e. Attachments Margin 7

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DEALER PARTS & ATTACHMENTS POLICY

Purpose

Efficient parts stock control is paramount to success, profit and cash flow.

Parts stock is a risk area for many dealers and it is important that there are clear policies in place. This will

ensure that inadequate parts stock is not held (which would affect customer service levels and retail parts

sales) or excessive parts stock is not held (which would reduce in value).

Stock Levels

Minimum and maximum stock levels should be established so that Off the Shelf Availability can be maximised

and VOR Parts Purchases (which incur a higher cost) can be minimised.

An overall value of parts and attachments stock should be agreed with the Parts Manager and he should then

be responsible for achieving the off the shelf availability whilst not exceeding that limit.

The following need to be considered when setting the stock levels.

 Historic sales of individual parts (and increasing or decreasing trends). As a general rule, parts that

have been sold (retail or internal) four times or more per year should be held in stock. However,

this lower value items may be stocked if they have been sold less often. The extent to which parts

have been used to satisfy warranty issues that have now

 Changes in the machine park (eg a higher number of JS excavators being sold is likely to mean a

higher usage of JS parts).

 Service contracts and Premier Cover agreements that are likely to mean a higher usage of parts

 Perishability of parts

A computerised stock management system such as Synchron (which is used by several JCB dealers) should

be used to establish recommended stocking levels and order patterns.

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DEALER PARTS & ATTACHMENTS POLICY

Stock Ordering

There should be clear responsibility for the ordering of parts and attachments. Any parts orders must not re-

sult in the maximum stock level for a part being exceeded.

Bulk orders should be considered to maximise margins, if projected sales volumes allow

All stock orders should be authorised by the Finance Director

Parts Marketing

Successful parts marketing is essential to maximise the profitability of the parts department. Therefore a ‘ring-

fenced’ budget should be allocated for its implementation. The activities should supplement the JCB National

Parts Campaigns and should include:

 Service advertising

 Special promotions (e.g. 10% off lubricants for one week only)

 Seasonal checks (e.g. pre-winter check)

 Maintenance plans (e.g. repair and maintenance plans)

 Extended Warranties (e.g. Premier Cover)

 Service contracts

This marketing should take the form of printed correspondence, tele-marketing, email, online collateral and

social media.

This marketing will lead to regular contact with customers, helping to build up a strong relationship.

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DEALER PARTS & ATTACHMENTS POLICY

Warehousing

High density storage should be used within the warehouse. This may include automation which speeds up

parts picking time and gives greater accuracy for stock control.

The back counter should be located adjacent to the workshop with a pull-down roller shutter for additional
security.

Stock Checks

A system of regular stock checks ensures that the dealer management system accurately reflects the physical

stock in the warehouse or engineers’ vans.

All warehouse stock and engineer vans should be checked at least every three months and any discrepancies

investigated.

The stock checks should verify that the stock is in good condition as well as the quantity of items.

Excess/Obsolete Stock

Excess stock consists of parts lines which have been sold by the dealer within the last year but the dealer does

not expect to sell all current stock of those lines within the next year. The quantity above the dealer’s ex-

pected sales within the forthcoming year is defined as excess stock.

Obsolete stock is parts lines that the dealer has not sold within the last year and does not expect to sell within

the next year.

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DEALER PARTS & ATTACHMENTS POLICY

Excess/Obsolete Stock Cont.

Efficient parts stock control is paramount to success, profit and cash flow.

Parts stock is a risk area for many dealers and it is important that there are clear policies in place. This will

ensure that inadequate parts stock is not held (which would affect customer service levels and retail parts

sales) or excessive parts stock is not held (which would reduce in value).

 Marketing of Excess/Obsolete Stock - A list of this stock should be regularly emailed to customers

and other dealers with competitive prices. It should also be listed on the dealer website as

‘discounted parts stock’ or ‘special offers’.

 Returns to JCB - A request should be made to JCB Service, at a minimum once per year, to re-

turn excess and obsolete stock. However, it is not possible to return perishable stock or stock

with damaged packaging.

 ‘Fire Sale’ - If neither of the above methods is successful, the stock should be sold for whatever

price can be achieved. This may involve selling stock at heavily discounted prices to JCB dealers in

countries that may still have use for these parts.

Obsolete Stock Provision

There should be a provision made each month within the dealer accounts for the depreciation of ob-

solete stock. This should be reviewed at least annually against actual stock values and after every parts

return or significant sale of obsolete stock.

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DEALER PARTS & ATTACHMENTS POLICY

Removing Attachments from Machines

Stock machines should always be sold with any attachments that they were purchased with the machine, as it

is likely that it will be difficult to sell these attachments separately.

In the rare circumstances that an attachment is removed from a new machine, this must be approved by the

Finance Director.

Key Performance Indicators

a. Off the Shelf Availability

This is essential to understand the extent to which customer demand for parts is met. If this percentage is

low, parts sales are being lost and customer satisfaction is being adversely affected.

Calculation:

Order lines from customers that have been satisfied from stock

Total order lines from customers

Benchmark: 80%

b. Stock Order Efficiency

Calculation:

Number of order lines ordered as stock or intermediate

Total number of order lines

Benchmark: 70%

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DEALER PARTS & ATTACHMENTS POLICY

Key Performance Indicators Cont.

c. Obsolete Stock

Calculation:

Value of stock which no lines have been sold in the last year

Total value of stock

Benchmark: 5%

d. Parts Margin

Calculation:

Parts gross profit

Parts turnover

Benchmark: 30%

e. Attachments Margin

Calculation:

Attachments gross profit

Attachments turnover

Benchmark: 30%