Joined: 15 May 2007 Posts: 774 Location: Baton Rouge, LA
Posted: Tue Jun 03, 2008 10:11 am Post subject: HELP! Part Vendor Has Trouble
Part vendor A offered average service and had average prices. Their profits were being pinched by high delivery cost, largely from fuel prices. After examining several options, management decided to add a delivery charge to each delivery. A $1.30 charge was added to each delivery. Within a month business dropped by 50%.
Joined: 19 May 2007 Posts: 206 Location: Camp Verde, AZ
Posted: Tue Jun 03, 2008 10:34 pm Post subject:
One way would be raise the cost of the parts enough to cover the additional costs of delivery.
A better way would be to offer great service. In doing so more parts would be sold and delivered. The fixed costs, cost of the vehicle and the drivers pay, associated with delivering parts, would remain about the same. But, by selling more parts they would make more profit. Instead of delivering parts to each shop one at a time, the parts vender would start to deliver multiple parts each trip. They could then become more efficient.
We had a dealer in town start charging extra for delivery of non-stocked parts. These are parts they do not have on the shelf but would get the next day on a normal stock delivery. They have poor service and average prices. We purchase most of our part for this brand from a dealer out of town and pay to have every part shipped in. The difference is not the shipping charge, we are paying more for shipping, but the great service we get. We can count on the correct part being here the next day.
_________________ David Wittmayer
Owner / Manager
Hansen Enterprises Fleet Repair, LLC
Camp Verde, AZ
www.hefrshop.com
I would have to agree with Dave. In addition, it might be a good idea for the part store owner or manager to visit each shop in person and ask what else they need to receive better value. Listening reveals much.
They might say to pick up other lines of mechandise or add other services.
While constant improvement is an ideal, it is often hard to come up with the insights for improvements.
Joined: 15 May 2007 Posts: 774 Location: Baton Rouge, LA
Posted: Thu Jun 05, 2008 10:26 am Post subject:
Dave wrote:
One way would be raise the cost of the parts enough to cover the additional costs of delivery.
A better way would be to offer great service. In doing so more parts would be sold and delivered. The fixed costs, cost of the vehicle and the drivers pay, associated with delivering parts, would remain about the same. But, by selling more parts they would make more profit. Instead of delivering parts to each shop one at a time, the parts vender would start to deliver multiple parts each trip. They could then become more efficient.
We had a dealer in town start charging extra for delivery of non-stocked parts. These are parts they do not have on the shelf but would get the next day on a normal stock delivery. They have poor service and average prices. We purchase most of our part for this brand from a dealer out of town and pay to have every part shipped in. The difference is not the shipping charge, we are paying more for shipping, but the great service we get. We can count on the correct part being here the next day.
Hi Dave,
I think expanding sales-per-delivery by improved service is a great idea! In a competitive market I think it is unwise to "invent" new charges, that others are not charging. This strikes me very much like an environmental charge or "shop supplies" as a line item on an invoice. It adds cost with no percieved value and seems to me to avoid serching for the real problem.
Joined: 15 May 2007 Posts: 774 Location: Baton Rouge, LA
Posted: Thu Jun 05, 2008 10:32 am Post subject:
Bud wrote:
I would have to agree with Dave. In addition, it might be a good idea for the part store owner or manager to visit each shop in person and ask what else they need to receive better value. Listening reveals much.
This is a very good point. I wonder if a meeting with their clients and asking for ideas might not have helped more. Perhaps a printout of the things each shop buys most and a suggested inventory.
Bud wrote:
They might say to pick up other lines of mechandise or add other services.
Also very good and as you state, may have come out by listening.
Bud wrote:
While constant improvement is an ideal, it is often hard to come up with the insights for improvements.
Certainly the hardest part, but also the competitive advantage of those that learn to do it. I believe, needed is intuitive thinking and learning to listen for needs, rather than only hearing request. Filling orders is simple, anticipating needs makes a business very wealthy.
Joined: 04 Sep 2007 Posts: 47 Location: Grand Rapids, MI, USA
Posted: Sat Jun 07, 2008 10:23 am Post subject: Re: HELP! Part Vendor Has Trouble
louis wrote:
Part vendor A offered average service and had average prices. Their profits were being pinched by high delivery cost, largely from fuel prices. After examining several options, management decided to add a delivery charge to each delivery. A $1.30 charge was added to each delivery. Within a month business dropped by 50%.
How might this have been handled differently?
I'm guessing we could add another several dozen ideas to the ones already mentioned. One vendor tried that here...for a few weeks before it was scrapped.
Parts delivery by most vendors is one of the most inefficient things I have ever seen. Severe lack of systems and lack of common sense.
One store I know of is saving massive costs after they purchased some scooters (50-100 MPG?) with large baskets which the drivers use to service customers in their immediate metro area.
And, your comment on hazmat and SS is dead on, Louis.
_________________ Tom Ham
AutomotiveManagementNetwork.com - Hams Management Systems
Joined: 15 May 2007 Posts: 774 Location: Baton Rouge, LA
Posted: Sun Jun 08, 2008 11:54 am Post subject: Re: HELP! Part Vendor Has Trouble
Tom Ham wrote:
One store I know of is saving massive costs after they purchased some scooters (50-100 MPG?) with large baskets which the drivers use to service customers in their immediate metro area.
Thanks Tom, I think that is a GREAT idea! I always felt it was also in the best interest of a vender to assist a business with inventory. How many small deliveries could be avoided with proper inventory management?
I dont mean to derail the thread ,but I feel shops and suppliers need to work together so both can be efficient.We expect customer loyalty and so do our suppliers.I have seen shops that phone multiple parts suppliers trying to save a few bucks,get pads from here and the rotors there.Some shops dont manage there time or inventory very well so the parts suppliers make on demand trips for fuses or muffler clamps that could be avoided and lower their cost and in the end ours. Customer has to pay the cost,hidden or upfront.
I have a supplier that is my first call and I pay them as soon as the statement arrives.In return they give me their best price level and as a bonus they sell me my big ticket equipment at their invoice.At the end of the day I fell we both win from the deal.
_________________ Jason Clark owner/tech
Clarks Automotive
Wellington Ontario
Canada
Joined: 15 May 2007 Posts: 774 Location: Baton Rouge, LA
Posted: Mon Jun 09, 2008 7:02 pm Post subject:
Jason wrote:
I dont mean to derail the thread ,but I feel shops and suppliers need to work together so both can be efficient.We expect customer loyalty and so do our suppliers.I have seen shops that phone multiple parts suppliers trying to save a few bucks,get pads from here and the rotors there.Some shops dont manage there time or inventory very well so the parts suppliers make on demand trips for fuses or muffler clamps that could be avoided and lower their cost and in the end ours. Customer has to pay the cost,hidden or upfront.
I have a supplier that is my first call and I pay them as soon as the statement arrives.In return they give me their best price level and as a bonus they sell me my big ticket equipment at their invoice.At the end of the day I fell we both win from the deal.
Hi Jason,
I don't think this is a derail at all, rather I feel it is right to the heart of the matter. An adversarial or even uncaring relationship with vendors will not be in the best interest of the business, long-term.
There are places for competition and places for cooperation. Dr. Deming was pretty clear on this in point four. I think your post is right on target, thanks for the input.
Jason is definitely not derailing the thread. Examples of cooperation like that abound in Demings teachings. Doesen't he say explicitely to reduce the number of suppliers anyway?
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