Spare parts management

1 | P a g e M e d h a k u m a r Y a d a v
Spare Business Unit
(SBU)
Spare Parts Management
Medha Kumar Yadav

PARTS MANAGEMENT
Click on the links given below
Parts Sales Analysis …………………………………4
Anticipate Demand & Order the parts ………………………………4
What is Inventory Management? ………………………………5
Principles of Inventory Management …………………………………6
Parts Manager Major Roles …………………………………6
Inventory Management Process …………………………………7
Inventory Cost ………………………………7
Indicator in Inventory Management …………………………………8
U.I.O …………………………………8
Key Inventory Terms …………………………………9
Role of Inventory ………………………10
Inventory Classification ………………………………10
ABC Analysis …………………………………10
FMS Analysis …………………………………11
RIS Analysis …………………………………11
HML Analysis …………………………………11
ABC FMS Analysis …………………………………12
Characteristics of Each Group on the basis of Consumption ……15
Strategy for Inventory Management ………………………………16
How to calculate Replenishment quantity? …………………………………16
Method 1. ORDER QUANTITY CALCULATION …………………………………16
Method 2. ORDER QUANTITY CALCULATION …………………………………16
Automated Ordering System …………………………………17
AOS Implementation Process …………………………………17
What is Demand Forecasting? …………………………………19
INPUTS & OUTPUT …………………………………19
Demand Forecasting Models …………………………………20
6 Months Medium ………………………………20
On the basis of RIS & FMS …………………………………20
On the basis of FMS & ABC …………………………………20
Optimization of Inventory …………………………………21
Service level – First Fill Rate (FFR calculation) …………………………………21
Key Performance Indicator – (KPI) …………………………………21
KPI - Order Ratio (Stock vs. Rush & VOR) …………………………………22
KPI – Inventory Turnover Ratio …………………………………22
KPI – Lost Sales …………………………………22
KPI – Return on Investment (ROI) …………………………………23
KPI - Improving Service level …………………………………23

KPI – Obsolescence …………………………………23
Cow Parts …………………………………24
Parts Pricing …………………………………25
Benefits of Effective Stock Management …………………………………25
Guidelines for doing Perpetual …………………………………26
Manpower Development …………………………………29
Warehouse Standardization …………………………………30
Objective of Warehouse Standardization …………………………………30
Warehouse, Before Standardization …………………………………30
Essence of Warehouse Standardization …………………………………31
Initiatives for F /Y2017 …………………………………37
Proposed Spare Parts Mother Warehouse Operations …………………………………37
Mother Warehouse …………………………………38
Mother Warehouse Details …………………………………39
Best in Class Processes …………………………………39
Example of Poka Yoke for Binning …………………………………39
Example of Poka Yoke for Final Packing …………………………………41

PARTS MANAGEMENT
Objective
“How to improve Customer Satisfaction & Increase the Parts Sales by using various
Management Tools & Control Procedures”
Parts Sales Analysis
Sales should be analyzed as per following type
1. Retail
2. Workshop
3. Body Shop
4. Trader
5. Internal
6. Warranty
7. Lost Sale
This analysis is required to understand the percentage of sale coming from each type so
accordingly inventory planning can be done.
Anticipate Demand & Order the parts
Demand planning process ensures the availability of “Right part in Right quantity” leading to higher
customer satisfaction.

What is Inventory Management?
Low Stock High Stock
High Turnover Low Turnover
Definition
A series of actions to keep proper inventory levels by purchasing right parts at the right time along with
right quantities in order to meet certain service levels at lowest possible
costs.
Objectives
1. Improve customer service level by rapid supply of parts.
2. Earn more profits by minimizing stock holding costs, ordering costs
and avoiding sold-out stock.
3. To ensure smooth flow of stock.
4. To provide for required quality of materials.
5. To control investments in stock.
6. Protection against fluctuating demand.
7. Protection against fluctuations in output.
8. Minimization of risk and uncertainty.
9. Risk of obsolescence.
10. Minimization of material cost
Function
1. Prevent excess stock and sold-out stock.
2. Achieve highest service levels with the lowest possible stock.
GOOD INVENTORY
MANAGEMENT
OU
POOR INVENTORY
MANAGMENT

Principles of Inventory Management
1. EFFICIENCY =Focus on Scientific Managements for Simple operations
2. ECONOMY =Focus on Economic Managements for Cost Reduction
3. EFFECTIVENESS=Focus Effective Management for Customer Satisfaction
Parts Manager Major Roles
“Right part at the Right Time at the Right Place & in Right quantity”
 What to buy?
 When to buy?
 How much (many) to buy?
 When not to buy?
The answer to these questions comes……
From the cumulative information in the inventory management system.
Inventory Management System
Demand
Management
System
Demand
Forecasting
System
Purchase
Order
System
RESULT
 Part No’s
 Quantities
 Time of
Purchase

Inventory Management Process
Inventory Policy
Analysis and Monitoring Operation and Process
Inventory Cost
Cost related with inventory management
Holding Cost
 Arises with amount of holding stock
 Varies with quantity of items being held
 Result from parts handling, damage, etc.
Ordering Cost
 Arises with frequency of purchase order
 Does not change with the order quantity
Setting Policy & Objective
How much cost for inventory? (Warehouse Capacity? Employees?
What is the target service level?
Forecasting , Purchasing ,Sales System Operation
P/O Placement (Regular/Emergency/ Vor)
F/UP Inbound/Outbound Process
Indicator Management
F/Rate Trend
B/O Analysis

Sold-out Stock Cost
 Hard to estimate
 Result in customer disappointment, lost sales, etc.
Indicator in Inventory Management
Indicator Description Formula
MOS
(Months of Supply)
Shows how many months can be operated without buying more
stock.
Total stock
Average monthly sales
Turnover Shows the how many times the inventory turns over in a year
-Higher turnover equals more profit
Annual sales
Average inventory
Fill Rate Shows customer satisfaction at the time of order
-Instantly allocated lines over requested lines
Allocated Lines
X
100%
Requested Lines
B/O LINE Shows how many lines are on Back Order.
-B/O Lines indicators are also measure of customer satisfaction
B/O Lines
Monthly Order Lines
U.I.O
Units in Operation
UNI is a number of vehicles operating on the roads in each country. It is one of the most important
factors to determine the size of A/S market. Available from government statistics agency & vehicle
registration office. A medium or long term parts operation can be based on the parts sales per UIO .It is
recommended that distributors, consider the parts sales per UIO in future inventory plan, warehouse
expansion plan ,etc.
Vehicles Scrap Rate as per Vehicle Age
Scrap rates show an upward trend according to the increase in vehicle age. Scrap rates vary country due
to differences in consumer’s behavior, road and weather conditions, national gross income, etc. The
concept of UIO is opposite to that of survival rate which is how many vehicles operate on the roads as
time elapses.
 High Level of Stock
 High Frequency of Purchase Order
 Sold-out Stock
Cause HIGH COST

Key Inventory Terms
Lead Time
Interval Between ordering and receiving order
Fill Rate
Percent of parts filled by the depot upon request via a stock order
Safety Stock
Inventory kept on the shelf as a ‘’Security blanket’’ in order to absorb erratic or unexpected sales
demand within a reasonable factor
Working Stock
Amount of inventory needed on the shelf to satisfy most immediate demands
On-Hand (Stock)
Number of pieces on the shelf
Back Order
An order which will be late in delivery because of temporary stock out
Obsolete Part
Parts which no longer in active production or use
VOR (Vehicle –off-the-road)
Terms applied to emergency purchase
AMD (Average Monthly Demand)
EOQ (Economic Order Quantity)
ROP (Reorder Point)
SOQ (Suggested Order Quantity)
MOS (Months of Supply)
IRL (Initial Recommendation Parts List)
SPL (Service Parts List)

Role of Inventory
1. Inventory acts as buffer for
 Sales
 Procurement Fluctuations
2. Improves response to Customers
 Immediate Fulfillment of Customer orders
 Customer Loyalty
3. Impacts CSI
Inventory Classification
Classification Stands For Criteria
ABC High Value , Medium Value, Low Value Based On $Value
FMSN Fast, Moving, Slow moving and Non-
Moving
Based on Qty
RIS Regular , Irregular, Sporadic Based on Movement of
Parts
HML High Medium Low Based on Unit Value
ABC Analysis
1. ABC analysis is done on the basis of sales value of each part.
2. ABC analysis process
 Take out the entire consumption, 6 month consumption or 1 Yrs. consumption report.
 Append gross sales value of each root part number over the period of one year or six month.
 Make a list of parts that ranks the parts in descending order of their sales value
All the parts should be included in this list irrespective of their Sales Value
Category Stands For Classification
A High value Parts that contribute to top 75% of value sold
B Medium value Parts that contribute to top 20% of value sold
C Low value Parts that contribute to top 5% of value sold

FMS Analysis
1. FMS analysis is done on the basis of sales Qty of each part.
2. FMS analysis process
 Take out the entire consumption, 6 month consumption or 1 Yrs. consumption report.
 Append gross sales Qty of each root part number over the period of one year or six month.
 Make a list of parts that ranks the parts in descending order of their sales value
All the parts should be included in this list irrespective of their Sales Qty
F Fast Moving Parts that contribute to top 75% of Qty sold
M Medium Moving Parts that contribute to top 20% of Qty sold
S Slow Moving Parts that contribute to top 5% of Qty sold
N Non Moving No Sales
RIS Analysis
1. RIS analysis is done on the basis of movement of parts got transacted in the given period.
2. RIS analysis process
To judge the frequency of movement of parts, the previous six-months or 12-months of
demand history will be used.
All the parts should be included in this list irrespective of their Sales Qty
R Regular Parts Moved in Months (9 to 12)
I Irregular Parts Moved in Months (5 to 8)
S Sporadic Parts Moved in Months (1 to 4)
HML Analysis
(Based on Unit Value)
 High – Value of the part more than $100
 Medium - Value of the part from $10 TO $99
 Low - Value of the part less than $10

ABC & FMS Analysis
We have seen how the movement of particulars part no .can be tracked across different using
“Movement Code” Analysis (MC analysis).
But since workshop deals in different part nos. & set of part no’s follow a certain trend, study of these
trends can be done through another inventory tool – FMS (Fast, Medium, Slow Moving parts) analysis
Let us understand Fast Moving, Medium Moving and Slow moving category of parts:
F Fast Moving Parts that contribute to top 75% of Qty sold
M Medium Moving Parts that contribute to top 20% of Qty sold
S Slow Moving Parts that contribute to top 5% of Qty sold
N Non Moving No Sales
A High value Parts that contribute to top 75% of value sold
B Medium value Parts that contribute to top 20% of value sold
C Low value Parts that contribute to top 5% of value sold
Steps for doing FMS analysis:
Step 1: Take total part consumption list from the system for last 1 yrs
Step 2: Short the list in descending order of their sale qty
Note: All parts should be included in that list irrespective of their sale qty
FMS Analysis is always to be done at root part no. It means consumption of all family part nos.should be
added to and updated against Root Part no.

FMS(N) (Fast Moving, Medium Moving, Slow Moving, Non Moving)
924.00
100.00%
Row Labels Sales Qty
(FMS)
Contribution
%
Cumulative FMS
AC00444 574 62.12% 62.12% F
AC00467 69 7.47% 69.59% F
AK00039NM 52 5.63% 75.22% M
ATU0043M 20 2.16% 77.38% M
AC00460 18 1.95% 79.33% M
AK00024 18 1.95% 81.28% M
AC00448 13 1.41% 82.68% M
AC00458 13 1.41% 84.09% M
AK00039 12 1.30% 85.39% M
AK00025 12 1.30% 86.69% M
ATU0043 12 1.30% 87.99% M
AC00428 12 1.30% 89.29% M
AC00447 10 1.08% 90.37% M
AK00034 9 0.97% 91.34% M
AC00424 8 0.87% 92.21% M
ATU0042 8 0.87% 93.07% M
AC00431 6 0.65% 93.72% M
AC00457 6 0.65% 94.37% M
AK00038 5 0.54% 94.91% M
AC00427 4 0.43% 95.35% S
AK00023 4 0.43% 95.78% S
AK00022 4 0.43% 96.21% S
AK00017 4 0.43% 96.65% S
AK00026 4 0.43% 97.08% S
AC00444M 4 0.43% 97.51% S
AK00021 3 0.32% 97.84% S
AC00426 3 0.32% 98.16% S
AK00043 3 0.32% 98.48% S
AK00053 2 0.22% 98.70% S
ATU0045 2 0.22% 98.92% S
AK00052 2 0.22% 99.13% S
ATU0018 2 0.22% 99.35% S
ATU0048 2 0.22% 99.57% S
AK00047 2 0.22% 99.78% S
AK00049 2 0.22% 100.00% S

ABC (A = High Value, B = Medium Value, C = Low Value)
3,148,443.79 100.00%
Row Labels
Sum of Sales
($)
Contribution
% Cumulative ABC
AC00444 778604.4 24.73% 24.73% A
AK00039NM 622159.2 19.76% 44.49% A
ATU0043M 294238.8 9.35% 53.84% A
ATU0043 177077.55 5.62% 59.46% A
AK00039 143575.2 4.56% 64.02% A
AC00458 128256.16 4.07% 68.09% A
AK00034 118324.8 3.76% 71.85% A
AC00428 103981.62 3.30% 75.16% B
AK00024 87022.66 2.76% 77.92% B
AC00431 86723.54 2.75% 80.67% B
AC00467 86097.9 2.73% 83.41% B
AK00038 65736 2.09% 85.50% B
AK00017 63619.2 2.02% 87.52% C
AC00424 51922.08 1.65% 89.17% C
AK00026 50397.6 1.60% 90.77% C
AC00457 47136.15 1.50% 92.26% C
AC00460 46101.04 1.46% 93.73% C
AC00426 39327.78 1.25% 94.98% C
ATU0045 29928.6 0.95% 95.93% C
AC00448 20186.01 0.64% 96.57% C
AK00025 18000 0.57% 97.14% C
AC00447 15139.76 0.48% 97.62% C
AC00427 10773.34 0.34% 97.96% C
ATU0042 9900.8 0.31% 98.28% C
AK00021 9105 0.29% 98.57% C
AK00047 7368 0.23% 98.80% C
AC00444M 7252 0.23% 99.03% C
AK00022 6412.4 0.20% 99.24% C
AK00052 6177.6 0.20% 99.43% C
ATU0048 4104.8 0.13% 99.56% C
AK00043 3837.5 0.12% 99.68% C
AK00049 3347.75 0.11% 99.79% C
AK00023 2934.2 0.09% 99.88% C
ATU0018 2003.1 0.06% 99.95% C
AK00053 1671.25 0.05% 100.00% C

Characteristics of Each Group on the basis of Consumption
ON THE BASIS OF SALES QTY & SALES VALUE (FMS & ABC ANALYSIS)
FA FAST MOVING HIGH VALUE SALES
FREE FLOW
FB FAST MOVING MEDIUM VALU SALES
FC FAST MOVING LOW VOLUME SALES
MA
MEDIUM
MOVING HIGH VALUE SALES
MB
MEDIUM
MOVING MEDIUM VALU SALES
MODERATE FLOW
MC
MEDIUM
MOVING LOW VOLUME SALES
SC SLOW MOVING LOW VOLUME SALES
SA SLOW MOVING HIGH VALUE SALES
RESTRICATED FLOW
SB SLOW MOVING MEDIUM VALU SALES

Strategy for Inventory Management
1. How to maintain the inventory?
2. When to order?
3. How much to order?
4. At what frequency?
Strategy No of Parts Value
Replenishment
Demand Forecasting
Total
How to calculate Replenishment quantity?
1. ORDER QUANTITY CALCULATION
Projected
Available
Balance
Inventory + Qty. on purchase order + Transfer Ord. Receipt(qty) +Qty
in Transit - Qty on sales order -Qty on Service Order (EDMS)-Transfer
ord. shipment(qty)
Safety Stock Avg. Sales * 1.5 (FREE FLOW PARTS) or Avg. sales * 0.75
(MODERATE FLOW PARTS) or Check (RESTRICATED FLOW
PARTS) NOT REQ. (NN)
Min. Qty Avg. Sales + Safety Stock
Lead. Time Avg. Sales*1.5 (45 DAYS)
Max. Qty Avg. Sales + Safety Stock + Lead Time
Re-order
point
Maximum. Qty – Minimum Qty
ORDER PAB Greater then Min qty Order =(NO)/PAB Lesser then Min qty
order=(Yes)
Suggested
Order Qty
(SOQ)
If order = (NO) then SOQ= 0 / If order = (Yes) then SOQ = Max QTY -
PAB
2. ORDER QUANTITY CALCULATION
SOQ = EMD *(LT+T) + S/S – (OH + O/O) + B/O
SOQ: Suggested Order Quantity T: Order Period O/O: On Order EMD: Estimated Monthly
Demand
S/S: Safety Stock B/O: Back Order LT: Lead Time O/H: On Hand
LT-DEMAND T-DEMAND
LT+T SAFETY STOCK
B/O
ON HAND
ON ORDER

Automated Ordering System
AOS (Automated Ordering System) is a tool to assist the Ordering Person for Inventory
Optimization
o Follows the consumption pattern of a part & use Statistical Methods to dynamically set inventory
norms
o Inventory norms are based on
o Distance from M&M warehouse
o Number of ordering days per week
o Two types of orders
o Non Editable Order
o For regular moving items
o Low demand fluctuation
o Parts with streamlined demand history
o Editable Order
o Slow Moving items
o Abnormal Demand items
o Seasonal Demand items
o High Value items
AOS Implementation Process
Ensure no stock mismatch and no damaged/un-used
parts
Proper Part Flagging
To check Initial SOQ (i-SOQ). In case of any changes in
Part Category, correct it.
To Provide AOS roll out confirmation
Download SOQ & Study non-editable parts. Escalate it
to M&M in case of any discrepancy.

What is Demand Forecasting?
Definition
Calculating the future demand in advance by using scientific and statistical method based on demand
history data.
Characteristics
1. Forecasting methods assume that the causal relations in the past continue to exist in the future.
2. There are always errors in forecasting.
3. Group basis forecast is more accurate than individual forecast.
4. Accuracy of forecast lowers as forecasting term increases.
5. There is no forecasting method that predicts exact random variation.
Variation Factor of Forecast
1. Trend
2. Shows a consistent incline or decline over time.
3. Seasonality
4. Repeat a large demand in a specific season annually
5. Cyclical Variation
6. Shows a repetitive demand pattern at a certain period.
7. Random Variation (Unpredictable)
8. Caused by unknown or random factor (no fixed form)
INPUTS & OUTPUT
Demand History . Monthly
Average
Technology Information Demand forecast system . EMD
Before / After Part .Safety Stock
-ITC
ITC forecasts system peaks using the following
Method:
— A sales forecast is derived.
—A system load factor is modeled to reflect usage
Patterns.
—The following relationship is used to extract the
System peak:
Peak Demand = Average Demand/Load Factor

Demand Forecasting Models
6 Months Medium
-Simplest Model
-Suitable for short term forecasting for stable demand
EXAMPLE
Month Jan Feb Mar Apr May Jun
Demand 5 4 7 3 6 5
EMD OF JUL = (5+4+7+3+6+5) / 6 =5
ON THE BASIS OF RIS & FMS
Category
PART
S
Range Category Parts Range
Regular
384 9 to 12
Months Fast Moving
51 Parts that contribute to top 75% of value
sold
Irregular
589 5 to 8
months
Medium
Moving
549 Parts that contribute to top 20% of value
sold
Sporadic
2795 1 to 4
months Slow Moving
3168
Parts that contribute to top 5% of value
sold
Total
3768
Total parts for Rolling Forecast = Regular + Fast
Moving + Slow Moving
984
ON THE BASIS OF FMS & ABC
CATEGORY
Demand
Forecasting
FA FAST MOVING HIGH VALUE SALES
FREE FLOW
PARTS
AVERAGE SALES
FB FAST MOVING MEDIUM VALU SALES
FC FAST MOVING LOW VOLUME SALES
MA MEDIUM MOVING HIGH VALUE SALES
MB MEDIUM MOVING MEDIUM VALU SALES
MODERATE
FLOW PARTS
MC MEDIUM MOVING LOW VOLUME SALES
SC SLOW MOVING LOW VOLUME SALES

Optimization of Inventory
Ordering by maintaining Safety, Max Stock & Reorder point
This method helps in optimizing the current stocking level & avoid stock out situation.
Service level – First Fill Rate (FFR calculation)
This is the proportion of demand we can supply from stock as a % of total demand.
Service Level = Line Items supplied x 100%
Line Items demanded
“This measurement is of Service level from stock”.
Overall achieving 100% service level is practically impossible but a figure in 90% FFR is reasonable
Key Performance Indicator – (KPI)
Spare Parts Manager must monitor
1. Order Ratio
2. Inventory Turns
3. Lost Sale
4. ROI – Return on Investment
5. Improving Service Level
6. Obsolescence

KPI - Order Ratio (Stock vs. Rush & VOR)
Order Ratio: This indicates the efficiency of stocking of parts the customer
need.
Ideal ratio is
Stock ordering – 90%
Rush & VOR orders – 10%
 Lower % on Stock orders indicate a poor Service level & hence
potentially poor Customer service
 Lower Stock Ratio means lower gross profit on parts Sales.
KPI – Inventory Turnover Ratio
This ratio indicates how many time inventory is rotated in a year. This is the operational indicator of
ROI in spares.
Inventory Turn Ratio = Annual Sales @ Cost price .
Average Inventory @ Cost price
Bench Mark – 2.5 to 4 Turns
Higher contribution can be achieved through same
Amount of inventory by maintaining higher inventory turns.
KPI – Lost Sales
As time progresses, range of parts need to be stocked in Warehouse increases due variety of reasons as
detailed below
1. Vehicles get older hence need an additional range of parts
2. Vehicles usage may change over time
3. New vehicles are added to the Range sold
4. Parts are modified
5. Parts are replaced
It is not possible to achieve 100% parts availability overall hence it
is must to have system to keep records of Lost of Sales &
regularly analyzing the lost demand

KPI – Return on Investment (ROI)
Return on Investment = Parts Profit
Parts Capital Employed
 Parts Profit can be defined as
 (Net Sales - Cost of Sales ) = Gross Profit
 (Gross Profit - Parts Expenses ) = Parts Department Profit
Note - Parts Department Expenses include Employee Salary + Other overheads in parts dept.
 Parts Capital Employed
 Parts Stock +Parts Equipment + Cost of Space Occupied +Parts debtors - Parts
Creditors
KPI - Improving Service level
 Reassess current stock to improve Inventory DEPTH
 Work closely with Service to anticipate their changing demands & requirement of parts
 Identify any vehicle applications may affect parts demand, for e.g. deep mining
 Keep in touch with Fleet Workshops to protect your sales from competition
KPI – Obsolescence
 Ideally we should only have Working Stock but in reality it is not possible - efforts required in
preventing Excess stock becoming Obsolete Stock
 Budget every year for Obsolescence Write Off
 How to identify obsolete part?
 Should do investigation like Checking Catalogue, Alternate part no, Car park in the market, No
movement in last 3 yrs.
 How should these be written off?
 50% value at the end of 1st yrs.
 25% value at the end of 2nd Year
 25% at the end of 3rd Year
- Parts which have no movement for one year should be identified separately & Special discount
should be given for liquidation. This process should be continued on regular basis
- Markets should check respective country specific regulations of supplying parts for 7years to 10
years before marking part as Obsolete
 Parts which have no consumption in last 3 years should be considered for
Obsolescence as they occupy space and carries Inventory holding cost
 Schemes should be floated with Traders / Retailers to liquidate such parts
1. Policy on Slow Moving / Non Moving stock
Even with the best of Inventory Management tools, there will be some inventory which may not be
moving but lying in stock
Such parts can be classified into 3
categories :Part group age
Description Category
I year Old Parts Parts not moved for more
than 1 year
‘Slow Moving
Stock’
2year Old Parts Parts not moved for more
than 2 year
‘Very Slow
Moving’
3 year Old Parts Parts not moved for more
than 3years
‘Non Moving
Stock’

2. Slow Moving Stock (1 year old parts)
Parts not moved for more than 1 year
 Probability of movement of such parts exists
Action plan:
 Such parts should be kept in the live locations of the warehouse but at the rear end
3. Very Slow Moving Stock (2 year old parts)
Parts not issued for more than 2 years
 Low probability of sale of such parts
Action plan:
 Take out from the live locations
 Pack in Carton Boxes
 List of the parts with quantity should be kept inside the box
 Paste the list on the outside of the box
 Keep the list with the Spare Parts Manager
 Plan schemes for liquidation of these parts
4. Non Moving Parts (3 year old parts)
Negligible probability of sale of these parts
Action Plan:
 Segregate these parts & scrap them as one time cleaning process
 Such parts should be taken out of Stock for reporting purpose
Obsolescence policy is to be implemented for such parts every year
COW PARTS
 Competitive COW Parts pricing plays very important role when Customer decide to buy the
vehicle
 Customer always compare COW parts prices with competition
 Always point of discussion in Auto Magazines & News Papers - Competitive parts prices helps
improve Car Sales

PARTS PRICING
 The Prices of similar parts of competitor models should be studied for competitive pricing.
 The profit margins of the fast moving parts should be flexible. It should be kept as such that it is
in comparison to similar competitor models.
 Comparison with grey market should be avoided as there is no quality assurance.
 Parts should be grouped together as Maintenance Parts, Wear & Tear parts, Body parts &
Other parts
 Differential Margin should be applied for respective groups considering prevailing practices in
the markets & the findings of competitors benchmarking study
For example:-
Part Group Parts
Distributor
Margin
Dealer
Margin
Maintenance
Parts
Oil Filter, Air Filter, Fuel Filter & other
maintenance parts
Max 20% Max 20%
Wear & Tear
Parts
Brake pads, Disc, Wiper Blades, Bearings 20 to 25% 20 to 30%
Body Parts Body Parts - Fenders & Doors 40 to 50% 45 to 60%
Other Parts Excluding above Categories & Body Parts 25 to 40% 30 to 45%
Benefits of Effective Stock Management
 Improved customer Satisfaction
 Improved profitability through higher revenue
 Improved space utilization
 Reduce the risk of obsolescence
 Improved vehicle sales
 Support proactive parts marketing policies

GUIDELINES FOR DOING PERPETUAL INVENTORY
Perpetual Inventory (PI) is required to be done on daily basis for sample parts
(constituting F,M & S categories of parts) in the warehouse
Frequency of part counting=Daily
How to decide what categories of parts to be counted at what
frequency?
Divide Parts using F,M,S & N ANALYSIS WITH THE PERIOD AS LAST Financial Year
Number of times a particular part which will be counted in a year is based on part
Category ( F: Fast moving ; M: Medium moving; S: Slow moving; N:No sale)
F Category: 3 times
M Category: 2 times
S Category: once
Find number of parts to be counted in day.
For ex: An average no of parts being stocked : 4000~5000.Considering 5000 parts,
we have to calculated no. of parts to be counted on daily basis
Part Category No of parts in Warehouse
No of times to count in a
year
Total items
F 500 3 1500
M 1000 2 2000
S 1500 1 1500
N 2000 0 0
TOTAL 5000

Number of working Days in a year = 300
No of parts to be counted per day =5000/300 ~ 17
This 17 parts to be divided in the same ratio of 3F:2M:1S
Append the counting day for all the parts
Take the list of items with opening stock of the day
Do physical counting of parts before start of operations or after close of
operation
Find the items where there is discrepancy.
Do a root cause analysis for the same using Fish bone Diagram
Eli mate the root cause
Take management approval and update in the system
Sample Fish bone diagram for nailing the root cause

Sr.
no
Part no Description
Computer
stock qty
(E)
Physical
Stock qty (F)
Diff qty
(E-F)
Counter
measure
taken
Remarks
1 0603AB0040N
VENTILATED
DISC ANGULAR
VANES 9 7 -2
2 0801CA0341N
CLUTCH COVER
ASSY 3 1 -2
3 9420000618
CLUTCH PLATE
BA 10 29 40 11
4 0088631
REAR VIEW
MIRROR RT 131 131 0
50 pc damage
…so
on

Manpower Development
Manpower is the building block of an organization. Sustainability of an organization depends on having:
 Right manpower with the right skill for the role.
 Optimum number of Manpower
 Happy & motivated manpower
Regular training to your staff, topics to be covered
1. System
2. Sales promotion
3. Operations
Business Processes in Dealer Spare Parts Operations:
 Transactional
 Operational
 Managerial
Regular training to your channel partners, topics to be covered
1. Selling techniques
2. Skill up-gradation
3. Awareness about genuine parts
TRAINING FOR CHANNEL PARTNERS TRAINING FOR INTERNAL STAFF

Warehouse Standardization
Objective of Warehouse Standardization
 Effective utilization of Space
 Maintain parts quality
 Efficient Operations
 Faster response to Workshop
 Safe handling procedure
 Increase profitability
Warehouse, Before Standardization

BEFORE AFTER
Essence of Warehouse Standardization
1. Product specific racks
For odd shape parts such as Muffler,
brake lines, fuel pipes, cables etc.
2. Special Racks
Rack for temporary storage of Receipt items.
Rack for Storage of pre pulled items.
Rack for Packed storage of Non Moving item.
3. Easy to maintain FIFO
4. Maintain one – part one location

Product Dimension Specific Racks
SM1 SM2
Muffler Rack

Product Specific/Special Racks

Small Parts Rack Small Parts Rack

Pre Pulled Rack Cantilever Rack
Cantilever Rack Cantilever Rack

Body Parts –Rack

Initiatives for F /Y2017
1. New Mother Warehouse implementation
2. To improve FFR & Quicker Back order execution
3. To minimize Wrong supply, Short supply & Damages in shipment
Proposed Spare Parts Mother Warehouse Operations

Mother Warehouse

Mother Warehouse Details
 Parts Stocking -10,000 Stock Keeping Unit (SKU)
 Total Area allocated is @20,000 sq-ft
 Introduction of Single delivery flow concept for final packing
 Trolley as a medium to assimilate all picked material for given customer delivery
 Flexibility to choose next available packer
Best in Class Processes
To reduce Wrong supply, Short supply & Damages in shipment
 New packing system with built in mistake proofing and reduced Turn Around Time
(TAT)
 Scan & pack –Zero error for end customer
 Work balancing with visual control on Warehouse movement
 Single delivery proofing
 Poka Yoke – Mistake Proofing
 Packaging improvements
Example of Poka Yoke for Binning
 Problem Faced
 Operators not following SOP of scanning the bin to confirm
 Root Cause & Impact
 System permits entry by keyboard. So operator can enter data without visiting
bin and allow Casual operator to bin material.
 Wrong location binning leading to material not available to customer
 Action taken
 Secret digit incorporated in BAR code on the bin.
 Operators cannot confirm Transfer Order by simply entering Location

Example of Poka Yoke for Binning
 Code -
• Transfer order can be confirmed only by scanning the bin
Example of Poka Yoke for Final Packing
Picking
Deliver to
Packing table
Identification
By scanning
Wrong Material/
Excess material
Yes/ No
System prevents
packing
System allows
Packing
Scan – Pack Method
No Yes
Code
with
Secret
Digits

Example of Poka Yoke for Final Packing
System does not allow
Packing of excess
Quantity
Packing Station (HUPAST)
System rejects excess quantity

Spare parts management

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