Before you can run an efficient parts department, it is important to ensure that everyone on your team is using, and understands, common parts department lingo.

This will ensure that your team is communicating effectively, and it will help to minimize the number of human errors that often result from a lack of understanding or knowledge. 

Pro Count West has listed 10 common inventory terms that each member of your parts department team should all know.

Carrying/Holding Costs

Carrying costs are the costs incurred to store or hold inventory including insurance, shrinkage, storage and handling costs.

Core

Core parts are parts that still have value once removed from a vehicle for replacement, the core acting as a deposit of sorts. If core parts are returned to the manufacturer, the shop will receive a core credit. These parts are then remanufactured for future use. Some examples are brake shoes, water pumps, starters, and alternators, engines and transmissions.

Cost of Goods Sold

Cost of Goods Sold, also known as COGS, are the costs associated with the production of goods, or in the case of your automotive repair shop, providing service. There are two primary categories:

1. Material costs – this includes the costs of purchasing your materials and parts, including carrying costs and delivery fees.
2. Labor Costs – the cost of labor directly related to completing jobs in the service shop. This number should also consider taxes, employee benefits and other remittances such as CPP and EI.

Dead Stock

Dead stock, more commonly referred to as obsolete inventory in the automotive parts department, refers to parts that have little to no demand and carry little to no value.

Purchase Order

A purchase order is the first document in the buying process and is created and distributed to a seller to indicate the parts and quantities you require.

Reorder Point

The reorder point is a predetermined quantity trigger that tells you when you need to reorder parts. This quantity is different for each part and is based on a number of factors including current and future demand, seasonality, turnover and how long it takes to replenish your stock.

Safety Stock

Safety stock are parts that are held in inventory to minimize the risk of shortages.

Inventory management depends greatly on forecasting, but sometimes there is unexpected demand or a delay with a parts order which can result in an inventory shortage. By maintaining extra stock for commonly used parts, you ensure you are covered, even in the most unexpected of situations.

Stock Keeping Units

Stock Keeping Units, better known as SKUs, are alpha numeric tracking codes that are assigned to each part to help differentiate it from other parts.

Supersession

Supersession is when one part is replaced by a new part with a different part number. It is important to keep track of supersession by cross referencing numbers in your system. This will ensure that you don’t accidentally order a part you already have in stock simply because the part number changed.

Unit of Measure

The unit of measure is the unit you use to measure your stock. In an automotive parts department different parts may have different units of measure - i.e. per part, per package, per inch, per quart, etc.

Using consistent units of measure can help increase the accuracy of your inventory records. Maintaining multiple measures for similar parts, such as feet for hose and inches for wire, increases the likelihood of miscounting when inputting sales and conducting physical counts.

If, during a physical inventory count, your inventory is substantially higher or lower than recorded, it is recommended that you confirm you have used the right unit of measure.

For help training your employees to maintain a well-managed inventory or for our help with your inventory management processes, contact us today.