Inventory shrinkage, whether it’s intentional or not, can create substantial problems for automotive dealerships. The most typical causes are simply poor internal controls.
The value of the missing item may not be the biggest cost to your business. Process and customer service problems occur, when a part that everyone thought was available, can’t be located. Looking for a part that isn’t on the premises wastes valuable time and irritates everyone. When your business is competing on customer service, as many dealerships are, it’s critical to avoid mistakes that make your Service Department appear less organized than it truly is.
So, what can you do to reduce missing parts inventory?
1. Control Access to Your Inventory Management Systems
It's important to limit the number of individuals who have access your dealership’s inventory management system, and that the access level is regulated. While we may never suspect that our employees would do so, a person could change quantities in your inventory system without alerting someone, if access is not supervised or cross-checks put in place. Errors can also occur because an untrained person inadvertently makes an improper entry. By allowing access to a few select individuals and requiring them to keep their login credentials private, you can minimize the risk of your inventory system being tampered with, and if there is a false entry, you will know exactly who to ask.
2. Ensure Everyone Understands and Follows Through with Inventory Policy
Has your dealership created policies and processes for managing returns, pulling parts, authorizing discounts, restocking parts, retrieving valuable inventory, handling returned or damaged parts and managing employee transactions? Doing so will minimize inventory errors. Once these policies are in place, be sure that each employee is well trained and that supervisors follow-up on any process mistakes.
3. Minimize Internal Theft
As we have said before, nobody wants to think that their employees are stealing from their business, but employee theft is an issue – especially with high value concealable items. You’ll want to minimize the risk of internal theft, without creating a difficult environment.
The first change I always put in place is to limit access to the Parts Department to parts personnel only. It always amazes me that technicians can roam the department and pull their own parts. As a manager, you are responsible for that inventory, so why allow access to everyone in the dealership? Remember, those are dollar bills on your shelves, not just parts.
Second, reduce your risk with a thorough employee screening process before hiring. Background checks are routinely utilized in HR to identify potential issues and help with employee selection. Next, make sure you create a positive work environment. Regular meetings provide two-way dialog and can help with employee morale. You would be surprised to find that many employees steal from their employers because they feel underappreciated and believe stolen parts are a form of compensation. Do you have appropriate security systems in place for controlled access, such as locked/caged areas? Keep these points in mind to create a work environment that reduces the risk of inventory losses.
4. Pin-Point Trouble Areas
One of the best ways to minimize missing inventory is to identify parts that are most susceptible and generate strategies that can reduce losses. Maybe your employees are misunderstanding a restocking process, or perhaps the issue is a part that is frequently unrecorded on their work orders?
One of the best ways to isolate the cause of your inventory losses is to conduct frequent inventory checks, especially on the Special Order shelves. Whether they are done on a monthly, quarterly or bi-annual basis, having a better idea of when the parts go missing, can better help you determine what went wrong.
At Pro Count, we are available year round to help you complete your parts inventories. We will come in and help you reconcile your accounts on a bi-annual, quarterly or monthly basis, so that you can ensure accuracy and resolve issues as they occur. And as always, feel free to contact us about any ideas or suggestions you can offer us or vice versa.