As a parts manager, one of your key responsibilities is optimizing parts costs and minimizing lost revenues. This can include sourcing vendors who offer the same product at a better price, minimizing shipping costs through bulk ordering, and reducing obsolescence.

Another effective way to optimize costs and minimize lost revenue is through the proper management of core inventory. 

Core inventory refers to parts that have a core value, often referred to as a core price or charge, which acts like a deposit to encourage parts departments to return these old parts to be reused or remanufactured - similar to returning a beverage bottle or can.

While it seems unlikely to misplace a core part or dispose of it incorrectly, lack of communication and attention to detail can result in a loss of income. If the part is not returned in a timely manner or worse, an additional expense may incur if the core is disposed of by other means, product lines are changed, or core values depreciate.

That’s why taking the time to determine which parts have a core value, maintaining proper records and ensuring that they are returned to the manufacturer or seller, will help you recover capital and increase revenue.

Managing core charges and inventory

In the world of automotive repair, there are a number of parts that can be remanufactured after they have reached the end of their current usefulness including, but not limited to, batteries, brake shoes, brake master cylinders, clutches, water pumps, starters, alternators and air conditioning compressors.

This means that the amount of capital tied up in cores can be significant and must be managed correctly.

1 - Accounting

Generally, a core part is identified by a core charge that is included on your bill over and above the price of the part itself. Once the first core has been paid, it will be recycled, assuming that you are always exchanging a new part for the old part.

While the core charge is a result of buying a specific part, it should be accounted for in a separate inventory account and not as part of your parts inventory.

There are three specific types of cores:

1. Core charges on new and remanufactured parts in inventory.
2. Dirty cores which are the used parts that will be returned to the manufacturer or supplier.
3. In-transit cores that have been credited to your customer and are waiting to be returned to the manufacturer or have been returned to the manufacturer and you are waiting for the credit.

2 - Storing

It is important to properly organize your cores. While you can simply throw them all in one bin, having an organized storage for cores, and ensuring all cores are stored in one area, will help make it easier to return them to the manufacturer or supplier.

3 - Returning

Returning your dirty cores in a timely manner is critical to optimizing cash flow. Many suppliers and manufacturers have deadlines that must be met. Ensuring that you meet these demands will minimize the likelihood of you losing the core value.

4 - Inventory

Cores should be looked at as an asset. When conducting your physical inventory counts, cycle counts and reconciliations, it is important to include your core parts in the process to verify that your records are accurate and to ensure that they are receiving the proper attention.

For more information on effectively managing core inventory to optimize your parts revenues, contact Pro Count West today.