Business Corner [Apr. 1990--Electronic Servicing & Technology]

Lynott is president of W.I. Lynott, Associates, a management consulting firm specializing in profitable service management and customer satisfaction research.

Reducing lack-parts calls

If your service business were one of the really big ones, chances are you would be paying close attention to the management of your repair parts inventories. An inventory valued at several hundred thousand dollars -- or several million dollars -- is much less likely to be neglected than is the parts inventory of a small service dealer.

But no matter what size the business is, the ratio of parts inventory to total as sets for service companies runs in a fairly narrow range. Parts inventories that ac count for more than 50% of the total as sets of an electronics business are not unusual.

On a relative basis, your parts inventory is just as important to the financial performance of your business as it is in a huge corporate chain. The obvious importance of the direct investment you have in your inventory is only the be ginning.

Repair parts management has an immediate and significant effect on the overall profitability of your business in ways that may not be obvious at a casual glance. Here are a few of the most important.

Technician productivity. These days, even the smallest service dealers are tuned in to the importance of technician productivity on bottom-line performance. Because of that, most servicers keep some sort of record of technician productivity. The trouble is, too many of those systems fail to recognize the role that inadequate parts management can play in cases of unsatisfactory performance.

When a technician (in the shop or on the road) needs a part that isn't in inventory, valuable time is lost. Productivity suffers. If that happens often enough (and it doesn't take much to be "enough"), the consequences will be lost profits. The reasons may well be hidden from an uninformed management.

Sound parts management provides levels of inventory that balance cost of in vestment against cost of lost productivity. The key to successful application of that philosophy rests in records that show exactly how often each part is needed.

Only when you have that information can you decide which parts belong in your inventory.

• Overall efficiency. Technicians are not the only ones affected by inadequate parts management. Every time a job must be rescheduled for parts, addition al paperwork is generated. Workloads are increased for parts-room personnel, dispatchers, office clerks and, yes, even the owner if the company is small. I have seen many cases of chronic frenzy on the part of support personnel that could be cooled down to a reasonable level if only parts management were more effective.

• Customer satisfaction. Each time a service call remains incomplete because of a lack-parts situation, one of your customers will remain unsatisfied. Lack parts calls can never be avoided entirely, of course, but a higher-than-optimum ratio of lack-parts calls has a cumulative effect on overall customer satisfaction with your company. And customer satisfaction is your end product -- the product that enables you to remain in business and to meet your profit objectives.

When the general level of customer satisfaction begins to decline in a service company, serious problems are in evitable.

• Employee morale. I don't know any one who regards dealing with irate customers as a desirable way to pass the time of day. When overall customer satisfaction is negatively affected by poor parts management, everyone in the organization, from the service manager to the person who answers the phone, will ultimately feel the effects. It doesn't take much imagination to figure out how this situation will affect overall employee morale.

Of all the conditions that can cause employee morale to deteriorate in a service business, none is more damaging than a general atmosphere of customer dissatisfaction. Good employees want to be identified with a company that has high regard for its customers. I have seen the pressures of dealing with avoidable customer problems drive away many valuable employees from service companies whose management couldn't understand their high employee turnover.

In this day of tight labor markets, no service dealer can afford to risk losing his best people for the same reasons that he is losing his best customers.

• Secondary effect. Poor parts management is, in some ways, like a viral infection in the body. Some of the symptoms are major and obvious. Others are secondary and often hidden even to the trained eye.

A consistent lack of parts that should be in your inventory causes a general in crease in the overall workload of your business. This, in turn, can create the impression that everyone is busy with productive work. The overall effect is to lower the efficiency of your organization, which generates unnecessary payroll costs.

Having the right parts on hand when you need them is an absolute requisite to optimum success in the service business. But there's another side to this coin: making sure your inventory isn't burdened with obsolete and unnecessary parts. We'll discuss that problem next month.