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Parts and distribution: Obsolete parts solution

Obsolete parts have always been a headache for dealers – one that carmakers have been reluctant to tackle. Parts get left on the shelf, either through misordering, slight damage or customers changing their mind, and no matter how good a dealer is at controlling his inventory, there will always be parts that fall into obsolete.

Last September, Mazda became the first manufacturer to launch an obsolete parts programme which allowed dealers to offer their slowest moving parts for re-sale via a national centre.

The programme is in line with Mazda’s ‘fix it right first time’ commitment to increase customer satisfaction and was developed to enable dealers sell their own parts, while also allowing them to purchase other parts from the national clearance centre (NCC) at a discounted price.

Savings passed onto customers

Dealers selling parts receive up to 50% back in revenue and will also be able to create more storage space. Those who buy obsolete parts from the centre save 20% on the cost, which they can then pass onto their customers. Foray takes 37.5%.

The programme is run for Mazda by Foray Motor Group, which controls the logistics and administration, but this is not a new venture for the company. It has been running a programme called Cash4Trash, for Ford parts, since late 2002.

Cash4Trash started as a database of obsolete stock which was posted on the internet, with agreed terms, that dealers bought and sold from each other.

With an estimated £25m of redundant stock in the Ford network the prospect of selling parts rather than simply writing them off led to Foray taking the next step and establishing the NCC. This centralised site stores parts ready for delivery to trade and retail customers.

User friendly search facility

“We wanted to take more control of the entire process from point of order to the dealer receiving the part,” says Howard Jenkins, group parts manager for Foray.

“The best way to achieve this is to house dealer stock on a common site ready for delivery on our next van or independent carrier. This gives us control over quality.”

Cash4Trash combines thousands of part numbers from different dealers into a common database with a user friendly search facility. “Once found, the programme shows the user which dealer is holding stock and all details relating to that dealer such as contact numbers and van collection times,” adds Jenkins.

All 582 UK Ford dealers have a credit account with the NCC and are provided with a unique log in and password.

Similar to the Mazda deal, when a Ford dealer sells a part through the centre, they are refunded at net less 50%. When they buy a part it’s at dealer net less 20%, which leaves a margin of 37.5% for the NCC.

Every part is scrutinised

“Terms are pre-arranged so everybody knows exactly what price they are paying and what they are selling at. Quality control is very tight and every part is scrutinised by a skilled parts technician,” says Jenkins. “We are popular with classic car drivers and owners clubs as these parts keep cherished vehicles alive.”

Holding on to slow moving parts has enormous cost implications for dealers as it limits storage space and, therefore, their ability to stock faster lines. Foray used this point to market Cash4Trash at dealer meetings and to dealer management system providers, together with mailshots to Ford dealer principals and parts managers.

“The programme addresses an age old problem in a unique way, bringing dealers together and improving relationships within the dealer body,” says Jenkins.

“It has also helped improve our wholesale business and dealers are prepared to purchase parts from us, resulting in an improvement to our bottom line. Our own obsolete stock has reduced, bringing profit and cash into the business.”

Unlike the Mazda programme, Cash4Trash is not backed by the manufacturer, but Jenkins believes there are massive opportunities for other brands to establish obsolete parts programmes.

“Our system can be easily adapted to operate with any franchise. All franchises have obsolete stock so an opportunity to sell it rather than write it off is desirable. At present there are millions of pounds worth of unused car parts destroyed each year.”

Generally dealers write off 50% of the cost after one year and 100% after two years. “Any money coming back in for parts is a desirable option,” adds Jenkins.

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