I have been in this business for a long time. I've seen recessions and depressions. I've witnessed things I never thought I would see. Before I continue, I will say I've never seen the auto parts business this topsy-turvy. As a result, we have instituted a few changes to help us survive and possibly prosper.
The above being said, I also realize how much we all love change. Sometimes we like change about as much as we like going to the dentist for a root canal. Well, I plan on keeping my teeth, and I also plan on keeping my store and employees, so I instituted several decay-ending measures to make sure myself and my employees can keep smiling even in turbulent times. The only troubling thing is that the major manufacturers are reporting stabilization, and even increases in business.
Well, if you lay off 20 percent of your workforce, go from three shifts to two and increase minimum amounts to get freight pre-paid, you should at the very least be stable, if not more profitable. Sounds to me like doing less with less equals more. Well, here is what I suggest.
EMPLOYEES - If you are like us, we pride ourselves on having top-quality employees. Unfortunately, they all wish to be paid. I don’t mind paying them, but I can’t pay the overtime that we used to. In busier times, we actually needed everyone here most of the time. So I coupled the reduction of hours with an annual performance review. During the review, I expressed what I felt each employee was doing right and wrong, and explained that as a company we had to reduce some hours in light of the slowdown. To my surprise, everyone understood and realized that the hourly cut-back had nothing to do with their performance.
INVENTORY - I think we all agree that during a slowdown, it’s a good time to take stock of what you have on the shelves. The first thing we did was employ a scheme of buy-back delays. For us this was easy because our computer system allows us to assign buy-back delays based on popularity codes. For instance, popular items are bought back almost nightly, and not-so-popular items may be delayed by several weeks.
Also, if you have dual or triple lines, make sure to order back the most popular, and not just all of them. Seasonal items are closely watched to try and make sure that we sell out of them and not reorder until next season.
ACCOUNTS RECEIVABLE (A/R) - The aftermarket has always lived by the mantra of, “They are slow, but they always pay.” Well, a good friend of mine in the auto parts business told me very early on in my career that volume hides a lot of sins. If you let your A/R get out of hand during these times, you have allowed it to transgress beyond repair. Slow payers are now no payers, and timely payers are most-of-the-time payers. I say cut them off.
CHANGE-OVERS - First of all, I usually hate them, but if you are not really happy with an under-performing line, now is the time. Funny thing here is that all of the manufacturers that are reporting stability or growth have change-over incentives the likes of which are tantamount to lunacy. Some offer 10 to 15 percent, even 30 percent incentive, to change or rebox, which is like the aftermarket’s version of Cash for Clunkers.
Believe me, I wish times were different, but here we are. We have got to tighten our belts, get a better grip on inventory and watch A/R like Fort Knox. Let’s face it, you’ve got to survive. My father once told me that being the captain of the ship is not a pleasant thing at times, but it’s better than walking the plank.