GM Implements New Parts Inventory Management System

General Motors has a sure way to make a customer unhappy: tell him he must leave his car overnight for repairs because a part is out of stock.

"Our data tells us that the vehicle owners that don't have a satisfactory dealership repair experience are only half as likely to buy that model car again," says Bryan Burkhardt, global director of retail inventory management for GM service and parts operations.

Burkhardt is supervising the rollout of a system for parts inventory management to 7,000 North American dealerships. The goal is to keep dealers stocked with the parts they need to keep customers' cars on the road, and GM getting repeat business from those customers. With Toyota overtaking GM in North America and the automaker closing down manufacturing facilities, the stakes for the new system are high.

Parts managers overstock frequently sold parts, which leaves them empty-handed when an infrequently used one is needed. There's "not enough breadth of parts, but way too much depth on the ones they do have," Burkhardt says.

That means GM's parts departments satisfy repair shop needs only 67% of the time. In pilot installations of the inventory management system, they were able to satisfy parts needs 96% of the time. The centralized, Web-based system achieves that by tracking what parts are used each day out of a dealer's inventory, collecting data as ebXML through an automated polling system. If any part falls below five units, the system informs the parts manager and forwards an order to one of 16 national parts distribution centers.

The system compares a dealer's daily sales to its inventory list. It knows national averages for dealership parts use, as well as local usage data, and can account for regional discrepancies, such as the use of more cooling-system parts in Phoenix. Altogether there are 500,000 GM parts from 4,000 suppliers; the average dealership stocks 5,000 parts.

Getting a centralized, mainframe-based inventory system to respond to conditions at individual dealerships was no small task. GM dealers have the right to choose their own dealer management system, and they use 28 different systems. The new inventory management system has been certified so far to work with six. About 1,000 dealerships have begun using the system since it started rolling out Aug. 5. As more dealer management systems are certified, more of the dealerships committed to using the new inventory management system will get it. "We want all of them on the system by the end of 2007," Burkhardt says. GM is adding 200 a month but needs to increase that to 300 to meet the goal, says Greg Knott, GM's process information officer for the global aftermarket.

Parts managers find that automated systems take a more objective view of what parts are needed. Left to their own devices, parts managers aren't very good at managing inventory, Burkhardt says. Their decisions may be colored by a misleading run of repairs or a reluctance to stock more expensive parts. Inventory affects a dealership's bottom line--parts are its single biggest asset, not new cars. But keeping too many of the wrong kinds of parts also affects the bottom line through slow turnover, not to mention dissatisfied customers.

With the new system, inventory turnover improves by 11%, says Donna Colorito, process information officer for service parts operations in North America. Overall inventory expense drops slightly by eliminating overstocking and reducing the need for overnight parts shipments.

Parts managers also get a break. With data automatically collected, the amount of time they spend figuring out what parts to order drops from 90 minutes per day to 10 or 15 minutes, Burkhardt says.

But GM didn't come up with the system to save time for parts managers. "At heart, it's about enhancing the ownership experience," he says, and keeping those customers in the GM camp.