The typical definition of a lost sale is simply the result of not fulfilling the demand of a customer parts request. Or on simpler terms, if you had the part and the price was right, the customer would have purchased the part from you. There are some parts experts saying to post a lost sale to a special order part that a customer does not return to purchase it. I agree to some extent, for example if the customer found the part at another store because they decided they needed it quicker after they ordered it from you. You know as well as I do that customers will order parts based on someone else's diagnosis. John Doe places an order for a fuel pump because his brother-in-law told him that was what was wrong with his car and finds out later that day it was the fuel pump relay. He doesn't bother to call you back to cancel the part. That doesn't constitute a "true" lost sale. Regarding posting lost sales for special orders not picked up, I think each situation should be checked case by case to determine if it really is a "true" lost sale. It is very important that "true" lost sales are tracked. For your computer system (DMS) to track and forecast suggested stock orders, it must track total demand. The formula for total demand is:
parts sold from stock + customer orders + emergency purchases + lost sales
There are basically five parts demand scenarios that take place in the everyday world of a parts department.
1. You have a customer demand for a part in which you have the part in stock. The customer purchases the part. You met the demand with a part that you had from your inventory which is also referred to as (off the shelf fill).
2. You have a customer demand for a part in which you do not have the part in stock. You inform the customer that the part can be ordered. The customer agrees and a order is taken which fulfils the demand.
3. You have a customer demand for a part in which you do not have the part in stock. You have a local source in which you can procure the part the same day. You fulfill the demand with what is referred to as an emergency purchase.
4. You have a customer demand for a part in which you do not have the part in stock. The customer can not wait for an order or you can not procure from a local source. The customer goes elsewhere to purchase the part. You lose the sale. You could have sold the part if you had it in stock, this fits the true definition of a lost sale. Record the lost sale in your DMS system.
5. You have a customer demand for a part in which you may or may not have the part in stock. The customer doesn't purchase or order the part because of price. This doesn't fit the true definition of a lost sale in relation to providing information to the DMS system for creating suggested stock orders. However, the information should be of great value to the manufacturer. I think the DMS systems should provide a way to track this information for the manufacturers. The manufacturers could use the information to adjust pricing or to change vendor sources for the parts in question.
The benchmark for total demand should be 100%. This is easily achievable. Just make sure all orders are entered through your DMS system. Emergency purchases are posted by the part number if it is the same make part or post a lost sale of the requested part if it is an aftermarket part. Make sure that "true" lost sales are posted everyday by every counterperson. I am not aware of any benchmark for lost sale postings and there probably shouldn't be. Some dealers, especially rural dealers may have very few lost sales because customers either purchase parts or order from their local dealer because of the lack of any other competition. And likewise, large dealers have such a huge inventory base that the customer demand can usually be filled from their inventory. James Brinkley - DealerInfoLink
Lost Sales Tips
When I first started in parts counter sales, I used the small note pads that our vendor salespeople would leave us to take customer orders. Unfortunately sometimes these notes would get lost and therefore a customer order would not be placed A tip I learned from my dealer principal was to use a spiral bound notebook to take orders. I took his tip even to a higher level. Each counterperson would have their own notebook which they would write their name on the front cover with the starting date and ending date when it was full. Each page would have the date of transaction. Each transaction with a customer that involved specifying a part would be written down with the necessary information to procure the correct part such as engine size, color, right or left side etc. This could be helpful later if the wrong part was ordered, was the customer at fault in providing wrong information or the counterperson fault. I also used the notebook to write down tasks that I needed to perform that day. I would also have a code to write in the left hand margin of the page. The codes I use are as follows:
S = sold the part from inventory
O = placed an order for the part
D = task completed(done)
LS = lost sale
a check mark = customer just checking price
I would draw a diagonally line through each transaction or task when it was completed. I would also wait until the end of the day to enter lost sales because of the fact that some customers would call back sometime during the day and actually order the part. The notebook made it easy if a customer called back in a few days or weeks perhaps to order the part that he or she was just price checking before. I would simply go back to the day they called and all the information would be there! I would also keep a couple of the previous completed notebooks just in case I had to refer back to them for any reason. I would also use the notebook to check and see if my counterpersons were actually posting lost sales. I would take a copy of my DMS (Reynolds & Reynolds) lost sale report and compare it to my notebook's listing of lost sales for the same month. I would also look at the counterperson's sales listing for that particular month to determine what percentage of the sales that was contributed that month. If a counterperson's sales contribution was 75% but their lost sales contribution was 30% for the month that alerts me to the possibility that a counterperson is not posting lost sales. James Brinkley - DealerInfoLink