Why its important to implement
Prevents wasted cashflow from unused parts inventory. Avoids total loss when suppliers refuse delayed credit processing after extended periods.
Credit Loss Risk
If the business does clean up and try to process credits after an extended period it is possible the parts supplier will refuse to process the credits, meaning a total loss for that part.
Cashflow Protection
If the business fails to send back parts that were not used they will have to pay for them and have a stockpile parts that are not needed, this eats away at cashflow. (in some places it is not possible to return parts but if its an OEM and similar vehicles are repaired often the risk is reduced)
Business Impact
Profit: Directly protected by timely credit processing and avoiding supplier refusals. Throughput: Minimal impact. Cycle Time: No direct impact. Idle Time: No direct impact. Customer Satisfaction: No direct impact.
Profit
By allowing parts to sit onsite with out processing credits the business is literally wasting cashflow.
Profit
By allowing to much time to pass the business risks the supplier refusing the credit, thus impacting the businesses profit by buying parts that were not used.
action steps
Establish credit processing procedures (end of production or weekly), assign responsibility to Parts Manager or admin staff, implement strong enforcement warnings.
Parts Credit Enforcement
Strong internal warnings if policy not followed once established
Parts Credit Processing
A process should be established to ensure Parts Manager or administration staff process credits at the end of the production process or at least weekly check and process all credits
Related tasks
Milestone:
05: Implement Performance Metrics Tracking System