This KPI informs you of the average price that you have paid for your stock in a specific product group or specific product line.
How does this differ from your Average Buying Margin? When you sell a part there are very few systems that tell you how that specific part was ordered i.e. stock order or V.O.R? Obviously the Buying Margin in each sector is very different.
Example:
Let's say that a Parts person ordered an engine on V.O.R. for one of your key customers. The next day a different person invoices that same engine out to the customer with their regular discount terms, not knowing that the engine was ordered on V.O.R.
This scenario actually happened in real life and the dealer in question lost R95 in that instant because the amount of discount given was greater than the profit margin they had in the V.O.R ordering system.
Discussion:
This KPI addresses this shortfall by assessing the true price paid for each product group, thereby protecting the department against too much discount being given where parts are ordered on a V.O.R basis.