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Improve your parts inventory and your bottom line with 5 tips from successful parts managers

Improve your parts inventory and your bottom line with 5 tips from successful parts managers

It’s not news that a parts department can have a substantial impact on a dealership’s profit. And with the parts business alone being $50+ billion industry, according to NADA, it would be crazy to not get in on the action, right?

Since I’ve worked at OEC, I’ve seen some tremendous ideas that parts managers have implemented to make their sales thrive and successfully manage their inventory. Specifically, I worked with a parts manager who would take his own idle inventory and list it on eBay himself to manage what was in his stock. What was he making money on? The items that were just sitting around collecting dust. In a nutshell, since consumers are keeping their vehicles longer, parts managers need to explain the importance of using OE parts to customers, and manage their parts inventory with accuracy. This keeps customers happy with quick turnaround times.

So what are the ingredients in this secret recipe of success? I know you are not looking to add more work to your to-do list. So to help, I’ve compiled the top 5 things successful parts managers do to keep inventory at a manageable level that you can use at your dealership.

1. Understand your OEM programs

With all of the OEM programs available surrounding inventory management, it’s more important than ever to grasp these three rules:

  • How much do you need to purchase from your OEM?
  • At what age can you return a part at full cost?
  • What are your loyalty qualifications?

All of this information can be accessed through your OEM portal or through OEM Representatives. Download the rules, make sure you understand and check it for updates. You never want to leave an opportunity on the table.

2. Manage your uselessness

I know this sounds a little strange to call parts useless, but hear me out. Successful parts managers know exactly what inventory they stock, how old it is, and how it sells. This is where knowing your OEM program can help; most programs have a certain timeline you need to follow in order to qualify a part’s return eligibility.

If OEM programs are not available, understand discounting and a part’s life cycle. Whether you have an OEM program that manages inventory, or you use a brokering agency/discount tool, the secret is to know when the part is useless to you and MUST GO. If you need help letting go of your idle parts, check out this article that can help you.

3. Invest in your parts department

I know this sounds really old fashioned, but you need to spend money to make money. But where you spend that money needs to be strategic: you need to invest in parts that sell. Each part that sits on your shelf for 12 months or longer has a 5% chance of ever selling. This number is so low, I have to repeat that… 5% chance of EVER selling. Not great odds, right? Well great parts managers invest in management/service tools to help sell these stagnant parts.

If you have idle parts, here is my best advice that will give those parts legs and get off your shelf:

  • Define your fast-moving parts, and make sure those parts are on your shelves. Most of the time, this requires an investment into a tool, understanding of a parts life cycle, and acceptance that there will come a time where you may have to take a loss in order to open up options for a future win.

4. Have a purchasing plan

Again, know your OEM program. Make sure you know what, and how much you have to purchase from your OEM to stay compliant. Most successful parts managers calculate this at the beginning of the month and reaffirm mid-month. Once compliant, they begin to look for other avenues to purchase fast-moving parts.

And here’s a tip for you: There is nothing smarter than increasing your profit margin by purchasing at a discount.Successful parts managers know all dealers do not share the same list of fast-moving parts and there are dealers selling your fast movers at a discount. Find them, have a program that finds them, or use a broker to make the match. The key is to have a plan when it comes to purchasing and profit margins.

5. Embrace change

This is perhaps the hardest one of all (even though it doesn’t have to be). Sometimes change is not easy, and I can attest to that. Just know that every successful parts manager adapts to industry change differently, but note they do, in fact, adapt to change.

If you don’t take anything else from this blog post, please take this: Utilize what you know, learn what you don’t, and take advantage of everything that’s available to you.