It’s not news that a parts department can have a substantial impact on a dealership’s profits. With the service and parts sales business totally more than 64-billion-dollar business, according to NADA, it would be crazy not to get in on the action, right?
Parts managers have tremendous ideas they’ve implemented to make their sales thrive and to improve the management of their inventory. One parts manager even takes his own idle inventory and lists it on eBay to help manage what was in his stock. What was he making money on? Items just sitting around collecting dust. Since consumers are keeping their vehicles longer, it’s critical for parts managers to explain the importance of using Manufacturer parts to customers and, at the same time, manage their parts inventory with accuracy. This keeps customers happy with quick turnaround times.
So, what are the keys to success (without adding more to your to-do list)? To help, here are the top five practices of successful parts managers to keep inventory at a manageable level that you can implement at your dealership:
1. Understand your Manufacturer parts programs
With all the Manufacturer programs available for inventory management, it’s more important than ever to grasp these three rules:
- How much do you need to purchase from your Manufacturer?
- At what age can you return a part at full cost?
- What are your loyalty qualifications?
You can access all this information through your Manufacturer portal or through Manufacturer representatives. Download the rules, make sure you understand them, and periodically check for updates. You never want to leave an opportunity on the table.
2. Manage your uselessness
I know it sounds strange to call parts useless, but successful parts managers know exactly what inventory they stock, how old it is, and how it sells. This is where knowing your Manufacturer program can help; most programs have a timeline you need to follow for a part to be return eligible.
Even if Manufacturer parts programs are not available, it’s good practice to understand discounting and a part’s lifecycle. Whether you have an Manufacturer program that manages your inventory, or you use a brokering agency/discount tool like OEC PartsBrokerDirect. The secret is to know when the part is useless to you and MUST GO.
3. Invest in your parts department
I know this sounds 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 . 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 must repeat that… 5% chance of EVER selling. Not great odds, right? But savvy parts managers invest in management or service tools to help sell these stagnant parts.
If you have idle parts, here is some advice that will give those parts legs and get them off your shelf:
- Identify your fast-moving parts and make sure those parts are on your shelves. Most of the time, this requires investing in a tool, understanding of a part’s lifecycle, and accepting that there will be a time when 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 Manufacturer parts program. Make sure you know what and how much you must purchase from your Manufacturer to stay compliant. 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: There is nothing smarter than increasing your profit margin by purchasing parts at a discount.
Successful parts managers know all dealers do not share the same list of fast-moving parts, and there are some dealers selling your fast movers at a discounted rate. 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 (though it doesn’t have to be). Change isn’t always easy, but successful parts managers adapt to industry trends.
If you take one thing from this, please make it this: Utilize what you know, learn what you don’t and take advantage of the tools available to you.
Source: NADA Data, Mid-Year Report 2019