The Parts Department is one of the most profitable departments for a dealership. Depending on the product mix the dealership sells, most parts departments that we work with make a 35% – 52% margin on their parts. The other reason that parts remains profitable and easily scalable is the fact that just one parts person can handle anywhere between $350,000 – $600,000 of parts on their own (again, depending on the mix). We see that in most OPE dealerships one parts person can handle between $350,000 – $450,000 alone while in the RLD market, one person has the ability to handle $400,000 – $500,000, and in the AG world parts people are able to handle anywhere from $450,000 – $600,000.
So, if our focus is this incredible department that can be easily scaled, what should our goals look like over the next 90 days?
If your focus is in Parts Stability, your goal might be making sure you have an accurate inventory of your parts. One of the questions Bob often asks is, “If you had a customer call your parts department from 50 miles away and ask for a specific part, and your business management software said you had the part in stock, would you go lay your hands on the part before telling the customer to drive in?” If you answered yes, then you need to take a look at your parts inventory. We encourage you to do cyclical counts on your parts over the course of the year. But, now is a great time to start the project so that you are ready for success in the next season.
Maybe for you, parts stability looks like getting your margins where they need to be. We utilize the pricing strategies of matrix and velocity pricing. You can find more information on both in our Dealer Toolbox. Both strategies will help you create an experience in your parts department where your customers walk away and say, “They have great prices and seem to have everything I need!”
Many dealers are focusing on Parts Growth over the next 90 days. We know the easiest way to grow your parts department is through additional service work. Your goal could include partnering with the service department to put together a preseason service special. One of the most effective ways that I have seen a preseason service special done time and time again is this: send out a mailer to one small group of customers at a time (approximately 100). Then have your parts person follow up with a phone call a few days later. This will not only increase the parts sales, but the service work as well.
The other area of focus around parts growth might be training your people on upselling and cross selling in your parts department. An example of upselling is when you go to a fast food restaurant and they ask if you would like a larger size drink or fries with your order. In your dealership, this may mean having two oil filters torn apart and asking what level of filtration they would like on their engine. When we talk about upselling, it’s the same as going to a fast food restaurant and them asking, “Would you like fries with that?” To upsell in your parts department, you need to think through the common parts that are sold and what else may be needed to make the repair that is causing the issue.
If parts accountability is your focus, then the goals you might have right now could be making sure the numbers – like your fill rate out of stocking inventory – are where they need to be. It could also include a plan for dealing with parts burn down in June or July of next year, giving you the power to have cash instead of inventory as you prepare for meetings with your manufacturers and your slow season.
Regardless of what your focus is in the Parts Department, if you want to see any lasting impact, now is the time to start the change. Get your people involved in the changes you are making and ask for their input. By starting the process now, your parts department will be ready for your best year yet once the season begins.