If you asked your parts manager to grow your parts business by 10% in the next 90 days, what would he or she say? Many parts managers would probably tell you that it’s simply NOT possible; but I can assure you, IT IS!
In most dealerships, the parts department is driven by the service department. Parts can only grow if the service department grows. Many parts managers will tell you that they can't sell more parts unless more ROs are written, or there are more sales per RO. In both of these options, the parts department has little control over potential growth opportunities ... or do they?
The first step
If your parts department had the needed part on the shelf and delivered that part to the tech within 3-4 minutes of his/her request, we could save 15 minutes per tech, per day. Using the group average from one of my fixed operations 20 Groups, 0.25 hours x 22 days = 5.5 hours per month for 1 tech. The group averages $37.19 in parts gross per labor hour. Then $37.19 x 5.5= $205 in additional monthly parts gross ($2,460 annually) for 15 minutes of time per tech.
The shop labor gross per hour average is $77 x 5.5 hours = $423.50 in monthly labor gross per tech ($5,082 annually), for a combined gross increase of $628.5 per tech, per month ($7,542 annually). If you have 10 techs, that's $24,600 of additional parts gross and $75,000 in additional fixed gross for 15 minutes per day. Don't you think stocking the correct parts on the shelf and delivering those parts to the tech makes "cents?" 7.5 million of them actually …
Finding profits you CAN control
If you are looking for growth within the parts department's control, you need to be looking outside of the ROs. The next logical place to look for growth would be to go after the wholesale parts business. This option is difficult, because unless you go BIG, or develop relationships with your local independent repair and body shops, profits are hard to come by. I typically hear the argument from parts managers that the margins are so small, that it doesn't make sense to compete. My counter to this argument is—would you like 15% of something, or 30% of nothing? You must look at what additional costs would be involved and whether it's profitable or not.
What else is there? The answer may be online. These days, all dealerships have an internet sales presence for their new and used cars. However, most dealerships do not have an internet presence for parts sales. Most dealers' reaction to this suggestion is "Why would I do that?", "You can't make any money," or "It takes too much time with very little return." These responses give me flashbacks to 10 years ago, when dealers began putting new and used cars online and we received the same responses from the variable operations folks. "It takes too much time, has too little return because I must price it so low, and I can't sell cars outside my market!" That argument didn't hold water then and it doesn't hold water now with your parts department. Having an internet parts presence is the answer.
Websites like OEConnection can help connect dealerships with body shops and independent repair facilities. All of which can now buy from your parts department versus another dealership. This is an excellent place to start. But let's also look at the retail consumer. Where do those customers go to find parts and accessories? Amazon, AutoZone, O'Reilly's—those are your typical answers. So, we're running into the same issue! Unless you have your parts listed online, your customers will not find them and won't purchase them from you. Provide your customers with an option to buy from their computer or mobile phone. Otherwise, they WILL be buying parts from your competitors.
A parts success story
One NCM client who committed to ramping up online parts and accessories sales is now producing over $30,000 per month in accessory sales. Their margins are below average, but they net 10% on $30,000 of sales versus a 30% margin of nothing. On top of this 10%, they receive additional money for hitting goals and purchases from their OEM. A typical internet parts showroom only costs the time for one person to manage, but our client was also able to have their internet parts sales employee work the front counter, so there were no additional labor costs! Due to all their efforts, their parts department was up 10% over their previous 90 days.
The best opportunity is right in front of you (or behind you). The shop! Making techs more productive will sell more parts. Invest in needed parts to supply demand, and become more efficient in delivering those parts to your techs. While the wholesale business is a niche for improvement, the internet is not going away. Get out there!
If you are looking for help in your parts department, and would like to learn more about areas in which you can earn more profits, we are currently enrolling students for our Parts & Accessories Management Program for 2018! NCM is also available for customized consulting services, and is accepting applications for our Parts and Wholesale Parts 20 Groups. If you want to maximize your parts department, NCM is ready to help.