January 2020: "A New Decade...A New Beginning"

It's hard to believe that not only are we approaching a new year, we are approaching yet another new decade. It seems like it was only yesterday, we were celebrating "The New Millennium". Our auto industry has not only survived the "ups and downs" for over 100 years, it has continually evolved over time.

Unlike many ideas, industries, or "fads" over the years, our industry still continues to evolve and expand into one of the leading industries in the world. Along with this continued growth and evolution comes the need and excitement for more...each and every year. 

It requires us to continually keep up with the competition and the desire to do something different with new ideas and ways to stay one step ahead. It also requires us to have a solid base of people, standards, guidelines, processes and a reputation just to stay in business.

In last month's issue of ACG "Smart Parts" we took a look back on the year as we do each year in December to gather and research the facts of what, in this case, 2019, revealed in our industry. We looked at the results that affected the automotive dealership, including and especially our parts departments.

In this issue, we will combined what we learned in 2019 along with a personal perspective that will collectively give us a "hands on" view of what happened in 2019 along with the facts and research on our industry that we collected last month. 

Even though we shared the research and facts of what 2019 brought us in last month's issue, I believe what's even more important information to share is what we actually experienced in 2019. Experiences from the people that are actually out there, day in and day out, working in our industry.

In my opinion, these personal experiences have led me to believe that we need to focus and change our way of thinking going forward. The "playing field" has changed and we need to have a new game plan to be successful and that game plan involves people, not just market swings.

Throughout my travels in 2019, I have spoken with and shared many experiences with literally thousands of people in our automotive industry. These people include; manufacturers, industry analysts, consultants, aftermarket vendors, dealer principle, department managers and dealership employees at every level.

In my opinion, the most important people in our industry are our people. The people working behind the scenes that are often forgotten are the ones actually driving the "engine" to our business. Sales people, service advisors, service & body technicians, parts staff, office staff, BDC staff, receptionists, greeters and shuttle drivers are the ones making it all happen.

I guess my above view is important to me because I've worked in those same trenches for many years in fixed operations from the counter level all the way up to fixed operations management. With these combined "in the trenches" experiences and current position, I believe I am pretty qualified to share the following overall perspective....

Here We Go!

As we start to combine the past and a look into the future with the research and facts learned and my personal perspective, we will look at, in my opinion, the most important areas that will determine and impact our success going forward, especially in the fixed operations.

People:

"A New Decade...A New Beginning" can not start without people, especially those mentioned above that are working in the trenches. In my opinion, our employees are not only the most important asset we have, we also have to look at how important hiring, training, developing and keeping them is. 

The hiring, training, developing and the retaining of all our employees starts with the proper pay plan. If you don't know it already, people "work" their pay plans whether "working" the clock, if paid by the hour, or whatever commission pay plan their on.

The challenge is to develop pay plans that "work" for both the employee and the dealer. Incentives for hourly employees will just result in "punching in and punching out", while incentives, for all employees involved, whether directly or indirectly will drive better results. Even office staff could benefit from incentives in their roles.

I also believe that all managers and direct sales staff should include a hiring process to include Personality Profiles to get the right "fit" on their behavior patterns to their environments that meet the position. Even though conducting Personality Profile are not a reason or requirement for hiring employees, it's a great tool to match the individual to the right position.

Technicians...we all know that it's difficult to find and keep technicians, so why are we still sticking to the old ways of trying to find them? With our older, experienced generation of technicians slowly fading away, we should be using their experience and knowledge to train younger, newer technicians. 

Their brains are our biggest asset as we could develop newer pay plans for them to train new technicians. The end result could perhaps be more billable hours on a number of younger technicians to offset their training expense. Developing the right apprenticeship program could benefit all involved and could actually lengthen the career of the older more experienced technicians.

Parts staff should also have incentives built in their pay plans as opposed to the normal salary and/or hourly based pay plans. Believe it or not, parts counter staff are salespeople and they should have individual and department incentives based on dealership goals and expectations.

Overall, dealership employee wages and overall compensation continue to grow each year. With this continued increase with wages and compensation in all dealership positions, the importance of hiring the right person for the right position can't go without notice.  

Customers:

Some may agree or disagree, but in many ways, our customers have changed over the last several years. They are more informed with social media in the areas of product knowledge, pricing, selection, demands and most important...their time. Customer retention is nothing new, but what is most surprising to me is that no one really talks to the customer!

In many dealerships that I have witnessed, the separation between employees and customers has gotten even worse with the evolution of "Express Service". Less time with the customer and the attitude of "get it in and get it out" has resulted in the customer feeling the same way..."get me in and get me out!"

The sad thing about this is that customer "avoidance" has replaced customer "engagement" as the separation of employee and customer evolves. To me, there is nothing more important than the "customer and client" relationship.

The Sales Department is not exempt either as I see more and more vehicle "spot deliveries", on line vehicle purchases, satellite vehicle purchases, etc. I realize customers want convenience and in some cases avoid the sales experience altogether, but eventually, in my opinion, we are just saying "Hello" and "Good Bye" to our customers at the same time.

In many dealerships that I have witnessed, customers are "recognized", but not really "known". By this I mean that many dealership employees seem to acknowledge and recognize their customers, but not many really "know" their customers. In some cases, and most shocking, many dealership employees actually try to "avoid" their customers.

Even though I don't necessarily agree with performing a personality profile on all our employees, I do believe that every dealer employee should be exposed to some form of interactive training that will help them "get to know" their customers. Wow!...what a concept! After all, gaining customer trust by engaging them is the best "closing tool" there is.

The Manufacturers:

If there is a number one standout that never seems to never stop evolving and changing, in my opinion is the vehicle manufacturer. Focuses ranging from manufacturer incentives for loyalty, compliance and requirements have seem to replace basic support to the dealer. 

Even though some manufacturers requirements and incentives vary, selling vehicles and parts are what they are in business for. It just seems to be getting harder and harder to meet their guidelines as they add more requirements and compliance between all departments to push volume on their end. It's much tougher today to be a smaller dealer then it was years ago.

In my opinion and from what I have witnessed in many dealerships, especially in parts, maybe we should just forget about compliance, which I call "obedience" and go back to the way we used to do it years ago. You can never "out buy" your growing obsolescence. That math doesn't support the facts, especially if you are a smaller dealership.

In other words, why should I buy another $10,000.00 in parts I don't need just to gain $300.00 - $400.00 in discounts, accruals and return reserves resulting in overstocking parts that I won't sell just to return them down the road?

In many cases, you would be better off buying parts that you do need as recommended by your own D.M.S., thus avoiding overstocking parts and building obsolescence. The expense from acquisition and holding costs will far, far outweigh any incentive the manufacturer may offer. Do the math and you just may realize that incentives may actually be costing you.

 Recommendation: Don't Become The Manufacturer's Second Warehouse!

The Parts Department:

This past year was a very busy year for me in the area of parts training and for good reason. In my opinion, dealers are becoming more and more interested in their Parts Departments and the need for additional training for their Parts Managers.

Even though every Parts Manager that I have met in the past and especially this past year are extremely talented, intelligent and in the right position, there is definitely a training void. With that said, what's missing in most cases is what they don't know.

Many Parts Managers have not received the proper training on the basics, which I call "Parts 101". Parts Managers have seemed to go "under the radar" by dealers when it comes down to training compared to training with other dealer managers and departments.

The results of this "lack of training", I'm seeing parts inventories accruing more obsolescence and overstocked quantities than I have ever seen before. In fact, recent studies on a large number of dealers revealed that over 25% of dealers sampled have obsolescence in excess of 25% and another 25% in overstocked parts.

Obsolete meaning parts that have no sales over 12 months, and overstocked quantities meaning active parts with too many parts than needed to meet demand. In other words, I may have 10 sets of brake pads of one particular part number when only 4 sets are needed to meet proper stocking levels.

I'm also seeing more and more Parts Managers not utilizing their own Dealer Management System, (D.M.S.) to it's full potential. Especially if you are a dealer that is enrolled in the manufacturers' Vendor Managed Inventory, (V.M.I.). More and more Parts Managers are relying solely on their manufacturer's to determine what they should stock and how many.

Unfortunately, relying solely on the manufacturer to determine what to stock and at what stocking level results in too much of what we don't need and not enough of what we do need. Utilizing the in house D.M.S. Stocking Criteria, (if set up properly) in conjunction with the manufacturer's V.M.I. is essential.

This is why I've been so busy lately as many Parts Managers don't even know how to input the right criteria in their own system. Criteria such as Phase-In/Phase/Out Parameters, Low and High Days Supply, (Best Reorder Point & Best Stocking Level), Source Ranking by Piece Sales to even create an accurate stock order.

Once again, this is not the fault of the Parts Manager as the lack of proper training is where the problem lies. Every single Parts Manager that I have "shared the proper information" with, (I don't call it training), has benefited and on their way to a more balanced inventory and increased "First Time Off Shelf Fill Rates".

After All..."How Do We Know What We Don't Know?"

The Bottom Line:

Even though change is inevitable, we all have to adapt to the necessary changes that we listed above. We also have to make a profit to stay in business no matter what the changes bring. Thus, the importance of our first topic of "People".

If we decide to run our business as usual without recognizing our new generation of hires, our current employees wants and needs, the basics of customer interaction and creating relationships, then we just might as well hang it all up.

We also have to hire, pay, educate and train our managers to do what they were hired to do. Today's dealership manager has to have "ownership" in mind as if their individual department was their own business. This means that dealers need to provide the proper training and hold them accountable.

Sales, gross and expenses have to be managed to industry and dealership guidelines, measured and managed every day, month and year. Today's dealership manager can longer be just "the next one in line", or because they've been an employee for many years, or perhaps even "bought for a lower price".

In Perspective:

Our business has changed a lot over the years, but in some ways, it hasn't changed at all. The people I have met and worked with have not changed, they all want the same things, have similar values and work hard. The "lingo" as well hasn't changed over the years as you can always tell if someone works in our industry just by this unique language.

Lastly, Service Absorption is more important than ever going forward as the Fixed Operations role in overall dealership survival can and could be the difference of the name on the front of the building. Even the higher volume sales stores can't guaranty the future of sales. Customers can and always will determine our ultimate success in the future...

Happy New Year From ACG "Smart Parts"!!!

If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ www.smartpartstraining.com, or...just pick up the phone and call me at (786) 521 - 1720...After all, not knowing is not worth not "fixing" it...