January 2026: January 2026 Predictions: "Top 10 Parts Hot Topics to Watch in 2026"

Happy New Year "Smart Parts" Readers!

It's time to reset the clock for another year and prepare for what's ahead. If you have been in our Automotive Industry as long as I have, it means that the past is now just the past and our dealers are looking for even higher expectations in the year ahead.

To me it has always been exciting to set new goals and expectations on not only our Parts Department Goals, but on ourselves as "Smart Parts" Managers. As the old saying goes, if we are not leading, then we are just following from behind.

As we enter the New Year, we wanted to take a look ahead and take what we have learned this past year and prepare for what we may expect, but mostly for what we may not expect. In doing so, we do have to look back and apply it forward into the New Year.

In our first issue of 2026, we wanted to focus on what the key issues that have been "topics of discussion" over the past year versus prior years. Even though the topics we discuss are not new, they have been brought to the surface and may send us into new or different directions going forward in 2026.

Our "Top 10 Parts Hot Topics to Watch in 2026" will reveal how these topics have managed their way the surface in 2025. We will also look at why more and more dealers are contacting me for more information and training in these areas. 

So, what exactly is a "Parts Hot Topic" and how does it make our Top 10 List? We could all perhaps come up with our own list, but the Top 10 Parts Hot Topics we will explore, in my opinion, are the topics most discussed this past year and have drawn much attention.

One thing for sure and what I can pretty much guaranty is that Dealers in general and Parts Managers for that matter are more up to speed on what's happening in their Parts Departments and quite frankly, it's about time!

We will list our "Top 10 Parts Hot Topics to Watch in 2026" in order starting with the most frequent topic discussed here at ACG "Smart Parts" all the way to our Number 10. We will offer our professional opinions backed years of experience in all topics discussed.

Most importantly, we will help our "Smart Parts" Managers deal with the topics, manage or achieve their dealers' expectations, and inform on how we can make the right decisions going into the New Year on each "Parts Hot Topic".

It's Time to Kick Off a New Year with ACG "Smart Parts"!.....Let's GO!

Number One: Dealer Management System, (DMS) Conversions

Our Number One Parts Hot Topic in 2025 and I believe will remain the top spot for 2026 is DMS Conversions. In my opinion, there are many reasons as to why we are seeing many dealers switching systems more than we have in the past.

One of the main reasons is price as more and more systems are now available and still evolving. As competition always dictates, more competition dictates lower prices and higher quality. Also, DMS Contracts are more lucrative and much easier to get out of compared to the past.

After all, the books have to be accurate, and the Office Manager has a big say in what system is selected and New & Used Vehicle Sales are a huge priority to the dealer. Unfortunately, the Fixed Operations Departments end up tagging along and getting whatever the system offers.

In 2025, the Top Two Dealer Management Systems that we have seen converted over to are Tekion and Dealertrack. Some reasons include price, Manufacturer Preference, other Dealer Referrals and easier Cloud Based Operations.

Even though we saw many dealers go back and forth from one system to another, these two were the most frequent from an ACG "Smart Parts" perspective. The one thing that I think we can all agree on is that switching to a new DMS is not a welcome sight by employees.

This is especially true in the Parts Department as initial Set Ups & Controls are crucial as the math has to be correct. Switching over to a new DMS can cause catastrophic impacts as each DMS has different ways in approaching proper Set Ups & Controls.

If you want to learn more on which DMS is best for Parts, you can go to our website at www.smartpartstraining.com and open our ACG Smart Parts Archives to our February 2024 issue where we ranked each system.

Number Two: Parts Reconciliation Issues

I can't remember a year where I have fielded so many questions and concerns on Parts Reconciliation between the Parts Ledger Balance Inventory and the Parts Controlled Inventory in the DMS, (PAD). This is happening for good reason as we will uncover more in our other "Top 10 Parts Hot Topics to Watch in 2026".

Parts Reconciliation is a normal procedure that dealers perform each year, usually at the end of each year after the Parts Physical Inventory has been performed. This procedure may be called the "Balancing of the Books" for the Parts Inventory.

In 2025, it seemed that more and more dealers were experiencing some heavy variances between Parts Accounting Inventory and the Controlled Parts Inventory on the DMS, or "PAD" Parts Inventory.

Question is why and how has this discrepancy become an issue all of a sudden? And why has the Parts Accounting Inventory shot up out of control? These negative impacts have led to the need for not only more audits to find out why, but also the need for more Parts Training on Basic Accounting in Parts.

Number Three: Controlling Parts Obsolescence

Our Number Three is also not something new for Parts Managers as parts will always be going obsolete at an annual rate of at least 3% - 5%. What has brought this one more to the surface in 2025 and predicted to continue in 2026 is that the normal rate of parts going obsolete is rising with many Manufacturers.

Parts are not only starting to go obsolete at a higher rate, but they are also going obsolete even quicker. Normally, we would be trying to work off our obsolescence once they hit 12 months or greater, but now we are seeing many dealers working on obsolescence at the 10 - 12 month No Sales Activity Category.

On top of that, Return Reserve Amounts are getting lower from many Manufacturers and harder to accrue. This leads to more obsolescence building up with fewer options to control it from happening.

This is another "Parts Hot Topic" that has been right up there this past year on the hit list with more Dealers and Parts Managers calling not only on how to get rid of it, but also how to control and prevent it in the future.

If you are an avid "Smart Parts" Reader, then you know we have focused on this topic quite heavily in the past, especially in our November 2025 issue. I do predict that Controlling & Preventing Obsolescence will be a "Parts Hot Topic" in 2026 and beyond.

It's not going away, and I believe it will just get even more attention as we approach each and every year. Dealers are more focused on Parts Obsolescence than ever as Parts Acquisition & Holding Cost rise and Reconciliation Issues become more frequent.

Number Four: Parts Core Values

Our Number Four "Parts Hot Topic" was actually featured our last issue of ACG "Smart Parts" in December. Even though not all Dealers are experiencing these massive increases in Parts Core Values depending on the Manufacturer, it's still a "Parts Hot Topic".

Parts Core Values have also been the Number One contributor to many of these negative variances on Parts Reconciliation. With many New & Dirty Core Values increasing to twice the actual cost of the part in some cases, we can already predict that this has and will be a "Parts Hot Topic" going into the New Year.

If we don't start separating our New & Dirty Core Values in Accounting, it will be much tougher to "reconcile" the two Parts Inventories, both in Accounting and in the PAD Inventories each month and year.

That being said, we need to be reconciling these inventories monthly and not waiting until the end of the year. If we wait until year end, the "drill down" becomes that much harder. Even if we don't make the adjustments until the end of the year, we should at least be tracking it monthly.

Number Five: Parts Gross Goals

This one has probably been the "hottest" of all our "Parts Hot Topics" in 2025 in the terms of aggressiveness. More and more dealers are seeing many of their 20 Group Dealers pushing the envelope to higher expectations, over and above current industry guidelines.

I will say though, even though it's an "aggressive" topic, we need to err on the side of caution in some respects. Everyone's market is different and what one dealer may be able to get in one market doesn't necessarily mean that another dealer can achieve the same higher Parts Gross Goals in another.

I've always said that I would rather get 42% of $200,000.00 in Parts Sales than 50% of $100,000.00. We can't spend that percentage, but we can spend the actual Parts Gross Dollars. This is also why I've always said that I could put the same Parts Matrix in five different stores and receive five different results.

As mentioned, each market is different and Parts Sales are also different between parts that sell with or without the matrix applied. We all know that higher cost parts like powertrain parts do not usually have the matrix applied, even though these sales weigh heavy in the overall Parts Retained Gross Percentages.

In my opinion, having the right Parts Pricing Strategy on Customer Pay Repair Orders should be measured by the Upsell Closing Ratio. Upsell Closing Ratios in Service should be 30% - 35%. If Closing Ratios are down, pricing may be an issue as well as Service Advisor Sales Training.

Number Six: Parts Supply Chain Issues

We have all experienced Parts Supply Chain Issues from every aspect from Manufacturers to Local Vendors, especially since the Covid-19 Crisis. The good news is that Parts Managers are telling me that these Supply Chain Issues are actually diminishing overall.

This does not mean though that some Manufacturers are still experiencing higher Parts Back Order Issues or "VIN Specific" Parts that are involved in on-going recalls. It just seems to be that the Supply Chain Issues may be on a positive upswing in 2026.

ACG "Smart Parts" predicts that more vendor options will be available in the upcoming year with more competitive pricing. Even though some of these options may come from the aftermarket, Parts Managers may have more options in filling customer demands.

We are also seeing that some Manufacturers such as Toyota, Honda and even Chrysler are increasing their "First Time Fill Rates" with dealers versus just a couple years ago. In my opinion, Toyota has always led the way in Dealer Fill Rates with better Return Policies.

Number Seven: Manufacturer Controls & Promotions

This one never ceases to amaze me as more and more Manufacturers are making it tougher for dealers to meet Overall Compliance Levels. Again, some Manufacturers more than others are requiring Dealers to buy more while receiving less on the back end.

In 2025, we experienced more Manufacturer Programs requiring Parts Managers to buy more by increasing Purchase Minimum Quantities on Faster Moving Parts. We believe that trend will continue for some Manufacturers in 2026.

Some Manufacturers have also raised the bar on "inclusiveness" in their Parts Promotions by tying in the Front-End Sales Department in Vehicle Allocations and overall New Vehicle Sales. This results in many dealers buying more parts than what they actually need in order to meet Program Requirements.

We also believe that this trend will continue in 2026 as more Manufacturers try to "get more" from dealers opposed to "giving more" back in the way of parts discounts and back end "funny money" as I refer to.

Number Eight: Parts Posting Procedures

Our Number Eight is always an issue, or "Parts Hot Topic" going forward into 2026. Lost Sales Posting is still and will always be an issue in increasing Overall First Time Fill Rates. Even if we are using the Manufacturers Vendor Managed Inventory Programs, posting Lost Sales Demands still remains a focal point.

The only way we can increase overall Parts First Time Fill Rates is to be posting qualified Lost Sales at a rate of at least 10% of Total Sales at Cost. It's just a fact that if we are not posting Lost Sales at a rate of at least 10% of Total Sales at cost, we will never achieve a First Time Fill Rate of at least 75%.

In addition, if we are not receiving parts to the right Parts Source, or Parts Stocking Group, we will just be adding to the Parts Reconciliation Nightmare. All Parts Employees that are allowed to order and receive parts into the DMS have to know how to receipt parts properly in order to receive and relieve the proper Sales & Cost of Sales Accounts.

Proper posting on parts that should be considered Emergency Purchases, Outside Purchases on non-Manufacturer Parts and Stock Order Purchases from all Vendors can make a huge difference on overall Stocking Status.

Number Nine: Overall Parts First Time Fill Rates

One of the most confusing categories is Parts Fill Rates as there are actually many "Fill Rates" that are measured with different definitions. The most common mistake many dealers make is that they confuse "Overall Fill Rate" with "First Time Fill Rate".

The Overall Fill Rate Calculation is "Total Sales at Cost Minus Lost Sales at Cost". In other words, if we don't post Lost Sales, our Overall Fill Rate would be 100%, no matter when or where we get the part and "fill the order".

In my opinion, the percentage of time we fill the parts request the "first time" is most important. First Time Fill Rate is defined as "Total Sales of Normal Stocking Parts at Cost Divided by Total Sales at Cost, Minus Emergency Purchases at Cost".

Seems like a pretty long definition but it makes sense as the parts we sell the most are the parts we stock. The exceptions would be those times that we run out of a part that we normally stock and had to chase for a customer resulting in an Emergency Purchase.

We predict that "First Time Off Shelf Fill Rates" will play a big part of "Closing the Sale" into 2026 and beyond. After all, it's much easier to close the sale if we have the part 75%-85% of the time. 

Just like up front in the Sales Department, it's much easier to get the customer to say "Yes" if the vehicle is on the lot. If we have the right part at the right time, or the right vehicle at the right time, history tells us that higher Closing Ratios will follow.

Number Ten: Parts Days Supply

Even though this is our Number Ten, I am reaching out with my biggest prediction for 2026. Industry Guide for Parts Days Supply has been 45 Days Supply for years and I believe that Parts Days Supply will increase to 50 - 55 Days Supply in many dealerships in 2026 and beyond.

Parts Managers have learned these past several years that nothing is guaranteed and back orders will happen, even on Fast Moving Parts. If there is one category that I have witnessed this past year is that Parts Managers are "stocking up", especially on Fast Moving Parts.

I've also witnessed more "Parts Hoarding" than I have ever seen before as Parts Managers are less willing to give up what they know they may need if Supply Chain Issues continue.

Even though the guideline hasn't changed for years, I am seeing more and more dealers allowing their Parts Managers to carry more of the good parts than they have in the past. This is a combination of Parts Managers knowing what they know about Parts Supply Chain Issues and Dealers taking more interest in their Parts Departments.

There is one important aspect of carrying more "Days Supply" of these Normal Stocking Parts and that is that Obsolescence has to be controlled. In order to carry these "Extra Days Supply", we have to be managing the Parts Obsolescence to Industry Guidelines.

The bad side of this if we want to carry more than a "45 Days Supply" of the good parts is if we carry a higher than desired amount of Parts Obsolescence. It's much more difficult to convince our dealers to carry more of the good parts if we already have an obsolescence problem.

The "Days Supply" calculation includes ALL Parts at cost, including Obsolescence. It also figures into our Parts Gross & True Turn Calculations. If we are carrying more than a desirable amount of Parts Obsolescence, than the Parts Manager can't afford to carry "Extra Days Supply" of the good stuff.

In 2025, I have seen many SMART "Smart Parts" Managers take advantage of "hoarding" and increasing their Days Supply of faster moving parts. The have also taken it to the next level in doing whatever it takes to get these parts, even if they are deemed as "not available".

This to me is an art and these Parts Managers that can afford to "stock up" and "hoard" is because they have earned it. Their dealers trust them with their purchases and their decisions. Ironically, these are the same Parts Managers that have extremely high "First Time Fill Rates", High Gross & True Turns and Higher Gross Profit Retention.

One thing that all these "Smart Parts" Managers have in common is that they are always on these "Parts Hot Topics", whether this past year, next year or beyond. They know how to view history, follow current trends and most important...prepare for what's ahead!

2026 is here and I believe that our ACG "Smart Parts" Predictions for the upcoming year are real. I also believe that if we look at all these "Top 10 Parts Hot Topics to Watch in 2026", they should always be our "Top 10 Parts Hot Topics" to watch at all times!

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...

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December 2025: Parts Core Values: "The New Parts Nightmare"

As we wind down the year of 2025, we would normally finish up with our ACG "Smart Parts Year in Review". This year, we will take a different approach and start next year with our 2026 Parts Predictions.

The focus on our December issue will be on a topic that has drawn a lot of attention these last couple of years and that topic is Parts Core Values. Not so much an issue of Parts Core Values in itself, but more on the impact of the costs of these cores.

These core impact costs have gone way beyond what we may have thought as it has finally reached a point of what I refer to as the "total net impact". Some Core Values are costing over double the actual cost of many parts themselves.

We also have core costs now added to many Collision Parts which we have never seen in the past. Manufacturers are trying to avoid aftermarket imitation parts from being produced and have now added "core charges" to many collision parts.

Even though these core charges on collision parts are not intended for "remanufacturing" these parts, they do still add up, especially for Wholesale Parts Dealers and Dealer Collison Centers.

In dealerships that do have a Collision Center, these Parts Core Values have impacted Parts Reconciliation immensely. In a department that doesn't usually have a "Parts Effect", except for Work-In-Process, the Dealership Collision Department is now a big player in Parts Reconciliation.

It goes even further than that now as Parts Purchases are highly impacted by the New Core Price. I've seen in many dealerships where the New Core Values actually outweigh the total parts purchases on the Manufacturers' P & A Summary. 

So, just how far does this all go?...can Core Values really impact so many areas such as Cash Flow?...Increased Parts Inventory Variances in Accounting?...Credit Turnaround Time...Overall Parts Gross Profit?...Days Supply and Inventory Turns?...

The answer is all the above and much more...

In this issue of ACG "Smart Parts", we will not only reveal our "Top 5 Core Value Impact Areas", but we will also reveal how we have to handle this new beast. We will go through processes that will help minimize the negative effects they can cause.

Before we even start though, we have to start looking at Parts Core Values differently than we have in the past. New Core Purchases and Dirty Core Amounts from those purchases are now causing us to look at our whole Parts Inventory differently.

Let's finish up 2025 and get ready for another New Year here at ACG "Smart Parts"!

As we go through our "Top 5 Core Value Impact Areas", we will split each one into two segments. We will look at the issue itself, or "Impact Area" first, then second, we will go through the solutions, or processes in controlling these Parts Core Charges. At time of purchase all the way down to handling the Dirty Core aspect.

We will also not list these impact areas in any order as they are all part of managing every aspect of these core values. Most important, we have to move all Parts Core Values up on our list of Duties & Responsibilities as "Smart Parts" Managers.

In order to properly "reconcile" the Parts Controlled Inventory, or PAD with the Accounting Department, every one of the "Impact Areas" have to be done religiously each and every month.

Accounting Variances:

I want to start with this one because it seems that this is what it all comes down to. When Parts Purchases and the Accounting Ledger Balance Inventory exceeds the amount of Parts Inventory on the shelf, a "red flag" goes up immediately.

It's always best to have it the other way around with the Controlled Inventory higher than the Parts Ledger Balance by at least 3% - 5% annually. Having a Parts Inventory "uplift" is what we expect each year when the books are closed.

When a "Negative Accounting" variance is discovered, it begins the "back tracking" to find out why. Most often, it's either posting errors in Accounting or perhaps an invoice was improperly recorded by the Parts Department.

All variances in the Parts Inventory start with purchases and with New Core Values added to the purchase of a part, this sends the Ledger Balance even higher. Once these parts are in inventory, even if they carry a ridiculous core value, they are added together as one overall cost of the part.

Our process in this category as Parts Managers is to know that these total costs with the core values need to be considered. Whether we are buying these parts for stock, or as Special Orders, the turnaround time is crucial.

The added cost of the New Core and the time it takes to sell the part and get the credit back on the Dirty Core needs to happen within 30 - 45 Days with Special Orders. Even if ordered for Warranty Purposes, the turnaround time is crucial.

If these parts carry a New Core Value at the start and are added to the Parts Inventory, they need to be "actively" selling within 0 - 6 months where they have an 85% chance to sell with a lower chance of going obsolete.

Either way, the Dirty Core "turnaround" time needs to be within a 30 - 45 days in order to relieve the Dirty Core Value with Accounting. Parts Warranty Cores should also be set up in Accounting with a separate Account Number to separate them from other warranty parts debits and credits.

All Dirty Cores need to be sent back daily, and especially by the third week of each month. This will give us the best chance of receiving credit from the Manufacturer and relieving these core values from the Ledger Balance.

Account & Parts Source Separation:

In my opinion, we need to always know what our Parts New Core & Dirty Core Amounts are, separate from the Main Parts Inventory. Even though these Core Values are part of the whole mix, we need to know these inventory values separately.

The "Impact Area" of Parts Core Values when looking at the Parts Inventory as a whole can be staggering. We need to know how much of our Parts Inventory is tied up in Overall Core Values before we can even tackle this situation.

This separation in Accounting can be set up rather easily by simply adding an account for the Main Parts Inventory with either a prefix or a suffix to the existing Parts Inventory Account Number. An example would be for GM's Parts Account of 242, would perhaps have a "242C" Account for Parts Core Values.

Most importantly though is that The Parts Department has to properly mark all these parts invoices correctly before sending them to Accounting. Otherwise, this process will fail from the beginning and should also be a process performed by the Parts Manager.

The separation on the Parts side in the DMS may be a little more difficult depending on the DMS. Most systems will separate the New & Dirty Core Amounts, but some do not separate New Core Amounts as they are added to the Main Parts Inventory. Most, if not all systems will separate Dirty Core Values.

There is no need to set up separate Parts Sources, or Stocking Groups as it would not make a difference overall. Even if we tried to separate them, the Manufacturer will just "default" them right back into the Main Default Source, which we do not control.

The most important part of this Core Separation is to know what these amounts are in both New Core Values & Dirty Core Values, which we can access. If we are on a DMS that does not provide the New Core Value automatically, reports can be generated to get this New Core Amount each month.

These DMS New Core & Dirty Core Values need to be provided to Accounting at the end of each month for proper separation on the Parts Ledger Balance. This will allow the Accounting Department to track credits and debits accurately.

Handling Dirty Core Credits & Debits:

This is a big one and probably the biggest culprit as to why we have so many discrepancies between the Accounting Ledger Balance Inventory and the Parts Controlled Inventory on the DMS.

These discrepancies occur because they are not properly handled and accounted for right up front in the Parts Department. In most cases, they are also not being attended to often enough as Dirty Cores just pile up.

I've seen Dirty Core piles in dealerships sitting there for extended periods of time, Dirty Cores out in the Service Department or even the Collision Center. I've also seen Wholesale Accounts that are over 30, 60 and 90 Days past due with many credits still pending which include Parts Dirty Cores not returned.

These are the most common areas that tie up all this Dirty Core "cash" that ultimately sends the Parts Ledger Balance skyrocketing just waiting to balance the Parts Inventory. Unfortunately, there are still Parts Managers out there that don't realize that Dirty Cores should be considered as cash waiting to be collected.

If we have these Core Value Accounts separated as we mentioned earlier, it is much easier to "expose" where this cash is and how to get it reconciled each month. Wholesale accounts should never be allowed to go past due more than 45 days, and processing credits should also have a limited timeline.

Even though the Parts Department bills out these Core Charges initially, it's the time waiting to balance these inventories in Accounting being the issue. Even though the DMS Inventory is relieved when they are billed out, parts gross does not get relieved up front as Core Charges are billed at cost.

In my opinion, the Parts Department should have a person, much like a Delivery Driver that picks up Dirty Cores and Parts Returns on a regular basis with Wholesale Accounts as well as their own Service and Collision Departments every day, week and month.

All credits whether Dirty Core Returns or other Parts Returns should not be a process that is done once in a while. It should be a Parts Process that happens daily, just like every other daily routine in the Parts Department.

Reconciliation Discrepancies:

The timing of listing this one is appropriate, right behind our previous one because if we have a daily process managing these credits, it's much easier for Accounting. If we do manage these "turnaround times" more often, it will be much easier to handle the discrepancies when they occur.

In addition to having a daily process, the Parts Manager has to have a basic understanding of how Accounting works. Proper posting is crucial in preventing or allowing fewer discrepancies right up front during the invoicing process.

The Parts Manager also has to have these Dirty Cores binned properly with a dedicated location to accurately account for these Dirty Cores. Just like any other part that we have a bin location for, Dirty Cores are no exception.

Our dealership policies should also be stricter and more decisive as to what parts are qualified for return, and most importantly a timeline as to when they are qualified for return, which should be 45 Days or Less. 

This is a tough one for big Wholesale Dealers or even for Dealers that have huge Collision Centers. Most Parts Managers don't want to jeopardize these accounts and tend to be more lenient. But when it comes down to the "nitty gritty", it's usually the Parts Department that is blamed and takes the hit.

The true reality of it all though is that the dealer takes the overall hit, especially when it comes down to negative discrepancies that have to be reconciled at a loss. These losses are also a 100% loss of Gross Profit.

Parts Key Performance Indicators:

Believe it or not, there are a lot of Negative Impacts from these astronomical effects from Parts Core Values, both New Core Values and Dirty Core Values. Many of our Parts Industry Key Performance Indicators, (KPI's) are hit severely.

Parts Gross and True Turns is one of them as these inflated Parts Inventory Amounts can increase or lower these Annual Gross & True Turns. The added amount of the New Core on the shelf can lower True Turns while increasing Gross Turn dollar amounts.

A good example of this is if we have a part that costs $300.00 and the Core Value is $200.00; it will represent a sale on the Gross Turn side of $500.00. This increases the Parts Gross Turn by an inflated amount of $200.00.

On the True Turn side, it could increase or decrease the real Parts True Turns depending on if that part is a Normal Stocking Part or a Non-Stocking Part. If the part that carries an additional core value and is a Normal Stocking Part, the True Turn is inflated.

If the part that carries an additional core value and was a Non-Stocking Part, or is Special Ordered, the Parts True Turn is decreased. These numbers may not seem to be much, but with some of these cores such as engines, transmissions and other power train parts that have enormous core values, it can make a huge difference.

Parts Days Supply can also be heavily impacted as these New Core Values can "fictitiously" drive Days Supply much higher than the Industry Guide of 45 Days Supply. This is why we need to know what our Parts Inventory Values are with and without New Core Values.

I have personally seen some of my dealers Parts Inventory carry as much as 30% of their Parts Inventory Value in added New Core Values. The difference in some of my stores has taken their "actual" Days Supply from 45 Days Supply to 55 Days Supply with the New Core Values added in.

Especially with smaller dealers with lower overall Parts Inventory Amounts, it doesn't take much in added New Core Values to give a false reading on Overall Days Supply. On the Accounting side and the Ledger Balance Inventory also effected, Office Managers, Comptrollers and Dealers are seeing the difference as well.

Lastly, Parts Gross Profit is extremely impacted by all these Core Values, especially Dirty Core Values being billed out on Parts Counter Tickets and Repair Orders. Being the fact that these Core Values are billed at cost, we can see the overall Parts Gross Profit Effect, both positive and negative.

The effects of Parts Gross Profit can be felt both as a "false" positive and negative depending on when they are billed out and when the Dirty Core is credited back in. Again, proving that these Core Value "turnaround" times have to be reduced.

As a matter of fact, and if we look back at what we have covered in this month's issue, it's all about the "turnaround" time that will result in fewer discrepancies overall. Knowledge is also key with the Parts Manager grabbing the reigns on all of this and knowing how Basic Accounting works.

In conclusion, I don't think that these Parts Core Values are going away soon so we have to get on top of this issue. We can't treat Parts Core Values like we did in the past, and it needs to be brought to the forefront and managed each and every day.

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...

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November 2025: Building Your Own "In-House" Parts Scrapping Program: "No More Parts Obsolescence!"

One of the most talked about Parts Department topic for Dealers for many years is Parts Obsolescence. Most dealers, in my opinion, don't really know much about their Parts Department's, but what they do know is Parts Sales, Gross & Net Profits and Obsolescence.

The brutal fact is that Parts Obsolescence will always be there at a rate of 5% - 10% each year. That being said, it's more of a question of what we are doing about it and what processes do we have in place to deal with each and every month.

The problem is that in many dealerships today, Parts Obsolescence just keeps accruing and it doesn't become an issue until it has grown to tremendous amounts. In addition, many dealers don't even realize what it is really costing them to hold the additional parts that have gone obsolete.

The real issue though in my opinion is that dealers don't really have to accept these above facts mentioned. Parts Obsolescence actually can be controlled and eliminated with the right plan that will address this issue on a monthly basis.

I do believe though that more and more dealers today are putting Parts Obsolescence to the forefront compared to years ago. In today's "Parts World", it seems that more dealers are realizing their true costs of holding these additional parts. These "frozen assets" are just tying up cash and just adding more acquisition & holding costs.

The good news is that there is a way to control and eliminate Parts Obsolescence that can be managed by the Parts Manager each month. We don't have to accept these out-of-control amounts of Parts Obsolescence anymore.

In this issue of ACG "Smart Parts", we will reveal our "Five Step Plan" on Controlling & Eliminating Parts Obsolescence once and for all. I will add though that the most important part in all this is that we have to "believe" it can be done.

We also have to know that Parts Obsolescence will never go away as all parts will eventually go obsolete. We just have to accept it and deal with it with a monthly plan that keep us "clean" of those parts with no sales over 12 months, or over 16 months on the Manufacturers Vendor Managed Inventory, (VMI) Program Parts.

Here We Go!...Smart Parts Managers are Just "Five Steps" Away from Being Obsolescence Free Forever!

Let's Get Started!

As mentioned earlier and before we take our first step on getting rid of Parts Obsolescence, we have to have the right "mindset" and to think through this process logically.

If you follow our "Five Step Plan", you will see that it all makes sense and can be done. Each step will also be listed in their proper order making it a true plan to success if taken seriously and seeing it all the way through.

Step One: Factory Return Reserve

Our first step we all pretty much know about as the parts we purchase from the Manufacturer do accrue revenue for returning qualified parts. This is obviously our first step as we should always use the monies accrued to receive 100% of the cost of these parts that are qualified for return.

The problem is that we never really accrue enough Parts Return Reserve to meet the rate of these parts that go obsolete each month and year. The only exception would be high-volume dealers that accrue much more return reserve that keeps their inventories pretty clean.

The other problem with these monies accrued from Parts Return Reserves is that many Parts Managers use these funds for returning Special Order Parts. These parts were either ordered by mistake or never got installed on customers vehicles and not used for returning Parts Obsolescence.

Step Two: Outside Obsolescence Vendors

Our next two steps are extremely important as these steps need to happen right at month 13, or month 16. Depending on the Manufacturers' Vendor Managed Inventory, (VMI) return guidelines on when they are qualified for return

Outside Vendors such as Dealermine, Parts Broker Direct and Find Rare Parts are just a few vendors that we should take advantage of. As soon as these parts hit that 13 or 16 month no sales threshold, we should be sending these parts lists out to these vendors for bids.

Even though the offers may be below actual cost, history tells us that these parts have a 98% chance of never selling again. That being said, the Return On Investment, (ROI) on selling these obsolete parts for parts that cycle through at higher rates is over 300% or higher.

Also, at month 13 or month 16, these parts are much more desirable for purchase from these vendors as they are just now dropping into the obsolescence category. These parts may still be active in other dealers' parts inventories.

This is where it may seem tough for many Parts Managers to let go, we have to stick to the plan because they are not moving in our parts inventory. As mentioned, these parts have a 98% chance of never selling again in our own parts inventory. 

It's time to let them go when we have the best chance on getting the most cash for these obsolete parts. It's the best time to take the money and run by investing this cash into those parts that are moving at a much higher rate as well as new parts that may Phase-In.

Step Three: In-House Parts Scrapping Program

Here's the "Missing Link" that we have all needed to become free of Parts Obsolescence Forever. After we have utilized all of our Return Reserve and sent our list of obsolete parts to these vendors mentioned, whatever we have left we will tackle with our In-House Scrapping Program.

Once again, and as mentioned earlier, we have to stick to the plan as far as these parts that have hit that 13th or 16th month with no sales. We can't "overthink" what may or may not sell in the future and just know the facts and what history tells us.

Here's how we build our In-House Parts Scrapping Program...

Much like "back in the day", Used Car Departments may have set up what is called a Used Car "Bruise Account". Each Used Vehicle that was sold had an added amount tacked on to their actual cost of that unit.

For example, if we were selling a Used Vehicle that had a cost of $15,000.00 and perhaps was being sold for $20,000.00. Then, let's say $400.00 was added to the cost of sales of that unit and set aside for the Used Vehicle "Bruise Account".

This additional $400.00 was "banked" into a fund that would offset those Used Vehicle Sales that were sold at cost or below cost. This fund would help the dealer in moving some of those older, aged units from their Used Vehicle Inventory, or "Obsolescence". 

Instead of reporting a loss of that unit, they could pull out funds from the "Bruise Account" to lower the cost and actually show a profit on that sale. This would allow the average gross profit of Used Vehicles to remain at expected levels.

The same holds true for parts by setting up a Parts Scrapping Account for Obsolete Parts. This Parts Scrapping Account can be created the same way by pulling out 2% of the Parts Gross Profit on Customer Pay Parts RO Sales where most dealers have a "Parts Matrix" on Repair Parts Sales. 

At the end of each month, a journal entry can be made by taking 2% of the Parts CPRO Gross and adding it to the cost of sales. Then, we could take that difference as a debit to CPRO Gross and credited to an Inventory Adjustment Account, thus creating a Parts Scrapping Account Bank.

This reduction in Parts CPRO Gross Profit each month can be replenished by adjusting the Parts "Cost Plus" Matrix. If we are utilizing a "Cost Plus" Matrix on Repair Parts, we can simply increase this matrix by 10% above cost. 

This will result in an additional 2% Retained Gross Profit to support the Parts Scrapping Account. This additional gross amount can also be easily managed by the Parts Manager throughout the month by watching these CPRO Parts Grosses each day.

The overall "net result" will be a wash as this 2% gain on CPRO Retained Parts Gross by increasing the "Cost Plus" Matrix by 10% will fund the In-House Parts Scrapping Account. It will also keep CPRO Parts Gross Percentages at current or expected levels.

For example, if the dealer was running at a consistent CPRO Gross Profit Percentage of 42%, the Accounting Department will take 2% of that gross. This will drop the gross down to 40% from the average of 42%. The modifications to the Parts Matrix will then bring it back up to 42%.

Step Four: Obsolescence Prevention

Our Fourth Step isn't one that is often thought of by most Parts Managers, although some Parts Managers try to prevent obsolescence the wrong way. Preventing obsolescence is not just simply buying fast moving parts and ordering everything else as needed.

Many Parts Managers do have a pretty clean slate as far as obsolescence goes, but their First Time Fill Rates are usually very low. The result is lower Service Productivity as parts that we should have based on demand are not in stock when needed.

Obsolescence Prevention, in my opinion is much different as we have to work both ends of the spectrum. We have to have the right parts at the right time with First Time Fill Rates at 75% - 85%. We can't try and control obsolescence at the expense of lower shop productivity.

We have to have the right Parts Phase-In Parameters and most importantly, the right Phase-Out Parameter Set Ups to begin with. We already know that once a part reaches 12 months with no sales, there's a 98% chance they will never sell again.

The best way to Prevent Obsolescence is to set the Parts Phase-Out Parameters around 7 - 9 months so once these parts sell in that time frame, they will not be reordered. They would have to "re-qualify" for Phase-In all over again.

Letting these parts Phase-Out and not letting them back in will lower the amount of obsolescence dropping down into the Over 12 Months No Sales Category. We especially have to be careful if we are enrolled in a Vendor Managed Inventory, (VMI) with the Manufacturer.

These VMI Programs will almost always want you to bring that part back in for replenishment, even if we sell those parts close to the time they need to go away. We need to let them go and not let the VMI Program put it back on the shelf.

Compliance is one thing but letting the Manufacturer add to our obsolescence is another. We always have to juggle and walk that line. Being "Compliant" is one thing, but adding obsolescence should not be the way to stay Complaint, or "Obedient" as I say.

We should always try and shop those parts that are in the 7 - 12 Month Category and sell them in those later months. We have to "stop the bleeding" before they become a problem once they hit 12 Months No Sales.

Step Five: "Don't Buy Obsolescence to Begin With!"

Many Parts Managers don't even realize that some parts they buy will end up obsolete to begin with. Special Ordered Parts are a great example of these parts that we buy could be considered obsolete on first purchase. After all, that's why they are called "Special Orders" to begin with as these parts have not met Phase-In Parameters.

Even though we will always have Special Orders at the rate of at least 15%-25%, we can implement a Special-Order Policy that will ensure that these parts get sold. Unfortunately, in many dealerships today, there is no Special-Order Parts Policy.

Getting deposits of course when applicable, having Order Pre-Appointment Process and an In-House Communication Process with other departments is critical. There also has to be a "consequence" by charging Return Fees to customers and other dealer departments.

There has to be accountability right up front and only authorized dealer personnel should be allowed to order these parts. We also have to be very strict in holding Parts Special Orders to 30 Days or Less. They should be returned between 30 and 45 days, regardless of the cost.

As mentioned earlier and unfortunately, much of the dealers Parts Return Reserve gets sucked up by returning Special Order Parts. Parts Return Reserve is supposed to be utilized for returning obsolescence and not Special Orders ordered by mistake or a lack of accountability.

The old theory of just putting these Special Orders back on the shelf in hopes that someone else will buy it down the road is a myth. Even though we may get lucky from time to time, overall, these parts will just add to obsolescence. 

Becoming "Obsolescence Free Forever" is not just a myth, and it can be a reality if we believe it and follow the "Five Step Plan". We have to work both ends of the scale by having the right parts at the right time and managing the obsolescence.

If we do one without the other, we will either have Controlled Obsolescence but Low First Time Fill Rates or great First Time Fill Rates with too much obsolescence. Both can and should be done if we are a "Smart Parts" Manager with the right "Five Step Plan".

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...

October 2025: Cautious or Aggressive: "Which Parts Manager Are You?"

I believe that everyone of us has our own unique Management Style, whether a Parts Manager, Service Manager, Collision Manager, Sales Manager or Office Manager. This holds true to ownership as well in the Automotive Dealership.

Even though each dealership department requires a set of skills, ability, knowledge and experience, we all manage in a way that is reflected by our own individual personality. The way we lead, the way we think, the way we prioritize and the way we communicate is determined by our individual personalities.

Even though in some dealership departments we would want a specific "desired" personality, the Parts Department is rather unique. Unique in a way that in my opinion, seems to have one personality type that is similar, or most "predominant" in most Parts Departments today.

In other dealer departments, we may find an array of personality types, or "traits" leading to perhaps different management styles, but Parts Managers seem to have specific personality trait which may be different from other dealer departments with the only exception given to Office Managers and Comptrollers.

This doesn't mean in any way that it is a bad thing, it just simply means that Parts Managers, Office Managers and Comptrollers all seem to have similar Personality Profiles. Quite honestly, I believe it's a good thing when managing the dealers Number Two Asset in Parts and in the Office.

But there are some positives and negatives when the Parts Manager has a more "Cautious" approach to managing the Parts Department, or a more "Aggressive" approach. Especially when it comes down to what parts we may or may not have on our shelves.

In this issue of ACG "Smart Parts", we will explore the differences in personalities and how they may affect many areas of Parts Management. We will bring out the positive and the negative effects of the "Cautious" Parts Manager and the "Aggressive" Parts Manager.

Believe it or not, experience, skill, ability and knowledge do not necessarily determine the overall decisions made by the Parts Manager. In my opinion, no matter what personality profile we have, often times "Common Sense" is left out, or "swayed" due to our personality profile and/or our overall "Belief System"

It's time once again "Smart Parts" Managers to break it all down...

Here We Go!

In my opinion, our biggest enemy that we have as Parts Managers is ourselves. The most common personality trait that most Parts Managers have is that "inner" part of us that tends to doubt, overthink and predict the future. We tend to constantly think to ourselves..."What If this happens, or what if that happens?"...

Getting back to our topic on who we are as Parts Managers, whether more Cautious or more Aggressive, let's start by saying that most Parts Managers lean towards being more Cautious than they are more Aggressive.

It's just our nature to be that way and quite honestly, and as a Dealer, I would definitely want that in my Parts Manager. After all, and as mentioned, the Parts Manager is controlling one of the Dealer's biggest assets.

But as in anything, there is always a "risk and a reward" no matter how we approach our Management Style in the Parts Department. It all starts with our overall Parts Objectives and what matters to us the most. 

Even if our dealer lays out their main Parts Department Objectives, it all seems to come down to Inventory Protection, Sales and Gross Profit. Unfortunately, one tends to be prioritized versus all the others, which all are equally important.

This is where we will start things off as we will break down the "Cautious" Parts Manager versus the "Aggressive" Parts Manager with the positives and negatives on both dominant personality profiles.

The "Cautious" Parts Manager Profile

Positive Personality Traits:

As I mentioned earlier, the "Cautious" Parts Manager tends to be more calculating, non-trusting, has to be black and white, over thinking, and the "analysis by paralysis" Parts Manager that will always tend to protect the dealer's asset by keeping obsolescence to a minimum, first and foremost.

They will also hold the line on Gross Profit Percentages, Expense Control, Asset Security, with a "Predictable" Performance Overall. This "Cautious" Personality Trait will also tend to be protective on rules and guidelines no matter what the situation may be, not wavering and not giving in.

These personality traits are comforting for the dealer especially with Parts Reconciliation between the Ledger Balance Inventory and the Controlled DMS Inventory. The "Cautious" Parts Manager is always a hero when these balances are met with some uplift each year.

The "Cautious" Parts Manager is also very "expense minded" and may even be "over critical" on purchases and always trying to "save a buck" and not buying or spending were unnecessary. Again, making the dealer feel much more comfortable with the Parts Department.

Negative Personality Traits:

Even though all the above is great when we think about protecting the dealer's asset, there are some adverse effects if you are a "Cautious" Parts Manager. If you are living life on the Service side of things, the "Cautious" Parts Manager may potentially build walls between the two departments.

Keep in mind, I'm not saying if you tend to be more of a "Cautious" Parts Manager, that you don't have a great relationship with the Service Department. It just simply means that the "Cautious" Parts Manager will definitely weigh the "pros and cons" before making their decisions.

In Service, no two days are the same as customer issues happen constantly where time is of the essence as time is a "perishable inventory". Parts Supply Chain Issues, Backorders, VIN Specific Parts and Stock Out Situations are just a few that can all tie vehicles up in the Shop.

If we are a "Cautious" Parts Manager, we may still hold the line no matter what the cost even though we are not facing the "Front Line" with our customers personally. The Service Manager and the Advisors are the ones facing the conflict, not the Parts Manager.

Another negative to the "Cautious" Parts Manager is that they tend to be more concerned about Obsolescence Protection than they are "First Time Fill Rates". In other words, and even if sales demands dictate that we should have more of the right parts, the "Cautious" Parts Manager chooses not to stock these parts for various reasons.

Maybe the part is too expensive, maybe it will become obsolete, maybe it won't sell, and we will be stuck with it. After all, we can always get these parts on an "as needed basis" if they need it and the vehicle is here.

What the overly "Cautious" Parts Manager does not realize, (or care about) is that they are tying up a lift for hours waiting or chasing parts that we could have had and increased shop productivity on the "first visit" to the Parts Counter. 

Both departments lose on these situations where the "Cautious" Parts Manager "chooses" Obsolescence Protection over obvious demands that are not filled on a potential first time basis. 

Even though parts demands are met, the choice is made to either not stock the part, or lower the Stocking Levels, which lead to "stock out" situations and more down time chasing or ordering parts we should have had in the first place.

The "Aggressive" Parts Manager Profile

Positive Personality Traits:

First and foremost, the "Aggressive" Parts Manager always works hand-in-hand with the Service Department. No matter what the situation, no matter what the need, the "Aggressive" Parts Manager wants in on the action.

Although, I am not saying that the "Cautious" Parts Manager doesn't work well with the Service Department as I mentioned. It just simply means that the "Cautious" Parts Manager tends to hesitate on their decisions more than the "Aggressive" Parts Manager.

Meaning that the "Aggressive" Parts Manager will do whatever it takes to have or find the parts they need to fill the customer demand, no matter what the cost. They will also be more aggressive on their Stock Order Recommendations, if of course the math is set up correctly on the DMS.

They are not usually concerned about the cost of the part or having the proper Stocking Levels even higher than recommended. The "Aggressive" Parts Manager also seems to report Lost Sales at very high levels to increase demand and First Time Fill Rates.

They may also be more aggressive on pricing strategies to achieve the desired sales and gross profit levels, not as concerned about customer perception, especially with wholesale clients. 

Lastly, on the positive side, the "Aggressive" Parts Manager tends to share more information, or "train" their Parts Staff more effectively. They don't hold back challenging their team to reach higher levels in their careers, delegating and trusting more than the "Cautious" Parts Manager.

Negative Personality Traits:

First and foremost, the "Aggressive" Parts Manager tends to have more Parts Obsolescence than the "Cautious" Parts Manager. The "Cautious" Parts Manager tends to put Obsolescence Protection as their main priority, which is a good thing for the dealer.

Another negative with the "Aggressive" Parts Manager is Parts Department Organization as their Parts Departments tend to look "sloppier". Parts on the floor, less security, Parts Reconciliation Variances with Accounting, lack of proper bookkeeping and so on.

The "Aggressive" Parts Manager may also lack accountability as far as price overrides and are less consistent on Pricing Policies, even though they may be sales and profit minded. Parts employees may also be allowed to make decisions that they should not be making.

Another negative for the more "Aggressive" Parts Manager is the lack of bin counts periodically to insure a more accurate inventory count throughout the month and year. Meaning that there may be less focus on the details that the "Cautious" Parts Manager may have.

Lastly, and due to fact that they tend to get the part at whatever the cost, they may tend to have higher Semi-Fixed Expenses on shipping costs, buying at a higher price and even higher Personnel Expense. The "Aggressive" Parts Manager seems to want to be on the front line and spend less time in their office drilling down the numbers.

The Bottom Line:

In my opinion, we need a Parts Manager with both Personality Traits in various areas. If we are a "Cautious" Parts Manager, our main priorities may include Obsolescence Protection, even though it may highly impact First Time Fill Rates.

In other words, if we are more focused on protecting from obsolescence, we would rather order the part instead of having the part on the shelf. Even if the part meets all Phase-In Criteria, we will rather order the part when needed, thus lowering Service Cycle Times.

Whether it be due to the cost of the part, or we may feel that we don't want to be stuck with the parts and adding to obsolescence. The "Cautious" Parts Manager will always protect the inventory first and worry about getting the part later if needed.

On the other hand, the "Aggressive" Parts Manager needs to learn to be more organized and pay attention to the details. Even though they may tend to be more willing to cooperate, there are added costs with expenses and accruing more obsolescence in the long run.

On an added note, there are many companies out there that specialize in controlling obsolescence or "Idle Inventory", but at the expense of lowering First Time Fill Rates. In my opinion, anyone can protect against obsolescence if we only stock the fast-moving parts and order everything else when needed.

It never fails, whenever I see a Parts Manager that is primarily "Obsolescence Protection Minded", the First Time Fill Rates tend to be lower. They are afraid to take a chance on adding to that obsolescence and the Service Department and ultimately the customer suffers.

More importantly, the dealer suffers as Service Productivity is lower and the worse part of it is, they will never see these Missed Opportunities on any Financial Statement. What could have been will not show as we will just break down the Financial on what is seen and not the unseen effects.

Vehicles could be tied up more in the Shop and resulting in Productivity going down, just to protect from obsolescence. Both have to be a priorities, Obsolescence Protection and First Time Fill Rates, they go hand in hand.

Although, and if we tend to be more of an "Aggressive" Parts Manager, the lack of attention to detail could cost the dealer highly in the Inventory Asset Department. After all, Parts Reconciliation is never a problem until it becomes a problem.

Much like OSHA, they are never a problem until they show up and we are in violation of many Safety Standards, and the fines are then levied out. The "Aggressive" Parts Manager has to learn their "total" Duties & Responsibilities of running the Parts Department.

Finally, don't be predominantly one or the other as far as being a "Cautious" Parts Manager or an "Aggressive" Parts Manager. We have to come out of our "Comfort Zones" and be the "Total Parts Manager".

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...

 

September 2025: The Long-Term Parts Effects of Changing Dealer Management Systems, (DMS)

We all know that change is not necessarily welcome even though some of us welcome change and is inevitable over time. Although, I think that most of us would agree that switching over to a new Dealer Management System, (DMS) is not one of life's changes that we all look forward to.

In this day and age, it seems that dealers are changing their DMS more than they ever have in the past. A couple of reasons for these more frequent DMS "changeovers" by dealers can be easily explained, even though we dread it when it does happen.

One reason for these more frequent DMS changeovers is the fact that there are more systems out there to choose from than there were 20 or 30 years ago. Back when systems were first introduced, there were just a few to choose from.

Reynolds & Reynolds, ADP, (now CDK), Convergent, UCS and Arcona were just a few that entered into the DMS market early on. Dealers also pretty much stayed with their system for years and years and were pretty comfortable with their system, except for consistently negotiating contracts and pricing from time to time.

DMS contracts were lengthy, and most dealers would need a team of lawyers to break their contracts with some of these DMS companies. All that has changed over the last 5 - 10 years with new systems popping up and cloud conversions.

In today's dealership world, breaking DMS Contracts is much easier, and the competition out there is immense. Systems are also more capable of doing more things due to new technology and are more "user friendly" than ever before while pricing has become more affordable than years ago. 

All that being said, I have had to now learn 14 different Dealer Management Systems in Parts & Service just to keep up with the systems that are out there today with more coming. Even though the "language" of each system may be different and some systems better than others, the basics have to be there, especially in Parts.

Converting over to a new DMS is not a welcome change as we mentioned as each department has to learn a new way of doing business as well as adapting to new routines.

Even though this DMS change is felt by everyone in the dealership, in my opinion, the biggest effect that this change brings could have the biggest, negative "long-term" effect on the Parts Department than any other department in the dealership.

One of the biggest DMS Changeover Frustrations is the fact that these conversions are conducted during normal business hours. I think we have all felt the impacts of trying to learn a new system and taking care of customers at the same time with phones blaring in the background.

Each one of us only cares about how it affects us personally during these conversions with stress at its highest level. So why do we think that Parts could feel more of the negative, long-term effects of a DMS Conversion?

It's time to find out why with our ACG Smart Parts "Top 10 DMS Parts Conversion Impacts" in the Parts Department that can impact our results for years to come!

Let's Begin!...

As we mentioned earlier, every dealership department is highly impacted by changing over to a new Dealer Management System, (DMS). But what we did not mention is the fact that these impacts in all the other dealership departments are temporary.

Once we manage through all the Op Code Changes, Service Pay Types, Accounting Integration, New Chart of Accounts, F & I Set Ups, Pricing, Sales Deal Set Ups, etc., they are good to go. At this point, it's just a matter time before we get used to navigating through the new system.

This is also true in Parts, but what lies underneath all these Parts Set Ups is what could have the most devastating overall impact over time if not understood or set up correctly. Not only the math has to be correct, but we also have to know and learn a new DMS "language".

Let's start with our "Top 10 DMS Parts Conversion Impacts" that can be felt for many years to come. Keep in my mind that our Top 10 are not listed in any particular order as all 10 play a role in potential negative results over the long term.

Parts Phase-In

Parts Phase-In is where it all begins as all parts have to "qualify" in order to become a Normal Stocking Part. This is also where the "life cycle" of a part begins, or "born" as every part has to have enough demands, (sales or lost sales) in separate months over a course of a determined number of days or months.

Many may not know that not all Dealer Management Systems have the same "language" on the initial Parts Set Ups to accurately track demands over a course of days or months. If we do not read the DMS verbiage correctly, we could actually be preventing parts from phasing in.

An example would be if we wanted to track demands of at least 1 in 3 separate months over the course of 8 months, it could actually be entered incorrectly into a new DMS. If we don't actually read the verbiage correctly, the DMS could actually be set at at least 3 demands in 3 separate months over the course of 8 months.

The result would be that the system would not phase in that part until it actually had 9 demands over 3 separate months over the course of 8 months. Thus, the results would mean that many parts that we may want to stock would not phase in.

Also, not all systems track demands in separate months like Tekion for example that only tracks total demands and not in separate months. This could actually cause an "early phase-in" problem. In other words, if we sold 16 lifters on one application, the system would potentially bring in those lifters prematurely.

Lastly on Parts Phase-In, switching over to a new DMS may require parts that were considered Normal Stocking Parts in the old DMS to go through the "Rephase-In" process all over again.

Normal Stocking Parts vs. Non-Stock Parts Status

Here's another huge Parts Long-Term Negative Affect as parts that had a Normal Stocking Parts Status in our previous DMS may just convert over into a Non-Stock Status in the new DMS. During Parts Conversion, some new systems do not recognize the previous DMS Stocking Status.

In the case of CDK for example, Normal Stocking Parts carry a "blank" Stocking Status. This means when the new DMS converts Normal Stocking Parts over from CDK, they often times default over to a Non-Stock Status. 

The new DMS may not recognize what a blank status means and defaults these parts to a Non-Stock Status. This ends up giving false Inventory Investment amounts on Normal Stocking Parts vs. Non-Stocking Parts on the Inventory Investment.

The only way to fix this issue is to do a "Batch Move", or "Mass Move" on all parts with a Normal Stocking Bin Location, with quantities over to Normal Stocking Status. Please be aware though if Special Order Parts are not binned as "SPORD" and carry a Normal Stocking Bin Location, they may be included in this "Batch Move", or "Mass Move".

Batch Moves, or Mass Moves

Speaking of being able to perform Batch Moves, or in some systems called a Mass Move may not be available in some Dealer Management Systems. Systems that do not provide the option of moving parts from one place to another in mass quantities based on the criteria selected have to be moved or adjusted one part at a time...not good!

Even though these systems do not provide this option, they may have other alternatives that require a lot of work and additional input. They also may not be accurate in many cases depending on the criteria needed or selected.

Weighted Daily Demand Option, (WDD)

This feature is a great option to have in any DMS but unfortunately is not available in most systems where Dealertrack, CDK, Tekion and DealerBuilt do provide this option. This WDD option allows the Parts Manager to "weight" annual piece sales over the course of the year.

In other words, I could sell 24 parts over the last 12 months, which could be 2 sales in in each month for 12 months, or it could be 12 sales over the last 2 months over the past year. This feature allows the Parts Manager to "weight" when parts sell and apply a desired percentage over the past 12 months.

This is especially an important feature on measuring seasonal sales with the peaks and valleys on when these sales occur. An example would be if I lived in Michigan and I sell 12 A/C Compressors over the course of the year, we could "capture" those sales when the occur in the summer months vs. the whole year.

Source Movement Updating, (ABC Source Ranking)

We all know that parts move at different rates over the course of a given year as some parts sell just 12 times a year and other may sell over 100 times a year. Each movement range requires different Stocking Levels for Best Reorder Points, (BRP) and Best Stocking Levels, (BSL).

Parts need to move into their Proper Source or Stocking Group as sales ranges change constantly in order for the Suggested Stock Order to be accurate on their stocking recommendations.

Even though most systems provide this option which is usually referred to as "ABC Source Ranking by Piece Sales", updating Parts Movement by Piece Sales is not automatic or in some system limited at best. In many systems, Source Movement has to be done manually each day, especially before running the Stock Order

The Negative Long-Term Result is that Stock Order recommendations will not be accurate and may affect the Manufacturers Vendor Managed Inventory, (VMI) recommendations as well. It can also lead to more Parts Obsolescence and "Stock Out" situations.

Parts Posting Procedures

This critical area can definitely lead to Long-Term Negative Parts Effects as every DMS has their own "quirks" in what is defined as a Lost Sale, Emergency Purchase, Stock Order Purchase, Supplemental Stock Purchases, "In & Out" Purchase or Other Purchases.

Defining these categories in every DMS is crucial in order "classify" each parts purchase and receipt accurately all the way into the Accounting Office. Posting Other Purchases and "In & Out" Purchases on Manufacturer Parts can have a Long-Term Effect on Stock Order Recommendations.

Other Receipts and "In & Out" Receipts and Purchases are not tracked for Stock Order Recommendations in most systems, even though sales history is recorded. These Outside Purchases, or "In & Out" Purchases should only be used for other receipts other than our own Manufacturer that we do not intend to stock.

On the issue of Lost Sales, some systems do not actually record a Lost Sale even though we enter the part as a Lost Sale. In other words, if we are not familiar with the new DMS, we may think we are posting a Lost Sale, but it doesn't really post as a Lost Sale unless we take an additional step to confirm the Lost Sale.

Parts Matrix

Implementing the right Parts Escalation Matrix can also be confusing from one DMS to another. Whether using a Cost Plus Matrix or a List Plus Matrix, we need to make sure how the DMS calculates the percentages. 

Some systems calculate the percentages with cost assumed while others may not. In one system Cost Plus 67% will net us a 40% retained gross profit where another system does not assume cost in the uplift and has to be entered as Cost Plus 167%.

In addition, some systems offer a "Cost Plus" Feature and a "List Plus" Feature within the same matrix where other systems may not. In some systems, you have to choose one or the other which makes it difficult for Parts Managers to choose the right percentages for "out of grid" defaults to MSRP on higher cost parts.

The Negative Long-Term Effect is inconsistent pricing, loss of additional gross profits and most important...more discounting by Parts Staff. It also makes it much tougher to sustain a Desired Gross Profit Trend that is sustainable.

Parts Flat Pricing or Family Pricing

While we are the topic, let's add in another pricing feature that may be different from one DMS to another is "Flat Pricing", or "Family Pricing" on Competitive Parts. Some systems require the Parts Manager to actually create a different Parts Source for their Competitive Parts.

The reason for setting these Competitive Parts is to set the Source Parameters to "not update" to lock in a desired out the door price without the Matrix. Setting these parts up in their own separate Source does accomplish the mission of locking in the price but at the sacrifice of Proper Stocking Levels if not set up for ABC Source Ranking as well.

On the other hand, there are quite a few systems the offer Flat Pricing that will override the Parts Matrix on selected parts, which is great. There is no sacrifice on Stocking Levels while the end goal is the same to lock in a fixed price.

The Negative Long-Term Parts Effect is if this Flat Price Feature is not available could be Stock Out situations on fast moving parts and loss of gross profit on parts we could have applied the Parts Matrix. All because we have to separate these parts into a separate Source just to lock in a fixed price.

System Navigation - Taking Shortcuts

Another area that differs from DMS to DMS is System Navigation as some systems are more "User Friendly" than others. Where this comes into play with the "Long-Term Effects of Changing the Dealer Management System, (DMS)" is that we are all Creatures of Habit" and we tend to always look for the easy way out.

Taking shortcuts in the DMS is not uncommon, but on the Parts Department side of the DMS, taking some shortcuts to make things easier can be detrimental. Entering in the wrong order codes and receipt codes could affect Accounting Reconciliation.

Relieving Dirty Cores for example is one huge area that can affect Accounting Integration as well as all parts returns. Making adjustments to the Parts Inventory improperly, discounting parts within the Repair Order or Counter Ticket instead of applying the correct discount codes at the bottom can impact gross profits and expense accounts.

Getting trained properly on the new DMS seems to always be an issue. It seems like they just want to make the system functional so we can get through the day and then they are gone. DMS Training is minimal at best without too much explanation as to why we have to do it in a certain way.

Parts Monthly Management Reports

Our last in our "Top 10 Long-Term Parts Effects of Changing Dealer Management Systems, (DMS)" is the Management Reports offered, or not offered in the new DMS. Each system has different reports that are supposed to give us all of our Parts Key Performance Indicators.

In my opinion, every DMS should be able to give us monthly parts data including...

• Parts Sales & Gross Information
• All Parts Fill Rates including Overall Parts Rates & First Time Fill Rates
• All Parts Purchases including Stock Order Receipts, Supplemental Stock Order Receipts, Customer Order Receipts, Emergency Purchase Receipts, Other Receipts and Unusual Receipts
• Processed Parts Orders and Outstanding Parts Orders in all Categories
• Parts Inventory Analysis to include Normal Stocking Parts, Non-Stock Parts, Manual Order Parts, Auto Phase Out Parts, Manual Phase Out Parts, Dirty Core Inventory and New Core Inventory.
• Annual Parts Gross & True Turns
• Parts Sales Activity in the 0 - 6 Month, 7 - 12 Month and Over 12 Month and Never Sold Parts Categories
• Cost of Sales of Normal Stocking Parts, Non-Stock Parts, Auto Phase Out Parts, Dealer Phase Out Parts
• Monthly Lost Sales at Cost
• Parts Inventory Adds, Deletes and Adjustments
• Beginning and Ending Parts Inventory Amounts Monthly

Believe it or not, many, many Dealer Management Systems do not provide this basic and necessary information on one Parts Monthly Management Report. In systems that do not provide this information makes it much tougher to manage the Parts Inventory Investment.

In closing, it all comes down to the dealer making the right decision on the best DMS that will suit their needs at an affordable price, and they are out there. Most important is that we need to "look before we leap", especially in Parts as the Long-Term Parts Effects could cost the dealer more than the potential savings by choosing the wrong DMS.

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...