March 2026: "Drilling Down Parts Industry Guidelines"

As we move into the end of the First Quarter of 2026, ACG "Smart Parts" will be focusing on a topic that has been around for decades. Every one of us strives to achieve our dealership goals and guidelines as well as what goals and guidelines dictated and set by our industry.

That being said, we thought that it would only be appropriate to focus on these Parts Goals & Guidelines right after the National Automobile Dealer Association, (NADA) had its Annual Convention early in February of this year in Las Vegas, NV.

NADA has been out there for decades dating back to the early 1900's bringing Automotive Dealers together to share ideas and develop a "standard" of goals and guidelines for all dealership departments.

By breaking down dealerships into individual groups by like franchises, performance levels, and demographics, they have been able to bring dealers together to share best ideas and best "practices".

These "20 Group Meetings" go on throughout each year for all dealership departments where information is shared and listed from below average, average and above average performance listed from all Key Performance Indicators, (KPI's). From there, they developed their Dealer Composite that ranks each dealer in these KPI areas top to bottom.

From there, dealers share their ideas on how they achieved above average performance, or perhaps how to achieve higher results if the results are less than desired. This information gathering and sharing creates a bond between group members and an overall goal of helping everyone achieve the overall "Group Goals".

Once a year, NADA and other like groups have their National Convention where all come together to see the latest products, services and ideas out there from vendors throughout our industry. It's also a time for dealers to come together on a national platform to celebrate and enjoy this years' venue and get away from the daily grind.

Having been fortunate to attend this event several times and even present at this event, I've also found that preparing to attend this event, (if one is fortunate) is key to getting the most out of it.

It's easy to get caught up in the "pomp & circumstance", but I believe we all have to prepare and have a plan when we attend. The overall excitement can be overwhelming, but we have to know what we want to learn, what we will take away and most important, what we will do when we get back to our dealerships.

To me, we have to go back and ask ourselves why we are there and why we are involved in these groups in the first place. The information gathered from all these dealers is compiled, analyzed and compared to come up with our "Industry Standards" in all dealership departments and that's what it's really about.

Now it's time to break it all down from the standpoint of the Parts Department and what these "Industry Standards" represent and what "Guidelines" have been set. They also have to be universal for all dealer franchises and most important, they have to be SMART.

They have to be Specific, Measurable, Attainable, Relevant and Time Focused for all dealer franchises, size, demographics and capabilities. In the area of the Parts Department, this is no different and we now have to "measure up" to these Industry Guidelines as one united front.

It's time to break down and look at what is expected from ALL ACG "Smart Parts" Managers!

Let's Begin...

Parts Receivables: 50% of Average Monthly Parts Sales

This is a great one to start with because I would guess that the majority of Parts Managers don't even know about this one, let alone know what it means or represents. Many dealers sell parts on Accounts Receivable and wait for their money to be paid at a later date.

The reason this one is so important is that we truly don't sell the part until it's been paid for. We have to follow the money, especially if we have a lot of charge accounts and are into the wholesale or fleet businesses.

If accounts are allowed to go past 30, 60 or even 90 days, we are not making money as it's just "paper money". This Industry Guideline is extremely important to measure our "good accounts" from our "bad accounts" and what a "good customer" really is.

It's also a very easy guideline to follow, measure and to have an idea of how much we should allow on our Accounts Receivable. If we sell $250,000.00 in Parts Sales each month, then our Accounts Receivable should not exceed $125,000.00 per month on average.

Parts Department Absorption Rate: w/Body Shop - 20%, w/o Body Shop - 25%

Another great guideline that measures just how much the Parts Department "absorbs" the dealers' expenses minus Owners Salaries and Variable Expense. We all have to do our part as to how much gross profit we generate to cover the dealership expenses.

This one to me is the true measurement on just how well the Parts Department performs from a gross profit standpoint. Sure, we can talk about Parts Obsolescence, Asset Management, First Time Fill Rates, (which are all important!), but we are in business first to make money.

At the end of the day, how much the Fixed Operations "absorbs" their portion of the dealers' expenses can be the determining factor on the dealers' overall success. Having to rely on Front End Sales can make the dealer profitable, but it's the Fixed Operations that ensures the overall success.

Parts Productivity: Inventory Gross Turns: 8 Annual Turns

This Parts Productivity area often gets confused as Annual Gross Turns will happen no matter if we have a Parts Inventory on the shelf or not. It simply determines what the "desired" Parts Inventory Level, or Amount should be based on a 45 Days Supply, or 1.5 Months.

It represents "sales" going through the Accounting Ledger and not necessarily parts being sold off the shelf. An example would be if I sold $100,000.00 in cost of parts on average each month, it means that we should have $150,000.00 in the Parts Inventory representing a 45 Days Supply of parts in "dollars".

After all, it's possible, but not really conceivable that we can sell $100,000.00 in parts cost of sales each month without really selling a dime off our own shelves. We could technically buy and sell parts without an inventory at all and still have a Gross Turn Rate.

Parts Inventory "True Turns" on the other hand is the only "turn rate" that actually measures how well we are selling our Normal Stocking Parts off the shelf. Although not listed in NADA's Parts Operating & Expense Profiles of 2025, the Overall Industry Guideline for Parts True Turns is 5 Annual Turns.

Parts Productivity: Sales Activity 0 - 6 Months: 85%

This is also a very important guideline as it dictates where our parts sales are coming from. In other words, we should be selling 85% of our parts within that 0 - 6 Month time frame, or "Activity Cycle". It's can also be an indicator of the actual "life span" of parts today.

If 85% of our parts sales are supposed to happen within that 0 - 6 Month Activity Cycle, it can also mean that the Parts Life Cycle is on its way out beyond this point. Hard to believe, but Parts Obsolescence starts at a very early age in its life span.

Parts Productivity: Sales Activity 7 - 12 Months: 10% - 15%

This Sales Activity Cycle of those parts that sell between 7 - 12 Months is what I call my "Stop the Bleeding!" Category. If we can maintain this industry guideline of 10% - 15%, it's much easier to control parts that will eventually become obsolete after 12 months.

If we can let these parts just phase out if the sale happens in this Activity Cycle and not reorder them, preventing obsolescence from happening on parts that haven't sold over 12 months is much easier.

After a part is born and continues through its "life cycle", the chances for "no future sales" grows higher and higher as the months go by. Even though we may sell parts that have been on our shelves for months and years, the overall percentages are staggering.

If a part hasn't sold in 9 months for example, there is two thirds chance that it will never sell again. Even though some manufacturers require us to hold these parts beyond 12 months in order to get full return credit, the bottom line is that we have a 98% chance of no future sales after 12 months.

Part Productivity: Over 12 Months: 5% or Less

This Parts Sales Activity Cycle of over 12 Months goes without saying as the guideline indicates. The trick is to minimize these parts in the Activity Cycle to begin with and deal with them in the previous Sales Activity Cycle of 7 - 12 Months.

This Activity Cycle also gets confused with Parts Obsolescence in general as we are talking about "Sales Activity" and not Parts with No Sales Over 12 Months. All of the Activity Cycles mentioned simply means that last sale happened in these date ranges in months.

Parts Sales Per Employee: $70,000.00 per Month

This is a pretty good guideline to look at when we are trying to determine how many Parts Employees we should have. Keep in mind that even though it gives us an idea of how many total Parts Employees we should have; it does not detail Parts Staffing Metrics.

For example, not all Parts Employees generate parts sales as there are many Parts Employees such as drivers, shipping & receiving staff, or even inventory clerks that do not generate parts sales.

That being said, a Counter Person needs to generate twice as much in sales to offset "nonproductive" Parts Personnel at a 2:1 Sales to Support Ratio. In my opinion, Parts Sales Personnel should produce at least $140,000.00 in parts sales per month.

Parts Gross Per Employee: $28,000.00 per Month

This category kind of "dovetails" to the previous one on Sales per Parts Employee with a little different twist, especially if there are a lot of wholesale sales. To me, this is the one I would use as Sales per Employee can be misleading if we don't generate enough parts gross profit to support the Parts Staff we have.

Parts Sales does indicate how much a Parts Counter or "Sales" Person should be able to handle from a sales standpoint, but it's up to the Parts Manager to keep the gross. This is why maintaining Industry Guidelines on all Parts Gross Categories is so important.

Parts to Labor Ratio: $1.00 Parts to $1.00 Labor, (1:1) - Customer Pay

This is a good guideline to look at once a month to see if we may have pricing issues, or "opportunities" in either Customer Pay Parts or Customer Pay Labor. Although it is not an indicator to measure if we are charging too much for either one, it just means that we may be missing opportunities.

An example would be if our Parts to Labor Ratio is high on the parts side, it may be that our Effective Labor Rate may be low. On the other hand, if the Labor Ratio is higher than the Parts Ratio, we may want to check our Customer Pay Parts Gross Retention, or our Upsell Closing Ratios.

Believe it or not, Service Advisor Pay Plans can also shift our Parts to Labor Ratios if Advisor Commissions lean more towards Labor than Parts. Everyone works their pay plans and if I can make more commission on labor, then I would overhaul a transmission versus a replacement, even though replacing it would be best for the customer.

Customer Pay Parts Pricing Policy: Matrix When Applicable from Cost

Most dealership Parts Managers utilize a Parts Pricing Matrix, but having a Parts Pricing Matrix does not ensure Customer Parts Gross Retention will be at desired levels. We could put the same matrix in five different dealerships with different results.

The key to an "effective" Parts Pricing Matrix is to have the right "recipe" that works for the individual dealer. There are many parts that are sold where the matrix is not applied such as powertrain parts, completive parts, accessories and tires just to name a few.

There are also many dealerships that allow parts pricing overrides and discounts way beyond control which obviously impacts the overall results. Just having a matrix is no guaranty of getting the right Customer Pay Retained Gross Percentages. It takes the right recipe, accountability and constant "tweaking" to achieve desired results.

Level of Service: 90% - 95%

Another confusing Industry Guideline as "Level of Service" is simply "Overall Parts Fill Rate" and defined differently depending in the DMS used. Level of Service, or Overall Fill Rate simply means that we filled the request, minus any Lost Sales posted against it.

In other words, if we don't post any Lost Sales, our Level of Service, or Overall Fill Rate would be 100% and we would look like a hero. This above definition is easy to confirm as the Industry Guideline for Lost Sales Posting is 5% - 10%, which is the exact opposite of this Level of Service Guideline of 90% - 95%.

To me, the most important Parts Fill Rate is "First Time Off Shelf Fill Rate", which represents the percentage of time we fill these parts requests on first visit. This First Time Fill Rate must be calculated manually as the Dealer Management Systems will not provide this Fill Rate Percentage, except for CDK's "Sales from Stock Ratio".

Parts Expense to Gross: Personnel: Mid 30% Range

Depending on the Manufacturer, the Industry Guideline for the percentage of Parts Personnel Expense to Parts Gross is in the mid-30% range. This allows the Dealer and Parts Manager to determine the amount of personnel expense compared to the gross generated from Parts Sales.

Along with the Parts Sales & Parts Gross per Employee, these guidelines help us to maintain a healthy "bottom line" while having the right number of Parts Employees. It also helps us to determine if we are spending too much or not enough on our most valuable asset, which is our people.

There are only two ways to maintain Industry Guidelines in of these Expense Categories and that is to either reduce expense or increase gross profit. We have to be careful here in my opinion, as lowering expense in order to be profitable isn't always the answer.

Parts Expense to Gross: Semi - Fixed Expense: 13% - 15%

Again, depending on the Manufacturer, the Parts Semi-Fixed Expense should be in the mid-teen percentage range. They are called "Semi-Fixed" Expenses for a reason as even though they are always going to be there, we do have some control of these expenses, thus the name "Semi-Fixed".

Expenses in this category may include Freight Expense, Parts Policy, Training, Advertising, Office Supplies and Outside Services to name a few. Even though we may not be able to control all of these expenses, we need to be aware of them and challenge them every month.

Parts Fixed Expense to Gross: 12% - 14%

Again, the actual Fixed Expense to Gross Guideline depends on the Manufacturer, but they also call them "Fixed Expenses" for a reason. Fixed Expense in every dealership department needs to be "fair" in my opinion and not weighted to one department more than the other.

Fixed Expense should be calculated based on occupancy percentage compared to total dealership building and land usage. In other words, if the Parts Department occupies 40% of the building and land square footage, then the rent should also reflect that percentage. 

Ultimately though, it's up to the dealer on how these Fixed Expenses are allocated. This also goes for building square footage on Heat, Power & Lights, Legal Expenses and Building Depreciation. Other Fixed Expenses such as Equipment Depreciation, Equipment Rental and Repairs to Equipment can be individualized by department.

Parts Gross Profit: Customer Pay: 40% - 42%

Even though this Industry Guideline is being pushed even higher, closer to 45%, we believe that the guideline is "fair" at 40% - 42%. There are many factors that can dictate what is available in different markets and demographics, but in the end, we think that this Industry Guideline is fair and achievable.

Proper use of the Cost-Plus Parts Matrix, Competitive Pricing on Parts Menu Items and Coupon Pricing needs to be reviewed at least a couple times a year. Parts prices go up often throughout the year, especially on "flat priced" parts and not updating these "out the door" prices often enough will just lead to lower gross amounts.

Parts Gross Profit: Warranty: 28% - 40%

Depending on if the Manufacturer allows the dealer to apply for a "Warranty Uplift" or not, this Industry Guideline can vary. There are still a few states that have not passed legislation to allow dealers to apply for a "Warranty Uplift" closer to, or even above the Customer Pay Parts Gross Profit Retention Percentage Guideline of 40% - 42%.

Much like applying for a Warranty Labor Rate Increase, applying for this Warranty Parts Increase requires comparing previous month's Parts Customer Pay Retention Percentages to determine the approved Parts "Warranty Uplift" Percentage.

Parts Gross Profit: Internal: 40% - 42%

There are still many dealers out there that still have their own reduced Internal Parts Pricing Policy. It is in our opinion that the Parts Internal Rate should be the same as the Customer Pay Parts Pricing Policy, whether MSRP, or Parts Matrix Price. 

Having a reduced Internal Parts Pricing Policy only passes this discount onto the customer. Often times, the difference from the reduced Internal Parts Pricing Policy compared to average MSRP will only make a difference of less than $50.00 per Used Vehicle sold.

Parts Net Profit to Gross Profit: 35% - 40%

Lastly, and again, depending on the Manufacturer, the Parts Net Profit to Gross Percentage Industry Guideline is the highest of all dealership departments. Achieving this Industry Guideline requires a combination of a lot of the previous key elements.

It all starts with Parts Sales, then retaining the proper Gross Guidelines, and then finally, maintaining and managing all the Parts Expense Categories of Personnel, Semi-Fixed and Fixed Expenses.

I've always said that we may not be able to control where all of our sales come from, but we can manage what we keep on the gross side. We can also manage, to a great degree, our Parts Expenses if we are looking at them each and every month.

Being the "Best of the Best" in the Parts Department and especially if your dealer is a member of a 20 Group, whether NADA or NCM, we have all the resources to succeed in all of the Industry Guideline Categories.

In my opinion, there is no greater feeling than to achieve these high levels with the support of those in the same group. The resources in these groups are many and to be driven to these higher expectations by those who are there and have been there will lead to your own desire to be there as well!

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...

....

    

February 2026: "Inside the Mind of Today's Parts Manager"

In our second issue of the New Year, we will be doing a Follow Up to our first issue which was our "Top 10 Parts Hot Topics for 2026". In that first issue, we made our predictions to what we may expect going forward concerning the topics mentioned.

As a follow up, we thought it would only make sense to explore how we might handle each one of the topics. Going "Inside the Mind of Today's Parts Manager" will allow us to get in the right mindset.

After all, we may agree or disagree with on how each one of us might handle the 2026 Parts Hot Topics. Even though we may all experience what we predicted last month, our results may differ depending on our mindset and how we approach them.

That being said, we chose to dive into our own minds here at ACG "Smart Parts" as to how we would approach these "Top 10 Parts Hot Topics for 2026". Even though our mindset and approach may be different from other "Smart Parts" Managers, we will approach them from our end.

All we ask is that we all have an open mind to perhaps doing our own self-evaluation and allow a little change that may make a difference. As we have mentioned in the past, Parts Managers have a unique Personality Profile that leans more to the cautious side versus being a little more aggressive on some of these topics.

Even though our opinions may differ, I think we could all agree that we all want to get better and we all want to succeed. Our mindset and our approach will determine how much better we will be and how well we succeed in achieving our overall goals.

So!...we will start out by giving all of our "Smart Parts" Readers our disclaimer to our February Issue of ACG "Smart Parts" in hopes that we all achieve and perhaps exceed our goals and expectations for 2026!

"The opinions and recommendations expressed in this issue of ACG "Smart Parts" are those provided by ACG "Smart Parts", a division of Automotive Consultants Group, Inc. and does not guaranty results as individual dealer results may vary based on dealership size, location and personal preferences".

There!...now that we got that clarified, let's see how our mindset and approach to this year's "Top 10 Parts Hot Topics of 2026" can actually impact our results going forward into 2026!

It's Time to Go "Inside the Mind of Today's Parts Manager!

Let's begin...

Last month, our first Hot Topic was DMS Conversions, (Dealer Management Systems) and how they impact all of us going through this transition. Nobody likes the idea of this change, but I will say that we have to accept it and move forward.

The first thing we have to do is forget about the old DMS and try not to compare one with the other. Every DMS does some things better or worse than the previous one, it's just the way it is. Keeping an open mind during this transition is crucial to understanding it going forward.

I will say that it is okay, and I highly recommend that we ask lots of questions as we try to "translate" one DMS Language to another. This is exactly how I got to learn 14 different systems, knowing what I needed and where I can find it in the new system.

 I never accepted "no" for an answer until I found the right answer from the right person.

Also, and especially in Parts, we need to question the math on initial Set Ups & Controls. Unfortunately, many Parts Managers don't question the math as they may feel that the Install Team must know what they are doing, which may not be the case.

Going through this transition from the standpoint of those installing the new DMS is very challenging, tedious and "deep". Mapping one DMS to another requires precision, communication and accurate information.

If you are a "Smart Parts" Manager that will be going through a DMS Transition in 2026, you will need to have an open mind, positive attitude and not be afraid to ask as many questions as you need.

Lastly, get the old system out of your head and be more attentive to how the mapping looks and making sure that all the info carries over to the new system accurately. Common areas are Parts Pricing & Assignments, Stocking Status, Parts Sources and Parts Movement Capabilities.

Our second Parts Hot Topic we discussed last month was Parts Reconciliation Issues. No matter what system we have, we need to be doing this "practice" monthly along with periodic bin checks daily, weekly and monthly.

Meeting up with the Accounting Department and comparing numbers weekly or monthly is a good practice to keep variances at a minimum. The "Smart Parts" Manager also needs to have basic Accounting Skills to know how parts are accounted for from a sales and cost of sales standpoint and how Parts Sources are mapped in Accounting.

The sooner we discover any parts variances in Accounting the better as opposed to waiting until after the Year End Parts Physical Inventory has been performed. Tracking these variances each day and each month will minimize discrepancies overall as well.

A simple Parts Monthly Reconciliation Form can be used by the Parts Manager that tracks the Controlled Parts Inventory in the DMS, (PAD Inventory) compared to the Ledger Balance Parts Inventory.

We went on last month with our third "Top 10 Parts Hot Topic for 2026" which was Parts Obsolescence Control. 

The most important part of controlling parts obsolescence is to tackle it early on. Waiting until it's too late after 12 months is not the way to control it as we need to know what's coming down the pipe.

Attacking it sooner also allows us to get the most Return on Investment, (ROI), as these parts that have just dropped down may still be desirable in other Dealership Parts Departments, or for some of these Parts Obsolescence Vendors.

Parts Obsolescence was, still and will be a Hot Topic for many years to come. We need to have a combination of Parts Obsolescence Vendors, Proper Phase-Out Parameters and an In-House Parts Scrapping Program in place to tackle this beast.

Lastly on this topic, we need to start phasing these parts out sooner and getting these lists out to Vendors, or scrapping them around the 10th month, No Movement Category. Waiting will only make it worse, and we could be using this money to stock more parts that are moving much more frequently.

Right along with Parts Reconciliation, our fourth "Top 10 Parts Hot Topic of 2026" was Parts Core Values, both Dirty and New have created a new Parts Nightmare. Especially with the higher values, we need to separate the Core Values in Parts Accounting Ledger Balance to track them separately.

Due to the cycle time of these cores and the fact that they tie up the dealers' cash, keeping this turnaround time to a minimum is crucial. This makes it much easier to reconcile and relieve these values if we try to keep them within 30 Days as much as possible.

Not only do we have to keep them within these 30 Days, we also have to make sure that when these Dirty Cores leave the building, the DMS needs to be updated and relieved as well. The Dirty Core Report in the DMS should always reflect what we really have on site.

Our fifth "Top 10 Parts Hot Topic of 2026" was our Parts Gross Profit Goals for 2026. Having a goal of any kind requires change or modification going forward. Depending on where we ended up the previous year and if we achieved those goals, we have to do the math all over again.

Modifying the Matrix is one thing, but the most time-consuming part of setting Parts Gross Goals is making the proper modifications to our Service Pricing Menus. Many Dealerships Parts & Service Departments really don't update the Service Menus often enough.

We should be looking at and perhaps updating these menus at least twice a year. Parts prices are always going up and if we don't keep up with these parts price increases without updating our Service Menu Prices, we will only lose gross.

Moving on to our second half of our "Top 10 Parts Hot Topics of 2026" and with our Number Six, let's get into the ACG "Smart Parts" brain with Supply Chain Issues. Even though many say that it's getting better, it's still nowhere near where we would like to see it.

In the opinion of the ACG "Smart Parts" brain, we have the opinion that we need to get the parts that we need, no matter what. Backorders, Restricted Parts or parts that appear to be unavailable have to be out there somewhere.

VIN Specific Parts are a different issue, and we all have to deal with them. But if we could minimize the overall Supply Chain Issues by working harder on those "hard to find", or backordered parts, we can deal with those VIN Specific parts a little easier. 

We understand that we won't find every part that we need, we still need to have the mindset that if the part is selling and the math supports it, we need to get it. Not only do we need to get them, but we also need to go find them as soon as we find out they are not readily available on first notification in our DMS.

Chasing down Backorders is much easier when we see them on a Stock Order as opposed to waiting until we need them on demand when the vehicle is on the lift. Early notification allows us to chase them down with less pressure and we may even have more options where to get them.

This is definitely another "mindset" issue and we can't wait until they show up eventually, even if we may have to pay a little more up front. Paying a few dollars more is better than tying up lifts, lowering productivity and losing total repair dollars just to save a few bucks.

If a part "appears" to be not available, that's when the work starts as our job doesn't end when we get that backorder notification, it's just now beginning. We have to remember that the Service Department is our Front Line, and we need to support them.

Moving on to our seventh, and I really love this one as we will give our take on the Manufacturers Controls, Promotions and Programs. The most important mindset that we need to have on this one is that we work "with" the Manufacturer and not "for" them.

Believe it or not, there are many Parts Managers out there that put the Manufacturer first and foremost, even over their own dealer who pays them. Being "compliant" is one thing, but being "obedient" is another.

We have to do what's right and in the best interest of our dealer. Even though we may feel that we are helping our dealers by following the Manufacturer's Recommendations, the overall negative impacts can be devastating. 

They love selling more parts but buying obsolescence up front and overstocking the Dealers' Parts Inventory is not helping the dealer. It's really simple as there are Industry Guidelines on Days Supply and Managing Obsolescence and that's where our focus should be.

Keep in mind that we are not saying that the Manufacturers' Controls, Promotions and Programs are all bad overall, we are just saying that we need do the research. A Wiper Blade Program may look good, and may have added discounts, but we never realize these discounts until we sell them.

Parts Posting Procedures was our Number Eight last month and though it may seem to be a minor topic, it's actually very huge from an Accounting standpoint. Ordering, Receipting and Posting parts to the wrong Parts Source or Stocking Groups can have huge ramifications if not done correctly.

We can't just assume that our Parts Staff knows that Parts Sources, or Stocking Groups are "mapped" and connected in the DMS to certain inventory and sales accounts. Any Parts Employee that is allowed to perform posting procedures has to know how to properly order, receive and post to the proper Parts Source or Stocking Group.

In 2025, this simple topic was near the top of the list of concerns and questions that I received over the last year. The damage it causes goes beyond what many may think from Pricing Issues, Lost Gross, Bin Count Errors, Outstanding Parts Orders and Increased Discrepancies on Parts Reconciliation just to name a few.

Coming in at our Number Nine was Parts First Time Fill Rates which is always confusing as there are actually many fill rate definitions out there. Even though at Number Nine, I believe it should be our Number One Goal as "Smart Parts" Managers.

First and foremost, Overall Fill Rate is not First Time Fill Rate!

Most often confused with Overall Parts Fill Rates, which most use as their number, we could actually have a high Overall Parts Fill Rate without even stocking a single part on our shelf. Overall Fill Rate simply means that the order was "filled" minus any Lost Sales posted against it.

Actually, having a high Overall Fill Rate just means that we are not reporting Lost Sales at Industry Guidelines. In effect, having a very high Overall Fill Rate is not a good thing, it's actually a bad thing.

Overall Parts Fill Rate also doesn't mean we filled it today as we could fill a parts order today, tomorrow, next week or next month and it would still count in that Parts Overall Fill Rate Percentage. To me, providing that part on first request is most important and is the true indicator on how well we stock our shelves.

Having a "First Time Off Shelf Fill Rate" at 75% - 85% should be our first and primary mission as "Smart Parts" Managers. We also have to protect and keep obsolescence at a minimum while providing this high First Time Fill Rate.

Our job is to do both and if we put Obsolescence Protection first while sacrificing a high First Time Fill Rate, we are defeating our purpose. Any Parts Manager can protect against obsolescence by just stocking the fast-moving parts and ordering everything else.

It never fails, when I see a Parts Manager that does a great job Controlling Obsolescence, they often have a Low First Time Fill Rate right along with it. Only the great "Smart Parts" Managers do both and it can be done.

The opposite may also happen with some Parts Managers as they may actually nave a good First Time Off Shelf Fill Rate, but their Obsolescence may also be high. The only way to have the best of both worlds is to have the right Set Ups based on the math right up front.

Finally, and at Number Ten, let's peak into the ACG "Smart Parts" Manager mind to see how we would manage our Parts Days Supply going forward. Keep in mind that the Industry Guideline on Days Supply is 45 Days. 

This also includes ALL Part Inventory such as Obsolescence and Overstock Quantities as it is a total overall dollar figure of the Parts Inventory. This is extremely important to know as I've seen dealers with a High Days Supply, but when I backed out the Parts Obsolescence, they actually had a Low Days Supply of the good stuff.

If we keep Parts Obsolescence to Industry Guidelines, we could actually afford to keep a few extra Days Supply of the parts we need the most. Having a little extra of the parts we need most is not a bad idea to avoid potential "stock out" situations.

We all know that even fast-moving parts can go on backorder and we never want to be on that end of the spectrum. Fast-moving parts are called that for a reason and if we keep the inventory clean, we can protect ourselves even better.

Looking ahead into a New Year is always exciting, but we all know that "Preparation Is the Key to Success". Our first month of the year we revealed our "Top 10 Hot Topics for 2026" based on what we experienced in 2025.

This month, we took it to the next step and revealed what's on our minds and how we would approach these "Top 10 Parts Hot Topics for 2026". 

In our opinion, one thing is for sure, if we keep doing the same thing the same way, we will get the same results. If we aren't getting the results we want or expect, then something has to change.

The question is and more importantly....

"What's Inside Your Mind and How Will You Approach our Top 10 Parts Hot Topics for 2026?"

f 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...

....

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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